EXHIBIT 99.1
NEWS RELEASE
For more information, contact:
Kenneth Schellenberg
FBCInvestorRelations@flagstar.com
(248) 312-5741
Flagstar Bancorp Reports Third Quarter 2020 Net Income of $222 million, or $3.88 Per Diluted Share
Key Highlights - Third Quarter 2020
•Surpassed record results from second quarter 2020 as all segments posted strong earnings
•Grew net interest income by $12 million to $180 million
•Achieved mortgage revenue of $358 million on strong gain on sale margin and volume growth
•Increased the allowance for credit losses by $30 million, raising the coverage ratio to 1.7 percent, or 3.1 percent excluding warehouse loans
•Generated tangible book value growth of 25 percent through the first nine months of 2020
TROY, Mich., Oct. 21, 2020 - Flagstar Bancorp, Inc. (NYSE: FBC), the holding company for Flagstar Bank, today reported third quarter 2020 net income of $222 million, or $3.88 per diluted share, compared to second quarter 2020 net income of $116 million, or $2.03 per diluted share and third quarter 2019 net income of $63 million, or $1.11 per diluted share.
“It was another quarter for the record books as we surpassed the high-water mark for earnings we set last quarter,” said Alessandro DiNello, president and chief executive officer of Flagstar Bancorp, Inc. "We once again demonstrated the power of our business model as strong results across all of our primary business segments combined to produce record earnings of $3.88 per share. And while our performance in mortgage is a headline, it shares the space with outstanding results from our banking and servicing teams."
“Banking performed remarkably well during the quarter, growing net interest income $12 million to $180 million. Our warehouse business—and our success in safely growing low-risk balances without sacrificing yield—was a big contributor to our performance. Our solid performance in warehouse, combined with a concerted effort to reduce deposit funding costs, resulted in a 6-basis-point increase in net interest margin, excluding loans with government guarantees that have not been repurchased.
“We also were pleased to see commercial loan deferrals end the quarter at just $47 million. That’s less than 1 percent of our commercial loan portfolio, down significantly from their peak in the second quarter. Still, we felt it was prudent to increase our credit reserves to $280 million to reflect the continued uncertainty of COVID-19 and its ongoing economic impact. We believe our conservative approach to fortify the bank’s balance sheet positions us well in an unpredictable economy. Our coverage ratio is now 3.1 percent, excluding warehouse loans, which places it among the strongest in the industry.
“In Servicing, we closed the quarter with a 6 percent increase over the second quarter in loans serviced and subserviced, bringing our servicing book to a little more than 1.1 million loans. This growth is especially strong considering the headwinds from the continued pressure of elevated prepayments, and it’s a testament to our business model and the strength of the relationships we have developed with our subservicing partners.
"Our mortgage team was absolutely stellar, producing revenue of $358 million on a 12-basis-point expansion of gain on sale margin and an 9 percent increase in fallout adjusted locks over the prior quarter. While a robust mortgage market fueled our revenue growth in the business, it is our diverse, multi-channel mortgage platform that allowed us to maximize mortgage profitability by optimizing product and channel mix.
“Like prior quarters, our results in the third quarter show the power of our business model. Mortgage was once again a standout, but it shares the stage with our unique and diversified businesses that deliver solid net interest income and margin in banking—led by contributions from warehouse lending—and predictable fee income from Servicing. Combined, they generated the capital that produced a tangible book value of $35.60 per share at quarter end."
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| Income Statement Highlights | | | | | | | |
| Three Months Ended | | | | | | |
| September 30,
2020 | June 30,
2020 | March 31,
2020 | December 31,
2019 | September 30,
2019 | | |
| (Dollars in millions) | | | | | | |
| Net interest income | $ | 180 | | $ | 168 | | $ | 148 | | $ | 152 | | $ | 146 | | | |
| Provision for credit losses | 32 | | 102 | | 14 | | — | | 1 | | | |
| Noninterest income | 452 | | 378 | | 157 | | 162 | | 171 | | | |
| Noninterest expense | 305 | | 296 | | 235 | | 245 | | 238 | | | |
| Income before income taxes | 295 | | 148 | | 56 | | 69 | | 78 | | | |
| Provision for income taxes | 73 | | 32 | | 10 | | 11 | | 15 | | | |
| Net income | $ | 222 | | $ | 116 | | $ | 46 | | $ | 58 | | $ | 63 | | | |
| Income per share: | | | | | | | |
| Basic | $ | 3.90 | | $ | 2.04 | | $ | 0.80 | | $ | 1.01 | | $ | 1.12 | | | |
| Diluted | $ | 3.88 | | $ | 2.03 | | $ | 0.80 | | $ | 1.00 | | $ | 1.11 | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Key Ratios | | | | | | | |
| Three Months Ended | | | | | | |
| September 30,
2020 | June 30,
2020 | March 31,
2020 | December 31,
2019 | September 30,
2019 | | |
| Net interest margin | 2.78 | % | 2.86 | % | 2.81 | % | 2.91 | % | 3.05 | % | | |
| Adjusted net interest margin (2) | 2.94 | % | 2.88 | % | 2.81 | % | 2.91 | % | 3.05 | % | | |
| Return on average assets | 3.1 | % | 1.8 | % | 0.8 | % | 1.0 | % | 1.2 | % | | |
| Return on average common equity | 41.5 | % | 23.5 | % | 9.8 | % | 12.7 | % | 14.7 | % | | |
| Efficiency ratio | 48.3 | % | 54.3 | % | 77.1 | % | 78.2 | % | 75.2 | % | | |
| HFI loan-to-deposit ratio | 75.9 | % | 76.7 | % | 74.9 | % | 76.5 | % | 74.2 | % | | |
| Adjusted HFI loan-to-deposit ratio (1) | 74.8 | % | 85.4 | % | 86.3 | % | 84.6 | % | 82.0 | % | | |
(1)Excludes warehouse loans and custodial deposits. See Non-GAAP Reconciliation for further information.
(2)Excludes LGG loans available for repurchase. See Non-GAAP Reconciliation for further information.
| | | | | | | | | | | | | | | | | | | | | | | |
| Average Balance Sheet Highlights | | | | | | | |
| Three Months Ended | | | | | % Change | |
| September 30,
2020 | June 30,
2020 | March 31,
2020 | December 31,
2019 | September 30,
2019 | Seq | Yr/Yr |
| (Dollars in millions) | | | | | | |
| Average interest-earning assets | $ | 25,738 | | $ | 23,692 | | $ | 21,150 | | $ | 20,708 | | $ | 18,997 | | 9 | % | 35 | % |
| Average loans held-for-sale (LHFS) | 5,602 | | 5,645 | | 5,248 | | 5,199 | | 3,786 | | (1) | % | 48 | % |
| Average loans held-for-investment (LHFI) | 14,839 | | 13,596 | | 11,823 | | 12,168 | | 11,743 | | 9 | % | 26 | % |
| Average total deposits | 19,561 | | 17,715 | | 15,795 | | 15,904 | | 15,817 | | 10 | % | 24 | % |
Net Interest Income
Net interest income in the third quarter 2020 was $180 million, an increase of $12 million (7 percent) compared to the second quarter 2020. The increase was primarily driven by warehouse loan growth and the impact of lower rates on deposit and borrowing costs, which was partially offset by lower yields on earning assets. Average earning assets increased $2.0 billion, reflecting increases of $2.5 billion in average total loans partially offset by a $0.6 billion decrease in average investment securities.
The net interest margin in the third quarter 2020 was 2.78 percent, an 8 basis point decrease from the prior quarter. Excluding the impact from the loans with government guarantees that have not been repurchased and do not accrue interest, adjusted net interest margin expanded 6 basis points to 2.94 percent in the third quarter, compared to adjusted net interest margin of 2.88 percent in the prior quarter. The increase in the adjusted net interest margin was primarily driven by a shift to higher yielding warehouse loans and lower rates on deposit and borrowing costs. Retail banking deposit rates decreased 22 basis points driven by the expiration of promotional rates on some of our savings deposits and the maturity of higher cost time deposits and a higher balance of noninterest bearing deposits. This improvement more than offset the impact of declining interest rates on the loans held-for-investment portfolio.
Loans held-for-investment averaged $14.8 billion for the third quarter 2020, increasing $1.2 billion (9 percent) from the prior quarter. The increase was primarily driven by $1.9 billion (51 percent) higher average warehouse loan balances as we grew this business and took advantage of the strong mortgage market. The result was partially offset by $0.5 billion (9 percent) lower average commercial loans, excluding warehouse, primarily due to a decrease in our home builder finance portfolio and the completion of the sale of the Paycheck Protection Program loans during the third quarter.
