EXHIBIT 99.1
NEWS RELEASE
For more information, contact:
Kenneth Schellenberg
FBCInvestorRelations@flagstar.com
(248) 312-5741
Flagstar Bancorp Reports First Quarter 2019 Net Income of $36 million, or $0.63 Per Diluted Share
Key Highlights - First Quarter 2019
| |
| • | Adjusted net income of $37 million, or $0.64 per diluted share, excluding costs related to the Wells Fargo branch acquisition. |
| |
| • | Successfully completed the integration of the 52 Wells Fargo branches acquired in December while experiencing only 4.9 percent deposit attrition. |
| |
| • | Adjusted net interest income grew $3 million to $126 million, reflecting full quarter benefit from acquired deposits and continued growth in LHFI portfolio. |
| |
| • | Mortgage revenues increased $11 million from prior quarter, led by an increase in fallout-adjusted locks and margin expansion of 12 basis points, partially offset by lower net return on MSRs. |
| |
| • | Total serviced accounts increased 13 percent from last quarter to 962,000. |
| |
| • | Exceptional asset quality with minimal net charge-offs, low delinquencies, no nonperforming commercial loans and strong allowance for loan loss coverage. |
TROY, Mich., April 23, 2019 - Flagstar Bancorp, Inc. (NYSE: FBC), the holding company for Flagstar Bank, FSB, today reported first quarter 2019 net income of $36 million, or $0.63 per diluted share, compared to fourth quarter 2018 net income of $54 million, or $0.93 per diluted share. On an adjusted basis, Flagstar reported net income of 37 million, or $0.64 per diluted share, for the first quarter 2019, compared to net income of $42 million, or $0.72 per diluted share, for the fourth quarter 2018. For the first quarter 2018, Flagstar reported net income of $35 million, or $0.60 per diluted share.
First Quarter 2019 Highlights:
"In the first quarter, we took another step in the continued transformation of our company. Thanks to our success in executing our business plan, we were pleased to initiate a quarterly dividend and a $50 million share buyback to return value to our shareholders,” said Alessandro DiNello, president and chief executive officer of Flagstar Bancorp, Inc. “These actions, coupled with our strong first quarter results, demonstrate the progress we have made to diversify our franchise and deliver strong results.
“Our banking and mortgage servicing businesses had another solid quarter. Deposit costs were 3 basis points lower, reflecting a full quarter of lower cost deposits from the Wells Fargo branch acquisition. We are also pleased that four months after conversion, we have experienced deposit attrition of only 4.9 percent,
substantially better than our 10 percent target and the 17 percent we modeled. Net interest margin expanded 10 basis points to 3.09 percent compared to an adjusted fourth quarter net interest margin of 2.99 percent. Total serviced accounts increased 13 percent to 962,000, continuing growth in a segment that provides both a stable source of fee income and liquidity.
“Our mortgage team delivered for the quarter, maintaining pricing and expense discipline in a very competitive mortgage environment, and then when the market turned favorable late in the quarter, our team was well positioned to take advantage of the opportunity. Fallout-adjusted locks increased 25 percent to $6.6 billion and gain on sale margin expanded for the second consecutive quarter. The improvement in net gain on loan sales more than offset lower net return on MSRs.
"Overall, I am pleased with our first quarter results and feel we are well positioned to continue to produce value for our shareholders."
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| | | | | | | | | | | | | | | |
| Income Statement Highlights | | | | |
| | Three Months Ended |
| | March 31,
2019 | December 31,
2018 | September 30,
2018 | June 30,
2018 | March 31,
2018 |
| | (Dollars in millions) |
| Net interest income | $ | 126 |
| $ | 152 |
| $ | 124 |
| $ | 115 |
| $ | 106 |
|
| Provision (benefit) for loan losses | — |
| (5 | ) | (2 | ) | (1 | ) | — |
|
| Noninterest income | 109 |
| 98 |
| 107 |
| 123 |
| 111 |
|
| Noninterest expense | 191 |
| 189 |
| 173 |
| 177 |
| 173 |
|
| Income before income taxes | 44 |
| 66 |
| 60 |
| 62 |
| 44 |
|
| Provision for income taxes | 8 |
| 12 |
| 12 |
| 12 |
| 9 |
|
| Net income | $ | 36 |
| $ | 54 |
| $ | 48 |
| $ | 50 |
| $ | 35 |
|
| | | | | | |
| Income per share: | | | | | |
| Basic | $ | 0.64 |
| $ | 0.94 |
| $ | 0.84 |
| $ | 0.86 |
| $ | 0.61 |
|
| Diluted | $ | 0.63 |
| $ | 0.93 |
| $ | 0.83 |
| $ | 0.85 |
| $ | 0.60 |
|
|
| | | | | | | | | | | | | | | |
Adjusted Income Statement Highlights (Non-GAAP) (1) | | | | |
| | Three Months Ended |
| | March 31,
2019 | December 31,
2018 | September 30,
2018 | June 30,
2018 | March 31,
2018 |
| | (Dollars in millions) |
| Net interest income | $ | 126 |
| $ | 123 |
| $ | 124 |
| $ | 115 |
| $ | 106 |
|
| Provision (benefit) for loan losses | — |
| (5 | ) | (2 | ) | (1 | ) | — |
|
| Noninterest income | 109 |
| 98 |
| 107 |
| 123 |
| 111 |
|
| Noninterest expense | 190 |
| 175 |
| 172 |
| 177 |
| 173 |
|
| Income before income taxes | 45 |
| 51 |
| 61 |
| 62 |
| 44 |
|
| Provision for income taxes | 8 |
| 9 |
| 12 |
| 12 |
| 9 |
|
| Net income | $ | 37 |
| $ | 42 |
| $ | 49 |
| $ | 50 |
| $ | 35 |
|
| | | | | | |
| Income per share: | | | | | |
| Basic | $ | 0.65 |
| $ | 0.73 |
| $ | 0.86 |
| $ | 0.86 |
| $ | 0.61 |
|
| Diluted | $ | 0.64 |
| $ | 0.72 |
| $ | 0.85 |
| $ | 0.85 |
| $ | 0.60 |
|
| |
| (1) | See Non-GAAP Reconciliation for further information. |
|
| | | | | | | | | | | | | |
| Key Ratios | | | | | | |
| | Three Months Ended | Change (bps) |
| | March 31,
2019 | December 31,
2018 | September 30,
2018 | June 30,
2018 | March 31,
2018 | Seq | Yr/Yr |
| Net interest margin | 3.09 | % | 3.70 | % | 2.93 | % | 2.86 | % | 2.76 | % | (61) | 33 |
Adjusted net interest margin (1) | 3.09 | % | 2.99 | % | 2.93 | % | 2.86 | % | 2.76 | % | 10 | 33 |
| Return on average assets | 0.8 | % | 1.2 | % | 1.0 | % | 1.1 | % | 0.8 | % | (40) | — |
|
| Return on average common equity | 9.2 | % | 14.0 | % | 12.8 | % | 13.5 | % | 9.9 | % | (480) | (70) |
| Efficiency ratio | 81.3 | % | 75.7 | % | 74.6 | % | 74.4 | % | 79.7 | % | 560 | 160 |
| HFI loan-to-deposit ratio | 71.0 | % | 74.7 | % | 78.3 | % | 80.5 | % | 79.9 | % | (370) | (890) |
Adjusted HFI loan-to-deposit ratio (2) | 77.0 | % | 77.3 | % | 77.8 | % | 78.1 | % | 83.9 | % | (30) | (690) |
| |
| (1) | The three months ended December 31, 2018, excludes $29 million of hedging gains reclassified from AOCI to net interest income in conjunction with the payment of long-term FHLB advances. See Non-GAAP Reconciliation for further information. |
| |
| (2) | Excludes warehouse loans and custodial deposits. |
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| | | | | | | | | | | | | | | | | | | |
| Average Balance Sheet Highlights | | | | | | |
| | Three Months Ended | % Change |
| | March 31,
2019 | December 31,
2018 | September 30,
2018 | June 30,
2018 | March 31,
2018 | Seq | Yr/Yr |
| | (Dollars in millions) | | |
| Average interest-earning assets | $ | 16,294 |
| $ | 16,391 |
| $ | 16,786 |
| $ | 15,993 |
| $ | 15,354 |
| (1 | )% | 6 | % |
| Average loans held-for-sale (LHFS) | 3,266 |
| 3,991 |
| 4,393 |
| 4,170 |
| 4,231 |
| (18 | )% | (23 | )% |
| Average loans held-for-investment (LHFI) | 9,164 |
| 8,916 |
| 8,872 |
| 8,380 |
| 7,487 |
| 3 | % | 22 | % |
| Average total deposits | 12,906 |
| 11,942 |
| 11,336 |
| 10,414 |
| 9,371 |
| 8 | % | 38 | % |
Net Interest Income
Net interest income decreased $26 million to $126 million for the first quarter 2019, as compared to the fourth quarter 2018. However, the fourth quarter included the recognition of $29 million of hedging gains in conjunction with the Wells Fargo branch acquisition. Excluding hedging gains, the Company's net interest income rose $3 million. This reflected the full quarter benefit of using lower cost deposits from the acquisition to reduce Federal Home Loan Bank advances. This action was partially offset by seasonal declines in loans held-for-sale and warehouse loans. Net interest margin rose 10 basis points to 3.09 percent for the first quarter 2019 as compared to adjusted net interest margin for the fourth quarter 2018.
