Toggle SGML Header (+)


Section 1: 8-K (8-K)

Document



 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 8-K
 
 Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 24, 2018

 393145671_flagstara09a01a06.jpg
(Exact name of registrant as specified in its charter)
 
 
 
 
 
 
Michigan
 
1-16577
 
38-3150651
(State or other jurisdiction of
incorporation)
 
(Commission File
Number)
 
(I.R.S. Employer
Identification No.)
 
 
5151 Corporate Drive, Troy, Michigan 48098
(Address of principal executive offices) (Zip Code)
(248) 312-2000
(Registrant's telephone number, including area code)
 
 Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
 






Item 2.02
Results of Operations and Financial Condition

On April 24, 2018, Flagstar Bancorp, Inc. (the "Company") issued a press release regarding its preliminary results of operations and financial condition for the three months ended March 31, 2018. The text of the press release is furnished as Exhibit 99.1 to this report. The Company will include final financial statements and additional analyses for the three months ended March 31, 2018 as part of its Quarterly Report on Form 10-Q.

On April 24, 2018, the Company will hold a conference call to review first quarter 2018 earnings. A copy of the slide presentation to be used by the Company on the conference call is furnished as Exhibit 99.2 to this Current Report on Form 8-K.


Item 9.01
Financial Statements and Exhibits
 
 Exhibits
 
 
 
 
99.1
  
Press release of Flagstar Bancorp, Inc. dated April 24, 2018
 
 
 
99.2
  
Flagstar Bancorp, Inc. Conference Call Presentation Slides - Earnings Presentation First Quarter 2018








SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
 
 
 
 
 
 
 
 
 
 
 
 
FLAGSTAR BANCORP, INC.
 
 
 
 
 
Dated:
April 24, 2018
 
 
 
By:
 
/s/ James K. Ciroli
 
 
 
 
 
 
 
James K. Ciroli
 
 
 
 
 
 
 
Executive Vice President and Chief Financial Officer







Exhibit Index
 
Exhibit No.
  
Description
 
 
 
 
99.1
  
 
 
 
99.2
  



(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit


393145671_flagstara43.jpg                393145671_fbcnyselisteda20.jpg

EXHIBIT 99.1
NEWS RELEASE
For more information, contact:        
David L. Urban
david.urban@flagstar.com
(248) 312-5970
                                
                                        
Flagstar Reports First Quarter 2018 Net Income of $35 million, or $0.60 per Diluted Share

Company delivers strong results despite challenging mortgage market

Key Highlights - First Quarter 2018

Net interest income relatively stable at $106 million, supported by solid gains in commercial loans.
Mortgage revenues decreased $11 million, or 15 percent from prior quarter, led by seasonal decline in mortgage originations and margin compression from competitive market.
Noninterest expense fell $5 million, or 3 percent from last quarter, driven by lower mortgage closings and prudent expense management.
Strong asset quality with minimal net charge-offs, low consumer delinquencies and no commercial delinquencies.
Acquisitions in the quarter position the Community Banking business for continued growth.

TROY, Mich., April 24, 2018 - Flagstar Bancorp, Inc. (NYSE:FBC), the holding company for Flagstar Bank, FSB, today reported first quarter 2018 net income of $35 million, or $0.60 per diluted share. This compared to a fourth quarter 2017 net loss of $45 million, or $0.79 per diluted share, which included a non-cash charge to the provision for income taxes of $80 million, or $1.37 per diluted share. Excluding the tax reform-related charge in the fourth quarter 2017, the Company had adjusted net income of $35 million, or $0.60 per diluted share. For the first quarter 2017, the Company reported net income of $27 million, or $0.46 per diluted share.

"This quarter continued to prove the resilience of our earnings," said Alessandro DiNello, president and chief executive officer of Flagstar Bancorp, Inc. “Our solid base of earning assets, along with careful expense management, helped us deliver strong results.

"We made terrific progress in strengthening the franchise in the first quarter. We continued to book high-quality commercial loans, we grew deposits, we kept our net interest margin stable and we closed on two strategic acquisitions that helped both sides of the balance sheet.

"First, we closed on the purchase of the mortgage warehouse business from Santander Bank, which brought approximately $500 million of mortgage warehouse loans to the balance sheet, then we acquired the branches of Desert Community Bank, bringing approximately $600 million in low cost deposits to the balance sheet.


1


"Servicing also continued to prosper. We sold $12 billion of mortgage servicing rights in the first quarter and agreed to sell an additional $7 billion next quarter, while entering into subservicing agreements for 100 percent of the sales. The purchasers of the MSRs have selected Flagstar to subservice their loans which is a testament to our best-in-class servicing platform. After all these sales close and together with non-Flagstar originated loans that we are scheduled to onboard in May and June, we will comfortably be above 500,000 loans serviced or subserviced by the end of the second quarter.

“We’re off to a nice start in 2018 supported by solid capital and a strong allowance coverage. Clearly, we have transformed our company into a well-diversified bank and have demonstrated the ability to produce consistent earnings."

