3rd Quarter 2019 Flagstar Bancorp, Inc. (NYSE: FBC) Earnings Presentation 3rd Quarter 2019 October 22, 2019
Cautionary statements 3rd Quarter 2019 This presentation contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Forward-looking statements are based on management’s current expectations and assumptions regarding the Company’s business and performance, the economy and other future conditions, and forecasts of future events, circumstances and results. However, they are not guarantees of future performance and are subject to known and unknown risks, uncertainties, contingencies and other factors. Generally, forward-looking statements are not based on historical facts but instead represent our management’s beliefs regarding future events. Such statements may be identified by words such as believe, expect, anticipate, intend, plan, estimate, may increase, may fluctuate, and similar expressions or future or conditional verbs such as will, should, would and could. Such statements are based on management’s current expectations and are subject to risks, uncertainties and changes in circumstances. Actual results and capital and other financial conditions may differ materially from those included in these statements due to a variety of factors, including without limitation those found 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). Any forward-looking statements made by or on behalf of us speak only as to the date they are made, and we do not undertake to update forward-looking statements to reflect the impact of circumstances or events that arise after the date the forward-looking statements were made, except as required under United States securities laws. In addition to results presented in accordance with GAAP, this presentation includes non-GAAP financial measures. 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, which are not required to be uniformly applied. 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 these conference call slides. Additional discussion of the use of non-GAAP measures can also be found in the Form 8-K Current Report related to this presentation 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. 2
Executive Overview 3rd Quarter 2019 Sandro DiNello, CEO
Strategic highlights 3rd Quarter 2019 Unique • Built to generate strong results in any interest rate environment; quarter results highlight the advantage of our unique business model; relationship-based business model - Industry-leading mortgage business, layered on top of a well balanced community bank and best in class servicing business • Net interest income was up 6%, driven by robust growth in our loan portfolio and deposits without compromising price Grow community or quality banking - Identified opportunities to add high quality loans in warehouse, CRE, C&I, and non-auto indirect portfolios; funding this asset growth with core deposits Strengthen • Mortgage revenue up on improved margin and volume, highlighting strength of our scalable origination platform mortgage and - Maintained disciplined pricing strategy focused on generating business in most profitable channels servicing revenues • Servicing delivered strong financial results; ended the quarter with 994,000 loans being serviced or subserviced • Net income of $63mm, or $1.11 per diluted share; up 56% vs. adjusted 2Q19 net income(1) Highly profitable • YTD 2019 adjusted RoTCE(1) of 13.6%; up 70 bps vs. YTD 2018 operations • Return on assets of 1.2% for Q319; up 39 bps vs. adjusted Q219(1) and up 15 bps vs. adjusted Q318(1) Positioned to thrive • Effective management of asset sensitivity as net interest margin was relatively flat at 3.05%, despite two rate cuts in any market • Diversified and scalable earning streams provide consistent capital creation and build shareholder value 1) Non-GAAP number. Please see reconciliations on page 41 and 42. 4
Financial Overview 3rd Quarter 2019 Jim Ciroli, CFO
Financial highlights 3rd Quarter 2019 • Net income of $63mm, or $1.11 per diluted share, in 3Q19, up 50% vs. adjusted 2Q19 net income(1) Solid earnings - Adjusted revenue growth(1) of $36mm, or 13%, led by higher mortgage revenue and net interest income • Loans held-for-investment increased $1.1bn vs 2Q19; 12% growth in commercial loans; 9% growth in consumer loans Growth in - Average warehouse loans up $511mm, benefitting from higher refinance volumes community banking - Average consumer loans higher $396mm higher, with evenly distributed loan growth across the portfolio • Net interest margin at 3.05%, relatively flat to prior quarter, despite two rate cuts in the quarter • Mortgage revenue(2) of $108mm; up $28mm, or 35%, vs. 2Q19 and $56mm, or 108% vs 3Q18 Higher mortgage - Net gain on loan sales rose $35mm, or 47%; GOS margin up 31 basis points and FOALs up $0.9bn, or 10% revenue - Net loss on MSRs of $2mm; increased refinance activity accelerated prepayments • Asset quality strong as net charge-offs were only 2 basis points and nonperforming loan ratio decreased to 0.21% Strong asset - ALLL covered 0.9% of loans HFI, or 1.1% excluding warehouse loans quality • Early stage loan delinquencies remain low at $12mm, or 10 basis points • Total risk based capital ratio at 11.5% (11.8%(1) under Capital Simplification) Robust capital - $2 billion period end asset growth, with $1.5 billion coming from warehouse and loans held-for-sale position • Tier 1 leverage ratio at 8.0% (8.4%(1) under Capital Simplification) 1) Non-GAAP number. Please see reconciliations on page 41 and 42. 2) Mortgage revenue is defined as net gain on loan sales HFS plus the net return on the MSRs. 6