Average total deposits were $19.6 billion in the third quarter 2020, increasing $1.8 billion (10 percent) from the second quarter 2020. Average custodial deposits increased $1.1 billion (18 percent) due to higher prepayments from refinancing, average government deposits increased $0.3 billion (29 percent) and retail deposits increased $0.2 billion (2 percent) primarily due to the continued impact of COVID-19 on consumer behavior and spending patterns and higher cash balances being carried by commercial depositors.
Provision for Credit Losses
The provision for credit losses was $32 million for the third quarter 2020, as compared to $102 million for the second quarter 2020. We have continued to add to our reserve balance as we believe the economic recovery will continue to be challenged due to the COVID-19 pandemic for an extended period of time, especially as it relates to consumer loan forbearance and the commercial real estate sector.
Noninterest Income
Noninterest income increased $74 million to $452 million in the third quarter 2020, as compared to $378 million for the second quarter 2020, primarily due to higher mortgage revenues.
Third quarter 2020 net gain on loan sales increased $43 million, to $346 million, as compared to $303 million in the second quarter 2020. The net gain on loan sale margin increased 12 basis points, to 2.31 percent for the third quarter 2020, as compared to 2.19 percent for the second quarter 2020. The increase was primarily driven by improved execution in secondary marketing and the gain associated with the residential mortgage-backed securitization transaction we executed during the quarter. Fallout -adjusted locks increased $1.2 billion, or 9 percent, to $15.0 billion, as historically low interest rates continued to fuel a strong refinance market.
Net return on mortgage servicing rights increased $20 million, to a $12 million net return for the third quarter 2020, compared to an $8 million net loss for the second quarter 2020. The third quarter 2020 MSR return normalized following the MSR valuation decrease caused by rising prepayment speeds in the second quarter 2020 which did not reoccur.
Loan administration income increased $5 million, to $26 million for the third quarter 2020, compared to $21 million for the second quarter 2020, largely driven by an increase in the average number of loans being
subserviced and higher level of fees for loans in forbearance.
Loan fees and charges increased $4 million, to $45 million for the third quarter 2020, compared to $41 million for the second quarter 2020, resulting from a 19 percent increase in mortgage closings.
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| Mortgage Metrics | | | | | | | |
| As of/Three months ended | | | | | Change (% / bps) | |
| September 30,
2020 | June 30,
2020 | March 31,
2020 | December 31,
2019 | September 30,
2019 | Seq | Yr/Yr |
| (Dollars in millions) | | | | | | |
| Mortgage rate lock commitments (fallout-adjusted) (1) (2) | $ | 15,000 | | $ | 13,800 | | $ | 11,200 | | $ | 8,200 | | $ | 9,200 | | 9% | 63% |
| Mortgage loans closed (1) | $ | 14,400 | | $ | 12,200 | | $ | 8,600 | | $ | 9,300 | | $ | 9,300 | | 19% | 56% |
| Net margin on mortgage rate lock commitments (fallout-adjusted) (2) | 2.31 | % | 2.19 | % | 0.80 | % | 1.23 | % | 1.20 | % | 12 | 111 |
| Net gain on loan sales | $ | 346 | | $ | 303 | | $ | 90 | | $ | 101 | | $ | 110 | | 14% | N/M |
| Net return (loss) on mortgage servicing rights (MSR) | $ | 12 | | $ | (8) | | $ | 6 | | $ | (3) | | $ | (2) | | N/M | N/M |
| Gain on loan sales + net return on the MSR | $ | 358 | | $ | 295 | | $ | 96 | | $ | 98 | | $ | 108 | | 21% | N/M |
| Loans serviced (number of accounts - 000's) (3) | 1,105 | | 1,042 | | 1,082 | | 1,091 | | 994 | | 6% | 11% |
| Capitalized value of MSRs | 0.85 | % | 0.87 | % | 0.95 | % | 1.21 | % | 1.14 | % | (2) | (29) |
| N/M - Not meaningful | | | | | | | |
| (1) Rounded to the nearest hundred million | | | | | | | |
| (2) 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. | | | | | | | |
| (3) Includes loans serviced for Flagstar's own loan portfolio, serviced for others, and subserviced for others. | | | | | | | |
Noninterest Expense
Noninterest expense increased to $305 million for the third quarter 2020, compared to $296 million for the second quarter 2020. This increase was primarily due to the capitalization of origination costs in the second quarter for the PPP loans and the accelerated vesting of certain components of executive compensation that resulted from the most recent secondary share offering. Despite increased volume, mortgage expenses were flat quarter over quarter as the ratio of mortgage noninterest expense to closings – our mortgage expense ratio – declined. This improvement was due to certain expenses in the second quarter that did not reoccur this quarter and are not expected to reoccur in the future, including certain performance-related incentives related to our Opes Advisors division.
The Company's efficiency ratio was 48 percent for the third quarter 2020, as compared to 54 percent for the second quarter 2020, primarily driven lower by extraordinary levels of gain on sale margin.
Income Taxes
The third quarter 2020 provision for income taxes totaled $73 million, with an effective tax rate of 24.7 percent, compared to $32 million and an effective tax rate of 21.5 percent for the second quarter 2020. Our effective tax rate increased due to the higher level of income, which is taxed at higher marginal tax rates. Additionally, we delayed certain tax planning strategies.
Asset Quality
| | | | | | | | | | | | | | | | | | | | | | | |
| Credit Quality Ratios | | | | | | | |
| As of/Three Months Ended | | | | | Change (% / bps) | |
| September 30,
2020 | June 30,
2020 | March 31,
2020 | December 31,
2019 | September 30,
2019 | Seq | Yr/Yr |
| (Dollars in millions) | | | | | | |
| Allowance for credit losses | $ | 280 | | $ | 250 | | $ | 152 | | $ | 110 | | $ | 113 | | 12% | N/M |
| Credit reserves to LHFI | 1.70 | % | 1.69 | % | 1.10 | % | 0.91 | % | 0.90 | % | 1 | 80 |
| Credit reserves to LHFI excluding warehouse | 3.07 | % | 2.60 | % | 1.54 | % | 1.12 | % | 1.16 | % | 47 | 191 |
| Charge-offs, net of recoveries | $ | 2 | | $ | 3 | | $ | 2 | | $ | 3 | | $ | 1 | | (33)% | 100% |
| Total nonperforming LHFI and TDRs | $ | 45 | | $ | 33 | | $ | 29 | | $ | 26 | | $ | 26 | | 36% | 73% |
| Net charge-offs to LHFI ratio (annualized) | 0.05 | % | 0.11 | % | 0.08 | % | 0.10 | % | 0.02 | % | (6) | 3 |
| Ratio of nonperforming LHFI and TDRs to LHFI | 0.28 | % | 0.22 | % | 0.21 | % | 0.21 | % | 0.21 | % | 6 | 7 |
| | | | | | | |
| Net charge-offs/(recoveries) to LHFI ratio (annualized) by loan type (1): | | | | | | | |
| Residential first mortgage | 0.07 | % | 0.26 | % | 0.08 | % | 0.08 | % | 0.07 | % | (19) | — |
| Home equity and other consumer | 0.23 | % | 0.28 | % | 0.28 | % | 0.49 | % | 0.27 | % | (5) | (4) |
| Commercial real estate | (0.01) | % | 0.01 | % | (0.01) | % | — | % | — | % | (2) | (1) |
| Commercial and industrial | 0.06 | % | 0.08 | % | 0.09 | % | 0.07 | % | (0.22) | % | (2) | 28 |
| N/M - Not meaningful | | | | | | | |
(1) Excludes loans carried under the fair value option.
The allowance for credit losses was $280 million and covered 1.70 percent of loans held-for-investment at September 30, 2020, flat compared to June 30, 2020. Excluding warehouse loans, the allowance coverage ratio was 3.07 percent, a 47 basis point increase from June 30, 2020. The increase in the allowance coverage reflects our forecast of economic conditions and our view that the economy will continue to be challenged for an extended period of time as a result of the COVID-19 pandemic.
Net charge-offs in the third quarter 2020 were negligible at $2 million, or 5 basis points of LHFI, compared to $3 million, or 11 basis points in the prior quarter.
Nonperforming loans were $45 million and our ratio of nonperforming loans to loans held-for-investment was 28 basis points at September 30, 2020, a 6 basis point increase compared to June 30, 2020. The increase was due to one commercial loan that was placed on nonaccrual during the quarter. At September 30, 2020, early stage loan delinquencies totaled $13 million, or 8 basis points, of total loans, compared to $15 million, or 10 basis points, at June 30, 2020.