First Quarter 2018 Highlights:

Income Statement Highlights
 
 
 
 
 
Three Months Ended
 
March 31,
2018
December 31,
2017
September 30,
2017
June 30,
2017
March 31,
2017
 
(Dollars in millions)
Net interest income
$
106

$
107

$
103

$
97

$
83

Provision (benefit) for loan losses

2

2

(1
)
3

Noninterest income
111

124

130

116

100

Noninterest expense
173

178

171

154

140

Income before income taxes
44

51

60

60

40

Provision for income taxes (1)
9

96

20

19

13

Net income (loss)
$
35

$
(45
)
$
40

$
41

$
27

 
 
 
 
 
 
Income (loss) per share:
 
 
 
 
 
Basic
$
0.61

$
(0.79
)
$
0.71

$
0.72

$
0.47

Diluted
$
0.60

$
(0.79
)
$
0.70

$
0.71

$
0.46

(1)
The three months ended December 31, 2017 included an $80 million, or $1.37 per diluted share, non-cash charge to the provision for income taxes, resulting from the revaluation of the Company's net deferred tax asset at a lower statutory rate as a result of the Tax Cuts and Jobs Act.
Key Ratios
 
 
 
 
 
 
 
Three Months Ended
 Change (bps)
 
March 31,
2018
December 31,
2017
September 30,
2017
June 30,
2017
March 31,
2017
Seq
Yr/Yr
Net interest margin
2.76
%
2.76
 %
2.78
%
2.77
%
2.67
%
0
9
Return on average assets
0.8
%
(1.1
)%
1.0
%
1.0
%
0.8
%
190
0
Return on average equity
9.9
%
(12.1
)%
11.1
%
11.6
%
7.9
%
N/M
200
Efficiency ratio
79.7
%
77.1
 %
73.5
%
72.0
%
76.8
%
260
290
N/M - Not meaningful


2


Balance Sheet Highlights
 
 
 
 
 
 
 
Three Months Ended
% Change
 
March 31,
2018
December 31,
2017
September 30,
2017
June 30,
2017
March 31,
2017
Seq
Yr/Yr
 
(Dollars in millions)
 
 
Average Balance Sheet Data
 
 
 
 
 


Average interest-earning assets
$
15,354

$
15,379

$
14,737

$
14,020

$
12,343

 %
24
%
Average loans held-for-sale (LHFS)
4,231

4,537

4,476

4,269

3,286

(7
)%
29
%
Average loans held-for-investment (LHFI)
7,487

7,295

6,803

6,224

5,639

3
 %
33
%
Average total deposits
9,371

9,084

9,005

8,739

8,795

3
 %
7
%

Net Interest Income

Net interest income fell $1 million to $106 million for the first quarter 2018, as compared to the fourth quarter 2017. The decrease from the prior quarter reflected two fewer days in the first quarter 2018. Both average earning assets and net interest margin were steady at $15.4 billion and 2.76 percent, respectively, as higher consumer, commercial real estate and commercial and industrial loans were offset by seasonal declines in loans held-for-sale and warehouse loans.

Loans held-for-investment averaged $7.5 billion for the first quarter 2018, increasing $192 million, or 3 percent, from the prior quarter. During the first quarter 2018, average consumer loans rose $214 million, or 7 percent, led by home equity lines of credit and mortgage loans (primarily jumbos). Commercial loan growth was solid with average commercial and industrial and commercial real estate loans increasing $169 million, or 6 percent. Average warehouse loans fell $191 million, driven by anticipated seasonal factors and lower overall mortgage volumes experienced by the Company's warehouse customers. The Company's purchase of a mortgage warehouse business occurring late in the quarter did not have a significant impact on average warehouse balances.

Average total deposits were $9.4 billion in the first quarter 2018, increasing $287 million, or 3 percent from the fourth quarter 2017. The increase was led by higher government and retail deposits, partially offset by seasonally lower company controlled deposits. Average government deposits rose $151 million, or 15 percent. Average retail deposits increased $109 million, or 2 percent, as higher retail certificates of deposit (up $222 million, or 16 percent) were partially offset by a decline in retail savings deposits (down $131 million, or 4 percent).

Provision for Loan Losses

The Company had no provision for loan losses for the first quarter 2018, as compared to $2 million for the fourth quarter 2017. The lack of provision expense reflected strong asset quality and a low level of net charge-offs in the quarter.

Noninterest Income

Noninterest income fell $13 million, or 10 percent, to $111 million in the first quarter of 2018, as compared to $124 million for the fourth quarter 2017. The decrease was primarily due to a drop in net gain on loan sales and loan fees and charges, partially offset by an increase in the net return on the mortgage servicing rights.

First quarter 2018 net gain on loan sales fell $19 million, or 24 percent, to $60 million, versus $79 million in the fourth quarter 2017. Fallout-adjusted locks fell 11 percent to $7.7 billion primarily due to a seasonal decline in mortgage originations. The net gain on loan sale margin fell 14 basis points to 0.77 percent for the first quarter 2018, as compared to 0.91 percent for the fourth quarter 2017. The lower margin was primarily due to competitive pricing pressure.

3


Mortgage Metrics
 
 
 
 
 
 
 
Three Months Ended
Change (% / bps)
 
March 31,
2018
December 31,
2017
September 30,
2017
June 30,
2017
March 31,
2017
Seq
Yr/Yr
 
(Dollars in millions)
 
 
Mortgage rate lock commitments (fallout-adjusted) (1) 
$
7,722

$
8,631

$
8,898

$
9,002

$
5,996

(11
)%
29
 %
Net margin on mortgage rate lock commitments (fallout-adjusted) (1) (2)
0.77
%
0.91
%
0.84
%
0.73
%
0.80
%
(14)
(3)
Net gain on loan sales
$
60

$
79

$
75

$
66

$
48

(24
)%
25
 %
Net (loss) return on the mortgage servicing rights (MSR)
$
4

$
(4
)
$
6

$
6

$
14

N/M
(71
)%
Gain on loan sales + net (loss) return on the MSR
$
64

$
75

$
81

$
72

$
62

(15
)%
3
 %
 
 
 
 
 
 
 
 
Residential loans serviced (number of accounts - 000's) (3)
470

442

415

402

393

6
 %
20
 %
Capitalized value of MSRs
1.27
%
1.16
%
1.15
%
1.14
%
1.10
%
11
17
N/M - Not meaningful
 
 
 
 
 
 
 
(1) Fallout-adjusted mortgage rate lock commitments are adjusted by a percentage of mortgage loans in the pipeline that are not expected to close based on previous historical experience and the level of interest rates.
(2) Gain on sale margin is based on net gain on loan sales (excludes net gain on loan sales of $1 million from loans transferred from HFI in the three months ended December 31, 2017, respectively) to fallout-adjusted mortgage rate lock commitments.
(3) Includes loans serviced for own loan portfolio, serviced for others, and subserviced for others.

