EXHIBIT 99.1
NEWS RELEASE
For more information, contact:
Kenneth Schellenberg
FBCInvestorRelations@flagstar.com
(248) 312-5741
Flagstar Bancorp Reports Fourth Quarter 2020 Net Income of $154 million, or $2.83 Per Diluted Share
Key Highlights - Fourth Quarter 2020
•Net interest income grew by $9 million with lower deposit costs and higher warehouse balances.
•Mortgage revenue was $232 million as fallout adjusted lock volume and gain on sale margins stayed strong.
•Asset quality remained solid with low levels of nonperforming loans and an industry-leading coverage ratio.
•Tangible book value per share reached $38.80 at year-end, representing a 36 percent increase for 2020.
TROY, Mich., Jan. 21, 2021 - Flagstar Bancorp, Inc. (NYSE: FBC), the holding company for Flagstar Bank, today reported fourth quarter 2020 net income of $154 million, or $2.83 per diluted share, compared to third quarter 2020 net income of $222 million, or $3.88 per diluted share and fourth quarter 2019 net income of $58 million, or $1.00 per diluted share.
"It was yet another outstanding quarter, capping off an exceptionally successful year for Flagstar,” said Alessandro DiNello, president and chief executive officer of Flagstar Bancorp, Inc. "All of our business segments contributed to produce earnings of $2.83 per share—75 percent of what we earned for the full year of 2019."
"Banking was once again a standout, as net interest income climbed $9 million to $189 million. And once again, our warehouse business led the way, as we continued to grow the low-risk balances this business generates. Our impressive performance in warehouse, coupled with a concerted effort to reduce funding costs, resulted in a flat net interest margin. In fact, net interest margin actually expanded 4 basis points when excluding those loans with government guarantees where we have the right to repurchase.
"We closed the quarter servicing and subservicing approximately 1.1 million loans, consistent with the prior quarter, despite the ongoing pressure of elevated prepayments. This is a testament to our business model, the quality of the service delivered, and the strength of the relationships we have developed with our subservicing partners.
"Our mortgage team continues to deliver, achieving revenues of $232 million for the quarter. While gain on sale margins did compress, we were pleased with how well they held up, finishing at 1.93 percent for the quarter. The team's all-out efforts—coupled with our diverse, multi-channel mortgage platform—made it possible for us to deliver a quality experience to customers all year long in the face of unprecedented volumes.
"Overall, 2020 was one for the record books. The performance of our mortgage and warehouse businesses was extraordinary, supported by the consistent results we have come to expect from servicing. Thanks to this success, we were positioned not only to secure an investment grade rating from Moody's rating agency, but were also able to execute a $150 million stock buyback.
"But the real story of the year was our employees. I could not be more proud of the way they responded, and continue to respond, to COVID-19. First, we had a business continuity plan in place and ready to go, and second, our employees did a masterful job of executing it. We've adapted to the change in our workplace and our success is written in our results. With the momentum of a strong year behind us and the power of a diversified franchise carrying us forward, we believe we are well positioned for continued success in 2021."
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| Income Statement Highlights | | | | | | |
| Three Months Ended | | |
| December 31,
2020 | September 30,
2020 | June 30,
2020 | March 31,
2020 | December 31,
2019 | | |
| (Dollars in millions, except per share data) | | |
| Net interest income | $ | 189 | | $ | 180 | | $ | 168 | | $ | 148 | | $ | 152 | | | |
| Provision for credit losses | 2 | | 32 | | 102 | | 14 | | — | | | |
| Noninterest income | 337 | | 452 | | 378 | | 157 | | 162 | | | |
| Noninterest expense | 319 | | 305 | | 296 | | 235 | | 245 | | | |
| Income before income taxes | 205 | | 295 | | 148 | | 56 | | 69 | | | |
| Provision for income taxes | 51 | | 73 | | 32 | | 10 | | 11 | | | |
| Net income | $ | 154 | | $ | 222 | | $ | 116 | | $ | 46 | | $ | 58 | | | |
| Income per share: | | | | | | | |
| Basic | $ | 2.86 | | $ | 3.90 | | $ | 2.04 | | $ | 0.80 | | $ | 1.01 | | | |
| Diluted | $ | 2.83 | | $ | 3.88 | | $ | 2.03 | | $ | 0.80 | | $ | 1.00 | | | |
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| Key Ratios | | | | | | |
| Three Months Ended | |
| December 31,
2020 | September 30,
2020 | June 30,
2020 | March 31,
2020 | December 31,
2019 | | |
| Net interest margin | 2.78 | % | 2.78 | % | 2.86 | % | 2.81 | % | 2.91 | % | | |
| Adjusted net interest margin (2) | 2.98 | % | 2.94 | % | 2.88 | % | 2.81 | % | 2.91 | % | | |
| Return on average assets | 2.1 | % | 3.1 | % | 1.8 | % | 0.8 | % | 1.0 | % | | |
| Return on average common equity | 27.6 | % | 41.5 | % | 23.5 | % | 9.8 | % | 12.7 | % | | |
| Efficiency ratio | 60.8 | % | 48.3 | % | 54.3 | % | 77.1 | % | 78.2 | % | | |
| HFI loan-to-deposit ratio | 74.5 | % | 75.9 | % | 76.7 | % | 74.9 | % | 76.5 | % | | |
| Adjusted HFI loan-to-deposit ratio (1) | 69.8 | % | 74.8 | % | 85.4 | % | 86.3 | % | 84.6 | % | | |
(1)Excludes warehouse loans and custodial deposits. See Non-GAAP Reconciliation for further information.
(2)Excludes loans with government guarantees available for repurchase. See Non-GAAP Reconciliation for further information.
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| Average Balance Sheet Highlights | | | | | | |
| Three Months Ended | % Change |
| December 31,
2020 | September 30,
2020 | June 30,
2020 | March 31,
2020 | December 31,
2019 | Seq | Yr/Yr |
| (Dollars in millions) | | |
| Average interest-earning assets | $ | 27,100 | | $ | 25,738 | | $ | 23,692 | | $ | 21,150 | | $ | 20,708 | | 5 | % | 31 | % |
| Average loans held-for-sale (LHFS) | 5,672 | | 5,602 | | 5,645 | | 5,248 | | 5,199 | | 1 | % | 9 | % |
| Average loans held-for-investment (LHFI) | 15,703 | | 14,839 | | 13,596 | | 11,823 | | 12,168 | | 6 | % | 29 | % |
| Average total deposits | 21,068 | | 19,561 | | 17,715 | | 15,795 | | 15,904 | | 8 | % | 32 | % |
Net Interest Income
Net interest income in the fourth quarter was $189 million, an increase of $9 million (5 percent) compared to the third quarter. The increase was primarily driven by warehouse loan growth and the impact of lower rates on deposit
costs, which was partially offset by lower yields on earning assets. Average earning assets increased $1.4 billion, reflecting an increase of $1.3 billion in average total loans, primarily warehouse, partially offset by a $0.3 billion decrease in average investment securities.
The net interest margin in the fourth quarter was 2.78 percent, flat to 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 4 basis points to 2.98 percent in the fourth quarter, compared to adjusted net interest margin of 2.94 percent in the prior quarter. The increase in the adjusted net interest margin was primarily driven by an increase in higher yielding warehouse loans and lower rates on deposits. Retail banking deposit rates decreased 18 basis points driven by the expiration of promotional rates on some of our savings deposits and the maturity of higher cost time deposits. This improvement more than offset the impact of declining interest rates in certain other categories of loans held-for-investment.
Loans held-for-investment averaged $15.7 billion for the fourth quarter, increasing $0.9 billion (6 percent) from the prior quarter. The increase was primarily driven by $1.3 billion (22 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 $0.2 billion (5 percent) lower average consumer loans, primarily due to a decrease in our residential first mortgage portfolio and $0.2 billion (12 percent) lower commercial and industrial loans.