Capital
| | | | | | | | | | | | | | | | | | | | | | | |
| Capital Ratios (Bancorp) | | | | | | Change (% / bps) | |
| September 30,
2020 | June 30,
2020 | March 31,
2020 | December 31,
2019 | September 30,
2019 | Seq | Yr/Yr |
| Tier 1 leverage (to adj. avg. total assets) | 8.04 | % | 7.76 | % | 8.09 | % | 7.57 | % | 7.98 | % | 28 | 6 |
| Tier 1 common equity (to RWA) | 9.21 | % | 9.11 | % | 9.17 | % | 9.32 | % | 9.25 | % | 10 | (4) |
| Tier 1 capital (to RWA) | 10.31 | % | 10.33 | % | 10.52 | % | 10.83 | % | 10.81 | % | (2) | (50) |
| Total capital (to RWA) | 11.29 | % | 11.32 | % | 11.18 | % | 11.52 | % | 11.54 | % | (3) | (25) |
| Tangible common equity to asset ratio (1) | 6.90 | % | 6.58 | % | 6.25 | % | 6.95 | % | 7.08 | % | 32 | (18) |
| Tangible book value per share (1) | $ | 35.60 | | $ | 31.74 | | $ | 29.52 | | $ | 28.57 | | $ | 27.62 | | 12% | 29% |
(1)See Non-GAAP Reconciliation for further information.
The Company maintained a solid capital position with regulatory ratios well above current regulatory quantitative guidelines for "well capitalized" institutions. The capital ratios are impacted by a 100 percent risk-weighting of the warehouse loan portfolio – the largest component of the Company’s held for sale portfolio. Adjusting the risk-weighting of warehouse loans to 50 percent, because of the historically low level of losses from this loan portfolio and the fact that the portfolio is fully collateralized with assets that would receive a 50 percent risk weighting, the Company would have had a Tier 1 common equity ratio of 10.9 percent and a total risk-based capital ratio of 13.4 percent at September 30, 2020.
Importantly, tangible book value per share grew to $35.60, up $3.86 from last quarter and $7.98 higher than the same quarter last year, an increase of 29 percent.
Earnings Conference Call
As previously announced, the Company's third quarter 2020 earnings call will be held Wednesday, October 21, 2020 at 11 a.m. (ET).
To join the call, please dial (800) 353-6461 toll free or (334) 323-0501 and use passcode 9179222. 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 9179222.
The conference call will also be available as a live audiocast on the Investor Relations section of flagstar.com, where it will be archived and available for replay and download. The slide presentation accompanying the conference call will be posted on the site.
About Flagstar
Flagstar Bancorp, Inc. (NYSE: FBC) is a $29.5 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 87 retail locations in 29 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 $227 billion of loans representing slightly over 1.1 million 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 certain 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. 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). The COVID-19 pandemic is adversely affecting us, our customers, counterparties, employees, and third-party service providers, and the ultimate extent of the impacts on our business, financial position, results of operations, liquidity, and prospects is uncertain. 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)
| | | | | | | | | | | | | | | | | | | | | | | |
| September 30,
2020 | | June 30,
2020 | | December 31,
2019 | | September 30,
2019 |
| Assets | | | | | | | |
| Cash | $ | 194 | | | $ | 204 | | | $ | 220 | | | $ | 234 | |
| Interest-earning deposits | 86 | | | 23 | | | 206 | | | 119 | |
| Total cash and cash equivalents | 280 | | | 227 | | | 426 | | | 353 | |
| Investment securities available-for-sale | 2,165 | | | 2,348 | | | 2,116 | | | 1,697 | |
| Investment securities held-to-maturity | 440 | | | 496 | | | 598 | | | 635 | |
| Loans held-for-sale | 5,372 | | | 5,615 | | | 5,258 | | | 4,196 | |
| Loans held-for-investment | 16,476 | | | 14,808 | | | 12,129 | | | 12,548 | |
| Loans with government guarantees | 2,500 | | | 1,791 | | | 736 | | | 607 | |
| Less: allowance for loan losses | (255) | | | (229) | | | (107) | | | (110) | |
| Total loans held-for-investment and loans with government guarantees, net | 18,721 | | | 16,370 | | | 12,758 | | | 13,045 | |
| Mortgage servicing rights | 323 | | | 261 | | | 291 | | | 285 | |
| Federal Home Loan Bank stock | 377 | | | 377 | | | 303 | | | 303 | |
| Premises and equipment, net | 410 | | | 410 | | | 416 | | | 417 | |
| Goodwill and intangible assets | 160 | | | 164 | | | 170 | | | 174 | |
| Other assets | 1,228 | | | 1,200 | | | 930 | | | 943 | |
| Total assets | $ | 29,476 | | | $ | 27,468 | | | $ | 23,266 | | | $ | 22,048 | |
| Liabilities and Stockholders’ Equity | | | | | | | |
| Noninterest-bearing deposits | $ | 9,429 | | | $ | 7,921 | | | $ | 5,467 | | | $ | 5,649 | |
| Interest-bearing deposits | 10,516 | | | 9,977 | | 9,679 | | 10,096 |
| Total deposits | 19,945 | | | 17,898 | | | 15,146 | | | 15,745 | |
| Short-term Federal Home Loan Bank advances and other | 2,226 | | | 3,354 | | | 4,165 | | | 2,329 | |
| Long-term Federal Home Loan Bank advances | 1,200 | | | 1,200 | | | 650 | | | 650 | |
| Other long-term debt | 493 | | | 493 | | | 496 | | | 496 | |
| Other liabilities | 3,417 | | | 2,552 | | | 1,021 | | | 1,094 | |
| Total liabilities | 27,281 | | | 25,497 | | | 21,478 | | | 20,314 | |
| Stockholders’ Equity | | | | | | | |
| Common stock | 1 | | | 1 | | | 1 | | | 1 | |
| Additional paid in capital | 1,493 | | | 1,488 | | | 1,483 | | | 1,481 | |
| Accumulated other comprehensive income | 46 | | | 46 | | | 1 | | | 5 | |
| Retained earnings | 655 | | | 436 | | | 303 | | | 247 | |
| Total stockholders’ equity | 2,195 | | | 1,971 | | | 1,788 | | | 1,734 | |
| Total liabilities and stockholders’ equity | $ | 29,476 | | | $ | 27,468 | | | $ | 23,266 | | | $ | 22,048 | |
Flagstar Bancorp, Inc.