Loans held-for-investment averaged $9.2 billion for the first quarter 2019, increasing $248 million from the prior quarter. During the first quarter 2019, average commercial real estate and commercial and industrial loans rose $328 million, or 9 percent. This increase was partially offset by a $162 million drop in warehouse loans due to anticipated seasonal factors. Average consumer loans rose $82 million, or 2 percent, driven primarily by growth in non-auto indirect loans and the full quarter impact from consumer loans acquired as part of the Wells Fargo branch acquisition.
Average total deposits were $12.9 billion in the first quarter 2019, increasing $964 million, or 8 percent from the fourth quarter 2018, driven by the full quarter impact of Wells Fargo branch deposits and higher custodial deposits, which rose $402 million, or 19 percent, driven by a 13 percent increase in serviced accounts.
Provision for Loan Losses
The Company had no provision for loan losses for first quarter 2019, as compared to a benefit of $5 million for the fourth quarter 2018. The lack of provision expense reflected strong asset quality and a low level of net charge-offs in the quarter.
Noninterest Income
Noninterest income increased $11 million, or 11 percent, to $109 million in the first quarter 2019, as compared to $98 million for the fourth quarter 2018. The increase was primarily driven by higher net gain on loan sales, net loan administration income and deposit fee income, partially offset by lower net return on MSRs and seasonally lower fee income.
First quarter 2019 net gain on loan sales increased $15 million, or 44 percent, to $49 million, versus $34 million in the fourth quarter 2018. The results reflected improvement in the mortgage environment late in the quarter which drove fallout-adjusted locks higher and an expansion of gain on sale margin. Fallout-adjusted locks increased 25 percent to $6.6 billion. The net gain on loan sale margin increased 12 basis points to 0.72 percent for the first quarter 2019, as compared to 0.60 percent for the fourth quarter 2018.
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| | | | | | | | | | | | | | | | | | | |
| Mortgage Metrics | | | | | | |
| | | Change (% / bps) |
| | March 31,
2019 | December 31,
2018 | September 30,
2018 | June 30,
2018 | March 31,
2018 | Seq | Yr/Yr |
| | (Dollars in millions) | | |
| For the three months ended: | | | | | | | |
Mortgage rate lock commitments (fallout-adjusted) (1) | $ | 6,602 |
| $ | 5,284 |
| $ | 8,290 |
| $ | 9,011 |
| $ | 7,722 |
| 25 | % | (15 | )% |
Net margin on mortgage rate lock commitments (fallout-adjusted) (1) (2) | 0.72 | % | 0.60 | % | 0.51 | % | 0.71 | % | 0.77 | % | 12 | (5) |
| Net gain on loan sales | $ | 49 |
| $ | 34 |
| $ | 43 |
| $ | 63 |
| $ | 60 |
| 44 | % | (18 | )% |
| Net return on the mortgage servicing rights (MSR) | $ | 6 |
| $ | 10 |
| $ | 13 |
| $ | 9 |
| $ | 4 |
| (40 | )% | 50 | % |
| Gain on loan sales + net return on the MSR | $ | 55 |
| $ | 44 |
| $ | 56 |
| $ | 72 |
| $ | 64 |
| 25 | % | (14 | )% |
| At the end of the period: | | | | | | | |
Loans serviced (number of accounts - 000's) (3) | 962 |
| 851 |
| 627 |
| 543 |
| 476 |
| 13 | % | 102 | % |
| Capitalized value of MSRs | 1.27 | % | 1.35 | % | 1.43 | % | 1.34 | % | 1.27 | % | (8) | — |
|
| (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 $2 million from loans transferred from LHFI during both the three months ended March 31, 2019 and December 31, 2018) to fallout-adjusted mortgage rate lock commitments. |
| (3) Includes loans serviced for own loan portfolio, serviced for others, and subserviced for others. |
Net return on mortgage servicing rights decreased $4 million, resulting in a net gain of $6 million for the first quarter 2019, as compared to a net gain of $10 million for the fourth quarter 2018. The decrease from the prior quarter reflected an increase in runoff due to lower interest rates and smaller benefit from the collection of contingencies related to MSR sales in prior periods.
Deposit fee income increased to $8 million for the first quarter 2019, as compared to $6 million for the fourth quarter 2018. The increase was driven by the full quarter benefit from the acquired Wells Fargo branches, despite continued fee waivers to assist customers during the Wells Fargo branch transition.
Noninterest Expense
Noninterest expense increased to $191 million for the first quarter 2019, as compared to $189 million for the fourth quarter 2018. Excluding acquisition costs of $1 million in the first quarter 2019 and $14 million in the fourth quarter 2018, adjusted noninterest expense in the first quarter 2019 was $190 million or $15 million higher than fourth quarter 2018. The increase is attributable to seasonally higher payroll taxes, employee benefits and a full quarter of expenses related to the 52 Wells Fargo branches acquired in December 2018.
The Company's efficiency ratio was 81 percent for the first quarter 2019, as compared to 76 percent for the fourth quarter 2018. Excluding hedging gains and expenses related to the acquisition of Wells Fargo branches, the adjusted efficiency ratio was 79 percent in the fourth quarter 2018.
Income Taxes
The first quarter 2019 provision for income taxes totaled $8 million, compared to $12 million for the fourth quarter 2018. The Company's effective tax rate was 18 percent for the first quarter 2019, consistent with our effective tax rate for the fourth quarter 2018.
Asset Quality
|
| | | | | | | | | | | | | | | | | | | |
| Credit Quality Ratios | | | | | | |
| | As of/Three Months Ended | Change (% / bps) |
| | March 31,
2019 | December 31,
2018 | September 30,
2018 | June 30,
2018 | March 31,
2018 | Seq | Yr/Yr |
| | (Dollars in millions) | | |
| Allowance for loan loss to LHFI | 1.3 | % | 1.4 | % | 1.5 | % | 1.5 | % | 1.7 | % | (10) | (40) |
| Charge-offs, net of recoveries | $ | 1 |
| $ | 1 |
| $ | 1 |
| $ | 1 |
| $ | 1 |
| — | % | — | % |
| Total nonperforming LHFI and TDRs | $ | 24 |
| $ | 22 |
| $ | 25 |
| $ | 27 |
| $ | 29 |
| 9 | % | (17 | )% |
| Net charge-offs to LHFI ratio (annualized) | 0.05 | % | 0.04 | % | 0.05 | % | 0.02 | % | 0.06 | % | 1 | (1) |
| Ratio of nonperforming LHFI and TDRs to LHFI | 0.24 | % | 0.24 | % | 0.28 | % | 0.30 | % | 0.35 | % | 0 | (11) |
The allowance for loan losses was $127 million at March 31, 2019, compared to $128 million at December 31, 2018. The allowance for loan losses covered 1.3 percent of loans held-for-investment at March 31, 2019, as compared to 1.4 percent of loans held-for-investment at December 31, 2018.