Quarterly income comparison 3rd Quarter 2019 $mm Observations 3Q19 2Q19 $ Variance % Variance A Net interest income Net interest income A $146 $138 $8 6% • Net interest income up $8mm, or 6% Provision (benefit) for loan losses ("PLL") 1 17 (16) N/M Net interest income after PLL 145 121 24 20% - Average earning assets increased 7% led by 12% growth in commercial loans Net gain on loan sales 110 75 35 47% Loan fees and charges 29 24 5 21% - Net interest margin 3.05%, relatively flat demonstrating effective management of funding Loan administration income 5 6 (1) (17%) costs. Net return on mortgage servicing rights (2) 5 (7) N/M (1) (4) (12%) Other noninterest income 29 33 B Noninterest income Total noninterest income B 171 143 (1) 28 20% Compensation and benefits 98 90 8 9% • Adjusted noninterest income(1) up $28mm, or 20% Commissions and loan processing expense 60 46 14 30% - Net gain on loan sales rose $35mm, or 47%, due Other noninterest expenses 80 78 2 3% to 31 basis points increase in GOS margin and a Total noninterest expense C 238 214 24 11% 10% increase in FOAL volume (1) 28 56% Income before income taxes 78 50 - Loan fees and charges up $5mm, or 21%, led by Provision for income taxes 15 9 (1) 6 67% higher mortgage loan closings Net income $63 $41 (1) $22 54% Diluted income per share $1.11 $0.71 (1) $0.40 56% C Noninterest expense Profitability Net interest margin 3.05% 3.08% (3 bps) (1) Total revenues $317 $281 $36 13% • Noninterest expense up $24mm, or 11% Net gain on loan sales / total revenue 35% 27% 800 bps Mortgage rate lock commitments, fallout adjusted $9,197 $8,344 $853 10% - Volume-driven mortgage expenses increased $20mm Mortgage closings $9,262 $8,641 $621 7% Net gain on loan sale margin, HFS 1.20% 0.89% 31 bps 1) Non-GAAP number for 2Q19. Number shown excludes DOJ benefit. Please see reconciliations on page 41 and 42. N/M – not meaningful 7
Average balance sheet highlights 3rd Quarter 2019 3Q19 ($mm) Observations Average Balance Sheet Interest-earning assets (1) Incr (Decr) $$%• SolidAverage gains loans in commercial HFI grew $1.1bn, loan portfolio; or 11% warehouse loans increased $91mm, or 6%, CRE loans increased $88mm, Loans held-for-sale $3,786 $247 7% or- Average4%, and commercial C&I loans increased loans increased $74mm, $734mm or 6% primarily (2) driven by $511mm increase in warehouse loans Consumer loans 4,874 396 9% • Consumer loans up $239mm, or 7%; focus on adding Commercial loans (2) 6,869 734 12% residential- Average consumermortgage andloans indire increasedct marine/RV $396mm, loans or 9%,with highdriven risk evenlyadjusted by returnsgrowth in non-auto indirect lending, Total loans held-for-investment 11,743 1,130 11% mortgage and HELOC portfolios Other earning assets (3) 3,468 (139) (4%) Interest-earning assets $18,997 $1,238 7% Interest-bearing liabilities Other assets 2,200 (7) (0%) Total assets $21,197 $1,231 6% • Average deposits increased $1.7bn, or 12%, primarily from higher custodial deposits driven by increase in Deposits $15,817 $1,658 12% refinance activity Short-term FHLB advances & other 1,910 (723) (27%) - Average custodial deposits rose $1.1bn, or 31% Long-term FHLB advances 536 182 51% Other long-term debt 495 (1) - % Other liabilities 717 61 9% Equity(4) Equity(4) Total liabilities $19,475 $1,177 6% • Tangible common equity to asset ratio of 7.09% Stockholders' equity 1,722 54 3% • FBC closing share price of $38.76 on October 21, 2019 is Total liabilities and stockholders' equity $21,197 $1,231 6% 140% of tangible book value per share Tangible book value per common share (4) $27.62 $1.46 6% 1) Measured vs. the prior quarter 2) Consumer loans include first and second mortgages, HELOC and other loans; commercial loans include commercial real estate, commercial & industrial and warehouse loans 3) Other earning assets include interest earning deposits, investment securities and loans with government guarantees 4) References a non-GAAP number. Please see reconciliations on page 41 and 42. 8
Asset quality 3rd Quarter 2019 Delinquencies ($mm) NPLs and performing TDRs ($mm) Performing TDRs NPLs $71 (1) $104 (1) 37 $68 $66 $67 $66 $38 $33 $34 25 22 24 26 $28 $29 26 43 44 43 41 40 9/30/2018 12/31/2018 3/31/2019 6/30/2019 9/30/2019 9/30/2018 12/31/2018 3/31/2019 6/30/2019 9/30/2019 Allowance coverage(2) (% of loans HFI) Nonperforming loan and asset ratios (3) (3) Total Consumer Commercial NPA/LHFI & OREOs NPL & TDRs/LHFI NPA/Total Assets 0.62% 1.6% 1.5% 1.4% 1.3% 0.54% 1.3% 0.35% 0.32% 0.33% 1.4% 1.4% 1.0% 0.29% 1.3% 1.0% 0.36% 0.9% 0.9% 0.28% 0.24% 0.24% 0.9% 0.21% 0.8% 0.17% 0.16% 0.17% 0.16% 9/30/2018 12/31/2018 3/31/2019 6/30/2019(1) 9/30/2019 9/30/2018 12/31/2018 3/31/2019 6/30/2019 9/30/2019 1) Includes $37 million Live Well loan which was fully liquidated in the third quarter 2019. 3) Excludes loans held-for-sale 2) Excludes loans carried under the fair value option and loans with government guarantees. 9