Average total deposits were $21.1 billion in the fourth quarter, increasing $1.5 billion (8 percent) from the third quarter. Average custodial deposits increased $1.2 billion (16 percent) due to higher prepayments from refinancing and average demand and savings deposits and government deposits increased $0.5 billion (6 percent).
Provision for Credit Losses
The provision for credit losses was $2 million for the fourth quarter, as compared to $32 million for the third quarter 2020. Our allowance for credit losses remained flat as compared to the balance as of September 30, 2020, due to continued economic uncertainty caused by COVID-19. We continue to believe the economic recovery will be challenged by the COVID-19 pandemic for an extended period of time and significant uncertainty remains related to distribution of the vaccines and government stimulus, especially as it affects consumer loan forbearance and the commercial real estate sector.
Noninterest Income
Noninterest income decreased $115 million to $337 million in the fourth quarter, as compared to $452 million for the third quarter, primarily due to lower mortgage revenues.
Fourth quarter net gain on loan sales decreased $114 million, to $232 million, as compared to $346 million in the third quarter 2020. The net gain on loan sale margin decreased 38 basis points, to 1.93 percent for the fourth quarter 2020, as compared to 2.31 percent for the third quarter 2020. Fallout-adjusted locks decreased $3 billion, or 20 percent, to $12.0 billion, reflecting seasonal holiday factors which were partially offset by the continued strength of the mortgage environment due to lower rates.
Lower mortgage rates continued to drive refinance activity causing prepayment speeds to be elevated, resulting in a $12 million decrease in the net return on mortgage servicing rights in the fourth quarter 2020, compared to a $12 million net return for the third quarter.
Loan fees and charges increased $8 million, to $53 million for the fourth quarter, compared to $45 million for the third quarter, primarily due to higher loss mitigation and forbearance fee income on subserviced loans despite a 9 percent decrease in mortgage closings.
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| Mortgage Metrics | | | | | | |
| As of/Three months ended | Change (% / bps) |
| December 31,
2020 | September 30,
2020 | June 30,
2020 | March 31,
2020 | December 31,
2019 | Seq | Yr/Yr |
| (Dollars in millions) | | |
| Mortgage rate lock commitments (fallout-adjusted) (1) (2) | $ | 12,000 | | $ | 15,000 | | $ | 13,800 | | $ | 11,200 | | $ | 8,200 | | (20)% | 47% |
| Mortgage loans closed (1) | $ | 13,100 | | $ | 14,400 | | $ | 12,200 | | $ | 8,600 | | $ | 9,300 | | (9)% | 41% |
| Net margin on mortgage rate lock commitments (fallout-adjusted) (2) | 1.93 | % | 2.31 | % | 2.19 | % | 0.80 | % | 1.23 | % | (38) | 70 |
| Net gain on loan sales | $ | 232 | | $ | 346 | | $ | 303 | | $ | 90 | | $ | 101 | | (33)% | N/M |
| Net return (loss) on mortgage servicing rights (MSR) | $ | — | | $ | 12 | | $ | (8) | | $ | 6 | | $ | (3) | | N/M | N/M |
| Gain on loan sales + net return on the MSR | $ | 232 | | $ | 358 | | $ | 295 | | $ | 96 | | $ | 98 | | (35)% | N/M |
| Loans serviced (number of accounts - 000's) (3) | 1,085 | | 1,105 | | 1,042 | | 1,082 | | 1,091 | | (2)% | (1)% |
| Capitalized value of MSRs | 0.86 | % | 0.85 | % | 0.87 | % | 0.95 | % | 1.21 | % | 1 | (35) |
| 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 $319 million for the fourth quarter, compared to $305 million for the third quarter. This increase was primarily due to a $7 million loss recognized on the early redemption of senior notes due July 15, 2021 which will settle in January, $3 million due to hiring in the mortgage and servicing business to expand capacity, and an additional $2 million was contributed to the Flagstar Foundation during the quarter to further the community in light of the pandemic and ongoing economic conditions.
Mortgage expenses were $155 million for the fourth quarter, an increase of $7 million compared to the prior quarter. The ratio of mortgage noninterest expense to closings – our mortgage expense ratio – was 1.18 percent an increase of 16 basis points quarter over quarter, primarily driven by efforts to expand capacity and a higher retail channel mix.
The Company's efficiency ratio was 61 percent for the fourth quarter, as compared to 48 percent for the third quarter, primarily driven higher due to the extraordinary levels of gain on sale margin in the third quarter.
Income Taxes
The fourth quarter provision for income taxes totaled $51 million, with an effective tax rate of 24.8 percent, compared to $73 million and an effective tax rate of 24.7 percent for the third quarter. Our effective tax rate remained flat primarily due to a non-recurring tax impact of $2 million from final sale of stock by a shareholder that formerly held more than 50 percent of our outstanding shares.
Asset Quality
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| Credit Quality Ratios | | | | | | |
| As of/Three Months Ended | Change (% / bps) |
| December 31,
2020 | September 30,
2020 | June 30,
2020 | March 31,
2020 | December 31,
2019 | Seq | Yr/Yr |
| (Dollars in millions) | | |
| Allowance for credit losses (2) | $ | 280 | | $ | 280 | | $ | 250 | | $ | 152 | | $ | 110 | | —% | N/M |
| Credit reserves to LHFI | 1.73 | % | 1.70 | % | 1.69 | % | 1.10 | % | 0.91 | % | 3 | 82 |
| Credit reserves to LHFI excluding warehouse | 3.20 | % | 3.07 | % | 2.60 | % | 1.54 | % | 1.12 | % | 13 | 208 |
| Charge-offs, net of recoveries | $ | 2 | | $ | 2 | | $ | 3 | | $ | 2 | | $ | 3 | | —% | (33)% |
| Total nonperforming LHFI and TDRs | $ | 57 | | $ | 45 | | $ | 33 | | $ | 29 | | $ | 26 | | 27% | 119% |
| Net charge-offs to LHFI ratio (annualized) | 0.04 | % | 0.05 | % | 0.11 | % | 0.08 | % | 0.10 | % | (1) | (6) |
| Ratio of nonperforming LHFI and TDRs to LHFI | 0.34 | % | 0.28 | % | 0.22 | % | 0.21 | % | 0.21 | % | 6 | 13 |
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| Net charge-offs/(recoveries) to LHFI ratio (annualized) by loan type (1): | | |
| Residential first mortgage | 0.11 | % | 0.07 | % | 0.26 | % | 0.08 | % | 0.08 | % | 4 | 3 |
| Home equity and other consumer | 0.06 | % | 0.23 | % | 0.28 | % | 0.28 | % | 0.49 | % | (17) | (43) |
| Commercial real estate | — | % | (0.01) | % | 0.01 | % | (0.01) | % | — | % | 1 | — |
| Commercial and industrial | 0.21 | % | 0.06 | % | 0.08 | % | 0.09 | % | 0.07 | % | 15 | 14 |
| N/M - Not meaningful | | | | | | | |
(1) Excludes loans carried under the fair value option.
(2) Includes the allowance for loan losses and the reserve on unfunded commitments.
The allowance for credit losses was $280 million and covered 1.73 percent of loans held-for-investment at December 31, 2020, a 3 basis point increase from September 30, 2020. Excluding warehouse loans, the allowance coverage ratio was 3.20 percent, a 13 basis point increase from September 30, 2020.
Net charge-offs in the fourth quarter 2020 remained low at $2 million, or 4 basis points of LHFI, compared to $2 million, or 5 basis points in the prior quarter.
Nonperforming loans were $57 million and our ratio of nonperforming loans to loans held-for-investment was 34 basis points at December 31, 2020, a 6 basis point increase compared to September 30, 2020. The increase was due to two commercial borrowers totaling $7 million in exposure that were placed on nonaccrual during the quarter. At December 31, 2020, early stage loan delinquencies totaled $36 million, or 22 basis points, of total loans, compared to $13 million, or 8 basis points, at September 30, 2020.