Net charge-offs in the first quarter 2019 were $1 million, or 5 basis points of LHFI, compared to $1 million, or 4 basis points in the prior quarter.
Nonperforming loans were $24 million at March 31, 2019, compared to $22 million at December 31, 2018. The ratio of nonperforming loans to loans held-for-investment was 0.24 percent at March 31, 2019, consistent with the ratio at December 31, 2018. At March 31, 2019, early stage loan delinquencies totaled $9 million, or 0.09 percent of total loans, compared to $7 million, or 0.08 percent at December 31, 2018. There were no commercial loan delinquencies greater than 90 days at March 31, 2019.
Capital
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| | | | | | | | | | | | | | | | | | | |
| Capital Ratios (Bancorp) | | Change (% / bps) |
| | March 31,
2019 | December 31,
2018 | September 30,
2018 | June 30,
2018 | March 31,
2018 | Seq | Yr/Yr |
| Tangible common equity to assets ratio (1) | 7.16 | % | 7.45 | % | 7.74 | % | 7.74 | % | 7.65 | % | (29) | (49) |
| Tier 1 leverage (to adj. avg. total assets) | 8.37 | % | 8.29 | % | 8.36 | % | 8.65 | % | 8.72 | % | 8 | (35) |
| Tier 1 common equity (to RWA) | 9.69 | % | 10.54 | % | 11.01 | % | 10.84 | % | 10.80 | % | (85) | (111) |
| Tier 1 capital (to RWA) | 11.51 | % | 12.54 | % | 13.04 | % | 12.86 | % | 12.90 | % | (103) | (139) |
| Total capital (to RWA) | 12.49 | % | 13.63 | % | 14.20 | % | 14.04 | % | 14.14 | % | (114) | (165) |
| MSRs to Tier 1 capital | 18.3 | % | 19.3 | % | 20.3 | % | 16.9 | % | 16.2 | % | (100) | 210 |
| Tangible book value per share (1) | $ | 24.65 |
| $ | 23.90 |
| $ | 25.13 |
| $ | 24.37 |
| $ | 23.62 |
| 3 | % | 4 | % |
| |
| (1) | See Non-GAAP Reconciliation for further information. |
The Company maintained a robust capital position with regulatory ratios well above current regulatory quantitative guidelines for "well capitalized" institutions. At March 31, 2019, the Company had a total risk-based capital ratio of
12.49 percent, as compared to 13.63 percent at December 31, 2018. The decrease in the ratio resulted primarily from balance sheet growth and share buyback, partially offset by earnings retention.
Under the terms of recently proposed changes to regulatory capital requirements, the Company's Tier 1 leverage ratio would have increased approximately 55 basis points and risk-based capital ratios by approximately 25-40 basis points at March 31, 2019 (pro forma basis).
Earnings Conference Call
As previously announced, the Company's first quarter 2019 earnings call will be held Tuesday, April 23, 2019 at 11 a.m. (ET).
To join the call, please dial (800) 289-0438 toll free or (786) 789-4783 and use passcode 9789633. 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 9789633.
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 an $19.4 billion savings and loan holding company headquartered in Troy, Mich. Flagstar Bank, FSB, provides commercial, small business, and consumer banking services through 160 branches in Michigan, Indiana, California, Wisconsin and Ohio. It also provides home loans through a wholesale network of brokers and correspondents in all 50 states, as well as 72 retail locations in 22 states, representing the combined retail branches of Flagstar and its Opes Advisors mortgage division. Flagstar is a leading national originator and servicer of mortgage and other consumer loans, handling payments and record keeping for $200 billion of loans representing 962,000 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, tangible common equity to assets ratio, return on average tangible equity, adjusted return on average tangible equity, adjusted return on average assets, adjusted net income, adjusted basic and diluted earnings per share, adjusted noninterest expense, adjusted net interest income, adjusted net interest margin, adjusted income before taxes, adjusted provision for income taxes, adjusted efficiency ratio and adjusted HFI loan-to-deposit ratio. 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.
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.
Flagstar Bancorp, Inc.
Consolidated Statements of Financial Condition
(Dollars in millions)
(Unaudited) |
| | | | | | | | | | | |
| | March 31,
2019 | | December 31,
2018 | | March 31,
2018 |
| Assets | | | | | |
| Cash | $ | 268 |
| | $ | 260 |
| | $ | 121 |
|
| Interest-earning deposits | 122 |
| | 148 |
| | 122 |
|
| Total cash and cash equivalents | 390 |
| | 408 |
| | 243 |
|
| Investment securities available-for-sale | 2,142 |
| | 2,142 |
| | 1,918 |
|
| Investment securities held-to-maturity | 683 |
| | 703 |
| | 771 |
|
| Loans held-for-sale | 3,874 |
| | 3,869 |
| | 4,743 |
|
| Loans held-for-investment | 9,936 |
| | 9,088 |
| | 8,134 |
|
| Loans with government guarantees | 470 |
| | 392 |
| | 286 |
|
| Less: allowance for loan losses | (127 | ) | | (128 | ) | | (139 | ) |
| Total loans held-for-investment and loans with government guarantees, net | 10,279 |
| | 9,352 |
| | 8,281 |
|
| Mortgage servicing rights | 278 |
| | 290 |
| | 239 |
|
| Net deferred tax asset | 90 |
| | 103 |
| | 130 |
|
| Federal Home Loan Bank stock | 303 |
| | 303 |
| | 303 |
|
| Premises and equipment, net | 414 |
| | 390 |
| | 348 |
|
| Goodwill and intangible assets | 182 |
| | 190 |
| | 72 |
|
| Other assets | 810 |
| | 781 |
| | 688 |
|
| Total assets | $ | 19,445 |
| | $ | 18,531 |
| | $ | 17,736 |
|
| Liabilities and Stockholders' Equity | | | | | |
| Noninterest bearing deposits | $ | 4,016 |
| | $ | 2,989 |
| | $ | 2,391 |
|
| Interest bearing deposits | 9,437 |
| | 9,391 |
| | 7,595 |
|
| Total deposits | 13,453 |
| | 12,380 |
| | 9,986 |
|
| Short-term Federal Home Loan Bank advances and other | 3,101 |
| | 3,244 |
| | 4,153 |
|
| Long-term Federal Home Loan Bank advances | 250 |
| | 150 |
| | 1,280 |
|
| Other long-term debt | 495 |
| | 495 |
| | 494 |
|
| Other liabilities | 572 |
| | 692 |
| | 396 |
|
| Total liabilities | 17,871 |
| | 16,961 |
| | 16,309 |
|
| Stockholders' Equity | | | | | |
| Common stock | 1 |