Capital 3rd Quarter 2019 Flagstar Bancorp Total Risk Based Capital Ratio Observations 3Q19 Balance sheet impact Net operating earnings contribution Tier 1 CET-1 Tier 1 Total RBC Change in MSR balance Proforma ratio under Capital Simplification(1) Leverage to RWA to RWA to RWA 3Q19 8.0% 9.2% 10.8% 11.5% 2Q19 7.9% 9.1% 10.7% 11.5% 11.9% 11.8% • Total risk based capital ratio of 11.5% (11.8% under Capital Simplification) (1) 11.5% 11.5% o Recently enacted capital relief adds 22 basis points in Q1 +46 bps 2020 for this ratio. -64 bps +20 bps • Tier 1 leverage ratio ended quarter at 8.0% (8.4% under Capital Simplification) (1) o Recently enacted capital relief adds 46 basis points in Q1 2020 for this ratio. Well Capitalized • Supporting value creation strategy, company has sufficient 10.0% capital to grow and hold additional interest earning assets 6/30/2019 9/30/2019 1) Non-GAAP number. Please see reconciliations on page 41 and 42. 10
Business Segment Overview 3rd Quarter 2019 Lee Smith, COO
Community banking 3rd Quarter 2019 Average commercial loans ($bn) Quarter-end commercial loan commitments ($bn) Commercial and Industrial Commercial Real Estate Warehouse Commercial and Industrial Commercial Real Estate Warehouse $12.1 $6.9 $11.2 $6.1 $10.3 $9.2 $9.5 4.8 $5.0 $4.8 $5.0 2.5 4.2 2.0 3.9 3.8 1.6 1.3 1.2 4.0 2.6 4.1 2.2 2.4 3.8 4.2 2.1 2.2 3.2 3.4 1.8 3.2 1.3 1.3 1.6 1.7 2.0 2.3 2.6 2.8 3Q18 4Q18 1Q19 2Q19 3Q19 9/30/2018 12/31/2018 3/31/2019 6/30/2019 9/30/2019 Average consumer loans ($bn) Average deposit funding(1) ($bn) Residential First Mortgages Other Consumer Loans Retail Government Custodial deposits Brokered deposits $4.9 $15.8 $4.5 $14.2 $4.2 $3.9 $4.1 $12.9 1.6 $11.9 4.6 1.4 $11.3 3.5 0.9 1.0 1.1 2.5 2.1 2.0 1.2 1.1 1.2 1.2 1.2 3.3 3.0 3.1 3.1 3.1 9.2 9.3 7.6 8.0 8.8 3Q18 4Q18 1Q19 2Q19 3Q19 3Q18 4Q18 1Q19 2Q19 3Q19 1) Includes custodial deposits which are included as part of mortgage servicing. 12
Mortgage originations 3rd Quarter 2019 Closings by purpose ($bn) Fallout-adjusted locks ($bn) Purchase originations Refinance originations $9.2 $8.3 $8.3 $9.2 $9.3 $8.6 $6.6 2.4 $6.3 3.2 4.8 $5.3 $5.5 2.0 1.9 6.8 5.4 4.5 4.3 3.6 3Q18 4Q18 1Q19 2Q19 3Q19 3Q18 4Q18 1Q19 2Q19 3Q19 71% 58% 63% 59% 44% Purchase Mix % Closings by mortgage type ($bn) Net gain on loan sales – revenue and margin Conventional Government Jumbo Gain on loan sale ($mm) Gain on sale margin (HFS) $9.2 $9.3 $110 $8.6 1.8 2.2 1.6 $6.3 $75 $5.5 1.9 2.6 1.2 2.0 0.9 $49 $43 1.20% 1.9 1.3 $34 0.89% 5.0 5.6 0.72% 4.4 0.60% 3.2 3.3 0.51% 3Q18 4Q18 1Q19 2Q19 3Q19 3Q18 4Q18 1Q19 2Q19 3Q19 13
Mortgage servicing 3rd Quarter 2019 Quarter-end loans serviced (000’s) $ UPB of MSRs sold ($bn) Serviced for Others Subserviced for Others Flagstar Loans HFI Bulk Sales Flow Transactions 962 983 994 851 $5.9 619 $5.4 $4.4 1.3 814 817 827 $3.6 705 0.5 $2.5 495 0.7 4.4 3.9 4.6 2.9 2.5 89 88 91 106 107 1.0 9/30/2018 12/31/2018 3/31/2019 6/30/2019 9/30/2019 3Q18 4Q18 1Q19 2Q19 3Q19 Average custodial deposits ($bn) MSR / CET1 (Bancorp) 4.5 3.5 24% 24% 23% 22% 2.5 20% 2.0 2.1 3Q18 4Q18 1Q19 2Q19 3Q19 9/30/2018 12/31/2018 3/31/2019 6/30/2019 9/30/2019 14
Noninterest expense and efficiency ratio 3rd Quarter 2019 Quarterly noninterest expense ($mm) and efficiency ratio Adjusted noninterest expense (1)Adjusted efficiency ratio (1)(2) $238 $214 $190 $172 $175 81% 79% 76% 75% 74% 3Q18 4Q18 1Q19 2Q19 3Q19 1) References non-GAAP number for 1Q19, 4Q18 and 3Q18; excludes acquisition costs of $1 million, $14 million and $1 million for 1Q19, 4Q18 and 3Q18, respectively, related to Wells Fargo branch acquisition. In addition, 4Q18 excludes $29 million of hedging gains reclassified from AOCI to net interest income in conjunction with the payment of long-term FHLB advances. Please see reconciliations on page 41 and 42. 2) References non-GAAP number for 2Q19; excludes DOJ benefit of $25 million for 2Q19. Please see reconciliations on page 41 and 42. 15
Closing Remarks / Q&A 3rd Quarter 2019 Sandro DiNello, CEO
Earnings guidance(1) 3rd Quarter 2019 4th Quarter 2019 Outlook • Net interest income flat Net interest income - Interest earning assets up slightly - Net interest margin declines 5 to 10 basis points • Mortgage Revenue, including gain on sale and net return on MSR, down 15-20% due to seasonality of mortgage Noninterest income market • All other noninterest income up slightly Noninterest expense • Noninterest expense to increase to between $230-$235 million, primarily reflecting variable mortgage costs 17 1) See cautionary statements on slide 2.
Appendix 3rd Quarter 2019 Company overview 19 Financial performance 23 Community banking 25 Mortgage originations 34 Mortgage servicing 36 Capital and liquidity 38 Non-GAAP reconciliation 41
COMPANY OVERVIEW Flagstar at a glance 3rd Quarter 2019 Corporate Overview • Traded on the NYSE (FBC) 160 88 Flagstar Retail home • Headquartered in Troy, MI Bank lending Branches Offices(1) • Market capitalization $2.2bn • Member of the Russell 2000 Index 99 Branches in Michigan Community banking • Leading Michigan-based bank with a balanced, diversified lending platform • $22bn of assets and $15.7bn of deposits • Nearly 220k household & over 26k business relationships Mortgage origination • 5th largest bank originator of residential mortgages ($29.8bn during twelve months ended September 30, 2019) • Scalable platform originating business in all channels and all 50 states including 88 retail home lending offices • More than 1,100 correspondent and nearly Operations center 1,000 broker relationships Mortgage servicing • 5th largest sub-servicer of mortgage loans nationwide • Servicing 994k loans as of September 30, 2019 1) Includes seven home lending offices located in banking branches. • Efficiently priced deposits from escrow balances 19
