FLAGSTAR BANCORP, INC. TROY, Mich., April 25, 2017 /PRNewswire/ --
Key Highlights - First Quarter 2017
-- Strong commercial loan growth with period-end commercial and industrial
and commercial real estate loans up 11 percent from prior quarter-end
and up 58 percent versus same quarter-end last year.
-- Mortgage revenues, including gain on sale and return on MSR, up $10
million, or 19 percent, from fourth quarter 2016, resulting from
improved MSR returns; increased purchase mortgage volumes largely offset
lower refinance levels.
-- Noninterest expense improved $2 million, or 1 percent, versus prior
quarter, on lower mortgage activity despite seasonally higher benefits
costs and acquisition-related expenses.
-- Sold $65 million fair value of MSR assets and entered into agreements to
sell nearly $200 million additional MSRs in second quarter 2017,
successfully executing MSR reduction strategy.
-- Asset quality strong with nonperforming loans declining to $28 million.
-- Strategic goals advanced with acquisition of Stearns' delegated
correspondent business and agreement to acquire certain assets of Opes
Advisors.
Flagstar Bancorp, Inc. (NYSE: FBC), the holding company for Flagstar Bank, FSB, today reported first quarter 2017 net income of $27 million, or $0.46 per diluted share, as compared to $28 million, or $0.49 per diluted share, in the fourth quarter 2016 and $39 million, or $0.54 per diluted share, in the first quarter 2016.
"We had another good quarter with solid results, despite facing the headwinds of seasonality and higher interest rates in our mortgage business," said Alessandro DiNello, president and chief executive officer of Flagstar Bancorp, Inc. "Our community bank came through again as a solid contributor to net interest income where strong growth in commercial real estate, commercial and industrial, and mortgage loans partially overcame a decline in warehouse loans. We also saw continued growth in retail deposits at an attractive funding level."
"We saw strong returns on the mortgage servicing rights we hold, reflecting the stronger market we are seeing in this rate environment. In the first quarter, we sold $65 million of our mortgage servicing rights. In the second quarter, we have entered into pending bulk sales of an additional $195 million of mortgage servicing rights under contract at a break-even price, including transaction costs. We have retained servicing on approximately two-thirds of the total MSR sale amount."
"We announced two acquisitions recently to support our position as a national leader in the mortgage industry. First was the purchase of the delegated correspondent business of Stearns Lending. This was an opportunistic acquisition that allows us to become a top five player in this channel. Second was our agreement to purchase certain assets of Opes Advisors, a high-quality retail mortgage originator. This acquisition dovetails nicely with our interest in growing our retail mortgage channel."
"We remain committed to continuing to grow our community bank and solidifying our position as an industry leader in mortgage banking. Looking ahead, we believe we are well positioned to benefit from a stronger economy, a stronger housing market and the pivot to a stronger purchase mortgage market."
First Quarter 2017 Highlights:
Income Statement Highlights
Three Months Ended
March 31, December 31, September 30, June 30, March 31,
2017 2016 2016 2016 2016
---- ---- ---- ---- ----
(Dollars in millions)
Net interest income $83 $87 $80 $77 $79
Provision (benefit)
for loan losses 3 1 7 (3) (13)
Noninterest income 100 98 156 128 105
Noninterest expense 140 142 142 139 137
--- --- --- --- ---
Income before income
taxes 40 42 87 69 60
Provision for income
taxes 13 14 30 22 21
--- --- --- --- ---
Net income $27 $28 $57 $47 $39
=== === === === ===
Income per share:
Basic $0.47 $0.50 $0.98 $0.67 $0.56
Diluted $0.46 $0.49 $0.96 $0.66 $0.54
Key Ratios
Three Months Ended Change (bps)
March 31, December 31, September 30, June 30, March 31, Seq Yr/Yr
2017 2016 2016 2016 2016
---- ---- ---- ---- ----
Net
interest
margin 2.67% 2.67% 2.58% 2.63% 2.66% 0 1
Return on
average
assets 0.8% 0.8% 1.6% 1.4% 1.2% (2) (40)
Return on
average
equity 7.9% 8.6% 16.5% 11.5% 10.1% (72) (220)
Return on
average
common
equity 7.9% 8.6% 17.5% 13.8% 12.2% (72) (430)
Efficiency
ratio 76.8% 76.7% 59.9% 68.2% 74.5% 10 230
Balance Sheet Highlights
Three Months Ended % Change
March 31, December 31, September 30, June 30, March 31, Seq Yr/Yr
2017 2016 2016 2016 2016
---- ---- ---- ---- ----
(Dollars in millions)
Average
Balance
Sheet Data
Average
interest-
earning
assets $12,343 $12,817 $12,318 $11,639 $11,871 (4)% 4%
Average loans
held-for-
sale (LHFS) 3,286 3,321 3,416 2,884 2,909 (1)% 13%
Average loans
held-for-
investment
(LHFI) 5,639 6,163 5,848 5,569 5,668 (9)% (1)%
Average total
deposits 8,795 9,233 9,126 8,631 8,050 (5)% 9%
Net Interest Income
Net interest income decreased $4 million, or 5 percent, to $83 million, as compared to $87 million for the fourth quarter 2016. The results reflected a 4 percent decrease in average earning assets, led by a contraction in warehouse loans, partially offset by increased investment securities, mortgage loans, commercial real estate loans and commercial and industrial loans.
Loans held-for-investment averaged $5.6 billion for the first quarter 2017, decreasing $524 million, or 9 percent, from the prior quarter. During the first quarter 2017, average warehouse loans fell $852 million, driven by anticipated seasonal factors and lower overall mortgage volumes experienced by the Company's warehouse customers. Commercial loan growth was strong with average commercial real estate loans increasing $109 million, or 9 percent and average commercial and industrial loans increasing $53 million, or 7 percent. Average consumer loans rose $166 million, or 6 percent, driven by an increase in mortgage loans (primarily jumbos).