Loan fees and charges fell to $20 million for the first quarter 2018, as compared to $24 million for the fourth quarter 2017. The decrease primarily reflected lower mortgage loan closings.

Net return on mortgage servicing rights (including the impact of hedges) increased $8 million, resulting in a net gain of $4 million for the first quarter 2018, as compared to a net loss of $4 million for the fourth quarter 2017. The increase from the prior quarter largely reflected two factors realized in the fourth quarter 2017 -- a $4 million decrease in fair value driven by model changes and a $3 million charge associated with MSR sales that closed in the first quarter 2018.

Noninterest Expense

Noninterest expense fell to $173 million for the first quarter 2018, as compared to $178 million for the fourth quarter 2017, due to lower mortgage closings and prudent expense management. During the first quarter 2018, commissions fell $5 million and loan processing expense declined $2 million from lower mortgage closings. The Company's efficiency ratio was 80 percent for the first quarter 2018, as compared to 77 percent for the fourth quarter 2017, resulting from the seasonal decline in mortgage revenue.

Income Taxes

The first quarter 2018 provision for income taxes totaled $9 million, as compared to $96 million in the fourth quarter 2017, which included a charge to the provision for income taxes of $80 million resulting from new tax legislation. As a result of tax reform, the Company's effective tax rate was 20 percent for the first quarter 2018, as compared to the adjusted effective tax rate of 32 percent for the fourth quarter 2017.


4



Asset Quality
Credit Quality Ratios
 
 
 
 
 
 
 
Three Months Ended
Change (% / bps)
 
March 31,
2018
December 31,
2017
September 30,
2017
June 30,
2017
March 31,
2017
Seq
Yr/Yr
 
(Dollars in millions)
 
 
Allowance for loan loss to LHFI
1.7
%
1.8
%
2.0
%
2.1
%
2.4
%
(10)
(70)
Charge-offs, net of recoveries
$
1

$
2

$
2

$

$
4

(50
)%
(75
)%
Total nonperforming loans held-for-investment
$
29

$
29

$
31

$
30

$
28

 %
4
 %
Net charge-offs to LHFI ratio (annualized)
0.06
%
0.12
%
0.08
%
0.04
%
0.27
%
(6)
(21)
Ratio of nonperforming LHFI to LHFI
0.35
%
0.38
%
0.44
%
0.44
%
0.47
%
(3)
(12)

The allowance for loan losses was $139 million at March 31, 2018, compared to $140 million at December 31, 2017. The allowance for loan losses covered 1.7 percent of loans held-for-investment at March 31, 2018, as compared to 1.8 percent of loans held-for-investment at December 31, 2017.

Net charge-offs in the first quarter 2018 were $1 million, or 6 basis points of HFI loans, compared to $2 million, or 12 basis points in the prior quarter.

Nonperforming loans held-for-investment were $29 million at March 31, 2018, unchanged from December 31, 2017. The ratio of nonperforming loans to loans held-for-investment was 0.35 percent at March 31, 2018, compared to 0.38 percent at December 31, 2017. At March 31, 2018, consumer loan delinquencies totaled $5 million, or 0.14 percent of consumer loans, compared to $5 million, or 0.15 percent at December 31, 2017. There were no commercial loan delinquencies greater than 30 days at March 31, 2018.

Capital
Capital Ratios (Bancorp)
Three Months Ended
Change (% / bps)
 
March 31,
2018
December 31,
2017
September 30,
2017
June 30,
2017
March 31,
2017
Seq
Yr/Yr
Tangible common equity to assets ratio
7.65
%
8.15
%
8.47
%
8.64
%
8.90
%
(50)
(125)
Tier 1 leverage (to adj. avg. total assets)
8.72
%
8.51
%
8.80
%
9.10
%
9.31
%
21
(59)
Tier 1 common equity (to RWA)
10.80
%
11.50
%
11.65
%
12.45
%
12.32
%
(70)
(152)
Tier 1 capital (to RWA)
12.90
%
13.63
%
13.72
%
14.65
%
14.70
%
(73)
(180)
Total capital (to RWA)
14.14
%
14.90
%
14.99
%
15.92
%
15.98
%
(76)
(184)
MSRs to Tier 1 capital
16.2
%
20.1
%
17.3
%
13.1
%
23.1
%
(390)
N/M
Tangible book value per share

$
23.62

$
24.04

$
25.01

$
24.29

$
23.96

(2
)%
(1
)%
N/M - Not meaningful

The Company maintained a robust capital position with regulatory ratios well above current regulatory quantitative guidelines for "well capitalized" institutions. At March 31, 2018, the Company had a Tier 1 leverage ratio of 8.72 percent, as compared to 8.51 percent at December 31, 2017. The increase in the ratio resulted from MSR sales and earnings retention, partially offset by the Company's acquisition of the branches of Desert Community Bank and the mortgage warehouse business from Santander Bank.

Under the terms of recently proposed changes to regulatory capital requirements, the Company's Tier 1 leverage ratio would have increased by approximately 50 basis points and risk-based capital ratios by approximately 10-25 basis points at March 31, 2018 (pro-forma basis).