COMPANY OVERVIEW Flagstar has a strong executive team 3rd Quarter 2019 Board of Directors John Lewis Chairman Chief Audit Officer Sandro DiNello Brian Dunn President & CEO • CEO since 5/13 • Over 40 years of banking experience with Flagstar and its predecessors with a strong emphasis on community banking, including the management of retail operations and product strategy Chief Chief Mortgage Community Chief Risk General Corporate Operating Officer Financial Officer Banking Banking Officer Counsel Responsibility Lee Smith Jim Ciroli Kristy Fercho Drew Ottaway Steve Figliuolo Patrick McGuirk Beth Correa • COO since 5/13 • CFO since 8/14 • Appointed • Executive Vice • CRO since 6/14 • General Counsel • Started as Director • Formerly a partner • More than 30 years President of President, • Over 35 years of since 6/15 of Corporate of MatlinPatterson of banking and Mortgage effective President of financial services • Over 20 years of Responsibility in Global Advisors and financial services 9/17 Banking experience with financial services 3/19 a Senior Director at experience with • Has 15 years • With Flagstar since Citizens Republic, legal experience • With Flagstar since Zolfo Cooper First Niagara, experience with 12/15 and has 30 Fleet Boston with the FDIC and 2011 and has more • Extensive expe- Huntington and Fannie Mae in years of banking Financial, First Sidley Austin LLP than 30 years of rience in financial KeyCorp various executive and commercial Union and Chase banking experience management and and leadership lending experience Manhattan with NBD, Chase, operations roles focused on in southeast and Comerica building banking Michigan with • Chartered Accoun- relationships and Comerica and NBD tant in England and growth initiatives Wales 20
Risk management COMPANY OVERVIEW Best-in-class risk management platform with 245 FTEs(1) 3rd Quarter 2019 Board of Directors Risk Committee Enterprise Sandro DiNello Risk Committee President & CEO Karen Sabatowski Steve Figliuolo Chief Compliance Chief Risk Officer Officer Chief QC / Financial Regulatory Modeling & Loan Operational Vendor Credit Appraisal MFIU Fraud Crimes Compliance Affairs Analytics Investigations Review Risk Management Officer Review (BSA/AML) FTEs 5 73 4 48 12 7 9 47 13 27 1) Does not include 30 FTEs in internal audit as of 9/30/2019. 21
COMPANY OVERVIEW Strong growth opportunities 3rd Quarter 2019 Grow community banking • Lift out teams opportunistically • Grow national lending platforms(1) • Cultivate middle-market and business banking - Expand warehouse lending (275bp spread) relationships, especially in acquired deposit footprint • Add specialty lending disciplines and teams - Grow home builder finance (400bp spread) - Build MSR lending (300bp spread; LTVs<60%) - Grow consumer lending business (home equity and non-auto indirect) Build mortgage subservicing business Strengthen mortgage business • Grow subservicing operations • Leverage diversified, scalable platform to drive efficiencies and lower cost per loan - Retain subservicing on MSR sales and onboard non-Flagstar originated loans • Solidify technology enhancements to improve customer experience and ease of use - Acquire new 3rd party subservicing relationships • Recruit experienced talent - Provide funding source for balance sheet • Maximize execution options (whole loan sales vs. securitizations) - Cross-sell additional revenue capabilities 1) Indicated spreads are targets and may not be reflective of actual spreads. 22
FINANCIAL PERFORMANCE Financial performance 3rd Quarter 2019 ● Solid growth in banking and subservicing has created more stable earnings ● Heightened focus on efficiency and expense management Revenue Composition and Earnings Metrics 9/30/2018 9/30/2019 Percentage Percentage Revenue (millions) YTD YTD of Revenue Increase Community Banking$ 248 $ 347 41% 40% Mortgage Servicing 70 124 15% 77% Subtotal 318 470 56% 48% Mortgage Origination 352 379 45% 8% Other(1) 16 (16) (1%) (201%) Total$ 686 $ 833 100% 21% Diluted Earnings per Share(2) $ 2.30 $ 2.46 7% (2) Return on Average Assets 1.0% 1.0% (2) Return on Average Tangible Common Equity 12.9% 13.6% 1) Non-GAAP number for YTD 3Q19. Number shown excludes $25 million DOJ benefit from 2Q19. 2) Non-GAAP number for YTD 3Q19. Number shown excludes $25 million DOJ benefit (net of tax) from 2Q19 and acquisition costs of $1 million (net of tax) related to Wells Fargo branch acquisition from December 1, 2018. Please see reconciliations on page 41 and 42. 23
FINANCIAL PERFORMANCE Higher net interest income is stabilizing earnings 3rd Quarter 2019 ● Achieving earning asset growth while continuing to grow net interest income - Strong net interest margin management ● Transition to more stable net interest income Average earning assets and net interest income Net interest income ($mm)(1) Average earning assets ($bn) CAGR 15% $19.0 $17.8 $16.8 $16.0 $16.4 $16.3 CAGR 19% $15.4 $15.4 $146 $14.7 $138 $14.0 $12.8 $124 $123 $126 $12.3 $12.3 $115 $11.9 $11.6 $11.2 $103 $107 $106 $10.7 $97 $87 $79 $80 $83 $73 $76 $77 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 Quarter/Year 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 NIM 2.75% 2.69% 2.66% 2.63% 2.58% 2.67% 2.67% 2.77% 2.78% 2.76% 2.76% 2.86% 2.93% 2.99% 3.09% 3.08% 3.05% 1) References non-GAAP number for 4Q18; excludes $29 million of hedging gains reclassified from AOCI to net interest income in conjunction with the payment of long-term FHLB advances. Please see reconciliations on page 41 and 42. 24