Capital
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| Capital Ratios (Bancorp) | | Change (% / bps) |
| December 31,
2020 | September 30,
2020 | June 30,
2020 | March 31,
2020 | December 31,
2019 | Seq | Yr/Yr |
| Tier 1 leverage (to adj. avg. total assets) | 7.71 | % | 8.04 | % | 7.76 | % | 8.09 | % | 7.57 | % | (33) | 14 |
| Tier 1 common equity (to RWA) | 9.15 | % | 9.21 | % | 9.11 | % | 9.17 | % | 9.32 | % | (6) | (17) |
| Tier 1 capital (to RWA) | 10.23 | % | 10.31 | % | 10.33 | % | 10.52 | % | 10.83 | % | (8) | (60) |
| Total capital (to RWA) | 11.89 | % | 11.29 | % | 11.32 | % | 11.18 | % | 11.52 | % | 60 | 37 |
| Tangible common equity to asset ratio (1) | 6.58 | % | 6.90 | % | 6.58 | % | 6.25 | % | 6.95 | % | (32) | (37) |
| Tangible book value per share (1) | $ | 38.80 | | $ | 35.60 | | $ | 31.74 | | $ | 29.52 | | $ | 28.57 | | 9% | 36% |
(1)See Non-GAAP Reconciliation for further information.
The Company maintained a solid capital position with regulatory ratios 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-investment 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 10.77 percent and a total risk-based capital ratio of 14.00 percent at December 31, 2020.
Importantly, tangible book value per share grew to $38.80, up $3.20 from last quarter and an increase of $10.23, or 36 percent, in 2020.
Earnings Conference Call
As previously announced, the Company's fourth quarter 2020 earnings call will be held Thursday, January 21, 2021 at 11 a.m. (ET).
To join the call, please dial (888) 204-4368 toll free or (856) 344-9299 and use passcode 3619451. 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 3619451.
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 $31.0 billion savings and loan holding company headquartered in Troy, Mich. Flagstar Bank, FSB, provides commercial, small business, and consumer banking services through 158 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 103 retail locations in 28 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 almost 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. 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)
| | | | | | | | | | | | | | | | | |
| December 31,
2020 | | September 30,
2020 | | December 31,
2019 |
| Assets | | | | | |
| Cash | $ | 251 | | | $ | 194 | | | $ | 220 | |
| Interest-earning deposits | 372 | | | 86 | | | 206 | |
| Total cash and cash equivalents | 623 | | | 280 | | | 426 | |
| Investment securities available-for-sale | 1,944 | | | 2,165 | | | 2,116 | |
| Investment securities held-to-maturity | 377 | | | 440 | | | 598 | |
| Loans held-for-sale | 7,098 | | | 5,372 | | | 5,258 | |
| Loans held-for-investment | 16,227 | | | 16,476 | | | 12,129 | |
| Loans with government guarantees | 2,516 | | | 2,500 | | | 736 | |
| Less: allowance for loan losses | (252) | | | (255) | | | (107) | |
| Total loans held-for-investment and loans with government guarantees, net | 18,491 | | | 18,721 | | | 12,758 | |
| Mortgage servicing rights | 329 | | | 323 | | | 291 | |
| Federal Home Loan Bank stock | 377 | | | 377 | | | 303 | |
| Premises and equipment, net | 392 | | | 410 | | | 416 | |
| Goodwill and intangible assets | 157 | | | 160 | | | 170 | |
| Other assets | 1,250 | | | 1,228 | | | 930 | |
| Total assets | $ | 31,038 | | | $ | 29,476 | | | $ | 23,266 | |
| Liabilities and Stockholders’ Equity | | | | | |
| Noninterest-bearing deposits | $ | 9,458 | | | $ | 9,429 | | | $ | 5,467 | |
| Interest-bearing deposits | 10,515 | | | 10,516 | | | 9,679 | |
| Total deposits | 19,973 | | | 19,945 | | | 15,146 | |
| Short-term Federal Home Loan Bank advances and other | 3,900 | | | 2,226 | | | 4,165 | |
| Long-term Federal Home Loan Bank advances | 1,200 | | | 1,200 | | | 650 | |
| Other long-term debt | 641 | | | 493 | | | 496 | |
| GNMA repurchase options | 1,851 | | | 1,783 | | | 70 | |
| Other liabilities | 1,272 | | | 1,634 | | | 951 | |
| Total liabilities | 28,837 | | | 27,281 | | | 21,478 | |
| Stockholders’ Equity | | | | | |
| Common stock | 1 | | | 1 | | | 1 | |
| Additional paid in capital | 1,346 | | | 1,493 | | | 1,483 | |
| Accumulated other comprehensive income | 47 | | | 46 | | | 1 | |
| Retained earnings | 807 | | | 655 | | | 303 | |
| Total stockholders’ equity | 2,201 | | | 2,195 | | | 1,788 | |
| Total liabilities and stockholders’ equity | $ | 31,038 | | | $ | 29,476 | | | $ | 23,266 | |
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 | | 3Q20 | | 4Q19 |
| December 31,
2020 | September 30,
2020 | June 30,
2020 | March 31,
2020 | December 31,
2019 | | Amount | Percent | | Amount | Percent |
| Interest Income | | | | | | | | | | | |
| Total interest income | $ | 212 | | $ | 206 | | $ | 201 | | $ | 201 | | $ | 213 | | | $ | 6 | | 3 | % | | $ | (1) | | — | % |
| Total interest expense | 23 | | 26 | | 33 | | 53 | | 61 | | | (3) | | (12) | % | | (38) | | (62) | % |
| Net interest income | 189 | | 180 | | 168 | | 148 | | 152 | | | 9 | | 5 | % | | 37 | | 24 | % |
| Provision for credit losses | 2 | | 32 | | 102 | | 14 | | — | | | (30) | | (94) | % | | 2 | | N/M |
| Net interest income after provision for credit losses | 187 | | 148 | | 66 | | 134 | | 152 | | | 39 | | 26 | % | | 35 | | 23 | % |
| Noninterest Income | | | | | | | | | | | |
| Net gain on loan sales | 232 | | 346 | | 303 | | 90 | | 101 | | | (114) | | (33) | % | | 131 | | N/M |
| Loan fees and charges | 53 | | 45 | | 41 | | 26 | | 30 | | | 8 | | 18 | % | | 23 | | 77 | % |
| Net return (loss) on the mortgage servicing rights | — | | 12 | | (8) | | 6 | | (3) | | | (12) | | N/M | | 3 | | N/M |
| Loan administration income | 25 | | 26 | | 21 | | 12 | | 8 | | | (1) | | (4) | % | | 17 | | N/M |
| Deposit fees and charges | 8 | | 8 | | 7 | | 9 | | 10 | | | — | | — | % | | (2) | | (20) | % |
| Other noninterest income | 19 | | 15 | | 14 | | 14 | | 16 | | | 4 | | 27 | % | | 3 | | 19 | % |
| Total noninterest income | 337 | | 452 | | 378 | | 157 | | 162 | | | (115) | | (25) | % | | 175 | | 108 | % |