Condensed Consolidated Statements of Operations
(Dollars in millions, except per share data)
(Unaudited)
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| | | | | | | Change compared to: | | | | |
| Three Months Ended | | | | | | 2Q20 | | | 3Q19 | |
| September 30,
2020 | June 30,
2020 | March 31,
2020 | December 31,
2019 | September 30,
2019 | | Amount | Percent | | Amount | Percent |
| Interest Income | | | | | | | | | | | |
| Total interest income | $ | 206 | | $ | 201 | | $ | 201 | | $ | 213 | | $ | 203 | | | $ | 5 | | 2 | % | | $ | 3 | | 1 | % |
| Total interest expense | 26 | | 33 | | 53 | | 61 | | 57 | | | (7) | | (21) | % | | (31) | | (54) | % |
| Net interest income | 180 | | 168 | | 148 | | 152 | | 146 | | | 12 | | 7 | % | | 34 | | 23 | % |
| Provision for credit losses | 32 | | 102 | | 14 | | — | | 1 | | | (70) | | (69) | % | | 31 | | N/M |
| Net interest income after provision for credit losses | 148 | | 66 | | 134 | | 152 | | 145 | | | 82 | | 124 | % | | 3 | | 2 | % |
| Noninterest Income | | | | | | | | | | | |
| Net gain on loan sales | 346 | | 303 | | 90 | | 101 | | 110 | | | 43 | | 14 | % | | 236 | | N/M |
| Loan fees and charges | 45 | | 41 | | 26 | | 30 | | 29 | | | 4 | | 10 | % | | 16 | | 55 | % |
| Net return (loss) on the mortgage servicing rights | 12 | | (8) | | 6 | | (3) | | (2) | | | 20 | | N/M | | 14 | | N/M |
| Loan administration income | 26 | | 21 | | 12 | | 8 | | 5 | | | 5 | | 24 | % | | 21 | | N/M |
| Deposit fees and charges | 8 | | 7 | | 9 | | 10 | | 10 | | | 1 | | 14 | % | | (2) | | (20) | % |
| Other noninterest income | 15 | | 14 | | 14 | | 16 | | 19 | | | 1 | | 7 | % | | (4) | | (21) | % |
| Total noninterest income | 452 | | 378 | | 157 | | 162 | | 171 | | | 74 | | 20 | % | | 281 | | 164 | % |
| Noninterest Expense | | | | | | | | | | | |
| Compensation and benefits | 123 | | 116 | | 102 | | 102 | | 98 | | | 7 | | 6 | % | | 25 | | 26 | % |
| Occupancy and equipment | 47 | | 44 | | 41 | | 43 | | 40 | | | 3 | | 7 | % | | 7 | | 18 | % |
| Commissions | 72 | | 61 | | 29 | | 35 | | 38 | | | 11 | | 18 | % | | 34 | | 89 | % |
| Loan processing expense | 24 | | 25 | | 20 | | 20 | | 22 | | | (1) | | (4) | % | | 2 | | 9 | % |
| Legal and professional expense | 9 | | 5 | | 6 | | 9 | | 6 | | | 4 | | 80 | % | | 3 | | 50 | % |
| Federal insurance premiums | 6 | | 7 | | 6 | | 6 | | 5 | | | (1) | | (14) | % | | 1 | | 20 | % |
| Intangible asset amortization | 3 | | 4 | | 3 | | 4 | | 3 | | | (1) | | (25) | % | | — | | — | % |
| Other noninterest expense | 21 | | 34 | | 28 | | 26 | | 26 | | | (13) | | (38) | % | | (5) | | (19) | % |
| Total noninterest expense | 305 | | 296 | | 235 | | 245 | | 238 | | | 9 | | 3 | % | | 67 | | 28 | % |
| Income before income taxes | 295 | | 148 | | 56 | | 69 | | 78 | | | 147 | | 99 | % | | 217 | | 278 | % |
| Provision for income taxes | 73 | | 32 | | 10 | | 11 | | 15 | | | 41 | | 128 | % | | 58 | | N/M |
| Net income | $ | 222 | | $ | 116 | | $ | 46 | | $ | 58 | | $ | 63 | | | $ | 106 | | 91 | % | | $ | 159 | | 252 | % |
| Income per share | | | | | | | | | | | |
| Basic | $ | 3.90 | | $ | 2.04 | | $ | 0.80 | | $ | 1.01 | | $ | 1.12 | | | $ | 1.86 | | 91 | % | | $ | 2.78 | | 248 | % |
| Diluted | $ | 3.88 | | $ | 2.03 | | $ | 0.80 | | $ | 1.00 | | $ | 1.11 | | | $ | 1.85 | | 91 | % | | $ | 2.77 | | 250 | % |
| | | | | | | | | | | |
| Cash dividends declared | $ | 0.05 | | $ | 0.05 | | $ | 0.05 | | $ | 0.04 | | $ | 0.04 | | | $ | — | | — | % | | $ | 0.01 | | 25 | % |
| N/M - Not meaningful | | | | | | | | | | | |
Flagstar Bancorp, Inc.
Condensed Consolidated Statements of Operations
(Dollars in millions, except per share data)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended | | | | Change | |
| September 30,
2020 | | September 30,
2019 | | Amount | Percent |
| Interest Income | | | | | | |
| Total interest income | $ | 608 | | | $ | 581 | | | $ | 27 | | 5 | % |
| Total interest expense | 112 | | | 171 | | | (59) | | (35) | % |
| Net interest income | 496 | | | 410 | | | 86 | | 21 | % |
| Provision for credit losses | 148 | | | 18 | | | 130 | | N/M |
| Net interest income after provision for credit losses | 348 | | | 392 | | | (44) | | (11) | % |
| Noninterest Income | | | | | | |
| Net gain on loan sales | 739 | | | 234 | | | 505 | | N/M |
| Loan fees and charges | 112 | | | 70 | | | 42 | | 60 | % |
| Net return (loss) on the mortgage servicing rights | 10 | | | 9 | | | 1 | | 11 | % |
| Loan administration income | 59 | | | 22 | | | 37 | | 168 | % |
| Deposit fees and charges | 24 | | | 28 | | | (4) | | (14) | % |
| Other noninterest income | 44 | | | 85 | | | (41) | | (48) | % |
| Total noninterest income | 988 | | | 448 | | | 540 | | 121 | % |
| Noninterest Expense | | | | | | |
| Compensation and benefits | 341 | | | 275 | | | 66 | | 24 | % |
| Occupancy and equipment | 132 | | | 118 | | | 14 | | 12 | % |
| Commissions | 162 | | | 76 | | | 86 | | N/M |
| Loan processing expense | 69 | | | 60 | | | 9 | | 15 | % |
| Legal and professional expense | 20 | | | 18 | | | 2 | | 11 | % |
| Federal insurance premiums | 19 | | | 14 | | | 5 | | 36 | % |
| Intangible asset amortization | 10 | | | 11 | | | (1) | | (9) | % |
| Other noninterest expense | 84 | | | 71 | | | 13 | | 18 | % |
| Total noninterest expense | 837 | | | 643 | | | 194 | | 30 | % |
| Income before income taxes | 499 | | | 197 | | | 302 | | 153 | % |
| Provision for income taxes | 115 | | | 37 | | | 78 | | N/M |
| Net income | $ | 384 | | | $ | 160 | | | $ | 224 | | 140 | % |
| Income per share | | | | | | |
| Basic | $ | 6.76 | | | $ | 2.83 | | | $ | 3.93 | | 139 | % |
| Diluted | $ | 6.71 | | | $ | 2.80 | | | $ | 3.91 | | 140 | % |
| | | | | | |
| Cash dividends declared | $ | 0.15 | | | $ | 0.12 | | | $ | 0.03 | | 25 | % |
| 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 | | | | Nine Months Ended | |
| September 30, 2020 | June 30,
2020 | September 30, 2019 | | September 30, 2020 | September 30, 2019 |
| Selected Mortgage Statistics (1): | | | | | | |
| Mortgage rate lock commitments (fallout-adjusted) (2) | $ | 15,000 | | $ | 13,800 | | $ | 9,200 | | | $ | 40,000 | | $ | 24,100 | |
| Mortgage loans closed | $ | 14,400 | | $ | 12,200 | | $ | 9,300 | | | $ | 35,200 | | $ | 23,400 | |
| Mortgage loans sold and securitized | $ | 14,500 | | $ | 12,900 | | $ | 8,200 | | | $ | 34,900 | | $ | 22,200 | |
| Selected Ratios: | | | | | | |
| Interest rate spread (3) | 2.44 | % | 2.52 | % | 2.48 | % | | 2.41 | % | 2.57 | % |
| | | | | | |
| Net interest margin | 2.78 | % | 2.86 | % | 3.05 | % | | 2.81 | % | 3.07 | % |
| Net margin on loans sold and securitized | 2.39 | % | 2.35 | % | 1.34 | % | | 2.12 | % | 1.05 | % |
| Return on average assets | 3.15 | % | 1.77 | % | 1.20 | % | | 1.97 | % | 1.08 | % |
| Adjusted return on average assets (4) (5) | 3.15 | % | 1.77 | % | 1.20 | % | | 1.97 | % | 0.98 | % |
| Return on average common equity | 41.54 | % | 23.47 | % | 14.72 | % | | 25.71 | % | 12.90 | % |
| Return on average tangible common equity (5) | 45.42 | % | 26.16 | % | 17.12 | % | | 28.58 | % | 15.30 | % |
| Adjusted return on average tangible common equity (4) (5) | 45.42 | % | 26.16 | % | 17.12 | % | | 28.58 | % | 13.99 | % |
| Efficiency ratio | 48.3 | % | 54.3 | % | 75.2 | % | | 56.4 | % | 75.0 | % |
| Common equity-to-assets ratio (average for the period) | 7.57 | % | 7.53 | % | 8.12 | % | | 7.66 | % | 8.34 | % |
| Average Balances: | | | | | | |
| Average interest-earning assets | $ | 25,738 | | $ | 23,692 | | $ | 18,997 | | | $ | 23,535 | | $ | 17,693 | |
| Average interest-bearing liabilities | $ | 14,281 | | $ | 15,119 | | $ | 12,893 | | | $ | 14,625 | | $ | 12,767 | |
| Average stockholders' equity | $ | 2,141 | | $ | 1,977 | | $ | 1,722 | | | $ | 1,991 | | $ | 1,658 | |
(1)Rounded to nearest hundred million.
(2)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.
(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)See Non-GAAP Reconciliation for further information.