Average total deposits were $8.8 billion in the first quarter 2017, decreasing $438 million, or 5 percent, from the fourth quarter 2016. The decrease was led by lower company-controlled deposits, partially offset by higher retail deposits. Average retail deposits increased $98 million, or 2 percent, due to growth in consumer savings accounts. Excluding warehouse loans and company-controlled deposits, the Company's HFI loan-to-deposit ratio remained low at 66 percent in the first quarter 2017, as compared to 63 percent in the fourth quarter 2016.
Net interest margin was unchanged at 2.67 percent for the first quarter 2017, as compared to the fourth quarter 2016. During the fourth quarter 2016, the Company terminated certain fixed rate FHLB advances which resulted in a $2 million, or 6 basis point, benefit to interest expense in the prior quarter.
Provision for Loan Losses
The provision for loan losses totaled $3 million for the first quarter 2017, as compared to $1 million for the fourth quarter 2016. The low level of provision expense reflected strong asset quality and largely matched net charge-offs in the quarter.
Noninterest Income
Noninterest income rose $2 million, or 2 percent, to $100 million in the first quarter of 2017, as compared to $98 million for the fourth quarter 2016. The increase was primarily due to an increase in the net return on the mortgage servicing rights, partially offset by a drop in net gain on loan sales and loan fees and charges.
First quarter 2017 net gain on loan sales fell $9 million, or 16 percent, to $48 million, versus $57 million in the fourth quarter 2016. Fallout-adjusted locks fell 2 percent to $6.0 billion due to lower refinance volumes, largely offset by stronger purchase activity. The net gain on loan sale margin fell 13 basis points to 0.80 percent for the first quarter 2017, as compared to 0.93 percent for the fourth quarter 2016. The lower margin was primarily due to competitive factors and the impact of extended turn times, offsetting the impact of lower warehouse loans.
Mortgage Metrics
Three Months Ended Change (% / bps)
March 31, December 31, September 30, June 30, March 31, Seq Yr/Yr
2017 2016 2016 2016 2016
---- ---- ---- ---- ----
(Dollars in millions)
Mortgage rate lock commitments
(fallout-adjusted) (1) $5,996 $6,091 $8,291 $8,127 $6,863 (2)% (13)%
Net margin on mortgage rate lock
commitments (fallout-adjusted)
(1) (2) 0.80% 0.93% 1.13% 1.04% 0.96% (13) (16)
Net gain on loan sales on HFS $48 57 $94 $85 $66 (16)% (27)%
Net (loss) return on the
mortgage servicing rights (MSR) $14 $(5) $(11) $(4) $(6) N/M N/M
Gain on loan sales HFS + net
(loss) return on the MSR $62 $52 $83 $81 $60 19% 3%
Residential loans serviced
(number of accounts -000's)
(3) 393 383 375 358 354 3% 11%
Capitalized value of mortgage
servicing rights 1.10% 1.07% 0.96% 0.99% 1.06% 3 4
N/M - Not meaningful
(1) Fallout-adjusted mortgage rate lock commitments are adjusted by a percentage of mortgage loans in the pipeline that are not expected to close based on previous historical experience and the level of interest rates.
(2) Gain on sale margin is based on net gain on loan sales (excluding gains from loans transferred from HFI) to fallout-adjusted mortgage rate lock commitments.
(3) Includes loans serviced for own loan portfolio, serviced for others, and subserviced for others.
Loan fees and charges fell to $15 million for the first quarter 2017, as compared to $20 million for the fourth quarter 2016. The decrease primarily reflected lower mortgage loan closings.
Net return on the mortgage servicing rights (including the impact of hedges) increased $19 million and was a net gain of $14 million for the first quarter 2017, as compared to a net loss of $5 million for the fourth quarter 2016. At March 31, 2017, the Company had $295 million of mortgage servicing rights and $195 million fair value of contracted sales that are expected to settle in the second quarter 2017.
The representation and warranty benefit was $4 million for the first quarter 2017, as compared to a $7 million benefit in the fourth quarter 2016. The representation and warranty reserve was reduced to $23 million at March 31, 2017, from $27 million at December 31, 2016, reflecting a continued improvement in risk trends and a repurchase pipeline that was only $6 million at March 31, 2017.
Noninterest Expense
Noninterest expense fell $2 million, or 1 percent, to $140 million for the first quarter 2017, as compared to $142 million for the fourth quarter 2016. During the first quarter 2017, the Company experienced an $8 million decline in mortgage-related expense (commissions and loan processing) as a result of lower mortgage closings, partially offset by a $6 million increase in compensation and benefits expense.
Compensation and benefits increased to $72 million for the first quarter 2017, as compared to $66 million for the prior quarter, substantially all of which was seasonally higher benefits expense.
Commissions were $10 million for the first quarter 2017, as compared to $15 million for the fourth quarter 2016. The $5 million decrease in the first quarter 2017 was primarily attributable to lower mortgage closings this quarter.
The Company's efficiency ratio was unchanged at 77 percent for the first quarter 2017, as compared to the fourth quarter 2016. Excluding $6 million of seasonal benefits expense and $1 million of acquisition-related costs, the Company's adjusted non-GAAP efficiency ratio was 73 percent for the first quarter 2017.
Income Taxes
The first quarter 2017 provision for income taxes totaled $13 million, as compared to $14 million in the fourth quarter 2016. The effective tax rate was unchanged at 33 percent for the first quarter 2017, as compared to the fourth quarter 2016.
