FLAGSTAR BANCORP, INC. TROY, Mich., Jan. 24, 2017 /PRNewswire/ -- Flagstar Bancorp, Inc. (NYSE: FBC), the holding company for Flagstar Bank, FSB, today reported fourth quarter 2016 net income of $28 million, or $0.49 per diluted share, as compared to $57 million, or $0.96 per diluted share, in the third quarter 2016 and $33 million, or $0.44 per diluted share, in the fourth quarter 2015.
Full year 2016 net income was $171 million, or $2.66 per diluted share, as compared to full year 2015 net income of $158 million, or $2.24 per diluted share. Third quarter 2016 results included a $24 million benefit related to a decrease in the fair value of the Department of Justice ("DOJ") settlement liability. Excluding this benefit, the Company had adjusted non-GAAP 2016 net income of $155 million, or $2.38 per diluted share, an increase in diluted earnings per share of 6 percent from the full year 2015.
"We are pleased to turn in another profitable quarter, capping a year of solid earnings growth for our Company," said Alessandro DiNello, president and chief executive officer of Flagstar Bancorp, Inc. "During the quarter, we saw growth in earning assets combined with net interest margin expansion. Asset quality remained rock solid, as it has all year, and expenses were well controlled. Mortgage originations declined seasonally, as expected, and coupled with rising interest rates made mortgage production challenging."
"We reached an important milestone during the quarter with the lifting of the Consent Order in December with the Office of the Comptroller of the Currency. We believe this represented a validation of the quality of our risk management organization, the strength of our balance sheet and our improved performance, and also reflected our success in building a broader, more stable and less risky business model."
"With the positive momentum from our 2016 performance, we are looking forward to 2017. We believe the economy will be a bit stronger and the interest rate curve a little steeper. Our business model is poised to continue to be successful."
Fourth Quarter 2016 Highlights:
Income Statement Highlights
Three Months Ended
December 31, September 30, June 30, March 31, December 31,
2016 2016 2016 2016 2015
---- ---- ---- ---- ----
(Dollars in millions)
Net interest income $87 $80 $77 $79 $76
Provision (benefit) for loan losses 1 7 (3) (13) (1)
Noninterest income 98 156 128 105 97
Noninterest expense 142 142 139 137 129
--- --- --- --- ---
Income before income taxes 42 87 69 60 45
Provision for income taxes 14 30 22 21 12
--- --- --- --- ---
Net income $28 $57 $47 $39 $33
=== === === === ===
Income per share:
Basic $0.50 $0.98 $0.67 $0.56 $0.45
Diluted $0.49 $0.96 $0.66 $0.54 $0.44
Key Ratios
Three Months Ended Change (bps)
December 3, September 30, June 30, March 31, December 31, Seq Yr/Yr
2016 2016 2016 2016 2015
---- ---- ---- ---- ----
Net interest margin 2.67% 2.58% 2.63% 2.66% 2.69% 9 (2)
Return on average assets 0.8% 1.6% 1.4% 1.2% 1.0% (83) (25)
Return on average equity 8.6% 16.5% 11.5% 10.1% 8.6% (793) 4
Return on average common equity 8.6% 17.5% 13.8% 12.2% 10.4% (885) (180)
Efficiency ratio 76.7% 59.9% 68.2% 74.5% 75.2% 1680 150
Balance Sheet Highlights
Three Months Ended % Change
December 31, September 30, June 30, March 31, December 31, Seq Yr/Yr
2016 2016 2016 2016 2015
---- ---- ---- ---- ----
(Dollars in millions)
Average Balance Sheet Data
Average interest-earning assets $12,817 $12,318 $11,639 $11,871 $11,240 4% 14%
Average loans held-for-sale (LHFS) 3,321 3,416 2,884 2,909 2,484 (3)% 34%
Average loans held-for-investment (LHFI) 6,163 5,848 5,569 5,668 5,642 5% 9%
Average total deposits 9,233 9,126 8,631 8,050 8,132 1% 14%
Note: Please refer to the financial
tables at the end of this news
release for a reconciliation of
adjusted non-GAAP financial
measures to the most directly
comparable measure prepared in
accordance with GAAP.
Net Interest Income
The Company continued to realize growth in its community banking business in the fourth quarter 2016. Net interest income increased to $87 million, compared to $80 million for the third quarter 2016. The results reflected a 4 percent increase in average earning assets, led by growth in investment securities, commercial loans and mortgage loans, and net interest margin expansion of 9 basis points.