(5)Excludes goodwill, intangible assets and the associated amortization. See Non-GAAP Reconciliation for further information.
| | | | | | | | | | | | | | | | | | | | | | | |
| September 30,
2020 | | June 30,
2020 | | December 31,
2019 | | September 30,
2019 |
| Selected Statistics: | | | | | | | |
| Book value per common share | $ | 38.41 | | | $ | 34.62 | | | $ | 31.57 | | | $ | 30.69 | |
Tangible book value per share (1) | $ | 35.60 | | | $ | 31.74 | | | $ | 28.57 | | | $ | 27.62 | |
| Number of common shares outstanding | 57,150,470 | | | 56,943,979 | | | 56,631,236 | | | 56,510,341 | |
| Number of FTE employees | 4,871 | | | 4,641 | | | 4,453 | | | 4,171 | |
| Number of bank branches | 160 | | | 160 | | | 160 | | | 160 | |
Ratio of nonperforming assets to total assets (2) | 0.17 | % | | 0.14 | % | | 0.15 | % | | 0.16 | % |
| Common equity-to-assets ratio | 7.45 | % | | 7.18 | % | | 7.68 | % | | 7.88 | % |
| MSR Key Statistics and Ratios: | | | | | | | |
| Weighted average service fee (basis points) | 35.0 | | | 37.0 | | | 39.7 | | | 39.9 | |
| Capitalized value of mortgage servicing rights | 0.85 | % | | 0.87 | % | | 1.21 | % | | 1.14 | % |
(1)Excludes goodwill and intangibles. See Non-GAAP Reconciliation for further information.
(2)Ratio excludes LHFS.
Average Balances, Yields and Rates
(Dollars in millions)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | | | | | | | | | |
| September 30, 2020 | | | | June 30, 2020 | | | | September 30, 2019 | | |
| 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 | $ | 5,602 | | $ | 45 | | 3.21% | | $ | 5,645 | | $ | 48 | | 3.42% | | $ | 3,786 | | $ | 40 | | 4.22% |
| Loans held-for-investment | | | | | | | | | | | |
| Residential first mortgage | 2,584 | | 21 | | 3.24% | | 2,822 | | 24 | | 3.41% | | 3,282 | | 29 | | 3.58% |
| Home equity | 951 | | 9 | | 3.77% | | 1,001 | | 9 | | 3.78% | | 934 | | 13 | | 5.37% |
| Other | 950 | | 13 | | 5.28% | | 881 | | 12 | | 5.42% | | 658 | | 10 | | 5.99% |
| Total consumer loans | 4,485 | | 43 | | 3.78% | | 4,704 | | 45 | | 3.87% | | 4,874 | | 52 | | 4.24% |
| Commercial real estate | 3,007 | | 27 | | 3.47% | | 3,101 | | 28 | | 3.64% | | 2,594 | | 35 | | 5.39% |
| Commercial and industrial | 1,650 | | 14 | | 3.25% | | 2,006 | | 17 | | 3.34% | | 1,767 | | 22 | | 4.97% |
| Warehouse lending | 5,697 | | 56 | | 3.92% | | 3,785 | | 38 | | 3.88% | | 2,508 | | 32 | | 5.00% |
| Total commercial loans | 10,354 | | 97 | | 3.68% | | 8,892 | | 83 | | 3.67% | | 6,869 | | 89 | | 5.14% |
| Total loans held-for-investment | 14,839 | | 140 | | 3.71% | | 13,596 | | 128 | | 3.74% | | 11,743 | | 141 | | 4.77% |
| Loans with government guarantees | 2,122 | | 5 | | 0.89% | | 858 | | 4 | | 1.97% | | 574 | | 4 | | 2.78% |
| Investment securities | 2,807 | | 16 | | 2.29% | | 3,417 | | 21 | | 2.42% | | 2,713 | | 17 | | 2.63% |
| Interest-earning deposits | 368 | | — | | 0.11% | | 176 | | — | | 0.11% | | 181 | | 1 | | 2.22% |
| Total interest-earning assets | 25,738 | | $ | 206 | | 3.16% | | 23,692 | | $ | 201 | | 3.38% | | 18,997 | | $ | 203 | | 4.27% |
| Other assets | 2,539 | | | | | 2,569 | | | | | 2,207 | | | |
| Total assets | $ | 28,277 | | | | | $ | 26,261 | | | | | $ | 21,204 | | | |
| Interest-Bearing Liabilities | | | | | | | | | | | |
| Retail deposits | | | | | | | | | | | |
| Demand deposits | $ | 1,824 | | $ | — | | 0.09% | | $ | 1,800 | | $ | 1 | | 0.22% | | $ | 1,388 | | $ | 3 | | 0.88% |
| Savings deposits | 3,675 | | 3 | | 0.34% | | 3,476 | | 4 | | 0.52% | | 3,262 | | 10 | | 1.20% |
| Money market deposits | 733 | | — | | 0.09% | | 716 | | — | | 0.12% | | 722 | | 1 | | 0.34% |
| Certificates of deposit | 1,672 | | 8 | | 1.62% | | 1,987 | | 10 | | 2.00% | | 2,583 | | 15 | | 2.40% |
| Total retail deposits | 7,904 | | 11 | | 0.53% | | 7,979 | | 15 | | 0.78% | | 7,955 | | 29 | | 1.42% |
| Government deposits | 1,403 | | 1 | | 0.35% | | 1,088 | | 2 | | 0.63% | | 1,253 | | 4 | | 1.45% |
| Wholesale deposits and other | 953 | | 4 | | 1.77% | | 738 | | 4 | | 2.07% | | 744 | | 5 | | 2.42% |
| Total interest-bearing deposits | 10,260 | | 16 | | 0.62% | | 9,805 | | 21 | | 0.86% | | 9,952 | | 38 | | 1.52% |
| Short-term FHLB advances and other | 2,328 | | 2 | | 0.20% | | 3,753 | | 2 | | 0.26% | | 1,910 | | 10 | | 2.24% |
| Long-term FHLB advances | 1,200 | | 3 | | 1.03% | | 1,068 | | 3 | | 1.13% | | 536 | | 2 | | 1.72% |
| Other long-term debt | 493 | | 5 | | 4.52% | | 493 | | 7 | | 4.99% | | 495 | | 7 | | 5.60% |
| Total interest-bearing liabilities | 14,281 | | 26 | | 0.72% | | 15,119 | | 33 | | 0.86% | | 12,893 | | 57 | | 1.79% |
| Noninterest-bearing deposits | | | | | | | | | | | |
| Retail deposits and other | 1,954 | | | | | 1,687 | | | | | 1,315 | | | |
| Custodial deposits (1) | 7,347 | | | | | 6,223 | | | | | 4,550 | | | |
| Total noninterest-bearing deposits | 9,301 | | | | | 7,910 | | | | | 5,865 | | | |
| Other liabilities | 2,554 | | | | | 1,255 | | | | | 717 | | | |
| Stockholders' equity | 2,141 | | | | | 1,977 | | | | | 1,722 | | | |
| Total liabilities and stockholders' equity | $ | 28,277 | | | | | $ | 26,261 | | | | | $ | 21,197 | | | |
| Net interest-earning assets | $ | 11,457 | | | | | $ | 8,573 | | | | | $ | 6,104 | | | |
| Net interest income | | $ | 180 | | | | | $ | 168 | | | | | $ | 146 | | |
| Interest rate spread (2) | | | 2.44% | | | | 2.52% | | | | 2.48% |
| Net interest margin (3) | | | 2.78% | | | | 2.86% | | | | 3.05% |
| Ratio of average interest-earning assets to interest-bearing liabilities | | | 180.2 | % | | | | 156.7 | % | | | | 147.3 | % |
| Total average deposits | $ | 19,561 | | | | | $ | 17,715 | | | | | $ | 15,817 | | | |
(1)Approximately 80 percent of custodial deposits from loans subserviced which pay interest is recognized as an offset in net loan administration income.
(2)Interest rate spread is the difference between rate of interest earned on interest-earning assets and rate of interest paid on interest-bearing liabilities.
(3)Net interest margin is net interest income divided by average interest-earning assets.