Asset Quality
Credit Quality Ratios
Three Months Ended Change (% / bps)
March 31, December 31, September 30, June 30, March 31, Seq Yr/Yr
2017 2016 2016 2016 2016
---- ---- ---- ---- ----
(Dollars in millions)
Allowance for loan loss to LHFI 2.4% 2.4% 2.3% 2.6% 2.9% 0 (50)
Allowance for loan loss to LHFI
and loans with government
guarantees 2.3% 2.2% 2.2% 2.4% 2.7% 10 (40)
Charge-offs, net of recoveries $4 $2 $7 $9 $12 100% (67)%
Charge-offs associated with
loans with government
guarantees 2 1 5 4 3 100% (33)%
Charge-offs associated with the
sale or transfer of
nonperforming loans and TDRs 1 - - 2 6 N/M N/M
Charge-offs, net of recoveries,
adjusted (1) $1 $1 $2 $3 $3 - % (67)%
------------------------------- --- --- --- --- --- --- --- ----
Total nonperforming loans held-
for-investment $28 $40 $40 $44 $53 (30)% (47)%
Net charge-offs to LHFI ratio
(annualized) 0.27% 0.13% 0.51% 0.62% 0.86% 14 (59)
Net charge-off ratio, adjusted
(annualized) 0.07% 0.07% 0.15% 0.18% 0.20% 0 (13)
Ratio of nonperforming LHFI to
LHFI 0.47% 0.67% 0.63% 0.76% 0.95% (20) (48)
N/M - Not meaningful
(1) Excludes charge-offs associated with loans with government guarantees and charge-offs associated with the sale or transfer of nonperforming loans and TDRs.
The allowance for loan losses was $141 million at March 31, 2017, covering 2.4 percent of loans held-for-investment, as compared to an allowance for loan losses of $142 million at December 31, 2016, covering 2.4 percent of loans held-for-investment.
Net charge-offs in the first quarter 2017 were $4 million, or 0.27 percent of applicable loans, compared to $2 million, or 0.13 percent of applicable loans in the prior quarter. The first quarter 2017 amount included $2 million of net charge-offs associated with loans with government guarantees compared to $1 million in the fourth quarter of 2016.
Nonperforming loans held-for-investment were $28 million at March 31, 2017, compared to $40 million at December 31, 2016, reflecting the sale of lower performing loans during the quarter. As in the prior quarter, there were no nonperforming commercial loans at March 31, 2017. The ratio of nonperforming loans to loans held-for-investment decreased to 0.47 percent at March 31, 2017 from 0.67 percent at December 31, 2016. At March 31, 2017, consumer loan delinquencies totaled $5 million, compared to $10 million at December 31, 2016. As in the prior quarter, there were no commercial loans more than 30 days delinquent at March 31, 2017.
Capital
Capital Ratios (Bancorp) Three Months Ended Change (% / bps)
March 31, December 31, September 30, June 30, March 31, Seq Yr/Yr
2017 2016 2016 2016 2016
---- ---- ---- ---- ----
Total capital 15.98% 16.41% 15.26% 20.19% 20.97% (43) (499)
Tier 1 capital 14.70% 15.12% 13.98% 18.89% 19.67% (42) (497)
Tier 1 leverage 9.31% 8.88% 8.88% 11.59% 11.04% 43 (173)
Mortgage servicing rights to Tier 1 capital 23.1% 26.7% 24.6% 19.9% 19.3% (360) 380
Book value per common share $24.03 $23.50 $22.72 $23.54 $22.82 2% 5%
The Company maintained a robust capital position with regulatory ratios well above current regulatory quantitative guidelines for "well capitalized" institutions. At March 31, 2017, the Company had a Tier 1 leverage ratio of 9.31 percent, as compared to 8.88 percent at December 31, 2016. The increase in the ratio resulted from earnings retention, MSR sales and a decrease in earning assets, partially offset by a higher phase-in requirement under Basel III.
At March 31, 2017, the Company had a common equity-to-assets ratio of 8.92 percent.
Earnings Conference Call
As previously announced, the Company's first quarter 2017 earnings call will be held Tuesday, April 25, 2017 at 11 a.m. (ET).
To join the call, please dial (877) 852-6583 toll free or (719) 325-4934 and use passcode 6536406. Please call at least 10 minutes before the conference is scheduled to begin. A replay will be available for five business days by calling (866) 375-1919 toll free or (719) 457-0820, using passcode 6536406
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 $15.4 billion savings and loan holding company headquartered in Troy, Mich. Flagstar Bank, FSB, provides commercial, small business, and consumer banking services through 99 branches in the state. It also provides home loans through a wholesale network of brokers and correspondents in all 50 states, as well as through 43 retail locations in 23 states. Flagstar is a leading national originator and servicer of mortgage loans, handling payments and record keeping for $83 billion of home loans representing 393,000 borrowers. For more information, please visit flagstar.com.
Use of Non-GAAP Financial Measures
In addition to results presented in accordance with GAAP, this news release includes non-GAAP financial measures, such as adjusted noninterest expense, adjusted efficiency ratio and estimated fully implemented Basel III capital levels and ratios. 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. Factors that could cause the Company's actual results to differ materially from those described in the forward-looking statements can be found in periodic Flagstar reports filed with the U.S. Securities and Exchange Commission, which are available on the Company's website (flagstar.com) and on the Securities and Exchange Commission's website (sec.gov). 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.
For more information, contact:
David L. Urban
david.urban@flagstar.com
(248) 312-5970
Flagstar Bancorp, Inc.