Loans held-for-investment averaged $6.2 billion for the fourth quarter 2016, increasing $315 million, or 5 percent, from the prior quarter. During the fourth quarter 2016, average commercial real estate loans increased $127 million, or 12 percent. Average consumer loans rose $111 million, or 4 percent, driven by an increase in mortgage loans (primarily jumbos). Average commercial and industrial loans also registered solid gains, increasing $88 million, or 14 percent.
Average total deposits were $9.2 billion in the fourth quarter 2016, increasing $107 million, or 1 percent, from the third quarter 2016. The increase was led by higher retail deposits, partially offset by lower government deposits. Average retail deposits rose $132 million, or 2 percent, due to an $89 million increase in savings deposits and a $28 million rise in demand deposits.
Net interest margin increased 9 basis points to 2.67 percent for the fourth quarter 2016, as compared to 2.58 percent for the third quarter 2016. During the quarter, the Company terminated certain fixed rate FHLB advances which resulted in a $2 million benefit to interest expense, accounting for 6 basis points of the increase.
Provision for Loan Losses
The provision for loan losses totaled $1 million for the fourth quarter 2016, as compared to $7 million for the third quarter 2016. The lower level of provision expense reflected strong asset quality and largely matched net charge-offs in the quarter.
Noninterest Income
Noninterest income decreased $58 million, or 37 percent, to $98 million, as compared to $156 million for the third quarter 2016. The decline was driven by a $37 million drop in net gain on loan sales and a $24 million benefit that was recognized in the third quarter 2016 from the reduction in fair value on the DOJ settlement liability.
Fourth quarter 2016 net gain on loan sales fell to $57 million, versus $94 million in the third quarter and $46 million in the same period last year. The decrease from the prior quarter reflected lower fallout-adjusted locks and a drop in the gain on sale margin. In the fourth quarter 2016, fallout-adjusted locks decreased 27 percent to $6.1 billion, primarily due to anticipated seasonal factors and lower refinance activity from significantly higher interest rates. The net gain on loan sale margin fell 20 basis points to 0.93 percent for the fourth quarter 2016, as compared to 1.13 percent for the third quarter 2016, driven by price competition.
Mortgage Metrics
Three Months Ended Change (% / bps)
December 31, September 30, June 30, March 31, December 31, Seq Yr/Yr
2016 2016 2016 2016 2015
---- ---- ---- ---- ----
(Dollars in millions)
Mortgage rate lock commitments (fallout-adjusted) (1) $6,091 $8,291 $8,127 $6,863 $5,027 (27)% 21%
Gain on sale margin (change in bps) (1)(2) 0.93% 1.13% 1.04% 0.96% 0.92% (20) 1
Net gain on loan sales on HFS $57 94 $85 $66 $46 (39)% 24%
Net (loss) return on the mortgage servicing rights ("MSR") $(5) $(11) $(4) $(6) $9 N/M N/M
Gain on loan sales HFS + net (loss) return on the MSR $52 $83 $81 $60 $55 (37)% (5)%
Residential loans serviced (number of accounts - 000's) (3) 383 375 358 354 361 2% 6%
Capitalized value of mortgage servicing rights (change in bps) 1.07% 0.96% 0.99% 1.06% 1.13% 11 (6)
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 $20 million for the fourth quarter 2016, as compared to $22 million for the third quarter 2016. The decrease primarily reflected lower mortgage loan closings.
Net return on the mortgage servicing asset (including the impact of hedges) was a net loss of $5 million for the fourth quarter 2016, as compared to a net loss of $11 million for the third quarter 2016. The net return on the mortgage servicing asset increased from the third quarter 2016. This was primarily due to lower prepayments and a $7 million charge recognized in the third quarter 2016 related to MSR sales with a fair value of $50 million that closed in the fourth quarter 2016, partially offset by unfavorable changes in fair value driven by an increase in market implied interest rate volatility experienced in the fourth quarter 2016.
The representation and warranty benefit was $7 million for the fourth quarter 2016, as compared to a $6 million benefit in the third quarter 2016. The representation and warranty reserve was reduced to $27 million at December 31, 2016, from $32 million at September 30, 2016, reflecting a continued improvement in risk trends and a repurchase demand pipeline that was only $6 million at December 31, 2016.
Total other noninterest income for the fourth quarter 2016 was $10 million, as compared to $36 million for the third quarter 2016. The decrease was almost entirely due to a $24 million reduction in the fair value of the Company's DOJ settlement liability recognized in the prior quarter.