COMMUNITY BANKING Strong market position 3rd Quarter 2019 ● Leading deposit share in Michigan, Fort Wayne, IN(1), and San Bernardino County, CA (High Desert Region) ● Provides access to markets with attractive demographics and low-cost, stable liquidity for continued balance sheet growth Michigan deposit share Key Markets Deposit Median Proj HHI Proj pop % YoY Deposits as of 9/30/2019 2019 Rank Market $mm % of total mkt share HHI growth(4) (4) Overall MI-based Institution Branches Total($mm) Share Change Flagstar Deposits growth 1Chase217 $44,432 20% 2% (3) Oakland County, MI 4,569 42.0% 8.0% 85,757 13.6% 2.6% 2 Comerica 194 28,995 13% -4% 3 Bank of America 96 22,820 10% 19%Grand Rapids, MI MSA 436 4.0% 1.9% 67,365 11.9% 3.2% 4PNC174 16,999 8% -1% Ann Arbor, MI MSA 282 2.6% 2.9% 75,938 13.8% 3.0% 5 Huntington 287 16,851 7% 7% 6 Fifth Third 199 16,640 7% 1%Fort Wayne, IN (1) 7 1 TCF Financial 233 16,404 7% 1% 716 6.6% 8.8% 58,513 10.1% 2.6% 82Flagstar Key Midwest Markets (5) 6,003 55.2% 6.1% 80,711 13.1% 2.7% (2) 114 13,026 6% 18% 9 Citizens 88 5,770 3%San 2% Bernardino County, CA (6) 608 5.6% 1.1% 69,132 14.7% 4.27% 10 Independent 69 3,011 1% 7% Top 10 1,671 $184,948 82%National 4% aggregate 66,010 9.9% 3.4% Source: S&P Global Market Intelligence; Note: Deposit data as of June 30, 2019 and projections based on 2019 estimates; MI-based banks highlighted. 1) Fort Wayne, IN deposit data is based on Fort Wayne, IN Fed District. Fort Wayne, IN demographic data is based on counties within Fort Wayne, IN Fed District, deposit weighted based on Flagstar’s portfolio. 2) Reflects the acquisition of 14 wells Fargo branches located in Michigan. 3) Oakland County data excludes $1.7bn of custodial deposits held at company headquarters. 4) 2019–2024 CAGR. 5) Key Midwest Markets Median HHI, projected HHI growth and projected population growth are deposit weighted based on Flagstar’s portfolio. 6) Deposit data is based on High Desert Region of San Bernardino County, CA. 25
Deposits COMMUNITY BANKING Portfolio and strategy overview 3rd Quarter 2019 Total average deposits ($bn) (2) Retail deposits Other deposits 15.8 • Flagstar gathers deposits from consumers, 14.2 12.9 businesses and select governmental entities 11.3 11.9 6.5 5.0 4.1 – Traditionally, CDs and savings accounts 3.7 3.9 represented the bulk of our branch-based retail 9.2 9.3 depository relationships 7.6 8.0 8.8 – Today, we are focused on growing DDA 3Q18 4Q18 1Q19 2Q19 Q319 balances with consumer, business banking and commercial relationships 3Q19 total average deposits – We additionally maintain depository Savings 21% relationships in connection with our mortgage MMDA DDA 4% origination and servicing businesses, and with 17% governmental entities CD – Cost of total deposits(1) equal to 0.96%, slightly 16% Government down from up from 0.98% in 2Q19 8% Brokered 5% Custodial 29% Total: $15.8bn 0.96% cost of total deposits(1) 1) Total deposits include noninterest bearing deposits. 2) Includes deposits from commercial and business banking customers. 26
COMMUNITY BANKING Deposit growth opportunities 3rd Quarter 2019 Core Deposits(1) Other Deposits Retail Government • Average balance of $7.3bn during 3Q19 of which 57% are • Average balance of $1.3bn during 3Q19 demand & savings accounts • Michigan and Indiana deposits are not required to be • Average core deposits(1) of $58mm per branch collateralized • Flagstar’s branding is helping grow core deposits • Strong, long-term relationships across the state • Branch acquisitions significantly enhance core deposit base Commercial(2) Custodial • Average balance of $2bn during 3Q19 • Average balance of $4.6bn during 3Q19 on 994k loans serviced and subserviced • Increasing balances with growing lines of business, including home builder finance • Deposit balances increase along with the number of loans serviced and subserviced • Offer complete line of treasury management services • Provides risk-based capital by reducing risk-weighting on qualified loans to same borrowers 1) Core deposits = total deposits excluding government, custodial, and brokered deposits. 2) Includes deposits from commercial and business banking customers. 27
Lending COMMUNITY BANKING Portfolio and strategy overview 3rd Quarter 2019 Total average loans ($bn) Loans HFS Loans HFI Loans with government guarantees $16.1 • Flagstar’s largest category of earning assets consists $14.6 $13.6 $13.3 of loans held-for-investment which averaged $11.7bn $12.9 during 3Q19 11.7 8.9 10.6 – Loans to consumers consist of residential first and 8.9 9.2 second mortgage loans, HELOC and other – C&I / CRE lending is an important growth strategy, 4.4 4.0 3.3 3.5 3.8 offering risk diversification and asset sensitivity 3Q18 4Q18 1Q19 2Q19 3Q19 – Warehouse lending to both originators that sell to Flagstar and those who sell to other investors 3Q19 average loans • Flagstar maintains a balance of mortgage loans held- 1st Mortgage 1st Mortgage for-sale which averaged $3.8bn during 3Q19 HFS HFI 23% 20% – Essentially all of our mortgage loans originated are Loans with sold into the secondary market 2nds, HELOC government & other guarantees – Flagstar has the option to direct a portion of the 10% 4% mortgage loans it originates to its own balance sheet Warehouse CRE and C&I 16% 27% 28