| Noninterest Expense | | | | | | | | | | | |
| Compensation and benefits | 125 | | 123 | | 116 | | 102 | | 102 | | | 2 | | 2 | % | | 23 | | 23 | % |
| Occupancy and equipment | 44 | | 47 | | 44 | | 41 | | 43 | | | (3) | | (6) | % | | 1 | | 2 | % |
| Commissions | 70 | | 72 | | 61 | | 29 | | 35 | | | (2) | | (3) | % | | 35 | | N/M |
| Loan processing expense | 29 | | 24 | | 25 | | 20 | | 20 | | | 5 | | 21 | % | | 9 | | 45 | % |
| Legal and professional expense | 11 | | 9 | | 5 | | 6 | | 9 | | | 2 | | 22 | % | | 2 | | 22 | % |
| Federal insurance premiums | 5 | | 6 | | 7 | | 6 | | 6 | | | (1) | | (17) | % | | (1) | | (17) | % |
| Intangible asset amortization | 3 | | 3 | | 4 | | 3 | | 4 | | | — | | — | % | | (1) | | (25) | % |
| Other noninterest expense | 32 | | 21 | | 34 | | 28 | | 26 | | | 11 | | 52 | % | | 6 | | 23 | % |
| Total noninterest expense | 319 | | 305 | | 296 | | 235 | | 245 | | | 14 | | 5 | % | | 74 | | 30 | % |
| Income before income taxes | 205 | | 295 | | 148 | | 56 | | 69 | | | (90) | | (31) | % | | 136 | | 197 | % |
| Provision for income taxes | 51 | | 73 | | 32 | | 10 | | 11 | | | (22) | | (30) | % | | 40 | | N/M |
| Net income | $ | 154 | | $ | 222 | | $ | 116 | | $ | 46 | | $ | 58 | | | $ | (68) | | (31) | % | | $ | 96 | | 166 | % |
| Income per share | | | | | | | | | | | |
| Basic | $ | 2.86 | | $ | 3.90 | | $ | 2.04 | | $ | 0.80 | | $ | 1.01 | | | $ | (1.04) | | (27) | % | | $ | 1.85 | | 183 | % |
| Diluted | $ | 2.83 | | $ | 3.88 | | $ | 2.03 | | $ | 0.80 | | $ | 1.00 | | | $ | (1.05) | | (27) | % | | $ | 1.83 | | 183 | % |
| | | | | | | | | | | |
| Cash dividends declared | $ | 0.05 | | $ | 0.05 | | $ | 0.05 | | $ | 0.05 | | $ | 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)
| | | | | | | | | | | | | | | | | | | | |
| Twelve Months Ended | | Change |
| December 31,
2020 | | December 31,
2019 | | Amount | Percent |
| Interest Income | | | | | | |
| Total interest income | $ | 819 | | | $ | 794 | | | $ | 25 | | 3 | % |
| Total interest expense | 134 | | | 232 | | | (98) | | (42) | % |
| Net interest income | 685 | | | 562 | | | 123 | | 22 | % |
| Provision for credit losses | 149 | | | 18 | | | 131 | | N/M |
| Net interest income after provision for credit losses | 536 | | | 544 | | | (8) | | (1) | % |
| Noninterest Income | | | | | | |
| Net gain on loan sales | 971 | | | 335 | | | 636 | | N/M |
| Loan fees and charges | 165 | | | 100 | | | 65 | | 65 | % |
| Net return on the mortgage servicing rights | 10 | | | 6 | | | 4 | | 67 | % |
| Loan administration income | 84 | | | 30 | | | 54 | | N/M |
| Deposit fees and charges | 32 | | | 38 | | | (6) | | (16) | % |
| Other noninterest income | 63 | | | 101 | | | (38) | | (38) | % |
| Total noninterest income | 1,325 | | | 610 | | | 715 | | 117 | % |
| Noninterest Expense | | | | | | |
| Compensation and benefits | 466 | | | 377 | | | 89 | | 24 | % |
| Occupancy and equipment | 176 | | | 161 | | | 15 | | 9 | % |
| Commissions | 232 | | | 111 | | | 121 | | N/M |
| Loan processing expense | 98 | | | 80 | | | 18 | | 23 | % |
| Legal and professional expense | 31 | | | 27 | | | 4 | | 15 | % |
| Federal insurance premiums | 24 | | | 20 | | | 4 | | 20 | % |
| Intangible asset amortization | 13 | | | 15 | | | (2) | | (13) | % |
| Other noninterest expense | 117 | | | 97 | | | 20 | | 21 | % |
| Total noninterest expense | 1,157 | | | 888 | | | 269 | | 30 | % |
| Income before income taxes | 704 | | | 266 | | | 438 | | 165 | % |
| Provision for income taxes | 166 | | | 48 | | | 118 | | N/M |
| Net income | $ | 538 | | | $ | 218 | | | $ | 320 | | 147 | % |
| Income per share | | | | | | |
| Basic | $ | 9.59 | | | $ | 3.85 | | | $ | 5.74 | | 149 | % |
| Diluted | $ | 9.52 | | | $ | 3.80 | | | $ | 5.72 | | 151 | % |
| | | | | | |
| Cash dividends declared | $ | 0.20 | | | $ | 0.16 | | | $ | 0.04 | | 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 | | Twelve Months Ended |
| December 31, 2020 | September 30,
2020 | December 31, 2019 | | December 31, 2020 | December 31, 2019 |
| Selected Mortgage Statistics (1): | | | | | | |
| Mortgage rate lock commitments (fallout-adjusted) (2) | $ | 12,000 | | $ | 15,000 | | $ | 8,200 | | | $ | 52,000 | | $ | 32,300 | |
| Mortgage loans closed | $ | 13,100 | | $ | 14,400 | | $ | 9,300 | | | $ | 48,300 | | $ | 32,700 | |
| Mortgage loans sold and securitized | $ | 12,000 | | $ | 14,500 | | $ | 8,100 | | | $ | 46,900 | | $ | 30,300 | |
| Selected Ratios: | | | | | | |
| Interest rate spread (3) | 2.44 | % | 2.44 | % | 2.39 | % | | 2.40 | % | 2.52 | % |
| | | | | | |
| Net interest margin | 2.78 | % | 2.78 | % | 2.91 | % | | 2.80 | % | 3.05 | % |
| Net margin on loans sold and securitized | 1.92 | % | 2.39 | % | 1.24 | % | | 2.07 | % | 1.10 | % |
| Return on average assets | 2.08 | % | 3.15 | % | 0.99 | % | | 2.00 | % | 1.05 | % |
| Adjusted return on average assets (4) (5) | 2.08 | % | 3.15 | % | 0.99 | % | | 2.00 | % | 0.96 | % |
| Return on average common equity | 27.58 | % | 41.54 | % | 12.69 | % | | 26.21 | % | 12.84 | % |
| Return on average tangible common equity (5) | 30.13 | % | 45.42 | % | 14.76 | % | | 29.00 | % | 15.15 | % |
| Adjusted return on average tangible common equity (4) (5) | 30.13 | % | 45.42 | % | 14.76 | % | | 29.00 | % | 13.87 | % |
| Efficiency ratio | 60.8 | % | 48.3 | % | 78.2 | % | | 57.6 | % | 75.8 | % |
| Common equity-to-assets ratio (average for the period) | 7.54 | % | 7.57 | % | 7.83 | % | | 7.63 | % | 8.20 | % |
| Average Balances: | | | | | | |
| Average interest-earning assets | $ | 27,100 | | $ | 25,738 | | $ | 20,708 | | | $ | 24,431 | | $ | 18,453 | |
| Average interest-bearing liabilities | $ | 13,782 | | $ | 14,281 | | $ | 14,208 | | | $ | 14,413 | | $ | 13,130 | |
| Average stockholders' equity | $ | 2,235 | | $ | 2,141 | | $ | 1,803 | | | $ | 2,052 | | $ | 1,695 | |
(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.