Consolidated Statements of Financial Condition
(Dollars in millions)
(Unaudited)
March 31, 2017 December 31, March 31, 2016
2016
---
(Unaudited) (Unaudited)
Assets
Cash $72 $84 $54
Interest-earning deposits 89 74 670
--- --- ---
Total cash and cash equivalents 161 158 724
Investment securities available-for-sale 1,650 1,480 1,314
Investment securities held-to-maturity 1,048 1,093 1,253
Loans held-for-sale 4,543 3,177 2,591
Loans held-for-investment 5,959 6,065 5,640
Loans with government guarantees 322 365 462
Less: allowance for loan losses (141) (142) (162)
---- ---- ----
Total loans held-for-investment and loans with government guarantees, net 6,140 6,288 5,940
Mortgage servicing rights 295 335 281
Federal Home Loan Bank stock 201 180 172
Premises and equipment, net 277 275 256
Net deferred tax asset 273 286 352
Other assets 773 781 854
--- --- ---
Total assets $15,361 $14,053 $13,737
======= ======= =======
Liabilities and Stockholders' Equity
Noninterest-bearing $1,831 $2,077 $1,984
Interest-bearing 6,814 6,723 6,485
----- ----- -----
Total deposits 8,645 8,800 8,469
Short-term Federal Home Loan Bank advances and other 3,186 1,780 1,250
Long-term Federal Home Loan Bank advances 1,200 1,200 1,625
Other long-term debt 493 493 247
Representation and warranty reserve 23 27 40
Other liabilities 443 417 548
--- --- ---
Total liabilities 13,990 12,717 12,179
Stockholders' Equity
Preferred stock - - 267
Common stock 1 1 1
Additional paid in capital 1,510 1,503 1,489
Accumulated other comprehensive (loss) income (6) (7) (11)
Accumulated deficit (134) (161) (188)
---- ---- ----
Total stockholders' equity 1,371 1,336 1,558
----- ----- -----
Total liabilities and stockholders' equity $15,361 $14,053 $13,737
======= ======= =======
Flagstar Bancorp, Inc.
Condensed Consolidated Statements of Operations
(Dollars in millions, except per share data)
(Unaudited)
First Quarter 2017 Compared to:
-------------------------------
Three Months Ended Fourth Quarter First Quarter
2016 2016
---- ----
March 31, December 31, September 30, June 30, March 31, Amount Percent Amount Percent
2017 2016 2016 2016 2016
---- ---- ---- ---- ----
Interest Income
Total interest income $110 $111 $106 $99 $101 $(1) (1) % $9 9 %
Total interest expense 27 24 26 22 22 3 13 % 5 23 %
--- --- --- --- --- --- --- --- ---
Net interest income 83 87 80 77 79 (4) (5) % 4 5 %
Provision (benefit) for loan 3 1 7 (3) (13) 2 N/M $16 N/M
losses
---
Net interest income after 80 86 73 80 92 (6) (7) % (12) (13) %
provision (benefit) for loan
losses
---
Noninterest Income
Net gain on loan sales 48 57 94 90 75 (9) (16) % $(27) (36) %
Loan fees and charges 15 20 22 19 15 (5) (25) % - - %
Deposit fees and charges 4 5 5 6 6 (1) (20) % (2) (33) %
Loan administration income 5 4 4 4 6 1 25 % (1) (17) %
Net (loss) return on the 14 (5) (11) (4) (6) 19 N/M 20 N/M
mortgage servicing rights
Representation and warranty 4 7 6 4 2 (3) (43) % 2 N/M
benefit
Other noninterest income 10 10 36 9 7 - - % 3 43 %
--- --- --- --- --- --- --- --- ---
Total noninterest income 100 98 156 128 105 2 2 % (5) (5) %
--- --- --- --- --- --- --- --- ----
Noninterest Expense
Compensation and benefits 72 66 69 66 68 6 9 % $4 6 %
Commissions 10 15 16 14 10 (5) (33) % $ - - %
Occupancy and equipment 22 21 21 21 22 1 5 % $ - - %
Asset resolution 2 1 2 1 3 1 N/M $(1) (33) %
Federal insurance premiums 3 2 3 3 3 1 50 % $ - - %
Loan processing expense 12 15 13 15 12 (3) (20) % $ - - %
Legal and professional 7 9 5 6 9 (2) (22) % $(2) (22) %
expense
Other noninterest expense 12 13 13 13 10 (1) (8) % $2 20 %
--- --- --- --- --- --- ---- --- ---
Total noninterest expense 140 142 142 139 137 (2) (1) % 3 2 %
--- --- --- --- --- --- ---- --- ---
Income before income taxes 40 42 87 69 60 (2) (5) % (20) (33) %
Provision for income taxes 13 14 30 22 21 (1) (7) % $(8) (38) %
--- --- --- --- --- --- ---- --- -----
Net income $27 $28 $57 $47 $39 $(1) (4) % $(12) (31) %
=== === === === === === ==== ==== =====
Income per share
Basic $0.47 $0.50 $0.98 $0.67 $0.56 $(0.03) (6) % $(0.09) (16) %
===== ===== ===== ===== ===== ====== ==== ====== =====
Diluted $0.46 $0.49 $0.96 $0.66 $0.54 $(0.03) (6) % $(0.08) (15) %
===== ===== ===== ===== ===== ====== ==== ====== =====
N/M - Not meaningful
Flagstar Bancorp, Inc.