COMMUNITY BANKING Community banking growth model 3rd Quarter 2019 Relationship-based growth platform New banker additions (past 2 years) • Primary focus is to build relationships # of Avg Years Line of Service Additions Experience - Recruit experienced bankers from larger regional banks Business Banking 10 18 - Retain seasoned bankers within our organization CRE Lending 4 20 • Leverage deep industry experience and client relationships Equip Financing Group 3 21 - Focus on moving relationships and credit facilities Homebuilder Finance 4 22 to Flagstar Indirect Lending 7 30 • Low incremental efficiency ratio - Marginal cost of 15-30% that varies with type of Warehouse Lending 6 28 loans underwritten Grand Total 34 23 29
Commercial lending COMMUNITY BANKING Diversified relationship-based approach 3rd Quarter 2019 Overview Warehouse - $3.2bn (9/30/19) • Warehouse lines with approximately 321 active % Advances sold to Flagstar relationships nationwide, of which approximately 81% Warehouse sell a portion of their loans to Flagstar • Collateralized by mortgage loans being funded which are paid off once the loan is sold ~90 • Diversified property types which are primarily income- borrowers Commercial ~180 producing in the normal course of business borrowers sell >75% Real Estate • Focused on experienced top-tier developers with sell <25% ~50 significant deposit and non-credit product opportunities borrowers sell 25% - 75% • Lines of credit and term loans for working capital Commercial needs, equipment purchases, and expansion projects & Industrial • Primarily Michigan based relationships or relationships with national finance companies Commercial Real Estate - $2.7bn (9/30/19) Commercial & Industrial - $1.7bn (9/30/19) Property type Industry Home Building Manufacturing 17% Hospitality 30% 7% Healthcare Multi Family Services 4% 18% 22% Office 8% Distribution Financial, 10% insurance & Other Government & Retail real estate 8% education 13% 40% Other Owner Occupied 4% 5% 15% 30
COMMUNITY BANKING Warehouse lending 3rd Quarter 2019 ● National relationship-based lending platform ● Attractive asset class with good spreads and low credit risk ● Strong growth potential and scalable platform ● Flagstar is well positioned to gain market share, leveraging relationships in complementary lines of business, including home builder finance and mortgage originations Warehouse lenders ranked by commitments ($mm) FBC warehouse loan commitments ($bn) YOY 2Q19 Outstandings Unfunded Commitments Rank Institution Growth Total Share 1 JPMorgan Chase 15% $15,000 18% $4.8 2 Texas Capital 22% 7,241 9% $4.2 3 First Tennessee 22% 6,965 8% $4.0 $3.9 $3.8 1.6 4 Wells Fargo -5% 5,500 7% 1.6 5 TIAA FSB (Everbank) 46% 5,100 6% 2.4 6 Merchants Bank 49% 4,460 5% 2.3 2.3 7 Flagstar Bancorp 1% 4,245 5% 8 Comerica 15% 4,100 5% 3.2 9 BB&T -1% 3,675 4% 2.6 10 U.S. Bancorp 20% 3,500 4% 1.6 1.5 1.6 Top 10 16% $59,786 72% 9/30/2018 12/31/2018 3/31/2019 6/30/2019 9/30/2019 Source: Inside Mortgage Finance as of September 6, 2019. 31
Warehouse lending COMMUNITY BANKING Low historical loss rate 3rd Quarter 2019 ● No net chargeoff since Q3 2014 ● Total net chargeoffs of $4.6 million since Q4 2006 while experiencing 19% CAGR in UPB Historical average warehouse UPB ($mm) and net chargeoffs ($mm) Annual NCO Rate Warehouse ‐ UPB 2,000 19% CAGR 5.00% from Q4 2006 1,800 1,600 4.00% 1,400 1,200 3.00% 1,000 800 2.00% 600 7 bps annual loss rate since 2006 400 1.00% 200 0.29% 0.22% 0.17% 0.17% ‐ 0.00% 0.01% 0.00% ‐‐‐‐‐ 0 0.00% Net Chargeoff (NCO) per Year (in millions) Year 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 NCO - 1.0 1.1 1.2 1.1 0.1 0.0 0.0 - - - - - 32
COMMUNITY BANKING Home builder finance 3rd Quarter 2019 Overview Tightening housing supply ● National relationship-based lending platform launched in 1Q16 Existing home sales (mm) Months supply of existing homes for sale (left axis) (right axis) - Attractive asset class with good spreads (~400 bps) 8 12 - Meaningful cross-sell opportunities including warehouse loans, 7 commercial deposits and purchase originations 10 6 ● Flagstar is well positioned to gain market share given builder and 8 mortgage relationships 5 4 6 - Focused on markets with strong housing fundamentals and 3 higher growth potential 4 - We have direct relationships with 7 of the top 10 and do 2 2 business with 56 of the top 100 builders nationwide through 1 September. 0 0 - We are well positioned to take advantage of supply/demand imbalance in housing market 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 1) Source: Bloomberg (through 5/31/19) Home builder finance footprint Home builder loan commitments(1) ($mm) Unpaid principal balance Unused $2,015 $1,798 $1,591 $1,422 $1,364 $1,106 $1,001 $812 $624 $704 $909 $740 $718 $779 $797 9/30/2018 12/31/2018 3/31/2019 6/30/2019 9/30/2019 1) Commitments are for loans classified as commercial real estate and commercial & industrial. 33
MORTGAGE ORIGINATIONS National distribution through multiple channels 3rd Quarter 2019 Residential mortgage originations by channel ($bn) Correspondent Broker Retail Other Bulk $7.0 $5.9 $5.8 $4.7 3.7 $4.2 2.5 2.0 2.0 2.1 $2.2 $1.6 $1.3 $1.0 $1.1 $1.2 3.3 3.4 3.8 $0.7 $0.9 $0.8 2.7 2.1 $0.5 3Q18 4Q18 1Q19 2Q19 3Q19 3Q18 4Q18 1Q19 2Q19 3Q19 3Q18 4Q18 1Q19 2Q19 3Q19 (1) • 3.7% market share with #7 national ranking(1) • 1.2% market share with #11 national ranking • 88 retail locations in 26 states • More than 1,100 correspondent partners • Nearly 1,000 brokerage relationships • Direct Lending is 17% of retail volume • Top 10 relationships account for 11% of overall correspondent volume • Top 10 relationships account for 12% of overall • Warehouse lines with over 302 correspondent brokerage volume relationships 1) Data source: As reported by Inside Mortgage Finance for 6M19 published August 23, 2019. 34