| | | | | | | | | | | | | | | | | |
| December 31,
2020 | | September 30,
2020 | | December 31,
2019 |
| Selected Statistics: | | | | | |
| Book value per common share | $ | 41.79 | | | $ | 38.41 | | | $ | 31.57 | |
Tangible book value per share (1) | $ | 38.80 | | | $ | 35.60 | | | $ | 28.57 | |
| Number of common shares outstanding | 52,656,067 | | | 57,150,470 | | | 56,631,236 | |
| Number of FTE employees | 5,214 | | | 4,871 | | | 4,453 | |
| Number of bank branches | 158 | | | 160 | | | 160 | |
Ratio of nonperforming assets to total assets (2) | 0.21 | % | | 0.17 | % | | 0.15 | % |
| Common equity-to-assets ratio | 7.09 | % | | 7.45 | % | | 7.68 | % |
| MSR Key Statistics and Ratios: | | | | | |
| Weighted average service fee (basis points) | 34.3 | | 35.0 | | | 39.7 | |
| Capitalized value of mortgage servicing rights | 0.86 | % | | 0.85 | % | | 1.21 | % |
(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 |
| December 31, 2020 | | September 30, 2020 | | December 31, 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 | $ | 5,672 | | $ | 42 | | 2.99% | | $ | 5,602 | | $ | 45 | | 3.21% | | $ | 5,199 | | $ | 51 | | 3.92% |
| Loans held-for-investment | | | | | | | | | | | |
| Residential first mortgage | 2,353 | | 19 | | 3.23% | | 2,584 | | 21 | | 3.24% | | 3,215 | | 30 | | 3.60% |
| Home equity | 890 | | 8 | | 3.69% | | 951 | | 9 | | 3.77% | | 989 | | 12 | | 4.86% |
| Other | 1,001 | | 13 | | 5.15% | | 950 | | 13 | | 5.28% | | 728 | | 11 | | 5.97% |
| Total consumer loans | 4,244 | | 40 | | 3.78% | | 4,485 | | 43 | | 3.78% | | 4,932 | | 53 | | 4.20% |
| Commercial real estate | 3,064 | | 27 | | 3.40% | | 3,007 | | 27 | | 3.47% | | 2,763 | | 34 | | 4.91% |
| Commercial and industrial | 1,447 | | 13 | | 3.55% | | 1,650 | | 14 | | 3.25% | | 1,726 | | 21 | | 4.80% |
| Warehouse lending | 6,948 | | 71 | | 3.99% | | 5,697 | | 56 | | 3.92% | | 2,747 | | 33 | | 4.61% |
| Total commercial loans | 11,459 | | 111 | | 3.78% | | 10,354 | | 97 | | 3.68% | | 7,236 | | 88 | | 4.77% |
| Total loans held-for-investment | 15,703 | | 151 | | 3.78% | | 14,839 | | 140 | | 3.71% | | 12,168 | | 141 | | 4.54% |
| Loans with government guarantees | 2,478 | | 5 | | 0.73% | | 2,122 | | 5 | | 0.89% | | 678 | | 4 | | 2.16% |
| Investment securities | 2,493 | | 14 | | 2.27% | | 2,807 | | 16 | | 2.29% | | 2,511 | | 16 | | 2.49% |
| Interest-earning deposits | 754 | | — | | 0.11% | | 368 | | — | | 0.11% | | 152 | | 1 | | 2.26% |
| Total interest-earning assets | 27,100 | | $ | 212 | | 3.09% | | 25,738 | | $ | 206 | | 3.16% | | 20,708 | | $ | 213 | | 4.04% |
| Other assets | 2,537 | | | | | 2,539 | | | | | 2,328 | | | |
| Total assets | $ | 29,637 | | | | | $ | 28,277 | | | | | $ | 23,036 | | | |
| Interest-Bearing Liabilities | | | | | | | | | | | |
| Retail deposits | | | | | | | | | | | |
| Demand deposits | $ | 1,842 | | $ | — | | 0.07% | | $ | 1,824 | | $ | — | | 0.09% | | $ | 1,448 | | $ | 3 | | 0.70% |
| Savings deposits | 3,847 | | 2 | | 0.20% | | 3,675 | | 3 | | 0.34% | | 3,335 | | 10 | | 1.19% |
| Money market deposits | 693 | | — | | 0.07% | | 733 | | — | | 0.09% | | 700 | | — | | 0.35% |
| Certificates of deposit | 1,415 | | 5 | | 1.18% | | 1,672 | | 8 | | 1.62% | | 2,459 | | 15 | | 2.37% |
| Total retail deposits | 7,797 | | 7 | | 0.33% | | 7,904 | | 11 | | 0.53% | | 7,942 | | 28 | | 1.39% |
| Government deposits | 1,579 | | 1 | | 0.26% | | 1,403 | | 1 | | 0.35% | | 1,192 | | 4 | | 1.39% |
| Wholesale deposits and other | 1,010 | | 4 | | 1.69% | | 953 | | 4 | | 1.77% | | 666 | | 4 | | 2.36% |
| Total interest-bearing deposits | 10,386 | | 12 | | 0.46% | | 10,260 | | 16 | | 0.62% | | 9,800 | | 36 | | 1.46% |
| Short-term FHLB advances and other | 1,598 | | 1 | | 0.20% | | 2,328 | | 2 | | 0.20% | | 3,262 | | 15 | | 1.74% |
| Long-term FHLB advances | 1,200 | | 3 | | 1.03% | | 1,200 | | 3 | | 1.03% | | 650 | | 3 | | 1.43% |
| Other long-term debt | 598 | | 7 | | 4.47% | | 493 | | 5 | | 4.52% | | 496 | | 7 | | 5.45% |
| Total interest-bearing liabilities | 13,782 | | 23 | | 0.65% | | 14,281 | | 26 | | 0.72% | | 14,208 | | 61 | | 1.65% |
| Noninterest-bearing deposits | | | | | | | | | | | |
| Retail deposits and other | 2,155 | | | | | 1,954 | | | | | 1,332 | | | |
| Custodial deposits (1) | 8,527 | | | | | 7,347 | | | | | 4,772 | | | |
| Total noninterest-bearing deposits | 10,682 | | | | | 9,301 | | | | | 6,104 | | | |
| Other liabilities | 2,938 | | | | | 2,554 | | | | | 921 | | | |
| Stockholders' equity | 2,235 | | | | | 2,141 | | | | | 1,803 | | | |
| Total liabilities and stockholders' equity | $ | 29,637 | | | | | $ | 28,277 | | | | | $ | 23,036 | | | |
| Net interest-earning assets | $ | 13,318 | | | | | $ | 11,457 | | | | | $ | 6,500 | | | |
| Net interest income | | $ | 189 | | | | | $ | 180 | | | | | $ | 152 | | |
| Interest rate spread (2) | | | 2.44% | | | | 2.44% | | | | 2.39% |
| Net interest margin (3) | | | 2.78% | | | | 2.78% | | | | 2.91% |
| Ratio of average interest-earning assets to interest-bearing liabilities | | | 196.6 | % | | | | 180.2 | % | | | | 145.8 | % |
| Total average deposits | $ | 21,068 | | | | | $ | 19,561 | | | | | $ | 15,904 | | | |
(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)
| | | | | | | | | | | | | | | | | | | | | | | |
| Twelve Months Ended, |
| December 31, 2020 | | December 31, 2019 |
| Average Balance | Interest | Annualized
Yield/Rate | | Average Balance | Interest | Annualized
Yield/Rate |
| Interest-Earning Assets | |
| Loans held-for-sale | $ | 5,542 | | $ | 184 | | 3.33 | % | | $ | 3,952 | | $ | 170 | | 4.30 | % |
| Loans held-for-investment | | | | | | | |
| Residential first mortgage | 2,704 | | 92 | | 3.36 | % | | 3,173 | | 115 | | 3.61 | % |
| Home equity | 965 | | 39 | | 4.01 | % | | 871 | | 46 | | 5.31 | % |
| Other | 912 | | 49 | | 5.38 | % | | 566 | | 36 | | 6.33 | % |
| Total consumer loans | 4,581 | | 180 | | 3.90 | % | | 4,610 | | 197 | | 4.26 | % |
| Commercial real estate | 3,030 | | 116 | | 3.77 | % | | 2,502 | | 136 | | 5.38 | % |
| Commercial and industrial | 1,692 | | 63 | | 3.65 | % | | 1,708 | | 88 | | 5.10 | % |