Summary of Selected Consolidated Financial and Statistical Data
(Dollars in millions, except share data)
(Unaudited)
Three Months Ended
------------------
March 31, 2017 December 31, 2016 March 31, 2016
-------------- ----------------- --------------
Selected Mortgage Statistics:
Mortgage loans originated (1) $5,912 $8,573 $6,352
Mortgage loans sold and securitized $4,484 $8,422 $6,948
Mortgage rate lock commitments (gross) $7,377 $7,611 $8,762
Selected Ratios:
Interest rate spread (2) 2.49% 2.49% 2.50%
Net interest margin 2.67% 2.67% 2.66%
Net margin on loans sold and securitized 1.06% 0.68% 0.94%
Return on average assets 0.76% 0.78% 1.16%
Return on average equity 7.88% 8.60% 10.08%
Return on average common equity 7.88% 8.60% 12.15%
Efficiency ratio 76.8% 76.7% 74.5%
Equity-to-assets ratio (average for the period) 9.59% 9.05% 11.52%
Average Balances:
Average common shares outstanding 56,921,605 56,607,933 56,513,715
Average fully diluted shares outstanding 58,072,563 57,824,854 57,600,984
Average interest-earning assets $12,343 $12,817 $11,871
Average interest-paying liabilities $10,319 $10,222 $9,823
Average stockholders' equity $1,346 $1,312 $1,561
March 31, 2017 December 31, 2016 March 31, 2016
-------------- ----------------- --------------
Selected Statistics:
Book value per common share $24.03 $23.50 $22.82
Number of common shares outstanding 57,043,565 56,824,802 56,557,895
Number of FTE employees 2,948 2,886 2,771
Number of bank branches 99 99 99
Ratio of allowance for loan losses to LHFI (3) 2.37% 2.37% 2.93%
Ratio of allowance for loan losses to LHFI and loans with government 2.25% 2.23% 2.70%
guarantees (3)
Ratio of nonperforming assets to total assets 0.27% 0.39% 0.49%
Equity-to-assets ratio 8.92% 9.50% 11.34%
Common equity-to-assets ratio 8.92% 9.50% 9.40%
MSR Key Statistics and Ratios:
Weighted average service fee (basis points) 26.7 26.7 28.2
Capitalized value of mortgage servicing rights 1.10% 1.07% 1.06%
Mortgage servicing rights to Tier 1 capital 23.1% 26.7% 19.3%
(1) Includes residential first mortgage and second mortgage loans.
(2) Interest rate spread is the difference between the annualized yield earned on average interest-earning assets for the period and the annualized rate of
interest paid on average interest bearing liabilities for the period.
(3) Excludes loans carried under the fair value option.
Flagstar Bancorp, Inc.
Earnings Per Share
(Dollars in millions, except share data)
(Unaudited)
Three Months Ended
March 31, 2017 December 31, 2016 March 31, 2016
-------------- ----------------- --------------
Net income 27 28 39
Deferred cumulative preferred stock dividends (1) - - (8)
--- --- ---
Net income applicable to common stockholders $27 $28 $31
=== === ===
Weighted average shares
Weighted average common shares outstanding 56,921,605 56,607,933 56,513,715
Effect of dilutive securities
May Investor warrants 49,149 151,560 305,219
Stock-based awards 1,101,809 1,065,361 782,050
--------- --------- -------
Weighted average diluted common shares 58,072,563 57,824,854 57,600,984
========== ========== ==========
Earnings per common share
Basic earnings per common share $0.47 $0.50 $0.56
Effect of dilutive securities
May Investor warrants - - -
Stock-based awards (0.01) (0.01) (0.02)
----- ----- -----
Diluted earnings per common share $0.46 $0.49 $0.54
===== ===== =====
(1) Under the terms of the Series C Preferred Stock, we elected to defer dividends beginning with the February 2012 dividend. In July 2016, we ended
the deferral and brought current our previously deferred dividends and redeemed the stock.
Average Balances, Yields and Rates
(Dollars in millions)
(Unaudited)
Three Months Ended
------------------
March 31, 2017 December 31, 2016 March 31, 2016
-------------- ----------------- --------------
Average Interest Annualized Average Interest Annualized Average Interest Annualized
Balance Balance Balance
Yield/Rate Yield/Rate Yield/Rate
----------
Interest-Earning Assets
Loans held-for-sale $3,286 $32 3.87% $3,321 $29 3.55% $2,909 $28 3.81%
Loans held-for-investment
Consumer loans (1) 2,857 26 3.60% 2,691 24 3.55% 3,314 29 3.52%
Commercial loans (1) 2,782 29 4.19% 3,472 35 4.06% 2,354 23 3.91%
----- --- ----- --- ----- ---
Total loans held-for-investment 5,639 55 3.89% 6,163 59 3.84% 5,668 52 3.68%
Loans with government guarantees 342 4 4.61% 389 4 4.23% 475 4 3.05%
Investment securities 3,012 19 2.51% 2,845 18 2.53% 2,692 17 2.51%
Interest-earning deposits 64 - 0.86% 99 1 0.51% 127 - 0.52%
--- --- --- --- --- ---
Total interest-earning assets 12,343 $110 3.55% 12,817 $111 3.46% 11,871 $101 3.39%
Other assets 1,700 1,672 1,672
----- ----- -----
Total assets $14,043 $14,489 $13,543
======= ======= =======
Interest-Bearing Liabilities
Retail deposits
Demand deposits $507 $ - 0.18% $521 $ - 0.21% $445 $ - 0.13%
Savings deposits 3,928 7 0.76% 3,840 7 0.77% 3,722 7 0.79%
Money market deposits 276 1 0.46% 256 - 0.43% 243 - 0.36%
Certificates of deposit 1,073 3 1.06% 1,079 3 1.05% 856 2 0.92%
----- --- ----- --- --- ---
Total retail deposits 5,784 11 0.75% 5,696 10 0.75% 5,266 9 0.74%
Government deposits
Demand deposits 235 - 0.39% 211 - 0.39% 256 - 0.39%
Savings deposits 459 1 0.52% 470 1 0.52% 419 1 0.52%
Certificates of deposit 318 - 0.63% 352 1 0.60% 412 1 0.47%
--- --- --- --- --- ---
Total government deposits 1,012 1 0.52% 1,033 2 0.52% 1,087 2 0.47%
Wholesale deposits and other 8 - 0.39% - - - % - - - %
--- --- --- --- --- ---
Total interest-bearing deposits 6,804 12 0.72% 6,729 12 0.72% 6,353 11 0.69%
Short-term Federal Home Loan Bank 1,822 3 0.73% 1,427 1 0.50% 1,662 2 0.38%
advances and other
Long-term Federal Home Loan Bank 1,200 6 1.87% 1,573 5 1.24% 1,560 7 1.86%
advances
Other long-term debt 493 6 5.04% 493 6 4.89% 248 2 3.22%
--- --- --- --- --- ---
Total interest-bearing liabilities 10,319 27 1.06% 10,222 24 0.97% 9,823 22 0.89%
Noninterest-bearing deposits (2) 1,991 2,504 1,697
Other liabilities 387 451 462
Stockholders' equity 1,346 1,312 1,561
----- ----- -----
Total liabilities and stockholders' $14,043 $14,489 $13,543
equity
Net interest-earning assets $2,024 $2,595 $2,048
====== ====== ======
Net interest income $83 $87 $79
=== === ===
Interest rate spread (3) 2.49% 2.49% 2.50%
==== ==== ====
Net interest margin (4) 2.67% 2.67% 2.66%
==== ==== ====
Ratio of average interest-earning 119.6% 125.4% 120.9%
assets to interest-bearing liabilities
Total average deposits $8,795 $9,233 $8,050
====== ====== ======
(1) Consumer loans include: residential first mortgage, second mortgage, HELOC and other consumer loans. Commercial loans include: commercial real estate, commercial and industrial, and warehouse lending loans.