Flagstar has restructured its operations to be profitable MORTGAGE ORIGINATIONS even at historical lows for the mortgage origination market 3rd Quarter 2019 U.S. residential mortgage origination market (historical and projected volumes) 5.8 $ in trillions 4.5 4.2 4.1 3.7 3.6 3.1 3.0 2.5 2.4 2.3 2.2 2.2 2.1 2.0 2.0 2.0 1.9 1.9 1.8 1.8 1.8 1.7 1.7 1.6 1.6 1.5 1.5 1.4 1.3 1.3 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019F 2020F 2021F Nominal ($) 0.6 0.9 1.0 0.8 0.6 0.8 0.8 1.7 1.4 1.1 2.2 2.9 3.8 2.8 3.0 2.7 2.4 1.5 2.0 1.7 1.4 2.0 1.8 1.3 1.7 2.1 1.8 1.6 2.0 1.8 1.8 (1) Real ($) 1.0 1.6 1.8 1.3 1.0 1.2 1.3 2.5 2.1 1.6 3.2 4.0 5.2 3.7 3.9 3.4 2.9 1.8 2.3 1.9 1.6 2.2 2.0 1.3 1.8 2.1 1.8 1.6 2.0 1.8 1.8 (2) Adjusted ($) 1.3 2.0 2.2 1.6 1.3 1.5 1.5 3.0 2.4 1.9 3.6 4.5 5.8 4.1 4.2 3.7 3.1 1.9 2.5 2.1 1.7 2.3 2.0 1.4 1.8 2.2 1.8 1.6 2.0 1.8 1.8 Source: Mortgage Bankers Association for actual periods and a blended average of forecast by Fannie Mae, Freddie Mac and Mortgage Bankers Association. 1. Adjusted for historical inflation as reported by Bureau of Labor Statistics (2018 = 100). 2. Adjusted for population growth as reported by the U.S. Census Bureau (2017 = 100). 35
MORTGAGE SERVICING Servicing 3rd Quarter 2019 Servicing Profitability Servicing Earnings before Tax ($mm) 3Q18 4Q18 1Q19 2Q19 3Q19 Net interest income Interest income (FTP) $ 14 $ 14 $ 18 $ 24 $ 30 Interest expense on custodial deposits(1) (12) (12) (15) (21) (25) Total net interest income 2 2 3 3 5 Noninterest income (2) Service fee income 16 20 25 26 27 Ancillary fee income 6 6 6 7 8 Late fee income 2 3 4 5 5 Total noninterest income 24 29 35 38 40 Noninterest expense(3) (22) (27) (31) (30) (31) Earnings before Tax$ 4 $ 4 $ 7 $ 11 $ 14 Average Custodial Deposits ($bn) $ 2.0 $ 2.1 $ 2.5 $ 3.5 $ 4.6 Average Loans Serviced for Others (000's) 592 739 906 972 988 1) Expense on custodial deposits from loans subserviced which is included in net loan administration income for GAAP purposes. Includes intersegment allocation. 2) Service fee income and late fee income are included in net loan administration income for GAAP purposes; ancillary fee income is included in loan fees and charges for GAAP purposes. 3) Includes direct allocations. 36
MORTGAGE SERVICING MSR portfolio 3rd Quarter 2019 MSR portfolio statistics MSR portfolio characteristics (% UPB) Measure ($mm) 6/30/2019 9/30/2019 Difference 2013 & byBy VintageVintage Unpaid principal balance $25,774 $25,038 ($736) prior; 5% Fair value of MSR $316 $285 ($31) 2014; Capitalized rate (% of UPB) 1.23% 1.14% (9 bps) 4% Multiple 3.042 2.794 (0.248) Note rate 4.441% 4.451% 1 bp 2015; 2018 2017 Service fee 0.399% 0.403% 0 bps 12% 39% 20% 2016 & Average Measure ($000) prior 2016 & UPB per loan $242 $234 ($8) 5% FICO 692 692 - 2019later; 79% Loan to value 86.92% 85.92% 100 bps 36% Net (loss) return on mortgage servicing rights ($mm) By Investor $ Return 3Q18 4Q18 1Q19 2Q19 3Q19 Net hedged profit (loss) ($1) $0 ($1) ($1) $2 Carry on asset 12 11 13 21 25 Run-off (4) (4) (7) (15) (30) GNMA Gross return on the $7 $7 $5 $5 ($3) 65% mortgage servicing rights Private Sale transaction & P/L 3 1 - (1) 1 3% Model changes 3 2 1 - - Freddie Net return on the $13 $10 $6 $4 ($2) 14% mortgage servicing rights ($) Fannie Average mortgage $270 $336 $291 $321 $292 18% servicing rights ($) Net return on the 18.8% 12.4% 9.1% 5.5% -2.7% mortgage servicing rights (%) 37
CAPITAL AND LIQUIDITY Balance sheet composition 3rd Quarter 2019 3Q19 average balance sheet (%) 1% Cash 13% Agency MBS ~62% of assets are in lower risk-content 18% assets: cash, marketable Mortgage loans 53% securities, warehouse held-for-investment Deposits excluding custodial deposits loans, loans held-for-sale and freshly-originated, high-FICO conforming 18% Loans held-for-sale mortgages underwritten by Flagstar 12% Warehouse loans 21% Custodial deposits Efficiently funds loans Attractive relationship held-for-sale and 28% warehouse loans lending with very low Commercial loans delinquencies and Other LHFI (1) 12% FHLB borrowings 2% Other long-term debt Primarily low risk, stable 1% MSR 4% Other liabilities assets (FHLB stock, BOLI, 9% 8% Equity premises & equipment, Other assets deferred tax asset, etc.) Assets Liabilities & Equity 1) Other LHFI includes home equity and other consumer loans. 38
CAPITAL AND LIQUIDITY Liquidity and funding 3rd Quarter 2019 HFI loan-to-deposit ratio(1) Commentary ■ Flagstar has invested 82% 81% significantly in building its 78% 77% 77% Community Bank, which provides attractive core deposit funding for its balance sheet ■ These retail deposits are supplemented by custodial deposits from the servicing business 3Q18 4Q18 1Q19 2Q19 3Q19 ■ Much of the remainder of Flagstar’s balance sheet is self- (2) Liquidity ratio funding given it is eligible collateral for FHLB advances Cash & investment securities FHLB borrowing capacity (which provides significant liquidity capacity) 30% 25% 17% 13% 13% 12% 3/31/2019 9/30/2019 1) HFI loan-to-deposit ratio is total average loans HFI (excluding warehouse loans) expressed as a percentage of total average deposits (excluding custodial deposits). 2) Cash, investment securities and FHLB borrowing capacity expressed as a percentage of total assets. 39