5


Earnings Conference Call

As previously announced, the Company's first quarter 2018 earnings call will be held Tuesday, April 24, 2018 at 11 a.m. (ET).

To join the call, please dial (800) 667-5617 toll free or (334) 323-0505 and use passcode 3321708. Please call at least 10 minutes before the conference is scheduled to begin. A replay will be available for five business days by calling (888) 203-1112 toll free or (719) 457-0820 and using passcode 3321708.

The conference call will also be available as a live audiocast on the Investor Relations section of flagstar.com, where it will be archived and available for replay and download. The slide presentation accompanying the conference call will be posted on the site.

About Flagstar

Flagstar Bancorp, Inc. (NYSE: FBC) is a $17.7 billion savings and loan holding company headquartered in Troy, Mich. Flagstar Bank, FSB, provides commercial, small business, and consumer banking services through 99 branches in Michigan and 8 branches in California through its Desert Community Bank division. It also provides home loans through a wholesale network of brokers and correspondents in all 50 states, as well as 92 retail locations in 31 states, representing the combined retail branches of Flagstar and its Opes Advisors mortgage division. Flagstar is a leading national originator and servicer of mortgage loans, handling payments and record keeping for $104 billion of home loans representing over 470,000 borrowers. For more information, please visit flagstar.com.

Use of Non-GAAP Financial Measures

In addition to results presented in accordance with GAAP, this news release includes non-GAAP financial measures, such as tangible book value per share, adjusted net income and adjusted earnings per share. The Company believes these non-GAAP financial measures provide additional information that is useful to investors in helping to understand the capital requirements Flagstar will face in the future and underlying performance and trends of Flagstar.

Non-GAAP financial measures have inherent limitations. Readers should be aware of these limitations and should be cautious with respect to the use of such measures. To compensate for these limitations, we use non-GAAP measures as comparative tools, together with GAAP measures, to assist in the evaluation of our operating performance or financial condition. Also, we ensure that these measures are calculated using the appropriate GAAP or regulatory components in their entirety and that they are computed in a manner intended to facilitate consistent period-to-period comparisons. Flagstar’s method of calculating these non-GAAP measures may differ from methods used by other companies. These non-GAAP measures should not be considered in isolation or as a substitute for those financial measures prepared in accordance with GAAP or in-effect regulatory requirements.

Where non-GAAP financial measures are used, the most directly comparable GAAP or regulatory financial measure, as well as the reconciliation to the most directly comparable GAAP or regulatory financial measure, can be found in this news release. Additional discussion of the use of non-GAAP measures can also be found in conference call slides, the Form 8-K Current Report related to this news release and in periodic Flagstar reports filed with the U.S. Securities and Exchange Commission. These documents can all be found on the Company’s website at flagstar.com.

6


Forward-Looking Statements

This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the current beliefs and expectations of Flagstar Bancorp, Inc.’s management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. The Company's actual results could differ materially from those described in the forward-looking statements depending upon various factors as described in periodic Flagstar reports filed with the U.S. Securities and Exchange Commission, which are available on the Company’s website (flagstar.com) and on the Securities and Exchange Commission's website (sec.gov). Other than as required under United States securities laws, Flagstar Bancorp does not undertake to update the forward-looking statements to reflect the impact of circumstances or events that may arise after the date of the forward-looking statements.



7


Flagstar Bancorp, Inc.
Consolidated Statements of Financial Condition
(Dollars in millions)
(Unaudited)
 
March 31, 2018
 
December 31,
2017
 
March 31, 2017
Assets
 
 
 
 
 
Cash
$
121

 
$
122

 
$
72

Interest-earning deposits
122

 
82

 
89

Total cash and cash equivalents
243

 
204

 
161

Investment securities available-for-sale
1,918

 
1,853

 
1,650

Investment securities held-to-maturity
771

 
939

 
1,048

Loans held-for-sale
4,743

 
4,321

 
4,543

Loans held-for-investment
8,134

 
7,713

 
5,959

Loans with government guarantees
286

 
271

 
322

Less: allowance for loan losses
(139
)
 
(140
)
 
(141
)
Total loans held-for-investment and loans with government guarantees, net
8,281

 
7,844

 
6,140

Mortgage servicing rights
239

 
291

 
295

Federal Home Loan Bank stock
303

 
303

 
201

Premises and equipment, net
348

 
330

 
277

Net deferred tax asset
130

 
136

 
273

Other assets
760

 
691

 
773

Total assets
$
17,736

 
$
16,912

 
$
15,361

Liabilities and Stockholders' Equity
 
 
 
 
 
Noninterest-bearing
$
2,391

 
$
2,049

 
$
1,831

Interest-bearing
7,595

 
6,885

 
6,814

Total deposits
9,986

 
8,934

 
8,645

Short-term Federal Home Loan Bank advances
4,153

 
4,260

 
3,186

Long-term Federal Home Loan Bank advances
1,280

 
1,405

 
1,200

Other long-term debt
494

 
494

 
493

Representation and warranty reserve
13

 
15

 
23

Other liabilities
383

 
405

 
443

Total liabilities
16,309

 
15,513

 
13,990

Stockholders' Equity
 
 
 
 
 
Common stock
1

 
1

 
1

Additional paid in capital
1,514

 
1,512

 
1,510

Accumulated other comprehensive loss
(30
)
 
(16
)
 
(6
)
Accumulated deficit
(58
)
 
(98
)
 