| | 1 |
| | 1 |
|
| Additional paid in capital | 1,476 |
| | 1,522 |
| | 1,514 |
|
| Accumulated other comprehensive loss | (31 | ) | | (47 | ) | | (30 | ) |
| Retained earnings/(accumulated deficit) | 128 |
| | 94 |
| | (58 | ) |
| Total stockholders' equity | 1,574 |
| | 1,570 |
| | 1,427 |
|
| Total liabilities and stockholders' equity | $ | 19,445 |
| | $ | 18,531 |
| | $ | 17,736 |
|
Flagstar Bancorp, Inc. Condensed Consolidated Statements of Operations (Dollars in millions, except per share data) (Unaudited) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | First Quarter 2019 Compared to: |
| | Three Months Ended | | Fourth Quarter 2018 | | First Quarter 2018 |
| | March 31,
2019 | December 31,
2018 | September 30,
2018 | June 30,
2018 | March 31,
2018 | | Amount | Percent | | Amount | Percent |
| Interest Income | | | | | | | | | | | |
| Total interest income | $ | 180 |
| $ | 181 |
| $ | 183 |
| $ | 167 |
| $ | 152 |
| | $ | (1 | ) | (1 | )% | | $ | 28 |
| 18 | % |
| Total interest expense | 54 |
| 29 |
| 59 |
| 52 |
| 46 |
| | 25 |
| 86 | % | | 8 |
| 17 | % |
| Net interest income | 126 |
| 152 |
| 124 |
| 115 |
| 106 |
| | (26 | ) | (17 | )% | | 20 |
| 19 | % |
| Provision (benefit) for loan losses | — |
| (5 | ) | (2 | ) | (1 | ) | — |
| | 5 |
| (100 | )% | | — |
| N/M |
|
| Net interest income after provision (benefit) for loan losses | 126 |
| 157 |
| 126 |
| 116 |
| 106 |
| | (31 | ) | (20 | )% | | 20 |
| 19 | % |
| Noninterest Income | | | | | | |
|
|
|
| |
|
|
|
|
| Net gain on loan sales | 49 |
| 34 |
| 43 |
| 63 |
| 60 |
| | 15 |
| 44 | % | | (11 | ) | (18 | )% |
| Loan fees and charges | 17 |
| 20 |
| 23 |
| 24 |
| 20 |
| | (3 | ) | (15 | )% | | (3 | ) | (15 | )% |
| Net return on the mortgage servicing rights | 6 |
| 10 |
| 13 |
| 9 |
| 4 |
| | (4 | ) | (40 | )% | | 2 |
| 50 | % |
| Loan administration income | 11 |
| 8 |
| 5 |
| 5 |
| 5 |
| | 3 |
| 38 | % | | 6 |
| 120 | % |
| Deposit fees and charges | 8 |
| 6 |
| 5 |
| 5 |
| 5 |
| | 2 |
| 33 | % | | 3 |
| 60 | % |
| Other noninterest income | 18 |
| 20 |
| 18 |
| 17 |
| 17 |
| | (2 | ) | (10 | )% | | 1 |
| 6 | % |
| Total noninterest income | 109 |
| 98 |
| 107 |
| 123 |
| 111 |
| | 11 |
| 11 | % | | (2 | ) | (2 | )% |
| Noninterest Expense | | | | | | |
|
|
|
| |
|
|
|
|
| Compensation and benefits | 87 |
| 82 |
| 76 |
| 80 |
| 80 |
| | 5 |
| 6 | % | | 7 |
| 9 | % |
| Occupancy and equipment | 38 |
| 36 |
| 31 |
| 30 |
| 30 |
| | 2 |
| 6 | % | | 8 |
| 27 | % |
| Commissions | 13 |
| 16 |
| 21 |
| 25 |
| 18 |
| | (3 | ) | (19 | )% | | (5 | ) | (28 | )% |
| Loan processing expense | 17 |
| 16 |
| 14 |
| 15 |
| 14 |
| | 1 |
| 6 | % | | 3 |
| 21 | % |
| Legal and professional expense | 6 |
| 9 |
| 7 |
| 6 |
| 6 |
| | (3 | ) | (33 | )% | | — |
| — | % |
| Federal insurance premiums | 4 |
| 4 |
| 6 |
| 6 |
| 6 |
| | — |
| — | % | | (2 | ) | (33 | )% |
| Intangible asset amortization | 4 |
| 3 |
| 1 |
| 1 |
| — |
| | 1 |
| 33 | % | | 4 |
| N/M |
|
| Other noninterest expense | 22 |
| 23 |
| 17 |
| 14 |
| 19 |
| | (1 | ) | (4 | )% | | 3 |
| 16 | % |
| Total noninterest expense | 191 |
| 189 |
| 173 |
| 177 |
| 173 |
| | 2 |
| 1 | % | | 18 |
| 10 | % |
| Income before income taxes | 44 |
| 66 |
| 60 |
| 62 |
| 44 |
| | (22 | ) | (33 | )% | | — |
| — | % |
| Provision for income taxes | 8 |
| 12 |
| 12 |
| 12 |
| 9 |
| | (4 | ) | (33 | )% | | (1 | ) | (11 | )% |
| Net income | $ | 36 |
| $ | 54 |
| $ | 48 |
| $ | 50 |
| $ | 35 |
| | $ | (18 | ) | (33 | )% | | $ | 1 |
| 3 | % |
| Income per share | | | | | | |
|
|
|
| |
|
|
|
|
| Basic | $ | 0.64 |
| $ | 0.94 |
| $ | 0.84 |
| $ | 0.86 |
| $ | 0.61 |
| | $ | (0.30 | ) | (32 | )% | | $ | 0.03 |
| 5 | % |
| Diluted | $ | 0.63 |
| $ | 0.93 |
| $ | 0.83 |
| $ | 0.85 |
| $ | 0.60 |
| | $ | (0.30 | ) | (32 | )% | | $ | 0.03 |
| 5 | % |
| | | | | | | | | | | | |
| Cash dividends declared | $ | 0.04 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| | $ | 0.04 |
| 100 | % | | $ | 0.04 |
| 100 | % |
N/M - Not meaningful
Flagstar Bancorp, Inc.
Summary of Selected Consolidated Financial and Statistical Data
(Dollars in millions, except share data)
(Unaudited)
|
| | | | | | | | | | | |
| | Three Months Ended |
| | March 31, 2019 | | December 31, 2018 | | March 31, 2018 |
| Selected Mortgage Statistics: | | | | | |
| Mortgage rate lock commitments (fallout-adjusted) (1) | $ | 6,602 |
| | $ | 5,284 |
| | $ | 7,722 |
|
| Mortgage loans originated (2) | $ | 5,513 |
| | $ | 6,340 |
| | $ | 7,886 |
|
| Mortgage loans sold and securitized | $ | 5,170 |
| | $ | 7,146 |
| | $ | 7,247 |
|
| Selected Ratios: | | | | | |
| Interest rate spread | 2.69 | % | | 3.52 | % | | 2.54 | % |
| Adjusted interest rate spread (3) (4) | 2.69 | % | | 2.63 | % | | 2.54 | % |
| Net interest margin | 3.09 | % | | 3.70 | % | | 2.76 | % |
| Adjusted net interest margin (4) | 3.09 | % | | 2.99 | % | | 2.76 | % |
| Net margin on loans sold and securitized | 0.92 | % | | 0.44 | % | | 0.82 | % |
| Return on average assets | 0.79 | % | | 1.17 | % | | 0.82 | % |
| Adjusted return on average assets (4)(5) | 0.80 | % | | 0.91 | % | | 0.82 | % |
| Return on average common equity | 9.16 | % | | 13.98 | % | | 9.94 | % |
| Return on average tangible common equity (6) | 11.55 | % | | 15.88 | % | | 10.21 | % |
| Adjusted return on average tangible common equity (4) (5) (6) | 11.78 | % | | 12.44 | % | | 10.21 | % |
| Efficiency ratio | 81.3 | % | | 75.7 | % | | 79.7 | % |
| Common equity-to-assets ratio (average for the period) | 8.59 | % | | 8.41 | % | | 8.27 | % |
| Average Balances: | | | | | |
| Average common shares outstanding | 56,897,799 |
| | 57,628,561 |
| | 57,356,654 |
|
| Average fully diluted shares outstanding | 57,586,100 |
| | 58,385,354 |
| | 58,314,385 |
|
| Average interest-earning assets | $ | 16,294 |
| | $ | 16,391 |
| | $ | 15,354 |
|
| Average interest-bearing liabilities | $ | 12,505 |
| | $ | 13,046 |
| | $ | 12,974 |
|
| Average stockholders' equity | $ | 1,583 |
| | $ | 1,548 |
| | $ | 1,414 |
|
| |