CAPITAL AND LIQUIDITY Interest rate risk 3rd Quarter 2019 • Flagstar remains asset sensitive to parallel rate shocks Earnings at Risk Economic Value of Equity ‐100 bps +100 bps ‐100 bps +100 5.0% 6.0% 3.0% 4.0% 2.0% 1.0% 0.0% (1.0%) (2.0%) (4.0%) (3.0%) (6.0%) (5.0%) 9/30/2018 12/31/2018 3/31/2019 6/30/2019 9/30/20199/30/2018 12/31/2018 3/31/2019 6/30/2019 9/30/2019 % Change % Change Scenario Q3 2019 Q2 2019 Q1 2019 Q4 2018Scenario Q3 2018 Q3 2019 Q2 2019 Q1 2019 Q4 2018 Q3 2018 +300 Shock 15.4% 13.9% 8.1% 9.1%+300 Shock 12.3% 1.1% 2.3% (4.7%) (12.1%) (13.6%) +200 Shock 10.3% 9.3% 5.5% 6.1%+200 Shock 8.3% 2.7% 3.5% (1.1%) (6.5%) (8.1%) +100 Shock 5.2% 4.7% 2.8% 3.1%+100 Shock 4.3% 2.6% 2.9% 0.7% (2.5%) (2.9%) Base ‐ ‐ ‐ ‐ Base ‐ ‐ ‐ ‐ ‐ ‐ ‐100 Shock (5.9%) (4.9%) (3.1%) (3.2%)‐100 Shock (4.3%) (4.7%) (4.3%) (3.4%) 0.5% 0.4% 40
NON-GAAP RECONCILIATION Non-GAAP reconciliation 3rd Quarter 2019 $mm Adjusted Net Interest Income, Other Noninterest Income, Noninterest Income, Total Revenues, Other Noninterest Expense, Noninterest Expense, Income before Income Taxes, Provision for Income Taxes, and Net Income 3 months ended 3 months ended 3 months ended 3 months ended 3 months ended September 30, 2019 June 30, 2019 March 31, 2019 December 31, 2018 September 30, 2018 Net Interest Income $ 152 Adjustment to remove hedging gains 29 Adjusted Net Interest Income $ 123 Other Noninterest Income$ 29 $ 58 Adjustment to remove DOJ benefit - 25 Adjusted Other Noninterest Income$ 29 $ 33 Noninterest Income$ 171 $ 168 Adjustment to remove DOJ benefit - 25 Noninterest Income$ 171 $ 143 Total Revenues $ 317 $ 306 Adjustment to remove DOJ benefit - 25 Adjusted Total Revenues$ 317 $ 281 Other Noninterest Expense$ 80 $ 78 Adjustment to remove Wells Fargo acquisition costs - - Adjusted Other Noninterest Expense$ 80 $ 78 Noninterest Expense$ 238 $ 214 $ 191 $ 189 $ 173 Adjustment to remove Wells Fargo acquisition costs - - 1 14 1 Adjusted Noninterest Expense$ 238 $ 214 $ 190 $ 175 $ 172 Income before Income Taxes$ 78 $ 75 Adjustment to remove DOJ benefit - (25) Adjustment to remove Wells Fargo acquisition costs - - Adjusted Income before Income Taxes $ 78 $ 50 Provision for Income Taxes$ 15 $ 14 Adjustment to remove DOJ benefit - (5) Adjustment Taxto remove impact Wells on adjustment Fargo acquisition for hedging costs gains (net of tax) - - - - Adjusted NetAdjusted Income Provision for Income Taxes $ $ 63 $ 15 $ 41 9 Net Income $ 63 $ 61 Adjustment to remove DOJ benefit (net of tax)3 months ended 3 months - ended 3 months (20) ended 9 months ended 9 months ended September 30, 2019 June 30, 2019 September 30, 2018 September 30, 2019 September 30, 2018 Diluted Earnings per Share$ 1.11 $ 1.06 $ 0.83 $ 2.80 $ 2.28 Adjustment to remove DOJ benefit (net of tax) - (0.35) - (0.35) - Adjustment to remove Wells Fargo acquisition costs (net of tax) - - 0.02 0.01 0.02 Adjusted Diluted EPS Adjusted Diluted Earnings per Share$ 1.11 $ 0.71 $ 0.85 $ 2.46 $ 2.30 41
NON-GAAP RECONCILIATION Non-GAAP reconciliation (continued) 3rd Quarter 2019 $mm Adjuste d R O A and R O T C E 3 months ended 3 months ended 3 months ended 9 months ended 9 months ended September 30, 2019 June 30, 2019 September 30, 2018 September 30, 2019 September 30, 2018 Return on Avera ge Assets 1.2% 1.2% 1.0% 1.1% 1.0% Ad justement to removeq uisitionac costs(net of tax) 0.0% 0.0% 0.1% 0.0% 0.0% Ad justement to remove DOJ benefit(net of tax) 0.0% -0.4% 0.0% -0.1% 0.0% Ad justed Return on Average Asse ts 1.2% 0.8% 1.1% 1.0% 1.0% Return on Average Commonq Euity 14.7% 14.6% 12.8% 12.9% 12.1% Ad justement to removeq uisitionac costs(net of tax) 0.0% 0.0% 0.3% 0.0% 0.1% Ad justement to remove DOJ benefit(net of tax) 0.0% -4.9% 0.0% -1.6% 0.0% Ad justed Return on Average Commonq Euity 14.7% 9.7% 13.1% 11.3% 12.2% Adjusted Return on Average Commonq Euity 14.7% 9.7% 13.1% 11.3% 12.2% Less: Intan gible asset amortizationpense ex 0.7% 0.8% 0.2% 0.8% 0.2% Less: Avera ge goodwill and intangible asset balance 1.8% 1.2% 0.4% 1.5% 0.5% Ad justed Return on Average Tangible Commonq uitEy 17.1% 11.7% 13.7% 13.6% 12.9% Tangible Book Value per Share and Tangible Common Equity to Assets Ratio Adjusted Efficiency Ratio 3 months ended 3 months ended 3 months ended 3 months ended 3 months ended September 30, 2019 June 30, 2019 March 31, 2019 December 31, 2018 September 30, 2018 Efficienc y Ratio 75% 70% 81% 76% 75% Ad justement to remove DOJ benefit 0% 6% 0% 0% 0% Adjustment to remove Wellsgo Far acquisition costs 0% 0% 0% -6% -1% Ad justment to remove gheding gains 0% 0% 0% 9% 0% Ad justed Efficiency Ratio% 75 76% 81% 79% 74% As of September 30, 2019 As of June 30, 2019 Total stockholders' equity$ 1,734 $ 1,656 Goodwill and intangible assets 174 178 Tangible book value $ 1,560 $ 1,478 Number of common shares outstanding 56,510,341 56,483,937 Regulatory Capital under Capital Simplification Tangible book value per share$ 27.62 $ 26.16 As of September 30, 2019 Total Assets $ 22,023 $ 20,206 Tangible common equity to assets ratio 7.09% 7.31% Total Risk-Based Capital Ratio Tier 1 Leverage Ratio B ase l III assets $ 15 ,442 $ 20 ,901 Regulatory capital - Basel III to capital simplification Net change in assets 607 105 Basel III $ 1,781 $ 1,668 Basel III with capital simplification $ 16,049 $ 21,006 C ap it a l ra ti os Net change in deductions to DTAs, MSRs and other capital components 105 105 Basel III Basel III with capital simplification11.5% $ 1,886 8.0% $ 1,773 Basel III with capitalRisk-weighted simplification assets – Basel III to capital simplification 11.8% 8.4% 42