Average Balances, Yields and Rates
(Dollars in millions)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended, | | | | | | |
| September 30, 2020 | | | | September 30, 2019 | | |
| Average Balance | Interest | Annualized
Yield/Rate | | Average Balance | Interest | Annualized
Yield/Rate |
| Interest-Earning Assets | | | | | | | |
| Loans held-for-sale | $ | 5,499 | | $ | 142 | | 3.44 | % | | $ | 3,532 | | $ | 119 | | 4.48 | % |
| Loans held-for-investment | | | | | | | |
| Residential first mortgage | 2,822 | | 72 | | 3.40 | % | | 3,158 | | 85 | | 3.61 | % |
| Home equity | 990 | | 30 | | 4.10 | % | | 832 | | 34 | | 5.50 | % |
| Other | 882 | | 36 | | 5.47 | % | | 512 | | 25 | | 6.51 | % |
| Total consumer loans | 4,694 | | 138 | | 3.94 | % | | 4,502 | | 144 | | 4.29 | % |
| Commercial real estate | 3,019 | | 90 | | 3.90 | % | | 2,414 | | 102 | | 5.56 | % |
| Commercial and industrial | 1,774 | | 50 | | 3.68 | % | | 1,702 | | 67 | | 5.20 | % |
| Warehouse lending | 3,937 | | 119 | | 3.98 | % | | 1,898 | | 74 | | 5.17 | % |
| Total commercial loans | 8,730 | | 259 | | 3.89 | % | | 6,014 | | 243 | | 5.34 | % |
| Total loans held-for-investment | 13,424 | | 397 | | 3.91 | % | | 10,516 | | 387 | | 4.89 | % |
| Loans with government guarantees | 1,267 | | 12 | | 1.23 | % | | 511 | | 11 | | 2.88 | % |
| Investment securities | 3,094 | | 56 | | 2.40 | % | | 2,957 | | 61 | | 2.77 | % |
| Interest-earning deposits | 251 | | 1 | | 0.56 | % | | 177 | | 3 | | 2.38 | % |
| Total interest-earning assets | 23,535 | | 608 | | 3.42 | % | | 17,693 | | 581 | | 4.37 | % |
| Other assets | 2,457 | | | | | 2,184 | | | |
| Total assets | $ | 25,992 | | | | | $ | 19,877 | | | |
| Interest-Bearing Liabilities | | | | | | | |
| Retail deposits | | | | | | | |
| Demand deposits | $ | 1,737 | | $ | 4 | | 0.33 | % | | $ | 1,311 | | $ | 8 | | 0.80 | % |
| Savings deposits | 3,513 | | 17 | | 0.63 | % | | 3,181 | | 26 | | 1.10 | % |
| Money market deposits | 712 | | 1 | | 0.17 | % | | 748 | | 2 | | 0.31 | % |
| Certificates of deposit | 1,970 | | 29 | | 1.98 | % | | 2,561 | | 44 | | 2.29 | % |
| Total retail deposits | 7,932 | | 51 | | 0.86 | % | | 7,801 | | 80 | | 1.37 | % |
| Government deposits | 1,208 | | 6 | | 0.68 | % | | 1,184 | | 13 | | 1.49 | % |
| Wholesale deposits and other | 758 | | 12 | | 2.03 | % | | 518 | | 9 | | 2.35 | % |
| Total interest-bearing deposits | 9,898 | | 69 | | 0.93 | % | | 9,503 | | 102 | | 1.44 | % |
| Short-term FHLB advances and other | 3,212 | | 16 | | 0.65 | % | | 2,420 | | 44 | | 2.45 | % |
| Long-term FHLB advances | 1,021 | | 9 | | 1.13 | % | | 349 | | 4 | | 1.71 | % |
| Other long-term debt | 494 | | 18 | | 4.94 | % | | 495 | | 21 | | 5.84 | % |
| Total interest-bearing liabilities | 14,625 | | 112 | | 1.01 | % | | 12,767 | | 171 | | 1.80 | % |
| Noninterest-bearing deposits | | | | | | | |
| Retail deposits and other | 1,680 | | | | | 1,278 | | | |
| Custodial deposits (1) | 6,120 | | | | | 3,524 | | | |
| Total noninterest-bearing deposits | 7,800 | | | | | 4,802 | | | |
| Other liabilities | 1,576 | | | | | 650 | | | |
| Stockholders' equity | 1,991 | | | | | 1,658 | | | |
| Total liabilities and stockholders' equity | $ | 25,992 | | | | | $ | 19,877 | | | |
| Net interest-earning assets | $ | 8,910 | | | | | $ | 4,926 | | | |
| Net interest income | | $ | 496 | | | | | $ | 410 | | |
| Interest rate spread (2) | | | 2.41 | % | | | | 2.57 | % |
| Net interest margin (3) | | | 2.81 | % | | | | 3.07 | % |
| Ratio of average interest-earning assets to interest-bearing liabilities | | | 160.9 | % | | | | 138.6 | % |
| Total average deposits | 17,698 | | | | | 14,305 | | | |
(1)Approximately 80 percent of custodial deposits from loans subserviced which pay interest is recognized as an offset in net loan administration income.
(2)Interest rate spread is the difference between rate of interest earned on interest-earning assets and rate of interest paid on interest-bearing liabilities.
(3)Net interest margin is net interest income divided by average interest-earning assets.
Earnings Per Share
(Dollars in millions, except share data)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | | | | | Nine Months Ended | | |
| September 30,
2020 | | June 30
2020 | | September 30, 2019 | | September 30,
2020 | | September 30, 2019 |
| Net Income | $ | 222 | | | $ | 116 | | | $ | 63 | | | $ | 384 | | | $ | 160 | |
| Weighted average common shares outstanding | 57,032,746 | | | 56,790,642 | | | 56,484,499 | | | 56,827,171 | | | 56,607,944 | |
| Stock-based awards | 347,063 | | 333,064 | | 626,297 | | | 404,518 | | 644,596 | |
| Weighted average diluted common shares | 57,379,809 | | | 57,123,706 | | | 57,110,796 | | | 57,231,689 | | | 57,252,540 | |
| Basic earnings per common share | $ | 3.90 | | | $ | 2.04 | | | $ | 1.12 | | | $ | 6.76 | | | $ | 2.83 | |
| Stock-based awards | (0.02) | | | (0.01) | | | (0.01) | | | (0.05) | | | (0.03) | |
| Diluted earnings per common share | $ | 3.88 | | | $ | 2.03 | | | $ | 1.11 | | | $ | 6.71 | | | $ | 2.80 | |
Regulatory Capital - Bancorp
(Dollars in millions)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2020 | | | June 30, 2020 | | | December 31, 2019 | | | September 30, 2019 | |
| Amount | Ratio | | Amount | Ratio | | Amount | Ratio | | Amount | Ratio |
| Tier 1 leverage (to adjusted avg. total assets) | $ | 2,256 | | 8.04 | % | | $ | 2,021 | | 7.76 | % | | $ | 1,826 | | 8.00 | % | | $ | 1,668 | | 7.98 | % |
| Total adjusted avg. total asset base | $ | 28,069 | | | | $ | 26,040 | | | | $ | 22,830 | | | | $ | 20,901 | | |
| Tier 1 common equity (to risk weighted assets) | $ | 2,016 | | 9.21 | % | | $ | 1,781 | | 9.11 | % | | $ | 1,586 | | 9.62 | % | | $ | 1,428 | | 9.25 | % |
| Tier 1 capital (to risk weighted assets) | $ | 2,256 | | 10.31 | % | | $ | 2,021 | | 10.33 | % | | $ | 1,826 | | 11.07 | % | | $ | 1,668 | | 10.81 | % |
| Total capital (to risk weighted assets) | $ | 2,471 | | 11.29 | % | | $ | 2,214 | | 11.32 | % | | $ | 1,936 | | 11.74 | % | | $ | 1,781 | | 11.54 | % |
| Risk-weighted asset base | $ | 21,882 | | | | $ | 19,562 | | | | $ | 16,493 | | | | $ | 15,432 | | |
Regulatory Capital - Bank
(Dollars in millions)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2020 | | | June 30, 2020 | | | December 31, 2019 | | | September 30, 2019 | |
| Amount | Ratio | | Amount | Ratio | | Amount | Ratio | | Amount | Ratio |
| Tier 1 leverage (to adjusted avg. total assets) | $ | 2,212 | | 7.89 | % | | $ | 1,969 | | 7.57 | % | | $ | 1,752 | | 7.71 | % | | $ | 1,747 | | 8.35 | % |
| Total adjusted avg. total asset base | 28,051 | | | | $ | 26,020 | | | | 22,727 | | | | $ | 19,614 | | |
| Tier 1 common equity (to risk weighted assets) | $ | 2,212 | | 10.11 | % | | $ | 1,969 | | 10.07 | % | | $ | 1,752 | | 11.04 | % | | $ | 1,747 | | 11.33 | % |
| Tier 1 capital (to risk weighted assets) | $ | 2,212 | | 10.11 | % | | $ | 1,969 | | 10.07 | % | | $ | 1,752 | | 11.04 | % | | $ | 1,747 | | 11.33 | % |
| Total capital (to risk weighted assets) | $ | 2,427 | | 11.09 | % | | $ | 2,161 | | 11.05 | % | | $ | 1,862 | | 11.73 | % | | $ | 1,860 | | 12.06 | % |
| Risk-weighted asset base | 21,882 | | | | $ | 19,559 | | | | $ | 15,873 | | | | $ | 14,538 | | |
Loans Serviced
(Dollars in millions)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2020 | | | June 30, 2020 | | | December 31, 2019 | | | September 30, 2019 | |
| Unpaid Principal Balance (1) | Number of accounts | | 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) | $ | 180,981 | | 893,559 | | | $ | 174,517 | | 854,693 | | $ | 194,638 | | 918,662 | | | $ | 171,145 | | 826,472 | |
| Serviced for others | 37,908 | | 148,868 | | | 29,846 | | 122,779 | | 24,003 | | 105,469 | | | 25,039 | | 106,992 | |
| Serviced for own loan portfolio (3) | 8,469 | | 62,486 | | | 9,211 | | 64,142 | | 9,536 | | 66,526 | | | 8,058 | | 60,088 | |
| Total loans serviced | $ | 227,358 | | 1,104,913 | | | $ | 213,574 | | 1,041,614 | | | $ | 228,177 | | 1,090,657 | | | $ | 204,242 | | 993,552 | |
(1)Unpaid principal balance, 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 LHFI (residential first mortgage, home equity and other consumer), LHFS (residential first mortgage), loans with government guarantees (residential first mortgage), and repossessed assets.