| (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. |
| |
| (4) | The three months ended December 31, 2018 excludes $29 million of hedging gains reclassified from AOCI to net interest income in conjunction with the payment of long-term FHLB advances. |
| |
| (5) | Excludes acquisition-related expenses attributable to the Wells Fargo branch acquisition of $1 million and $14 million for the three months ended March 31, 2019 and December 31, 2018, respectively. |
| |
| (6) | Excludes goodwill, intangible assets and the associated amortization. |
|
| | | | | | | | | | | |
| | March 31, 2019 | | December 31, 2018 | | March 31, 2018 |
| Selected Statistics: | | | | | |
| Book value per common share | $ | 27.86 |
| | $ | 27.19 |
| | $ | 24.87 |
|
| Tangible book value per share (1) | $ | 24.65 |
| | $ | 23.90 |
| | $ | 23.62 |
|
| Number of common shares outstanding | 56,480,086 |
| | 57,749,464 |
| | 57,399,993 |
|
| Number of FTE employees | 3,996 |
| | 3,938 |
| | 3,659 |
|
| Number of bank branches | 160 |
| | 160 |
| | 107 |
|
| Ratio of nonperforming assets to total assets (2) | 0.17 | % | | 0.16 | % | | 0.19 | % |
| Common equity-to-assets ratio | 8.09 | % | | 8.47 | % | | 8.05 | % |
| MSR Key Statistics and Ratios: | | | | | |
| Weighted average service fee (basis points) | 38.0 |
| | 35.8 |
| | 30.4 |
|
| Capitalized value of mortgage servicing rights | 1.27 | % | | 1.35 | % | | 1.27 | % |
| Mortgage servicing rights to Tier 1 capital | 18.3 | % | | 19.3 | % | | 16.2 | % |
| |
| (1) | Excludes goodwill and intangibles of $182 million, $190 million, and $72 million at March 31, 2019, December 31, 2018, and March 31, 2018, respectively. See Non-GAAP Reconciliation for further information. |
Average Balances, Yields and Rates
(Dollars in millions)
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended |
| | March 31, 2019 | | December 31, 2018 | | March 31, 2018 |
| | 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 | $ | 3,266 |
| $ | 38 |
| 4.72 | % | | $ | 3,991 |
| $ | 48 |
| 4.78 | % | | $ | 4,231 |
| $ | 44 |
| 4.12 | % |
| Loans held-for-investment | | | | | | | | | | | |
| Residential first mortgage | 3,044 |
| 28 |
| 3.64 | % | | 3,115 |
| 29 |
| 3.68 | % | | 2,773 |
| 23 |
| 3.41 | % |
| Home equity | 745 |
| 10 |
| 5.63 | % | | 717 |
| 10 |
| 5.43 | % | | 668 |
| 9 |
| 5.21 | % |
| Other | 356 |
| 6 |
| 7.11 | % | | 231 |
| 3 |
| 6.06 | % | | 27 |
| — |
| 4.56 | % |
| Total Consumer loans | 4,145 |
| 44 |
| 4.30 | % | | 4,063 |
| 42 |
| 4.12 | % | | 3,468 |
| 32 |
| 3.76 | % |
| Commercial Real Estate | 2,250 |
| 33 |
| 5.66 | % | | 2,171 |
| 31 |
| 5.52 | % | | 1,954 |
| 24 |
| 4.87 | % |
| Commercial and Industrial | 1,594 |
| 21 |
| 5.39 | % | | 1,345 |
| 19 |
| 5.48 | % | | 1,217 |
| 16 |
| 5.21 | % |
| Warehouse Lending | 1,175 |
| 16 |
| 5.47 | % | | 1,337 |
| 18 |
| 5.29 | % | | 848 |
| 11 |
| 5.14 | % |
| Total Commercial loans | 5,019 |
| 70 |
| 5.53 | % | | 4,853 |
| 68 |
| 5.45 | % | | 4,019 |
| 51 |
| 5.03 | % |
| Total loans held-for-investment | 9,164 |
| 114 |
| 4.97 | % | | 8,916 |
| 110 |
| 4.84 | % | | 7,487 |
| 83 |
| 4.44 | % |
| Loans with government guarantees | 455 |
| 3 |
| 2.96 | % | | 350 |
| 2 |
| 2.72 | % | | 291 |
| 3 |
| 3.72 | % |
| Investment securities | 3,258 |
| 24 |
| 2.91 | % | | 2,996 |
| 21 |
| 2.84 | % | | 3,233 |
| 22 |
| 2.69 | % |
| Interest-earning deposits | 151 |
| 1 |
| 2.77 | % | | 138 |
| — |
| 1.55 | % | | 112 |
| — |
| 1.67 | % |
| Total interest-earning assets | 16,294 |
| $ | 180 |
| 4.43 | % | | 16,391 |
| $ | 181 |
| 4.39 | % | | 15,354 |
| $ | 152 |
| 3.95 | % |
| Other assets | 2,144 |
| | | | 2,022 |
| | | | 1,736 |
| | |
| Total assets | $ | 18,438 |
| | | | $ | 18,413 |
| | | | $ | 17,090 |
| | |
| Interest-Bearing Liabilities | | | | | | | | | | | |
| Retail deposits | | | | | | | | | | | |
| Demand deposits | $ | 1,220 |
| $ | 2 |
| 0.68 | % | | $ | 1,072 |
| $ | 3 |
| 1.02 | % | | $ | 548 |
| $ | — |
| 0.26 | % |
| Savings deposits | 3,089 |
| 7 |
| 0.95 | % | | 3,075 |
| 7 |
| 0.91 | % | | 3,490 |
| 7 |
| 0.81 | % |
| Money market deposits | 778 |
| 1 |
| 0.27 | % | | 446 |
| — |
| 0.41 | % | | 205 |
| — |
| 0.44 | % |
| Certificates of deposit | 2,488 |
| 13 |
| 2.13 | % | | 2,274 |
| 11 |
| 1.88 | % | | 1,619 |
| 6 |
| 1.45 | % |
| Total retail deposits | 7,575 |
| 23 |
| 1.22 | % | | 6,867 |
| 21 |
| 1.22 | % | | 5,862 |
| 13 |
| 0.92 | % |
| Government deposits | | | | | | | | | | | |
| Demand deposits | 305 |
| — |
| 0.63 | % | | 269 |
| 1 |
| 0.67 | % | | 241 |
| — |
| 0.55 | % |
| Savings deposits | 568 |
| 3 |
| 1.75 | % | | 602 |
| 3 |
| 1.69 | % | | 483 |
| 2 |
| 1.11 | % |
| Certificates of deposit | 297 |
| 1 |
| 1.94 | % | | 313 |
| 1 |
| 1.76 | % | | 401 |
| 1 |
| 1.19 | % |
| Total government deposits | 1,170 |
| 4 |
| 1.51 | % | | 1,184 |
| 5 |
| 1.48 | % | | 1,125 |
| 3 |
| 1.02 | % |
| Wholesale deposits and other | 387 |
| 2 |
| 2.23 | % | | 625 |
| 3 |
| 2.08 | % | | 171 |
| 1 |
| 1.91 | % |
| Total interest-bearing deposits | 9,132 |
| 29 |
| 1.30 | % | | 8,676 |
| 29 |
| 1.31 | % | | 7,158 |
| 17 |
| 0.96 | % |
| Short-term FHLB advances and other | 2,725 |
| 17 |
| 2.54 | % | | 2,954 |
| 18 |
| 2.39 | % | | 4,032 |
| 15 |
| 1.53 | % |
| Long-term FHLB advances | 153 |
| 1 |
| 1.54 | % | | 921 |
| (25 | ) | (10.65 | )% | | 1,290 |
| 7 |
| 2.10 | % |
| Less: Swap gain reclassified out of OCI (1) | | — |
| | | | 29 |
| | | | — |
| |
| Adjusted long-term FHLB advances (1) | 153 |
| 1 |
| 1.54 | % | | 921 |
| 4 |
| 1.97 | % | | 1,290 |
| 7 |
| 2.10 | % |
| Other long-term debt | 495 |
| 7 |
| 5.90 | % | | 495 |
| 7 |
| 5.65 | % | | 494 |
| 7 |
| 5.37 | % |
| Adjusted total interest-bearing liabilities (1) | 12,505 |
| 54 |
| 1.75 | % | | 13,046 |
| 58 |
| 1.76 | % | | 12,974 |
| 46 |
| 1.41 | % |
| Noninterest-bearing deposits (2) | 3,774 |
| | | | 3,266 |
| | | | 2,213 |
| | |
| Other liabilities | 576 |
| | | | 553 |
| | | | 489 |
| | |
| Stockholders' equity | 1,583 |
| | | | 1,548 |
| | | | 1,414 |
| | |