(2) Includes noninterest-bearing company-controlled deposits that arise due to the servicing of loans for others.
(3) Interest rate spread is the difference between rate of interest earned on interest-earning assets and rate of interest paid on interest-bearing liabilities.
(4) Net interest margin is net interest income divided by average interest-earning assets.
Regulatory Capital - Bancorp
(Dollars in millions)
(Unaudited)
March 31, 2017 December 31, 2016 September 30, 2016 June 30, 2016 March 31, 2016
Amount Ratio Amount Ratio Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Tier 1 leverage (to adjusted $1,277 9.31% $1,256 8.88% $1,225 8.88% $1,514 11.59% $1,453 11.04%
tangible assets)
Total adjusted tangible $13,716 $14,149 $13,798 $13,068 $13,167
asset base
Tier 1 common equity (to $1,071 12.32% $1,084 13.06% $1,056 12.04% $1,086 13.55% $1,032 13.96%
risk weighted assets)
Tier 1 capital (to risk $1,277 14.70% $1,256 15.12% $1,225 13.98% $1,514 18.89% $1,453 19.67%
weighted assets)
Total capital (to risk $1,389 15.98% $1,363 16.41% $1,338 15.26% $1,618 20.19% $1,549 20.97%
weighted assets)
Risk weighted asset base $8,689 $8,305 $8,767 $8,014 $7,387
====== ====== ====== ====== ======
Regulatory Capital - Bank
(Dollars in millions)
(Unaudited)
March 31, 2017 December 31, 2016 September 30, 2016 June 30, 2016 March 31, 2016
Amount Ratio Amount Ratio Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Tier 1 leverage (to adjusted $1,477 10.74% $1,491 10.52% $1,459 10.55% $1,576 12.03% $1,509 11.43%
tangible assets)
Total adjusted tangible $13,754 $14,177 $13,824 $13,102 $13,200
asset base
Tier 1 common equity (to $1,477 16.93% $1,491 17.90% $1,459 16.59% $1,576 19.58% $1,509 20.34%
risk weighted assets)
Tier 1 capital (to risk $1,477 16.93% $1,491 17.90% $1,459 16.59% $1,576 19.58% $1,509 20.34%
weighted assets)
Total capital (to risk $1,588 18.20% $1,598 19.18% $1,571 17.87% $1,679 20.86% $1,605 21.63%
weighted assets)
Risk weighted asset base $8,726 $8,332 $8,794 $8,048 $7,421
====== ====== ====== ====== ======
Loan Originations
(Dollars in millions)
(Unaudited)
Three Months Ended
March 31, 2017 December 31, 2016 March 31, 2016
Consumer loans
Mortgage (1) $5,912 95.1% $8,573 97.3% $6,352 98.3%
Other consumer (2) 47 0.8% 46 0.5% 27 0.4%
--- --- --- --- --- ---
Total consumer loans 5,959 95.9% 8,619 97.8% 6,379 98.7%
Commercial loans (3) 257 4.1% 191 2.2% 84 1.3%
--- --- --- --- --- ---
Total loan originations $6,216 100.0% $8,810 100.0% $6,463 100.0%
====== ===== ====== ===== ====== =====
(1) Includes residential first
mortgage and second mortgage
loans.
(2) Includes HELOC and other
consumer loans.
(3) Includes commercial real
estate and commercial and
industrial loans.
Loans Held-for-Investment
(Dollars in millions)
(Unaudited)
March 31, 2017 December 31, 2016 March 31, 2016
Consumer loans
Residential first mortgage $2,463 41.3% $2,327 38.3% $2,410 42.8%
Second mortgage 86 1.4% 126 2.1% 129 2.3%
HELOC 290 4.9% 317 5.2% 366 6.5%
Other 27 0.5% 28 0.5% 31 0.5%
--- --- --- --- --- ---
Total consumer loans 2,866 48.1% 2,798 46.1% 2,936 52.1%
----- ---- ----- ---- ----- ----
Commercial loans
Commercial real estate 1,399 23.5% 1,261 20.8% 851 15.1%
Commercial and industrial 854 14.3% 769 12.7% 571 10.1%
Warehouse lending 840 14.1% 1,237 20.4% 1,282 22.7%
--- ---- ----- ---- ----- ----
Total commercial loans 3,093 51.9% 3,267 53.9% 2,704 47.9%
----- ---- ----- ---- ----- ----
Total loans held-for-investment $5,959 100.0% $6,065 100.0% $5,640 100.0%
====== ===== ====== ===== ====== =====
Residential Loans Serviced
(Dollars in millions)
(Unaudited)
March 31, 2017 December 31, 2016 March 31, 2016
Unpaid Number of Unpaid Number of Unpaid Number of
Principal accounts Principal accounts Principal accounts
Balance Balance Balance
------- ------- -------
Serviced for own loan portfolio (1) $7,369 33,766 $5,816 29,244 $5,293 29,078
Serviced for others 26,763 116,965 31,207 133,270 26,613 118,768
Subserviced for others (2) 48,940 242,445 43,127 220,075 40,437 206,033
------ ------- ------ ------- ------ -------
Total residential loans serviced $83,072 393,176 $80,150 382,589 $72,343 353,879
======= ======= ======= ======= ======= =======
(1) Includes loans held-for-
investment (residential first
mortgage, second mortgage and
HELOC), loans-held-for-sale
(residential first mortgage),
loans with government guarantees
(residential first mortgage),
and repossessed assets.