| Warehouse lending | 4,694 | | 190 | | 3.98 | % | | 2,112 | | 107 | | 4.99 | % |
| Total commercial loans | 9,416 | | 369 | | 3.86 | % | | 6,322 | | 331 | | 5.17 | % |
| Total loans held-for-investment | 13,997 | | 549 | | 3.87 | % | | 10,932 | | 528 | | 4.79 | % |
| Loans with government guarantees | 1,571 | | 15 | | 1.04 | % | | 553 | | 15 | | 2.66 | % |
| Investment securities | 2,943 | | 70 | | 2.37 | % | | 2,845 | | 77 | | 2.71 | % |
| Interest-earning deposits | 378 | | 1 | | 0.33 | % | | 171 | | 4 | | 2.35 | % |
| Total interest-earning assets | $ | 24,431 | | $ | 819 | | 3.33 | % | | $ | 18,453 | | $ | 794 | | 4.28 | % |
| Other assets | 2,477 | | | | | 2,221 | | | |
| Total assets | $ | 26,908 | | | | | $ | 20,674 | | | |
| Interest-Bearing Liabilities | | | | | | | |
| Retail deposits | | | | | | | |
| Demand deposits | $ | 1,763 | | $ | 6 | | 0.27 | % | | $ | 1,345 | | $ | 11 | | 0.77 | % |
| Savings deposits | 3,597 | | 19 | | 0.52 | % | | 3,220 | | 36 | | 1.13 | % |
| Money market deposits | 707 | | 1 | | 0.15 | % | | 736 | | 2 | | 0.32 | % |
| Certificates of deposit | 1,831 | | 32 | | 1.83 | % | | 2,536 | | 59 | | 2.31 | % |
| Total retail deposits | 7,898 | | 58 | | 0.73 | % | | 7,837 | | 108 | | 1.37 | % |
| Government deposits | 1,301 | | 7 | | 0.56 | % | | 1,186 | | 17 | | 1.46 | % |
| Wholesale deposits and other | 821 | | 16 | | 1.94 | % | | 554 | | 13 | | 2.36 | % |
| Total interest-bearing deposits | 10,020 | | 81 | | 0.81 | % | | 9,577 | | 138 | | 1.44 | % |
| Short-term FHLB advances and other | 2,807 | | 16 | | 0.58 | % | | 2,633 | | 59 | | 2.23 | % |
| Long-term FHLB advances | 1,066 | | 12 | | 1.10 | % | | 425 | | 7 | | 1.59 | % |
| Other long-term debt | 520 | | 25 | | 4.80 | % | | 495 | | 28 | | 5.65 | % |
| Total interest-bearing liabilities | 14,413 | | 134 | | 0.93 | % | | 13,130 | | 232 | | 1.76 | % |
| Noninterest-bearing deposits | | | | | | | |
| Retail deposits and other | 1,799 | | | | | 1,291 | | | |
| Custodial deposits (1) | 6,725 | | | | | 3,839 | | | |
| Total noninterest-bearing deposits | 8,524 | | | | | 5,130 | | | |
| Other liabilities | 1,919 | | | | | 719 | | | |
| Stockholders' equity | 2,052 | | | | | 1,695 | | | |
| Total liabilities and stockholders' equity | $ | 26,908 | | | | | $ | 20,674 | | | |
| Net interest-earning assets | $ | 10,018 | | | | | $ | 5,323 | | | |
| Net interest income | | $ | 685 | | | | | $ | 562 | | |
| Interest rate spread (2) | | | 2.40 | % | | | | 2.52 | % |
| Net interest margin (3) | | | 2.80 | % | | | | 3.05 | % |
| Ratio of average interest-earning assets to interest-bearing liabilities | | | 169.5 | % | | | | 140.5 | % |
| Total average deposits | 18,544 | | | | | 14,708 | | | |
(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 | | Twelve Months Ended |
| December 31,
2020 | | September 30
2020 | | December 31, 2019 | | December 31,
2020 | | December 31, 2019 |
| Net Income | $ | 154 | | | $ | 222 | | | $ | 58 | | | $ | 538 | | | $ | 218 | |
| Weighted average common shares outstanding | 53,912,584 | | | 57,032,746 | | | 56,513,890 | | | 56,094,542 | | | 56,584,238 | |
| Stock-based awards | 431,382 | | 347,063 | | 684,844 | | | 411,271 | | 654,740 | |
| Weighted average diluted common shares | 54,343,966 | | | 57,379,809 | | | 57,198,734 | | | 56,505,813 | | | 57,238,978 | |
| Basic earnings per common share | $ | 2.86 | | | $ | 3.90 | | | $ | 1.01 | | | $ | 9.59 | | | $ | 3.85 | |
| Stock-based awards | (0.03) | | | (0.02) | | | (0.01) | | | (0.07) | | | (0.05) | |
| Diluted earnings per common share | $ | 2.83 | | | $ | 3.88 | | | $ | 1.00 | | | $ | 9.52 | | | $ | 3.80 | |
Regulatory Capital - Bancorp
(Dollars in millions)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 | | September 30, 2020 | | December 31, 2019 |
| Amount | Ratio | | Amount | Ratio | | Amount | Ratio |
| Tier 1 leverage (to adjusted avg. total assets) | $ | 2,270 | | 7.71 | % | | $ | 2,256 | | 8.04 | % | | $ | 1,826 | | 8.00 | % |
| Total adjusted avg. total asset base | $ | 29,444 | | | | $ | 28,069 | | | | $ | 22,830 | | |
| Tier 1 common equity (to risk weighted assets) | $ | 2,030 | | 9.15 | % | | $ | 2,016 | | 9.21 | % | | $ | 1,586 | | 9.62 | % |
| Tier 1 capital (to risk weighted assets) | $ | 2,270 | | 10.23 | % | | $ | 2,256 | | 10.31 | % | | $ | 1,826 | | 11.07 | % |
| Total capital (to risk weighted assets) | $ | 2,638 | | 11.89 | % | | $ | 2,471 | | 11.29 | % | | $ | 1,936 | | 11.74 | % |
| Risk-weighted asset base | $ | 22,190 | | | | $ | 21,882 | | | | $ | 16,493 | | |
Regulatory Capital - Bank
(Dollars in millions)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 | | September 30, 2020 | | December 31, 2019 |
| Amount | Ratio | | Amount | Ratio | | Amount | Ratio |
| Tier 1 leverage (to adjusted avg. total assets) | $ | 2,390 | | 8.12 | % | | $ | 2,212 | | 7.89 | % | | $ | 1,752 | | 7.71 | % |
| Total adjusted avg. total asset base | 29,437 | | | | $ | 28,051 | | | | 22,727 | | |
| Tier 1 common equity (to risk weighted assets) | $ | 2,390 | | 10.77 | % | | $ | 2,212 | | 10.11 | % | | $ | 1,752 | | 11.04 | % |
| Tier 1 capital (to risk weighted assets) | $ | 2,390 | | 10.77 | % | | $ | 2,212 | | 10.11 | % | | $ | 1,752 | | 11.04 | % |
| Total capital (to risk weighted assets) | $ | 2,608 | | 11.75 | % | | $ | 2,427 | | 11.09 | % | | $ | 1,862 | | 11.73 | % |
| Risk-weighted asset base | 22,194 | | | | $ | 21,882 | | | | $ | 15,873 | | |
Loans Serviced
(Dollars in millions)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 | | September 30, 2020 | | December 31, 2019 |
| 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) | $ | 178,606 | | 867,799 | | | $ | 180,981 | | 893,559 | | | $ | 194,638 | | 918,662 | |
| Serviced for others (3) | 38,026 | | 151,081 | | | 37,908 | | 148,868 | | | 24,003 | | 105,469 | |
| Serviced for own loan portfolio (4) | 10,079 | | 66,519 | | | 8,469 | | 62,486 | | | 9,536 | | 66,526 | |
| Total loans serviced | $ | 226,711 | | 1,085,399 | | | $ | 227,358 | | 1,104,913 | | | $ | 228,177 | | 1,090,657 | |
(1)UPB, net of write downs, does not include premiums or discounts.