| Total liabilities and stockholders' equity | $ | 18,438 |
| | | | $ | 18,413 |
| | | | $ | 17,090 |
| | |
| Net interest-earning assets | $ | 3,789 |
| | | | $ | 3,345 |
| | | | $ | 2,380 |
| | |
| Net interest income (1) | | $ | 126 |
| | | | $ | 123 |
| | | | $ | 106 |
| |
| Adjusted interest rate spread (1) (3) | | | 2.69 | % | | | | 2.63 | % | | | | 2.54 | % |
| Adjusted net interest margin (1) (4) | | | 3.09 | % | | | | 2.99 | % | | | | 2.76 | % |
| Ratio of average interest-earning assets to interest-bearing liabilities | | | 130.3 | % | | | | 125.6 | % | | | | 118.3 | % |
| Total average deposits | $ | 12,906 |
| | | | $ | 11,942 |
| | | | $ | 9,371 |
| | |
| |
| (1) | The three months ended December 31, 2018 excludes $29 million of hedging gains reclassified from AOCI in conjunction with the payment of long-term FHLB advances. |
| |
| (2) | Includes noninterest-bearing custodial deposits that arise due to the servicing of loans for others. |
| |
| (3) | Interest rate spread is the difference between rate of interest earned on interest-earning assets and rate of interest paid on interest-bearing liabilities. |
| |
| (4) | Net interest margin is net interest income divided by average interest-earning assets. |
Earnings Per Share
(Dollars in millions, except share data)
(Unaudited)
|
| | | | | | | | | | | |
| | Three Months Ended |
| | March 31, 2019 | | December 31, 2018 | | March 31, 2018 |
| Net income | $ | 36 |
| | $ | 54 |
| | $ | 35 |
|
| Weighted average shares | | | | | |
| Weighted average common shares outstanding | 56,897,799 |
| | 57,628,561 |
| | 57,356,654 |
|
| Effect of dilutive securities | | | | | |
| Stock-based awards | 692,473 |
| | 756,793 |
| | 957,731 |
|
| Weighted average diluted common shares | 57,590,272 |
| | 58,385,354 |
| | 58,314,385 |
|
| Earnings per common share | | | | | |
| Basic earnings per common share | $ | 0.64 |
| | $ | 0.94 |
| | $ | 0.61 |
|
| Effect of dilutive securities | | | | | |
| Stock-based awards | (0.01 | ) | | (0.01 | ) | | (0.01 | ) |
| Diluted earnings per common share | $ | 0.63 |
| | $ | 0.93 |
| | $ | 0.60 |
|
Regulatory Capital - Bancorp
(Dollars in millions)
(Unaudited)
|
| | | | | | | | | | | | | | | | | |
| | March 31, 2019 | | December 31, 2018 | | March 31, 2018 |
| | Amount | Ratio | | Amount | Ratio | | Amount | Ratio |
| Tier 1 leverage (to adjusted avg. total assets) | $ | 1,520 |
| 8.37 | % | | $ | 1,505 |
| 8.29 | % | | $ | 1,475 |
| 8.72 | % |
| Total adjusted avg. total asset base | $ | 18,171 |
| | | $ | 18,158 |
| | | $ | 16,918 |
| |
| Tier 1 common equity (to risk weighted assets) | $ | 1,280 |
| 9.69 | % | | $ | 1,265 |
| 10.54 | % | | $ | 1,235 |
| 10.80 | % |
| Tier 1 capital (to risk weighted assets) | $ | 1,520 |
| 11.51 | % | | $ | 1,505 |
| 12.54 | % | | $ | 1,475 |
| 12.90 | % |
| Total capital (to risk weighted assets) | $ | 1,650 |
| 12.49 | % | | $ | 1,637 |
| 13.63 | % | | $ | 1,617 |
| 14.14 | % |
| Risk-weighted asset base | $ | 13,209 |
| | | $ | 12,006 |
| | | $ | 11,440 |
| |
Regulatory Capital - Bank
(Dollars in millions)
(Unaudited)
|
| | | | | | | | | | | | | | | | | |
| | March 31, 2019 | | December 31, 2018 | | March 31, 2018 |
| | Amount | Ratio | | Amount | Ratio | | Amount | Ratio |
| Tier 1 leverage (to adjusted avg. total assets) | $ | 1,641 |
| 9.04 | % | | $ | 1,574 |
| 8.67 | % | | $ | 1,537 |
| 9.08 | % |
| Total adjusted avg. total asset base | $ | 18,155 |
| | | $ | 18,151 |
| | | $ | 16,926 |
| |
| Tier 1 common equity (to risk weighted assets) | $ | 1,641 |
| 12.44 | % | | $ | 1,574 |
| 13.12 | % | | $ | 1,537 |
| 13.42 | % |
| Tier 1 capital (to risk weighted assets) | $ | 1,641 |
| 12.44 | % | | $ | 1,574 |
| 13.12 | % | | $ | 1,537 |
| 13.42 | % |
| Total capital (to risk weighted assets) | $ | 1,771 |
| 13.42 | % | | $ | 1,705 |
| 14.21 | % | | $ | 1,679 |
| 14.66 | % |
| Risk-weighted asset base | $ | 13,193 |
| | | $ | 11,997 |
| | | $ | 11,449 |
| |
Loans Serviced
(Dollars in millions)
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | | |
| | March 31, 2019 | | December 31, 2018 | | March 31, 2018 |
| | Unpaid Principal Balance (1) | | Number of accounts | | Unpaid Principal Balance (1) | | Number of accounts | | Unpaid Principal Balance (1) | | Number of accounts |
Subserviced for others (2) | $ | 170,476 |
| | 814,248 |
| | $ | 146,040 |
| | 705,149 |
| | $ | 77,748 |
| | 360,396 |
|
| Serviced for others | 21,925 |
| | 90,622 |
| | 21,592 |
| | 88,434 |
| | 18,767 |
| | 77,426 |
|
Serviced for own loan portfolio (3) | 7,631 |
| | 56,687 |
| | 7,438 |
| | 57,401 |
| | 7,653 |
| | 38,291 |
|
| Total loans serviced | $ | 200,032 |
| | 961,557 |
| | $ | 175,070 |
| | 850,984 |
| | $ | 104,168 |
| | 476,113 |
|
| |
| (1) | UPB, net of write downs, does not include premiums or discounts. |
| |
| (2) | Includes temporary short-term subservicing performed as a result of sales of servicing-released mortgage servicing rights. Includes repossessed assets. |
| |
| (3) | Includes loans held-for-investment (residential first mortgage, home equity and other consumer), loans-held-for-sale (residential first mortgage), loans with government guarantees (residential first mortgage), and repossessed assets. |
Loans Held-for-Investment
(Dollars in millions)
(Unaudited)
|
| | | | | | | | | | | | | | | | | |
| | March 31, 2019 | | December 31, 2018 | | March 31, 2018 |
| Consumer loans | | | | | | | | |
| Residential first mortgage | $ | 3,100 |
| 31.2 | % | | $ | 2,999 |
| 33.0 | % | | $ | 2,818 |
| 34.6 | % |
| Home equity | 796 |
| 8.0 | % | | 731 |
| 8.0 | % | | 671 |
| 8.3 | % |
| Other | 433 |
| 4.4 | % | | 314 |
| 3.5 | % | | 25 |
| 0.3 | % |
| Total consumer loans | 4,329 |
| 43.6 | % | | 4,044 |
| 44.5 | % | | 3,514 |
| 43.2 | % |
| Commercial loans | | | | | | | | |
| Commercial real estate | 2,324 |
| 23.4 | % | | 2,152 |
| 23.7 | % | | 1,985 |
| 24.4 | % |
| Commercial and industrial | 1,651 |
| 16.6 | % | | 1,433 |
| 15.8 | % | | 1,228 |
| 15.1 | % |
| Warehouse lending | 1,632 |
| 16.4 | % | | 1,459 |