(134
)
Total stockholders' equity
1,427

 
1,399

 
1,371

Total liabilities and stockholders' equity
$
17,736

 
$
16,912

 
$
15,361





8


Flagstar Bancorp, Inc.
 Condensed Consolidated Statements of Operations
 (Dollars in millions, except per share data)
(Unaudited)
 
 
 
First Quarter 2018 Compared to:
 
Three Months Ended
 
Fourth Quarter
2017
 
First Quarter
2017
 
March 31,
2018
December 31,
2017
September 30,
2017
June 30,
2017
March 31,
2017
 
Amount
Percent
 
Amount
Percent
Interest Income
 
 
 
 
 
 
 
 
 
 
 
Total interest income
$
152

$
148

$
140

$
129

$
110

 
$
4

3
 %
 
$
42

38
 %
Total interest expense
46

41

37

32

27

 
5

12
 %
 
19

70
 %
Net interest income
106

107

103

97

83

 
(1
)
(1
)%
 
23

28
 %
Provision (benefit) for loan losses

2

2

(1
)
3

 
(2
)
(100
)%
 
(3
)
(100
)%
Net interest income after provision (benefit) for loan losses
106

105

101

98

80

 
1

1
 %
 
26

33
 %
Noninterest Income
 
 
 
 
 
 




 




Net gain on loan sales
60

79

75

66

48

 
(19
)
(24
)%
 
12

25
 %
Loan fees and charges
20

24

23

20

15

 
(4
)
(17
)%
 
5

33
 %
Deposit fees and charges
5

4

5

5

4

 
1

25
 %
 
1

25
 %
Loan administration income
5

5

5

6

5

 

 %
 

 %
Net (loss) return on the mortgage servicing rights
4

(4
)
6

6

14

 
8

N/M

 
(10
)
(71
)%
Representation and warranty benefit
2

2

4

3

4

 

 %
 
(2
)
(50
)%
Other noninterest income
15

14

12

10

10

 
1

7
 %
 
5

50
 %
Total noninterest income
111

124

130

116

100

 
(13
)
(10
)%
 
11

11
 %
Noninterest Expense
 
 
 
 
 
 




 




Compensation and benefits
80

80

76

71

72

 

 %
 
8

11
 %
Commissions
18

23

23

16

10

 
(5
)
(22
)%
 
8

80
 %
Occupancy and equipment
30

28

28

25

22

 
2

7
 %
 
8

36
 %
Federal insurance premiums
6

5

5

4

3

 
1

20
 %
 
3

100
 %
Loan processing expense
14

16

15

14

12

 
(2
)
(13
)%
 
2

17
 %
Legal and professional expense
6

8

7

8

7

 
(2
)
(25
)%
 
(1
)
(14
)%
Other noninterest expense
19

18

17

16

14

 
1

6
 %
 
5

36
 %
Total noninterest expense
173

178

171

154

140

 
(5
)
(3
)%
 
33

24
 %
Income before income taxes
44

51

60

60

40

 
(7
)
(14
)%
 
4

10
 %
Provision for income taxes
9

96

20

19

13

 
(87
)
(91
)%
 
(4
)
(31
)%
Net income (loss)
$
35

$
(45
)
$
40

$
41

$
27

 
$
80

N/M

 
$
8

30
 %
Income (loss) per share
 
 
 
 
 
 




 




Basic
$
0.61

$
(0.79
)
$
0.71

$
0.72

$
0.47

 
$
1.40

N/M

 
$
0.14

30
 %
Diluted
$
0.60

$
(0.79
)
$
0.70

$
0.71

$
0.46

 
$
1.39

N/M

 
$
0.14

30
 %
N/M - Not meaningful


9



 
 
 
 
Flagstar Bancorp, Inc.
Summary of Selected Consolidated Financial and Statistical Data
(Dollars in millions, except share data)
(Unaudited)
 
Three Months Ended
 
March 31, 2018
 
December 31, 2017
 
March 31, 2017
Selected Mortgage Statistics:
 
 
 
 
 
Mortgage rate lock commitments (fallout-adjusted) (1) 
$
7,722

 
$
8,631

 
$
5,996

Mortgage loans originated (2)
$
7,886

 
$
9,749

 
$
5,903

Mortgage loans sold and securitized
$
7,247

 
$
10,096

 
$
4,484

Selected Ratios:
 
 
 
 
 
Interest rate spread (3)
2.54
%
 
2.56
 %
 
2.49
%
Net interest margin
2.76
%
 
2.76
 %
 
2.67
%
Net margin on loans sold and securitized
0.82
%
 
0.78
 %
 
1.06
%
Return on average assets
0.82
%
 
(1.05
)%
 
0.76
%
Return on average equity
9.94
%
 
(12.07
)%
 
7.88
%
Efficiency ratio
79.7
%
 
77.1
 %
 
76.8
%
Equity-to-assets ratio (average for the period)
8.27
%
 
8.73
 %
 
9.59
%
Average Balances:
 
 
 
 
 
Average common shares outstanding
57,356,654

 
57,186,367

 
56,921,605

Average fully diluted shares outstanding
58,314,385

 
57,186,367

 
58,072,563

Average interest-earning assets
$
15,354

 
$
15,379

 
$
12,343

Average interest-paying liabilities
$
12,974

 
$
12,939

 
$
10,319

Average stockholders' equity
$
1,414

 
$
1,497

 
$
1,346

(1)
Fallout-adjusted mortgage rate lock commitments are adjusted by a percentage of mortgage loans in the pipeline that are not expected to close based on previous historical experience and the level of interest rates.
(2)
Includes residential first mortgage.
(3)
Interest rate spread is the difference between the annualized yield earned on average interest-earning assets for the period and the annualized rate of interest paid on average interest-bearing liabilities for the period.
 