(2) Includes temporary short-term
subservicing performed as a
result of sales of servicing-
released mortgage servicing
rights. Includes repossessed
assets.
Allowance for Loan Losses
(Dollars in millions)
(Unaudited)
Three Months Ended
March 31, December 31, March 31,
2017 2016 2016
---- ---- ----
Allowance for loan losses $141 $142 $162
Charge-offs
Consumer loans
Residential first mortgage (4) (3) (11)
Second mortgage - - (1)
HELOC - - (1)
Other (1) (1) (1)
---
Total consumer loans (5) (4) (14)
Total commercial loans - - -
Total charge-offs $(5) $(4) $(14)
Recoveries
Consumer loans
Residential first mortgage - 1 -
HELOC - - 1
Other 1 - 1
---
Total consumer loans 1 1 2
Commercial loans
Commercial real estate - 1 -
Total commercial loans - 1 -
--- --- ---
Total recoveries 1 2 2
--- --- ---
Charge-offs, net of recoveries $(4) $(2) $(12)
Net charge-offs to LHFI ratio (annualized) (1) 0.27% 0.13% 0.86%
Net charge-offs ratio, adjusted (annualized) (1)(2) 0.07% 0.07% 0.20%
Net charge-offs/(recoveries) to LHFI ratio (annualized) by loan type (1)
Residential first mortgage 0.60% 0.38% 1.50%
Second mortgage 0.51% (0.92)% 4.72%
HELOC and consumer 0.24% 0.50% 0.69%
Commercial real estate (0.02)% (0.05)% (0.02)%
Commercial and industrial (0.01)% (0.12)% (0.01)%
(1) Excludes loans carried under the
fair value option.
(2) Excludes charge-offs of $1
million, zero, and $6 million
related to the sale of
nonperforming loans, TDRs and non-
agency loans during the three
months ended March 31, 2017,
December 31, 2016, and March 31,
2016, respectively. Also excludes
charge-offs related to loans with
government guarantees of $2
million, $1 million, and $3
million during the three months
ended March 31, 2017, December 31,
2016, and March 31, 2016,
respectively.
Composition of Allowance for Loan Losses
(Dollars in millions)
(Unaudited)
March 31, 2017 March 31, December 31,
2017 2016
-------------- ---------- ------------
Consumer loans
Residential first
mortgage $61 $65
Second mortgage 7 8
HELOC 14 16
Other 1 1
--- ---
Total consumer loans 83 90
Commercial loans
Commercial real estate 32 28
Commercial and
industrial 20 17
Warehouse lending 6 7
--- ---
Total commercial loans 58 52
--- ---
Total allowance for
loan losses $141 $142
==== ====
Nonperforming Loans and Assets
(Dollars in millions)
(Unaudited)
March 31, December 31, March 31,
2017 2016 2016
---- ---- ----
Nonperforming loans $17 $22 $27
Nonperforming TDRs 5 8 6
Nonperforming TDRs at inception but performing for less than six months 6 10 20
--- --- ---
Total nonperforming loans held-for-investment 28 40 53
Real estate and other nonperforming assets, net 13 14 14
--- --- ---
Nonperforming assets held-for-investment, net (1) $41 $54 $67
=== === ===
Ratio of nonperforming assets to total assets 0.27% 0.39% 0.49%
Ratio of nonperforming loans held-for-investment to loans held-for-investment 0.47% 0.67% 0.95%
Ratio of nonperforming assets to loans held-for-investment and repossessed 0.69% 0.90% 1.20%
assets
Ratio of nonperforming assets to Tier 1 capital + allowance for loan losses 2.90% 3.93% 4.15%
(1) Does not include nonperforming
loans held-for-sale of $21
million, $6 million, and $6
million at March 31, 2017,
December 31, 2016, and March 31,
2016, respectively.
Asset Quality - Loans Held-for-Investment
(Dollars in millions)
(Unaudited)
30-59 Days 60-89 Days Greater than Total Past Total Loans
Past Due Past Due 90 days (1) Due Held-for-
Investment
----------
March 31, 2017
Consumer loans $4 $1 $28 $33 $2,866
Commercial loans - - - - 3,093
--- --- --- --- -----
Total loans $4 $1 $28 $33 $5,959
=== === === === ======
December 31, 2016
Consumer loans $8 $2 $40 $50 $2,798
Commercial loans - - - - 3,267
--- --- --- --- -----
Total loans $8 $2 $40 $50 $6,065
=== === === === ======
March 31, 2016
Consumer loans 8 3 52 $63 $2,936
Commercial loans - - 1 1 2,704
--- --- --- --- -----
Total loans $8 $3 $53 $64 $5,640
=== === === === ======
(1) Includes performing
nonaccrual loans that are
less than 90 days delinquent
and for which interest
cannot be accrued.