| 16.0 | % | | 1,407 |
| 17.3 | % |
| Total commercial loans | 5,607 |
| 56.4 | % | | 5,044 |
| 55.5 | % | | 4,620 |
| 56.8 | % |
| Total loans held-for-investment | $ | 9,936 |
| 100.0 | % | | $ | 9,088 |
| 100.0 | % | | $ | 8,134 |
| 100.0 | % |
Allowance for Loan Losses
(Dollars in millions)
(Unaudited)
|
| | | | | | | | | | | |
| | As of/For the Three Months Ended |
| | March 31, 2019 | December 31, 2018 | March 31, 2018 |
| Allowance for loan losses | | | | | |
| Residential first mortgage | $ | 35 |
| | $ | 38 |
| | $ | 47 |
|
| Home equity | 16 |
| | 15 |
| | 21 |
|
| Other | 4 |
| | 3 |
| | 1 |
|
| Total consumer loans | 55 |
| | 56 |
| | 69 |
|
| Commercial real estate | 36 |
| | 48 |
| | 44 |
|
| Commercial and industrial | 30 |
| | 18 |
| | 20 |
|
| Warehouse lending | 6 |
| | 6 |
| | 6 |
|
| Total commercial loans | 72 |
| | 72 |
| | 70 |
|
| Total allowance for loan losses | $ | 127 |
| | $ | 128 |
| | $ | 139 |
|
Allowance for Loan Losses
(Dollars in millions)
(Unaudited)
|
| | | | | | | | | | | |
| | For the Three Months Ended |
| | March 31, 2019 | December 31, 2018 | March 31, 2018 |
| Beginning balance | $ | 128 |
| | $ | 134 |
| | $ | 140 |
|
| Provision (benefit) for loan losses | — |
| | (5 | ) | | — |
|
| Charge-offs | | | | | |
| Total consumer loans | (2 | ) | | (2 | ) | | (2 | ) |
| Total charge-offs | $ | (2 | ) | | $ | (2 | ) | | $ | (2 | ) |
| Recoveries | | | | | |
| Total consumer loans | 1 |
| | 1 |
| | 1 |
|
| Total recoveries | 1 |
| | 1 |
| | 1 |
|
| Charge-offs, net of recoveries | (1 | ) | | (1 | ) | | (1 | ) |
| Ending balance | $ | 127 |
| | $ | 128 |
| | $ | 139 |
|
Net charge-offs/(recoveries) to LHFI ratio (annualized) by loan type (1): | | | | | |
| Residential first mortgage | 0.05 | % | | 0.05 | % | | 0.11 | % |
| Home equity and other consumer | 0.23 | % | | 0.23 | % | | 0.28 | % |
| Commercial real estate | — | % | | (0.02 | )% | | (0.01 | )% |
| Commercial and industrial | 0.02 | % | | — | % | | (0.01 | )% |
| |
| (1) | Excludes loans carried under the fair value option. |
Nonperforming Loans and Assets
(Dollars in millions)
(Unaudited)
|
| | | | | | | | | | | |
| | March 31, 2019 | December 31, 2018 | March 31, 2018 |
| Nonperforming LHFI | $ | 14 |
| | $ | 12 |
| | $ | 14 |
|
| Nonperforming TDRs | 3 |
| | 3 |
| | 5 |
|
| Nonperforming TDRs at inception but performing for less than six months | 7 |
| | 7 |
| | 10 |
|
Total nonperforming LHFI and TDRs (1) | 24 |
| | 22 |
| | 29 |
|
| Real estate and other nonperforming assets, net | 8 |
| | 7 |
| | 5 |
|
| LHFS | $ | 13 |
| | $ | 10 |
| | $ | 11 |
|
| Total nonperforming assets | $ | 45 |
| | $ | 39 |
| | $ | 45 |
|
| | | | | | |
Ratio of nonperforming assets to total assets (2) | 0.17 | % | | 0.16 | % | | 0.19 | % |
| Ratio of nonperforming LHFI and TDRs to LHFI | 0.24 | % | | 0.24 | % | | 0.35 | % |
Ratio of nonperforming assets to LHFI and repossessed assets (2) | 0.33 | % | | 0.32 | % | | 0.42 | % |
| |
| (1) | Includes less than 90 day past due performing loans placed on nonaccrual. Interest is not being accrued on these loans. |
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, 2019 | | | | | | | | | |
| Consumer loans | $ | 6 |
| | $ | 2 |
| | $ | 24 |
| | $ | 32 |
| | $ | 4,329 |
|
| Commercial loans | — |
| | 1 |
| | — |
| | 1 |
| | 5,607 |
|
| Total loans | $ | 6 |
| | $ | 3 |
| | $ | 24 |
| | $ | 33 |
| | $ | 9,936 |
|
| December 31, 2018 | | | | | | | | | |
| Consumer loans | $ | 5 |
| | $ | 2 |
| | $ | 22 |
| | $ | 29 |
| | $ | 4,044 |
|
| Commercial loans | — |
| | — |
| | — |
| | — |
| | 5,044 |
|
| Total loans | $ | 5 |
| | $ | 2 |
| | $ | 22 |
| | $ | 29 |
| | $ | 9,088 |
|
| March 31, 2018 | | | | | | | | | |
| Consumer loans | 4 |
| | 1 |
| | 29 |
| | $ | 34 |
| | $ | 3,514 |
|
| Commercial loans | — |
| | — |
| | — |
| | — |
| | 4,620 |
|
| Total loans | $ | 4 |
| | $ | 1 |
| | $ | 29 |
| | $ | 34 |
| | $ | 8,134 |
|
| |
| (1) | Includes performing nonaccrual loans that are less than 90 days delinquent and for which interest cannot be accrued. |
Troubled Debt Restructurings
(Dollars in millions)
(Unaudited)
|
| | | | | | | | | | | |
| | TDRs |
| | Performing | | Nonperforming | | Total |
| March 31, 2019 | |
| Consumer loans | $ | 43 |
| | $ | 10 |
| | $ | 53 |
|
| Commercial loans | — |
| | — |
| | — |
|
| Total TDR loans | $ | 43 |
| | $ | 10 |
| | $ | 53 |
|
| December 31, 2018 | | | | | |
| Consumer loans | $ | 44 |
| | $ | 10 |
| | $ | 54 |
|
| Total TDR loans | $ | 44 |
| | $ | 10 |
| | $ | 54 |
|
| March 31, 2018 | | | | | |
| Consumer loans | $ | 44 |
| | $ | 15 |
| | $ | 59 |
|
| Commercial loans | 5 |
| | — |
| | 5 |
|
| Total TDR loans | $ | 49 |
| | $ | 15 |
| | $ | 64 |
|
Non-GAAP Reconciliation
(Dollars in millions)
(Unaudited)
In addition to analyzing the Company's results on a reported basis, management reviews the Company's results and the results on an adjusted basis. The non-GAAP measures presented in the tables below reflect the adjustments of the reported U.S.GAAP results for significant items that management does not believe are reflective of the Company's current and ongoing operations. The acquisition related expenses and hedging gains recognized in conjunction with the Well Fargo branch acquisition in 2018 are not reflective of our ongoing operations and, therefore, have been excluded from our U.S. GAAP results. The Company believes that tangible book value per share, tangible common equity to assets ratio, return on average tangible equity, adjusted return on average tangible equity, adjusted return on average assets, adjusted net income, adjusted basic and diluted earnings per share, adjusted noninterest expense, adjusted net interest income, adjusted net interest margin, adjusted income before taxes, adjusted provision for income taxes, adjusted efficiency ratio and adjusted HFI loan-to-deposit ratio provide a meaningful representation of its operating performance on an ongoing basis.
The following tables provide a reconciliation of non-GAAP financial measures.