March 31, 2018
 
December 31, 2017
 
March 31, 2017
Selected Statistics:
 
 
 
 
 
Book value per common share
$
24.87

 
$
24.40

 
$
24.03

Tangible book value per share (1)
23.62

 
24.04

 
23.96

Number of common shares outstanding
57,399,993

 
57,321,228

 
57,043,565

Number of FTE employees
3,659

 
3,525

 
2,948

Number of bank branches
107

 
99

 
99

Ratio of nonperforming assets to total assets
0.19
%
 
0.22
%
 
0.27
%
Common equity-to-assets ratio
8.05
%
 
8.27
%
 
8.92
%
MSR Key Statistics and Ratios:
 
 
 
 
 
Weighted average service fee (basis points)
30.4

 
28.9

 
26.7

Capitalized value of mortgage servicing rights
1.27
%
 
1.16
%
 
1.10
%
Mortgage servicing rights to Tier 1 capital
16.2
%
 
20.1
%
 
23.1
%
(1)
Excludes goodwill and intangibles of $72 million, $21 million, and $4 million at March 31, 2018, December 31, 2017, and March 31, 2017, respectively, included in Other Assets on the Consolidated Statement of Financial Condition. See Non-GAAP Reconciliation for further information.




10


Average Balances, Yields and Rates
(Dollars in millions)
(Unaudited)
 
Three Months Ended
 
March 31, 2018
 
December 31, 2017
 
March 31, 2017
 
Average Balance
Interest
Annualized
Yield/Rate
 
Average Balance
Interest
Annualized
Yield/Rate
 
Average Balance
Interest
Annualized
Yield/Rate
Interest-Earning Assets
 
Loans held-for-sale
$
4,231

$
44

4.12
%
 
$
4,537

$
46

4.07
%
 
$
3,286

$
32

3.87
%
Loans held-for-investment
 
 
 
 
 
 
 
 
 
 
 
Residential first mortgage
2,773

23

3.41
%
 
2,704

23

3.37
%
 
2,399

20

3.33
%
Home equity
668

9

5.21
%
 
524

7

5.11
%
 
431

6

5.08
%
Other
27


4.56
%
 
26


4.49
%
 
27


4.49
%
Total Consumer loans
3,468

32

3.76
%
 
3,254

30

3.66
%
 
2,857

26

3.60
%
Commercial Real Estate
1,954

24

4.87
%
 
1,866

21

4.48
%
 
1,318

12

3.80
%
Commercial and Industrial
1,217

16

5.21
%
 
1,136

14

4.76
%
 
774

9

4.56
%
Warehouse Lending
848

11

5.14
%
 
1,039

13

4.82
%
 
690

8

4.51
%
Total Commercial loans
4,019

51

5.03
%
 
4,041

48

4.65
%
 
2,782

29

4.19
%
Total loans held-for-investment
7,487

83

4.44
%
 
7,295

78

4.21
%
 
5,639

55

3.89
%
Loans with government guarantees
291

3

3.72
%
 
260

3

3.90
%
 
342

4

4.61
%
Investment securities
3,233

22

2.69
%
 
3,204

21

2.61
%
 
3,012

19

2.51
%
Interest-earning deposits
112


1.67
%
 
83


1.33
%
 
64


0.86
%
Total interest-earning assets
15,354

$
152

3.95
%
 
15,379

$
148

3.81
%
 
12,343

$
110

3.55
%
Other assets
1,736

 
 
 
1,772

 
 
 
1,700

 
 
Total assets
$
17,090

 
 
 
$
17,151

 
 
 
$
14,043

 
 
Interest-Bearing Liabilities
 
 
 
 
 
 
 
 
 
 
 
Retail deposits
 
 
 
 
 
 
 
 
 
 
 
Demand deposits
$
548

$

0.26
%
 
$
547

$

0.26
%
 
$
507

$

0.18
%
Savings deposits
3,490

7

0.81
%
 
3,621

8

0.77
%
 
3,928

7

0.76
%
Money market deposits
205


0.44
%
 
231


0.52
%
 
276

1

0.46
%
Certificates of deposit
1,619

6

1.45
%
 
1,397

5

1.32
%
 
1,073

3

1.06
%
Total retail deposits
5,862

13

0.92
%
 
5,796

13

0.84
%
 
5,784

11

0.75
%
Government deposits
 
 
 
 
 
 
 
 
 
 
 
Demand deposits
241


0.55
%
 
204


0.59
%
 
235


0.39
%
Savings deposits
483

2

1.11
%
 
394

1

0.94
%
 
459

1

0.52
%
Certificates of deposit
401

1

1.19
%
 
376

1

1.05
%
 
318


0.63
%
Total government deposits
1,125

3

1.02
%
 
974

2

0.91
%
 
1,012

1

0.52
%
Wholesale deposits and other
171

1

1.91
%
 
45


1.50
%
 
8


0.39
%
Total interest-bearing deposits
7,158

17

0.96
%
 
6,815

15

0.86
%
 
6,804

12

0.72
%
Short-term Federal Home Loan Bank advances and other
4,032

15

1.53
%
 
4,329

14

1.25
%
 
1,822

3

0.73
%
Long-term Federal Home Loan Bank advances
1,290

7

2.10
%
 
1,301

6

1.93
%
 
1,200

6

1.87
%
Other long-term debt
494

7

5.37
%
 
494

6

5.12
%
 
493

6

5.04
%
Total interest-bearing liabilities
12,974

46

1.41
%
 
12,939

41

1.25
%
 
10,319

27

1.06
%
Noninterest-bearing deposits (1)
2,213

 
 
 
2,269

 
 