Loans Held-for-Investment
(Dollars in millions)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2020 | | | June 30, 2020 | | | December 31, 2019 | | | September 30, 2019 | | | | |
| Consumer loans | | | | | | | | | | | | | | |
| Residential first mortgage | $ | 2,472 | | 15.0 | % | | $ | 2,716 | | 18.3 | % | | $ | 3,154 | | 26.0 | % | | $ | 3,258 | | 26.0 | % | | | |
| Home equity | 924 | | 5.6 | % | | 978 | | 6.6 | % | | 1,024 | | 8.4 | % | | 985 | | 7.8 | % | | | |
| Other | 973 | | 5.9 | % | | 898 | | 6.1 | % | | 729 | | 6.0 | % | | 693 | | 5.5 | % | | | |
| Total consumer loans | 4,369 | | 26.5 | % | | 4,592 | | 31.0 | % | | 4,907 | | 40.4 | % | | 4,936 | | 39.3 | % | | | |
| Commercial loans | | | | | | | | | | | | | | |
| Commercial real estate | 2,996 | | 18.2 | % | | 3,016 | | 20.4 | % | | 2,828 | | 23.3 | % | | 2,697 | | 21.5 | % | | | |
| Commercial and industrial | 1,520 | | 9.2 | % | | 1,968 | | 13.3 | % | | 1,634 | | 13.5 | % | | 1,700 | | 13.6 | % | | | |
| Warehouse lending | 7,591 | | 46.1 | % | | 5,232 | | 35.3 | % | | 2,760 | | 22.8 | % | | 3,215 | | 25.6 | % | | | |
| Total commercial loans | 12,107 | | 73.5 | % | | 10,216 | | 69.0 | % | | 7,222 | | 59.6 | % | | 7,612 | | 60.7 | % | | | |
| Total loans held-for-investment | $ | 16,476 | | 100.0 | % | | $ | 14,808 | | 100.0 | % | | $ | 12,129 | | 100.0 | % | | $ | 12,548 | | 100.0 | % | | | |
Other Consumer Loans Held-for-Investment
(Dollars in millions)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2020 | | | June 30, 2020 | | | December 31, 2019 | | | September 30, 2019 | | | | |
| Indirect Lending | $ | 710 | | 73.0 | % | | $ | 647 | | 72.0 | % | | $ | 578 | | 79.3 | % | | $ | 519 | | 74.9 | % | | | |
| Point of Sale | 202 | | 20.8 | % | | 181 | 20.2 | % | | 63 | | 8.6 | % | | 58 | | 8.4 | % | | | |
| Other | 61 | | 6.3 | % | | 70 | 7.8 | % | | 88 | | 12.1 | % | | 116 | | 16.7 | % | | | |
| Total other consumer loans | $ | 973 | | 100.0 | % | | $ | 898 | | 100.0 | % | | $ | 729 | | 100.0 | % | | $ | 693 | | 100.0 | % | | | |
Allowance for Credit Losses
(Dollars in millions)
(Unaudited)
| | | | | | | | | | | | | | | | | |
| September 30, 2020 | | June 30, 2020 | | September 30, 2019 |
| Residential first mortgage | $ | 52 | | | $ | 60 | | | $ | 28 | |
| Home equity | 29 | | | 28 | | | 16 | |
| Other | 38 | | | 34 | | | 6 | |
| Total consumer loans | 119 | | | 122 | | | 50 | |
| Commercial real estate | 89 | | | 83 | | | 33 | |
| Commercial and industrial | 42 | | | 23 | | | 22 | |
| Warehouse lending | 5 | | | 1 | | | 5 | |
| Total commercial loans | 136 | | | 107 | | | 60 | |
| Allowance for loan losses | 255 | | | 229 | | | 110 | |
| Reserve for unfunded commitments | 25 | | | 21 | | | 3 | |
| Allowance for credit losses | $ | 280 | | | $ | 250 | | | $ | 113 | |
Allowance for Credit Losses
(Dollars in millions)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, 2020 | | | | | | | |
| Residential First Mortgage | Home Equity | Other Consumer | Commercial Real Estate | Commercial and Industrial | Warehouse Lending | Total LHFI Portfolio (1) | Unfunded Commitments |
| Beginning balance | $ | 60 | | $ | 28 | | $ | 34 | | $ | 83 | | $ | 23 | | $ | 1 | | $ | 229 | | $ | 21 | |
| Provision (benefit) for credit losses: | | | | | | | | |
| Loan volume | (4) | | (1) | | 3 | | — | | (4) | | 1 | | (5) | | 4 | |
| Economic forecast (2) | (3) | | (3) | | (1) | | — | | — | | — | | (7) | | — | |
| Credit (3) | (7) | | 1 | | (4) | | 13 | | 12 | | — | | 15 | | — | |
| Qualitative factor adjustments (4) | 6 | | 3 | | 5 | | (7) | | 11 | | 3 | | 21 | | — | |
| Charge-offs | (2) | | (1) | | (1) | | — | | — | | — | | (4) | | — | |
| Provision for charge-offs | 2 | | 1 | | 1 | | — | | — | | — | | 4 | | — | |
| Recoveries | — | | 1 | | 1 | | — | | — | | — | | 2 | | — | |
| Ending allowance balance | $ | 52 | | $ | 29 | | $ | 38 | | $ | 89 | | $ | 42 | | $ | 5 | | $ | 255 | | $ | 25 | |
| | | | | | | | |
(1) Excludes loans carried under the fair value option.
(2) Includes changes in the lifetime loss rate based on current economic forecasts as compared to forecasts used in the prior quarter.
(3) Includes changes in the probability of default and severity of default based on current borrower and guarantor characteristics, as well as individually evaluated reserves.
•(4) Includes $10 million of unallocated reserves attributed to various portfolios for presentation purposes.
Nonperforming Loans and Assets
(Dollars in millions)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| September 30,
2020 | | June 30,
2020 | | December 31,
2019 | | September 30,
2019 |
| Nonperforming LHFI | $ | 36 | | | $ | 23 | | | $ | 16 | | | $ | 16 | |
| Nonperforming TDRs | 4 | | | 4 | | | 3 | | | 3 | |
| Nonperforming TDRs at inception but performing for less than six months | 5 | | | 6 | | | 7 | | | 7 | |
| Total nonperforming LHFI and TDRs (1) | 45 | | | 33 | | | 26 | | | 26 | |
| Other nonperforming assets, net | 6 | | | 7 | | | 10 | | | 9 | |
| LHFS | 6 | | | 7 | | | 5 | | | 17 | |
| Total nonperforming assets | $ | 57 | | | $ | 47 | | | $ | 41 | | | $ | 52 | |
| | | | | | | |
| Ratio of nonperforming assets to total assets (2) | 0.17 | % | | 0.14 | % | | 0.15 | % | | 0.16 | % |
| Ratio of nonperforming LHFI and TDRs to LHFI | 0.28 | % | | 0.22 | % | | 0.21 | % | | 0.21 | % |
| Ratio of nonperforming assets to LHFI and repossessed assets (2) | 0.31 | % | | 0.27 | % | | 0.30 | % | | 0.29 | % |
(1)Includes less than 90 day past due performing loans placed on nonaccrual. Interest is not being accrued on these loans.