(2)Loans subserviced for a fee for non-Flagstar owned loans or MSRs. Includes temporary short-term subservicing performed as a result of sales of servicing-released MSRs.
(3)Loans for which Flagstar owns the MSR.
(4)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)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 | | September 30, 2020 | | December 31, 2019 | | |
| Consumer loans | | | | | | | | | | | |
| Residential first mortgage | $ | 2,266 | | 14.0 | % | | $ | 2,472 | | 15.0 | % | | $ | 3,154 | | 26.0 | % | | | |
| Home equity | 856 | | 5.3 | % | | 924 | | 5.6 | % | | 1,024 | | 8.4 | % | | | |
| Other | 1,004 | | 6.1 | % | | 973 | | 5.9 | % | | 729 | | 6.0 | % | | | |
| Total consumer loans | 4,126 | | 25.4 | % | | 4,369 | | 26.5 | % | | 4,907 | | 40.4 | % | | | |
| Commercial loans | | | | | | | | | | | |
| Commercial real estate | 3,061 | | 18.9 | % | | 2,996 | | 18.2 | % | | 2,828 | | 23.3 | % | | | |
| Commercial and industrial | 1,382 | | 8.5 | % | | 1,520 | | 9.2 | % | | 1,634 | | 13.5 | % | | | |
| Warehouse lending | 7,658 | | 47.2 | % | | 7,591 | | 46.1 | % | | 2,760 | | 22.8 | % | | | |
| Total commercial loans | 12,101 | | 74.6 | % | | 12,107 | | 73.5 | % | | 7,222 | | 59.6 | % | | | |
| Total loans held-for-investment | $ | 16,227 | | 100.0 | % | | $ | 16,476 | | 100.0 | % | | $ | 12,129 | | 100.0 | % | | | |
Other Consumer Loans Held-for-Investment
(Dollars in millions)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 | | September 30, 2020 | | December 31, 2019 | | |
| Indirect Lending | $ | 713 | | 71.0 | % | | $ | 710 | | 73.0 | % | | $ | 578 | | 79.3 | % | | | |
| Point of Sale | 211 | | 21.0 | % | | 202 | 20.8 | % | | 63 | | 8.6 | % | | | |
| Other | 80 | | 8.0 | % | | 61 | 6.3 | % | | 88 | | 12.1 | % | | | |
| Total other consumer loans | $ | 1,004 | | 100.0 | % | | $ | 973 | | 100.0 | % | | $ | 729 | | 100.0 | % | | | |
Allowance for Credit Losses
(Dollars in millions)
(Unaudited)
| | | | | | | | | | | | | | | | | |
| December 31, 2020 | | September 30, 2020 | | December 31, 2019 |
| Residential first mortgage | $ | 49 | | | $ | 52 | | | $ | 22 | |
| Home equity | 25 | | | 29 | | | 14 | |
| Other | 39 | | | 38 | | | 6 | |
| Total consumer loans | 113 | | | 119 | | | 42 | |
| Commercial real estate | 84 | | | 89 | | | 38 | |
| Commercial and industrial | 51 | | | 42 | | | 22 | |
| Warehouse lending | 4 | | | 5 | | | 5 | |
| Total commercial loans | 139 | | | 136 | | | 65 | |
| Allowance for loan losses | 252 | | | 255 | | | 107 | |
| Reserve for unfunded commitments | 28 | | | 25 | | | 3 | |
| Allowance for credit losses | $ | 280 | | | $ | 280 | | | $ | 110 | |
Allowance for Credit Losses
(Dollars in millions)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended December 31, 2020 |
| Residential First Mortgage | Home Equity | Other Consumer | Commercial Real Estate | Commercial and Industrial | Warehouse Lending | Total LHFI Portfolio (1) | Unfunded Commitments |
| Beginning balance | $ | 52 | | $ | 29 | | $ | 38 | | $ | 89 | | $ | 42 | | $ | 5 | | $ | 255 | | $ | 25 | |
| Provision (benefit) for credit losses: | | | | | | | | |
| Loan volume | (2) | | (2) | | 1 | | 1 | | (2) | | — | | (4) | | 3 | |
| Economic forecast (2) | (6) | | (6) | | (2) | | — | | — | | (1) | | (15) | | — | |
| Credit (3) | (1) | | (2) | | (4) | | — | | 8 | | — | | 1 | | — | |
| Qualitative factor adjustments (4) | 6 | | 5 | | 6 | | (6) | | 3 | | — | | 14 | | — | |
| Charge-offs | (1) | | — | | (1) | | — | | (1) | | — | | (3) | | — | |
| Provision for charge-offs | 1 | | — | | 1 | | — | | 1 | | — | | 3 | | — | |
| Recoveries | — | | 1 | | — | | — | | — | | — | | 1 | | — | |
| Ending allowance balance | $ | 49 | | $ | 25 | | $ | 39 | | $ | 84 | | $ | 51 | | $ | 4 | | $ | 252 | | $ | 28 | |
(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 $7 million of unallocated reserves attributed to various portfolios for presentation purposes.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Twelve Months Ended December 31, 2020 |
| Residential First Mortgage | Home Equity | Other Consumer | Commercial Real Estate | Commercial and Industrial | Warehouse Lending | Total LHFI Portfolio (1) | Unfunded Commitments |
| (Dollars in millions) |
| Beginning balance ALLL | $ | 22 | | $ | 14 | | $ | 6 | | $ | 38 | | $ | 22 | | $ | 5 | | $ | 107 | | $ | 3 | |
| Impact of adopting ASC 326 | 25 | | 12 | | 10 | | (14) | | (6) | | (4) | | 23 | | 7 | |
| Beginning allowance balance | 47 | | 26 | | 16 | | 24 | | 16 | | 1 | | 130 | | 10 | |
| Provision (benefit) for credit losses: | | | | | | | | |
| Loan volume | (10) | | (4) | | 9 | | 3 | | (3) | | 1 | | (4) | | 7 | |
| Economic forecast (2) | 5 | | (6) | | 3 | | 15 | | (3) | | (1) | | 13 | | 11 | |
| Credit (3) | (5) | | (3) | | (2) | | 23 | | 20 | | — | | 33 | | — | |
| Qualitative factor adjustments (4) | 12 | | 8 | | 11 | | 19 | | 21 | | 3 | | 74 | | — | |
| Charge-offs | (6) | | (3) | | (5) | | — | | (1) | | — | | (15) | | — | |
| Provision for charge-offs | 6 | | 3 | | 5 | | — | | 1 | | — | | 15 | | — | |
| Recoveries | — | | 4 | | 2 | | — | | — | | — | | 6 | | — | |
| Ending allowance balance | $ | 49 | | $ | 25 | | $ | 39 | | $ | 84 | | $ | 51 | | $ | 4 | | $ | 252 | | $ | 28 | |
(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 $7 million of unallocated reserves attributed to various portfolios for presentation purposes.