 
1,991

 
 
Other liabilities
489

 
 
 
446

 
 
 
387

 
 
Stockholders' equity
1,414

 
 
 
1,497

 
 
 
1,346

 
 
Total liabilities and stockholders' equity
$
17,090

 
 
 
$
17,151

 
 
 
$
14,043

 
 
Net interest-earning assets
$
2,380

 
 
 
$
2,440

 
 
 
$
2,024

 
 
Net interest income
 
$
106

 
 
 
$
107

 
 
 
$
83

 
Interest rate spread (2)
 
 
2.54
%
 
 
 
2.56
%
 
 
 
2.49
%
Net interest margin (3)
 
 
2.76
%
 
 
 
2.76
%
 
 
 
2.67
%
Ratio of average interest-earning assets to interest-bearing liabilities
 
 
118.3
%
 
 
 
118.9
%
 
 
 
119.6
%
Total average deposits
$
9,371

 
 
 
$
9,084

 
 
 
$
8,795

 
 
(1)
Includes noninterest-bearing company-controlled deposits that arise due to the servicing of loans for others.
(2)
Interest rate spread is the difference between rate of interest earned on interest-earning assets and rate of interest paid on interest-bearing liabilities.
(3)
Net interest margin is net interest income divided by average interest-earning assets.


 
 
 
 
 
 
 
 

11


Flagstar Bancorp, Inc.
Earnings Per Share
(Dollars in millions, except share data)
(Unaudited)
 
Three Months Ended
 
March 31, 2018
 
December 31, 2017
 
March 31, 2017
Net income (loss)
35

 
(45
)
 
27

Weighted average shares
 
 
 
 
 
Weighted average common shares outstanding
57,356,654

 
57,186,367

 
56,921,605

Effect of dilutive securities
 
 
 
 
 
May Investor warrants

 

 
49,149

Stock-based awards (1)
957,731

 

 
1,101,809

Weighted average diluted common shares
58,314,385

 
57,186,367

 
58,072,563

Earnings (loss) per common share
 
 
 
 
 
Basic earnings (loss) per common share
$
0.61

 
$
(0.79
)
 
$
0.47

Effect of dilutive securities
 
 
 
 
 
May Investor warrants

 

 

Stock-based awards (1)
(0.01
)
 

 
(0.01
)
Diluted earnings (loss) per common share
$
0.60

 
$
(0.79
)
 
$
0.46

(1)
Three months ended December 31, 2017, excludes 1.2 million shares, or 2 cents per share, of unvested stock-based awards that are anti-dilutive due to net loss position.

Regulatory Capital - Bancorp
(Dollars in millions)
(Unaudited)
 
March 31, 2018
 
December 31, 2017
 
March 31, 2017
 
Amount
Ratio
 
Amount
Ratio
 
Amount
Ratio
Tier 1 leverage (to adjusted avg. total assets)
$
1,475

8.72
%
 
$
1,442

8.51
%
 
$
1,277

9.31
%
Total adjusted avg. total asset base
$
16,918

 
 
$
16,951

 
 
$
13,716

 
Tier 1 common equity (to risk weighted assets)
$
1,235

10.80
%
 
$
1,216

11.50
%
 
$
1,071

12.32
%
Tier 1 capital (to risk weighted assets)
$
1,475

12.90
%
 
$
1,442

13.63
%
 
$
1,277

14.70
%
Total capital (to risk weighted assets)
$
1,617

14.14
%
 
$
1,576

14.90
%
 
$
1,389

15.98
%
Risk-weighted asset base
$
11,440

 
 
$
10,579

 
 
$
8,689

 


Regulatory Capital - Bank
(Dollars in millions)
(Unaudited)
 
March 31, 2018
 
December 31, 2017
 
March 31, 2017
 
Amount
Ratio
 
Amount
Ratio
 
Amount
Ratio
Tier 1 leverage (to adjusted avg. total assets)
$
1,537

9.08
%
 
$
1,531

9.04
%
 
$
1,477

10.74
%
Total adjusted avg. total asset base
$
16,926

 
 
$
16,934

 
 
$
13,754

 
Tier 1 common equity (to risk weighted assets)
$
1,537

13.42
%
 
$
1,531

14.46
%
 
$
1,477

16.93
%
Tier 1 capital (to risk weighted assets)
$
1,537

13.42
%
 
$
1,531

14.46
%
 
$
1,477

16.93
%
Total capital (to risk weighted assets)
$
1,679

14.66
%
 
$
1,664

15.72
%
 
$
1,588

18.20
%
Risk-weighted asset base
$
11,449

 
 
$
10,589

 
 
$
8,726

 

12


Loan Originations
(Dollars in millions)
(Unaudited)
 
Three Months Ended
 
March 31, 2018
 
December 31, 2017
 
March 31, 2017
Residential first mortgage
$
7,886

98.2
%
 
$
9,749

96.1
%
 
$
5,903

95.0
%
Home equity (1)
65

0.8
%
 
111

1.1
%
 
56

0.9
%
Total consumer loans
7,951

99.0
%
 
9,860

97.2
%
 
5,959

95.9
%
Commercial loans (2)
79

1.0
%
 
283

2.8
%
 
257

4.1
%
Total loan originations
$
8,030

100.0
%
 
$
10,143

100.0
%
 
$
6,216

100.0
%
(1)
Includes second mortgage loans, HELOC loans, and other consumer loans.
(2)
Includes commercial real estate and commercial and industrial loans.