(2)Ratio excludes LHFS.
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 LHFI |
| September 30, 2020 | | | | | | | | | |
| Consumer loans | $ | 9 | | $ | 6 | | $ | 4 | | $ | 48 | | $ | 36 | | | $ | 49 | | | $ | 4,369 | |
| Commercial loans | — | | | — | | | 10 | | | 10 | | | 12,107 | |
| Total loans | $ | 9 | | | $ | 4 | | | $ | 46 | | | $ | 59 | | | $ | 16,476 | |
| June 30, 2020 | | | | | | | | | |
| Consumer loans | $ | 9 | | | $ | 6 | | | $ | 33 | | | $ | 48 | | | $ | 4,592 | |
| Commercial loans | — | | | — | | | — | | | — | | | 10,216 | |
| Total loans | $ | 9 | | | $ | 6 | | | $ | 33 | | | $ | 48 | | | $ | 14,808 | |
| December 31, 2019 | | | | | | | | | |
| Consumer loans | $ | 9 | | | $ | 5 | | | $ | 26 | | | $ | 40 | | | $ | 4,907 | |
| Commercial loans | — | | | — | | | — | | | — | | | 7,222 | |
| Total loans | $ | 9 | | | $ | 5 | | | $ | 26 | | | $ | 40 | | | $ | 12,129 | |
| September 30, 2019 | | | | | | | | | |
| Consumer loans | $ | 9 | | | $ | 3 | | | $ | 26 | | | $ | 38 | | | $ | 4,936 | |
| Commercial loans | — | | | — | | | — | | | — | | | 7,612 | |
| Total loans | $ | 9 | | | $ | 3 | | | $ | 26 | | | $ | 38 | | | $ | 12,548 | |
(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 |
| September 30, 2020 | | | | | |
| Consumer loans | $ | 34 | | | $ | 9 | | | $ | 43 | |
| Commercial loans | 5 | | | — | | | 5 | |
| Total TDR loans | $ | 39 | | | $ | 9 | | | $ | 48 | |
| June 30, 2020 | | | | | |
| Consumer loans | $ | 35 | | | $ | 10 | | | $ | 45 | |
| Commercial loans | 5 | | | — | | | 5 | |
| Total TDR loans | $ | 40 | | | $ | 10 | | | $ | 50 | |
| December 31, 2019 | | | | | |
| Consumer loans | $ | 38 | | | $ | 10 | | | $ | 48 | |
| Total TDR loans | $ | 38 | | | $ | 10 | | | $ | 48 | |
| September 30, 2019 | | | | | |
| Consumer loans | $ | 39 | | | $ | 10 | | | $ | 49 | |
| Total TDR loans | $ | 39 | | | $ | 10 | | | $ | 49 | |
Non-GAAP Reconciliation
(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 DOJ benefit and loans with government guarantees that have not been repurchased and don't accrue interest 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 common equity, adjusted return on average tangible common equity, adjusted return on average assets, adjusted HFI loan-to-deposit ratio and adjusted net interest margin 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.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30,
2020 | | June 30,
2020 | | March 31,
2020 | | December 31,
2019 | | September 30,
2019 | | |
| (Dollars in millions, except share data) | | | | | | | | | | |
| Total stockholders' equity | $ | 2,195 | | | $ | 1,971 | | | $ | 1,842 | | | $ | 1,788 | | | $ | 1,734 | | | |
| Less: Goodwill and intangible assets | 160 | | | 164 | | | 167 | | | 170 | | | 174 | | | |
| Tangible book value | $ | 2,035 | | | $ | 1,807 | | | $ | 1,675 | | | $ | 1,618 | | | $ | 1,560 | | | |
| | | | | | | | | | | |
| Number of common shares outstanding | 57,150,470 | | | 56,943,979 | | | 56,729,789 | | | 56,631,236 | | | 56,510,341 | | | |
| Tangible book value per share | $ | 35.60 | | | $ | 31.74 | | | $ | 29.52 | | | $ | 28.57 | | | $ | 27.62 | | | |
| | | | | | | | | | | |
| Total assets | $ | 29,476 | | | $ | 27,468 | | | $ | 26,805 | | | $ | 23,266 | | | $ | 22,048 | | | |
| Tangible common equity to assets ratio | 6.90 | % | | 6.58 | % | | 6.25 | % | | 6.95 | % | | 7.08 | % | | |
Adjusted return on average common equity, adjusted return on average tangible common equity and adjusted return on average assets.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | | | | | Nine Months Ended | | |
| September 30, 2020 | | December 31, 2019 | | September 30, 2019 | | September 30, 2020 | | September 30, 2019 |
| (Dollars in millions) | | | | | | | | |
| Net income | $ | 222 | | | $ | 58 | | | $ | 63 | | | $ | 384 | | | $ | 160 | |
| Add: Intangible asset amortization, net of tax | 3 | | | 3 | | | 2 | | | 7 | | | 10 | |
| Tangible net income | $ | 225 | | | $ | 61 | | | $ | 65 | | | $ | 391 | | | $ | 170 | |
| | | | | | | | | |
| Total average equity | $ | 2,141 | | | $ | 1,803 | | | $ | 1,722 | | | $ | 1,991 | | | $ | 1,658 | |
| Less: Average goodwill and intangible assets | 162 | | | 172 | | | 176 | | | 165 | | | 184 | |
| Total tangible average equity | $ | 1,979 | | | $ | 1,631 | | | $ | 1,546 | | | $ | 1,826 | | | $ | 1,474 | |
| | | | | | | | | |
| Return on average tangible common equity | 45.42 | % | | 14.76 | % | | 17.12 | % | | 28.58 | % | | 15.30 | % |
| Adjustment to remove DOJ adjustment | — | % | | — | % | | — | % | | — | % | | (1.31) | % |
| Adjusted return on average tangible common equity | 45.42 | % | | 14.76 | % | | 17.12 | % | | 28.58 | % | | 13.99 | % |
| | | | | | | | | |
| Return on average assets | 3.15 | % | | 0.99 | % | | 1.20 | % | | 1.97 | % | | 1.08 | % |
| Adjustment to remove DOJ adjustment | — | % | | — | % | | — | % | | — | % | | (0.10) | % |
| Adjusted return on average assets | 3.15 | % | | 0.99 | % | | 1.20 | % | | 1.97 | % | | 0.98 | % |
Adjusted HFI loan-to-deposit ratio.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30,
2020 | | June 30,
2020 | | March 31,
2020 | | December 31, 2019 | | September 30,
2019 | | |
| (Dollars in millions) | | | | | | | | | | |
| Average LHFI | $ | 14,839 | | | $ | 13,596 | | | $ | 11,823 | | | $ | 12,168 | | | $ | 11,743 | | | |
| Less: Average warehouse loans | 5,697 | | | 3,785 | | | 2,310 | | | 2,747 | | | 2,508 | | | |
| Adjusted average LHFI | $ | 9,142 | | | $ | 9,811 | | | $ | 9,513 | | | $ | 9,421 | | | $ | 9,235 | | | |
| | | | | | | | | | | |
| Average deposits | $ | 19,561 | | | $ | 17,715 | | | $ | 15,795 | | | $ | 15,904 | | | $ | 15,817 | | | |
| Less: Average custodial deposits | 7,347 | | | 6,223 | | | 4,776 | | | 4,772 | | | 4,550 | | | |
| Adjusted average deposits | $ | 12,214 | | | $ | 11,492 | | | $ | 11,019 | | | $ | 11,132 | | | $ | 11,267 | | | |
| | | | | | | | | | | |
| HFI loan-to-deposit ratio | 75.9 | % | | 76.7 | % | | 74.9 | % | | 76.5 | % | | 74.2 | % | | |
| Adjusted HFI loan-to-deposit ratio | 74.8 | % | | 85.4 | % | | 86.3 | % | | 84.6 | % | | 82.0 | % | | |
Adjusted net interest margin.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | | | | | | | |
| September 30, 2020 | | June 30,
2020 | | March 31,
2020 | | December 31, 2019 | | September 30, 2019 |
| | | | | | | | | |
| Net interest margin | 2.78 | % | | 2.86 | % | | 2.81 | % | | 2.91 | % | | 3.05 | % |
| Adjustment to LGG loans available for repurchase | 0.16 | % | | 0.02 | % | | — | % | | — | % | | — | % |
| Adjusted net interest margin | 2.94 | % | | 2.88 | % | | 2.81 | % | | 2.91 | % | | 3.05 | % |