Nonperforming Loans and Assets
(Dollars in millions)
(Unaudited)
| | | | | | | | | | | | | | | | | |
| December 31,
2020 | | September 30,
2020 | | December 31,
2019 |
| Nonperforming LHFI | $ | 46 | | | $ | 36 | | | $ | 16 | |
| Nonperforming TDRs | 5 | | | 4 | | | 3 | |
| Nonperforming TDRs at inception but performing for less than six months | 6 | | | 5 | | | 7 | |
| Total nonperforming LHFI and TDRs (1) | 57 | | | 45 | | | 26 | |
| Other nonperforming assets, net | 8 | | | 6 | | | 10 | |
| LHFS | 9 | | | 6 | | | 5 | |
| Total nonperforming assets | $ | 74 | | | $ | 57 | | | $ | 41 | |
| | | | | |
| Ratio of nonperforming assets to total assets (2) | 0.21 | % | | 0.17 | % | | 0.15 | % |
| Ratio of nonperforming LHFI and TDRs to LHFI | 0.34 | % | | 0.28 | % | | 0.21 | % |
| Ratio of nonperforming assets to LHFI and repossessed assets (2) | 0.40 | % | | 0.31 | % | | 0.30 | % |
(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 |
| December 31, 2020 | | | | | | | | | |
| Consumer loans | $ | 9 | | | $ | 6 | | | $ | 38 | | | $ | 53 | | | $ | 4,126 | |
| Commercial loans | 21 | | | — | | | 17 | | | 38 | | | 12,101 | |
| Total loans | $ | 30 | | | $ | 6 | | | $ | 55 | | | $ | 91 | | | $ | 16,227 | |
| September 30, 2020 | | | | | | | | | |
| Consumer loans | $ | 9 | | | $ | 4 | | | $ | 36 | | | $ | 49 | | | $ | 4,369 | |
| Commercial loans | — | | | — | | | 10 | | | 10 | | | 12,107 | |
| Total loans | $ | 9 | | | $ | 4 | | | $ | 46 | | | $ | 59 | | | $ | 16,476 | |
| December 31, 2019 | | | | | | | | | |
| Consumer loans | $ | 9 | | | $ | 5 | | | $ | 26 | | | $ | 40 | | | $ | 4,907 | |
| Commercial loans | — | | | — | | | — | | | — | | | 7,222 | |
| Total loans | $ | 9 | | | $ | 5 | | | $ | 26 | | | $ | 40 | | | $ | 12,129 | |
(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 |
| December 31, 2020 | |
| Consumer loans | $ | 31 | | | $ | 10 | | | $ | 41 | |
| Commercial loans | 5 | | | — | | | 5 | |
| Total TDR loans | $ | 36 | | | $ | 10 | | | $ | 46 | |
| September 30, 2020 | | | | | |
| Consumer loans | $ | 34 | | | $ | 9 | | | $ | 43 | |
| Commercial loans | 5 | | | — | | | 5 | |
| Total TDR loans | $ | 39 | | | $ | 9 | | | $ | 48 | |
| December 31, 2019 | | | | | |
| Consumer loans | $ | 38 | | | $ | 10 | | | $ | 48 | |
| Total TDR loans | $ | 38 | | | $ | 10 | | | $ | 48 | |
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.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31,
2020 | | September 30,
2020 | | June 30,
2020 | | March 31,
2020 | | December 31,
2019 | | |
| (Dollars in millions, except share data) |
| Total stockholders' equity | $ | 2,201 | | | $ | 2,195 | | | $ | 1,971 | | | $ | 1,842 | | | $ | 1,788 | | | |
| Less: Goodwill and intangible assets | 157 | | | 160 | | | 164 | | | 167 | | | 170 | | | |
| Tangible book value | $ | 2,044 | | | $ | 2,035 | | | $ | 1,807 | | | $ | 1,675 | | | $ | 1,618 | | | |
| | | | | | | | | | | |
| Number of common shares outstanding | 52,656,067 | | | 57,150,470 | | | 56,943,979 | | | 56,729,789 | | | 56,631,236 | | | |
| Tangible book value per share | $ | 38.80 | | | $ | 35.60 | | | $ | 31.74 | | | $ | 29.52 | | | $ | 28.57 | | | |
| | | | | | | | | | | |
| Total assets | $ | 31,038 | | | $ | 29,476 | | | $ | 27,468 | | | $ | 26,805 | | | $ | 23,266 | | | |
| Tangible common equity to assets ratio | 6.58 | % | | 6.90 | % | | 6.58 | % | | 6.25 | % | | 6.95 | % | | |
Adjusted return on average common equity, adjusted return on average tangible common equity and adjusted return on average assets.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Twelve Months Ended |
| December 31, 2020 | | September 30, 2020 | | December 31, 2019 | | December 31, 2020 | | December 31, 2019 |
| (Dollars in millions) |
| Net income | $ | 154 | | | $ | 116 | | | $ | 58 | | | $ | 538 | | | $ | 218 | |
| Add: Intangible asset amortization, net of tax | 2 | | | 3 | | | 3 | | | 10 | | | 12 | |
| Tangible net income | $ | 156 | | | $ | 119 | | | $ | 61 | | | $ | 548 | | | $ | 230 | |
| | | | | | | | | |
| Total average equity | $ | 2,235 | | | $ | 1,977 | | | $ | 1,803 | | | $ | 2,052 | | | $ | 1,695 | |
| Less: Average goodwill and intangible assets | 159 | | | 165 | | | 172 | | | 164 | | | 179 | |
| Total tangible average equity | $ | 2,076 | | | $ | 1,812 | | | $ | 1,631 | | | $ | 1,888 | | | $ | 1,516 | |
| | | | | | | | | |
| Return on average tangible common equity | 30.13 | % | | 26.16 | % | | 14.76 | % | | 29.00 | % | | 15.15 | % |
| Adjustment to remove DOJ adjustment | — | % | | — | % | | — | % | | — | % | | (1.28) | % |
| Adjusted return on average tangible common equity | 30.13 | % | | 26.16 | % | | 14.76 | % | | 29.00 | % | | 13.87 | % |
| | | | | | | | | |
| Return on average assets | 2.08 | % | | 1.77 | % | | 0.99 | % | | 2.00 | % | | 1.05 | % |
| Adjustment to remove DOJ adjustment | — | % | | — | % | | — | % | | — | % | | (0.09) | % |
| Adjusted return on average assets | 2.08 | % | | 1.77 | % | | 0.99 | % | | 2.00 | % | | 0.96 | % |
Adjusted HFI loan-to-deposit ratio.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31,
2020 | | September 30,
2020 | | June 30,
2020 | | March 31,
2020 | | December 31,
2019 | | |
| (Dollars in millions) |
| Average LHFI | $ | 15,703 | | | $ | 14,839 | | | $ | 13,596 | | | $ | 11,823 | | | $ | 12,168 | | | |
| Less: Average warehouse loans | 6,948 | | | 5,697 | | | 3,785 | | | 2,310 | | | 2,747 | | | |
| Adjusted average LHFI | $ | 8,755 | | | $ | 9,142 | | | $ | 9,811 | | | $ | 9,513 | | | $ | 9,421 | | | |
| | | | | | | | | | | |
| Average deposits | $ | 21,068 | | | $ | 19,561 | | | $ | 17,715 | | | $ | 15,795 | | | $ | 15,904 | | | |
| Less: Average custodial deposits | 8,527 | | | 7,347 | | | 6,223 | | | 4,776 | | | 4,772 | | | |
| Adjusted average deposits | $ | 12,541 | | | $ | 12,214 | | | $ | 11,492 | | | $ | 11,019 | | | $ | 11,132 | | | |
| | | | | | | | | | | |
| HFI loan-to-deposit ratio | 74.5 | % | | 75.9 | % | | 76.7 | % | | 74.9 | % | | 76.5 | % | | |
| Adjusted HFI loan-to-deposit ratio | 69.8 | % | | 74.8 | % | | 85.4 | % | | 86.3 | % | | 84.6 | % | | |
Adjusted net interest margin.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended |
| December 31, 2020 | | September 30,
2020 | | June 30,
2020 | | March 31,
2020 | | December 31, 2019 |
| Net interest margin | 2.78 | % | | 2.78 | % | | 2.86 | % | | 2.81 | % | | 2.91 | % |
| Adjustment to LGG loans available for repurchase | 0.20 | % | | 0.16 | % | | 0.02 | % | | — | % | | — | % |
| Adjusted net interest margin | 2.98 | % | | 2.94 | % | | 2.88 | % | | 2.81 | % | | 2.91 | % |