Residential Loans Serviced
(Dollars in millions)
(Unaudited)
 
March 31, 2018
 
December 31, 2017
 
March 31, 2017
 
Unpaid Principal Balance (1)
Number of accounts
 
Unpaid Principal Balance (1)
Number of accounts
 
Unpaid Principal Balance (1)
Number of accounts
Serviced for own loan portfolio (2)
$
7,629

32,185

 
$
7,013

29,493

 
$
7,369

33,766

Serviced for others
18,767

77,426

 
25,073

103,137

 
26,763

116,965

Subserviced for others (3)
77,748

360,396

 
65,864

309,814

 
48,940

242,445

Total residential loans serviced
$
104,144

470,007

 
$
97,950

442,444

 
$
83,072

393,176

(1)
UPB, net of write downs, does not include premiums or discounts.
(2)
Includes loans held-for-investment (residential first mortgage and home equity), loans-held-for-sale (residential first mortgage), loans with government guarantees (residential first mortgage), and repossessed assets.
(3)
Includes temporary short-term subservicing performed as a result of sales of servicing-released mortgage servicing rights. Includes repossessed assets.

Loans Held-for-Investment
(Dollars in millions)
(Unaudited)
 
March 31, 2018
 
December 31, 2017
 
March 31, 2017
Consumer loans
 
 
 
 
 
 
 
 
Residential first mortgage
$
2,818

34.6
%
 
$
2,754

35.7
%
 
$
2,463

41.3
%
Home equity
671

8.3
%
 
664

8.6
%
 
376

6.3
%
Other
25

0.3
%
 
25

0.3
%
 
27

0.5
%
Total consumer loans
3,514

43.2
%
 
3,443

44.6
%
 
2,866

48.1
%
Commercial loans
 
 
 
 
 
 
 
 
Commercial real estate
1,985

24.4
%
 
1,932

25.1
%
 
1,399

23.5
%
Commercial and industrial
1,228

15.1
%
 
1,196

15.5
%
 
854

14.3
%
Warehouse lending
1,407

17.3
%
 
1,142

14.8
%
 
840

14.1
%
Total commercial loans
4,620

56.8
%
 
4,270

55.4
%
 
3,093

51.9
%
Total loans held-for-investment
$
8,134

100.0
%
 
$
7,713

100.0
%
 
$
5,959

100.0
%

13


Allowance for Loan Losses
(Dollars in millions)
(Unaudited)
 
As of/For the Three Months Ended
 
March 31,
2018
 
December 31,
2017
 
March 31,
2017
Allowance for loan losses
 
 
 
 
 
Residential first mortgage
$
47

 
$
47

 
$
61

Home equity
21

 
22

 
21

Other
1

 
1

 
1

Total consumer loans
69

 
70

 
83

Commercial real estate
44

 
45

 
32

Commercial and industrial
20

 
19

 
20

Warehouse lending 
6

 
6

 
6

Total commercial loans
70

 
70

 
58

Total allowance for loan losses
$
139

 
$
140

 
$
141

Charge-offs
 
 
 
 
 
 Total consumer loans
(2
)
 
(3
)
 
(5
)
 Total commercial loans

 
(1
)
 

Total charge-offs
$
(2
)
 
$
(4
)
 
$
(5
)
Recoveries
 
 
 
 
 
Total consumer loans
1

 

 
1

Total commercial loans

 
2

 

Total recoveries
1

 
2

 
1

Charge-offs, net of recoveries
$
(1
)
 
$
(2
)
 
$
(4
)
Net charge-offs to LHFI ratio (annualized) (1)
0.06
 %
 
0.11
 %
 
0.27
 %
Net charge-offs/(recoveries) to LHFI ratio (annualized) by loan type (1):
 
 
Residential first mortgage
0.11
 %
 
0.26
 %
 
0.60
 %
Home equity and other consumer
0.28
 %
 
0.39
 %
 
0.29
 %
Commercial real estate
(0.01
)%
 
0.03
 %
 
(0.02
)%
Commercial and industrial
(0.01
)%
 
(0.15
)%
 
(0.01
)%
(1)
Excludes loans carried under the fair value option.

Nonperforming Loans and Assets
(Dollars in millions)
(Unaudited)
 
March 31,
2018
 
December 31,
2017
 
March 31,
2017
Nonperforming LHFI
$
14

 
$
13

 
$
17

Nonperforming TDRs
5

 
5

 
5

Nonperforming TDRs at inception but performing for less than six months
10

 
11

 
6

Total nonperforming LHFI and TDRs (1)
29

 
29

 
28

Real estate and other nonperforming assets, net
5

 
8

 
13

LHFS
$
11

 
$
9

 
$
21

Total nonperforming assets
$
45

 
$
46

 
$
62

 
 
 
 
 
 
Ratio of nonperforming assets to total assets (2)
0.19
%
 
0.22
%
 
0.27
%
Ratio of nonperforming LHFI and TDRs to LHFI
0.35
%
 
0.38
%
 
0.47
%
Ratio of nonperforming assets to LHFI and repossessed assets (2)
0.42
%
 
0.48
%
 
0.69
%
(1)
Includes less than 90 day past due performing loans placed on nonaccrual. Interest is not being accrued on these loans.
(2)
Ratio excludes LHFS.

14


Asset Quality - Loans Held-for-Investment
(Dollars in millions)
(Unaudited)
 
30-59 Days Past Due
 
60-89 Days Past Due
 
Greater than 90 days (1)
 
Total Past Due
 
Total Loans Held-for-Investment
March 31, 2018
 
 
 
 
 
 
 
 
 
Consumer loans
$
4

 
$
1

 
$
29

 
$
34

 
$
3,514

Commercial loans

 

 

 

 
4,620

Total loans
$
4

 
$
1

 
$
29

 
$
34

 
$
8,134

December 31, 2017