Tangible book value per share and tangible common equity to assets ratio. |
| | | | | | | | | | | | | | | | | | | |
| | March 31, 2019 | | December 31,
2018 | | September 30,
2018 | | June 30,
2018 | | March 31, 2018 |
| | (Dollars in millions, except share data) |
| Total stockholders' equity | $ | 1,574 |
| | $ | 1,570 |
| | $ | 1,518 |
| | $ | 1,475 |
| | $ | 1,427 |
|
| Less: Goodwill and intangible assets | 182 |
| | 190 |
| | 70 |
| | 71 |
| | 72 |
|
| Tangible book value | $ | 1,392 |
| | $ | 1,380 |
| | $ | 1,448 |
| | $ | 1,404 |
| | $ | 1,355 |
|
| |
| | | | | | | | |
| Number of common shares outstanding | 56,480,086 |
| | 57,749,464 |
| | 57,625,439 |
| | 57,598,406 |
| | 57,399,993 |
|
| Tangible book value per share | $ | 24.65 |
| | $ | 23.90 |
| | $ | 25.13 |
| | $ | 24.37 |
| | $ | 23.62 |
|
| | | | | | | |
| |
|
| Total assets | $ | 19,445 |
| | $ | 18,531 |
| | $ | 18,697 |
| | $ | 18,130 |
| | $ | 17,736 |
|
| Tangible common equity to assets ratio | 7.16 | % | | 7.45 | % | | 7.74 | % | | 7.74 | % | | 7.65 | % |
Return on average tangible equity, adjusted return on average tangible equity and adjusted return on average assets.
|
| | | | | | | | | | | |
| | Three Months Ended |
| | March 31, 2019 | | December 31, 2018 | | March 31, 2018 |
| | (Dollars in millions) |
| Net income | $ | 36 |
| | $ | 54 |
| | $ | 35 |
|
| Less: Intangible asset amortization | 4 |
| | 3 |
| | — |
|
| Tangible net income | $ | 40 |
| | $ | 57 |
| | $ | 35 |
|
| | | | | | |
| Total equity | $ | 1,583 |
| | $ | 1,548 |
| | $ | 1,414 |
|
| Less: Average goodwill and intangible assets | 187 |
| | 129 |
| | 36 |
|
| Total tangible equity | $ | 1,396 |
| | $ | 1,419 |
| | $ | 1,378 |
|
| | | | | | |
| Return on average equity | 9.16 | % | | 13.98 | % | | 9.94 | % |
| Return on average tangible equity | 11.55 | % | | 15.88 | % | | 10.21 | % |
| Adjustment to remove Wells Fargo acquisition costs | 0.23 | % | | 3.32 | % | | — | % |
| Adjustment to remove hedging gains | — | % | | (6.76 | )% | | — | % |
| Adjusted return on average tangible equity | 11.78 | % | | 12.44 | % | | 10.21 | % |
| | | | | | |
| Return on average assets | 0.79 | % | | 1.17 | % | | 0.82 | % |
| Adjustment to remove Wells Fargo acquisition costs | 0.01 | % | | 0.26 | % | | — | % |
| Adjustment to remove hedging gains | — | % | | (0.52 | )% | | — | % |
| Adjusted return on average assets | 0.80 | % | | 0.91 | % | | 0.82 | % |
Adjusted income before taxes, net income, provision for income taxes, basic earnings per share, diluted earnings per share, net interest income, net interest margin, noninterest expense and efficiency ratio. |
| | | | | | | | | | | |
| | Three Months Ended |
| | March 31, 2019 | | December 31, 2018 | | September 30, 2018 |
| | (Dollars in millions) |
| Income before income taxes | $ | 44 |
| | $ | 66 |
| | $ | 60 |
|
| Adjustment for Wells Fargo acquisition costs | 1 |
| | 14 |
| | 1 |
|
| Adjustment for hedging gains | — |
| | (29 | ) | | — |
|
| Adjusted income before income taxes | $ | 45 |
| | $ | 51 |
| | $ | 61 |
|
| | | | | | |
| Provision for income taxes | $ | 8 |
| | $ | 12 |
| | $ | 12 |
|
| Tax impact on adjustment for Wells Fargo acquisition costs | — |
| | 2 |
| | — |
|
| Tax impact on adjustment for hedging gains | — |
| | (5 | ) | | — |
|
| Adjusted provision for income taxes | $ | 8 |
| | $ | 9 |
| | $ | 12 |
|
| | | | | | |
| Net income | $ | 36 |
| | $ | 54 |
| | $ | 48 |
|
| Adjusted net income | $ | 37 |
| | $ | 42 |
| | $ | 49 |
|
| | | | | | |
| Weighted average common shares outstanding | 56,897,799 |
| | 57,628,561 |
| | 57,600,360 |
|
| Weighted average diluted common shares | 57,586,100 |
| | 58,385,354 |
| | 58,332,598 |
|
| Adjusted basic earnings per share | $ | 0.65 |
| | $ | 0.73 |
| | 0.86 |
|
| Adjusted diluted earnings per share | $ | 0.64 |
| | $ | 0.72 |
| | 0.85 |
|
| | | | | | |
| Total net interest income | $ | 126 |
| | $ | 152 |
| | 124 |
|
| Hedging gains | — |
| | (29 | ) | | — |
|
| Adjusted total net interest income | $ | 126 |
| | $ | 123 |
| | $ | 124 |
|
| | | | | | |
| Average interest earning assets | $ | 16,294 |
| | $ | 16,391 |
| | $ | 16,786 |
|
| Net interest margin | 3.09 | % | | 3.70 | % | | 2.93 | % |
| Adjusted net interest margin | 3.09 | % | | 2.99 | % | | 2.93 | % |
| | | | | | |
| Total noninterest expense | $ | 191 |
| | $ | 189 |
| | $ | 173 |
|
| Wells Fargo acquisition costs | 1 |
| | 14 |
| | 1 |
|
| Adjusted total noninterest expense | $ | 190 |
| | $ | 175 |
| | $ | 172 |
|
| | | | | | |
| Efficiency ratio | 81.3 | % | | 75.7 | % | | 74.6 | % |
| Adjustment to remove Wells Fargo acquisition costs | (0.5 | )% | | (5.7 | )% | | (0.5 | )% |
| Adjustment to remove hedging gains | — | % | | 9.2 | % | | — | % |
| Adjusted efficiency ratio | 80.8 | % | | 79.2 | % | | 74.1 | % |
Adjusted HFI loan-to-deposit ratio.
|
| | | | | | | | | | | | | | | | | | | |
| | March 31, 2019 | | December 31,
2018 | | September 30,
2018 | | June 30,
2018 | | March 31, 2018 |
| | (Dollars in millions, except share data) |
| Average LHFI | $ | 9,164 |
| | $ | 8,916 |
| | $ | 8,872 |
| | $ | 8,380 |
| | $ | 7,487 |
|
| Less: Warehouse loans | 1,175 |
| | 1,337 |
| | 1,586 |
| | 1,495 |
| | 848 |
|
| Adjusted average LHFI | $ | 7,989 |
| | $ | 7,579 |
| | $ | 7,286 |
| | $ | 6,885 |
| | $ | 6,639 |
|
| |
| |
| |
| |
| |
|
| Average deposits | $ | 12,906 |
| | $ | 11,942 |
| | $ | 11,336 |
| | $ | 10,414 |
| | $ | 9,371 |
|
| Less: Custodial deposits | 2,535 |
| | 2,133 |
| | 1,971 |
| | 1,604 |
| | 1,456 |
|
| Adjusted average deposits | $ | 10,371 |
| | $ | 9,809 |
| | $ | 9,365 |
| | $ | 8,810 |
| | $ | 7,915 |
|
| | | | | | | | | | |
| HFI loan-to-deposit ratio | 71.0 | % | | 74.7 | % | | 78.3 | % | | 80.5 | % | | 79.9 | % |
| Adjusted HFI loan-to-deposit ratio | 77.0 | % | | 77.3 | % | | 77.8 | % | | 78.1 | % | | 83.9 | % |