Representation and Warranty Reserve
(Dollars in millions)
(Unaudited)
Three Months Ended
March 31, 2017 December 31, 2016 March 31, 2016
-------------- ----------------- --------------
Balance at beginning of period $27 $32 $40
Provision (benefit)
Gain on sale reduction for representation and warranty liability - 1 2
Representation and warranty provision (benefit) (4) (7) (2)
--- --- ---
Total (4) (6) -
(Charge-offs) recoveries, net - 1 -
--- --- ---
Balance at end of period $23 $27 $40
=== === ===
Troubled Debt Restructurings
(Dollars in millions)
(Unaudited)
TDRs
Performing Nonperforming Total
---------- ------------- -----
March 31, 2017
Consumer loans $48 $11 $59
Total TDR loans $48 $11 $59
=== === ===
December 31, 2016
Consumer loans $67 $18 $85
Total TDR loans $67 $18 $85
=== === ===
March 31, 2016
Consumer loans $75 $25 $100
Commercial loans - 1 1
Total TDR loans $75 $26 $101
=== === ====
Non-GAAP Reconciliation
(Dollars in millions)
(Unaudited)
Basel III (transitional) to Basel III (fully phased-in) reconciliation. On January 1, 2015, the Basel III rules became effective, subject to transition provisions primarily related to regulatory deductions and adjustments impacting common equity Tier 1 capital and Tier 1 capital. We have transitioned to the Basel III framework beginning in January
2015 and are subject to a phase-in period extending through 2018. Accordingly, the calculations provided below are estimates. These measures are considered to be non-GAAP financial measures because they are not formally defined by GAAP and the Basel III implementation regulations will not be fully phased-in until January 1, 2019. The
regulations are subject to change as clarifying guidance becomes available and the calculations currently include our interpretations of the requirements including informal feedback received through the regulatory process. Other entities may calculate the Basel III ratios differently from ours based on their interpretation of the guidelines. Since
analysts and banking regulators may assess our capital adequacy using the Basel III framework, we believe that it is useful to provide investors information enabling them to assess our capital adequacy on the same basis.
March 31, 2017 Common Equity Tier 1 Leverage (to Tier 1 Capital
(to Total Risk-Based
Tier 1 (to Risk Adjusted Tangible Risk Weighted Capital (to Risk
Weighted Assets) Assets) Assets) Weighted Assets)
--------------- ------ ------ ---------------
(Dollars in millions)
(Unaudited)
Flagstar Bancorp (the Company)
Regulatory capital - Basel III (transitional) to Basel III (fully
phased-in)
Basel III (transitional) $1,071 $1,277 $1,277 $1,389
Increased deductions related to deferred tax assets, mortgage (119) (85) (85) (83)
servicing rights and other capital components
Basel III (fully phased-in) capital $952 $1,192 $1,192 $1,306
---- ------ ------ ------
Risk-weighted assets - Basel III (transitional) to Basel III
(fully phased-in)
Basel III assets (transitional) $8,689 $13,716 $8,689 $8,689
Net change in assets 131 (85) 131 131
--- --- --- ---
Basel III (fully phased-in) assets $8,820 $13,631 $8,820 $8,820
------ ------- ------ ------
Capital ratios
Basel III (transitional) 12.32% 9.31% 14.70% 15.98%
Basel III (fully phased-in) 10.79% 8.75% 13.52% 14.81%
March 31, 2017 Common Equity Tier 1 Leverage (to Tier 1 Capital
(to Total Risk-Based
Tier 1 (to Risk Adjusted Tangible Risk Weighted Capital (to Risk
Weighted Assets) Assets) Assets) Weighted Assets)
--------------- ------ ------ ---------------
Flagstar Bank (the Bank) (Dollars in millions)
(Unaudited)
Regulatory capital - Basel III (transitional) to Basel III (fully
phased-in)
Basel III (transitional) $1,477 $1,477 $1,477 $1,588
Increased deductions related to deferred tax assets, mortgage (60) (60) (60) (56)
servicing rights and other capital components
Basel III (fully phased-in) capital $1,417 $1,417 $1,417 $1,532
------ ------ ------ ------
Risk-weighted assets - Basel III (transitional) to Basel III (fully
phased-in)
Basel III assets (transitional) $8,726 $13,754 $8,726 $8,726
Net change in assets 262 (61) 262 262
--- --- --- ---
Basel III (fully phased-in) assets $8,988 $13,693 $8,988 $8,988
------ ------- ------ ------
Capital ratios
Basel III (transitional) 16.93% 10.74% 16.93% 18.20%
Basel III (fully phased-in) 15.77% 10.35% 15.77% 17.04%
Adjusted Noninterest Expense and Adjusted Efficiency Ratio. 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. These non-GAAP measures
reflect the adjustment 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 Company believes that adjusted noninterest expense
and an adjusted efficiency ratio based on these non-GAAP measures provide a meaningful representation of its operating performance on an ongoing basis. These are measures that management uses to assess performance of the Company
against its peers and evaluate overall performance. The Company believes these non-GAAP financial measures provide useful information for investors, securities analysts and others because they provide a tool to evaluate the
Company's performance on an ongoing basis and compared to its peers.
The following table provides a reconciliation of non-GAAP financial measures.
Three Months Ended
------------------
March 31, 2017
--------------
(Dollars in millions)
(Unaudited)
Total noninterest expense $140
Adjustment to remove seasonal payroll taxes (6)
Adjustment to remove acquisition-related costs (1)
Total adjusted noninterest expense $133
----
Net interest income $83
Total noninterest income $100
Efficiency Ratio 76.8%
Adjustment to remove seasonal payroll taxes (3.3)%
Adjustment to remove acquisition-related costs (0.5)%
Adjusted Efficiency Ratio 73.0%
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/flagstar-reports-first-quarter-2017-net-income-of-27-million-or-046-per-diluted-share-300444773.html
SOURCE Flagstar Bancorp, Inc.