Noninterest Expense
Noninterest expense was unchanged at $142 million for the fourth quarter 2016, as compared to the third quarter 2016. Legal and professional expense rose $4 million, while compensation and benefits expense fell $3 million.
The Company's efficiency ratio was 77 percent for the fourth quarter 2016, compared to an adjusted non-GAAP efficiency ratio of 67 percent in the prior quarter, excluding the $24 million benefit from the drop in fair value on the DOJ settlement liability in the third quarter 2016.
Income Taxes
The fourth quarter 2016 provision for income taxes totaled $14 million, as compared to $30 million in the third quarter 2016. The effective tax rate in the fourth quarter 2016 declined slightly to 33 percent, as compared to 34 percent in the third quarter 2016 and the full year 2016.
Asset Quality
Credit Quality Ratios
Three Months Ended Change (% / bps)
December 31, September 30, June 30, March 31, December 31, Seq Yr/Yr
2016 2016 2016 2016 2015
---- ---- ---- ---- ----
(Dollars in millions)
Allowance for loan loss to LHFI 2.4% 2.3% 2.6% 2.9% 3.0% 10 (60)
Allowance for loan loss to LHFI and loans with government guarantees 2.2% 2.2% 2.4% 2.7% 2.8% 0 (60)
Charge-offs, net of recoveries $2 $7 $9 $12 $9 (71)% (78)%
Charge-offs associated with loans with government guarantees 1 5 4 3 3 (80)% (67)%
Charge-offs associated with the sale or transfer of nonperforming loans and TDRs - - 2 6 2 N/M N/M
Charge-offs, net of recoveries, adjusted (1) $1 $2 $3 $3 $4 (50)% (75)%
------------------------------------------- --- --- --- --- --- ---- ----
Total nonperforming loans held-for-investment $40 $40 $44 $53 $66 - % (39)%
Net charge-offs to LHFI ratio (annualized) 0.13% 0.51% 0.62% 0.86% 0.62% (38) (49)
Net charge-off ratio, adjusted (annualized) 0.07% 0.15% 0.18% 0.20% 0.29% (8) (22)
Ratio of nonperforming LHFI to LHFI 0.67% 0.63% 0.76% 0.95% 1.05% 4 (38)
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 Company continued to experience solid credit performance in the fourth quarter 2016. The allowance for loan losses was $142 million at December 31, 2016, covering 2.4 percent of loans held-for-investment, as compared to an allowance for loan losses of $143 million at September 30, 2016, covering 2.3 percent of loans held-for-investment.
Net charge-offs in the fourth quarter 2016 were $2 million, or 0.13 percent of applicable loans, compared to $7 million, or 0.51 percent of applicable loans in the prior quarter. The fourth quarter 2016 amount included $1 million of net charge-offs associated with loans with government guarantees compared to $5 million in the third quarter of 2016.
Nonperforming loans held-for-investment were $40 million at December 31, 2016, unchanged from September 30, 2016. As in the prior quarter, there were no nonperforming commercial loans at December 31, 2016. The ratio of nonperforming loans to loans held-for-investment increased to 0.67 percent at December 31, 2016 from 0.63 percent at September 30, 2016. At December 31, 2016, consumer loan delinquencies totaled $10 million, up slightly from September 30, 2016. As in the prior quarter, there were no commercial loans more than 30 days delinquent at December 31, 2016.
Capital
Capital Ratios (Bancorp) Three Months Ended Change (% / bps)
December 31, September 30, June 30, March 31, December 31, Seq Yr/Yr
2016 2016 2016 2016 2015
---- ---- ---- ---- ----
Total capital 16.42% 15.26% 20.19% 20.97% 20.28% 116 (386)
Tier 1 capital 15.14% 13.98% 18.89% 19.67% 18.98% 116 (384)
Tier 1 leverage 8.88% 8.88% 11.59% 11.04% 11.51% - (263)
Mortgage servicing rights to Tier 1 capital 26.7% 24.6% 19.9% 19.3% 20.6% 210 610
Book value per common share $23.50 $22.72 $23.54 $22.82 $22.33 3% 5%
The Company maintained a robust capital position with regulatory ratios well above current regulatory quantitative guidelines for "well capitalized" institutions. At December 31, 2016, the Company had a Tier 1 leverage ratio of 8.88 percent, unchanged from September 30, 2016.
At December 31, 2016, the Company had a common equity-to-assets ratio of 9.50 percent.
Earnings Conference Call
As previously announced, the Company's fourth quarter 2016 earnings call will be held Tuesday, January 24, 2017 at 11 a.m. (ET).
To join the call, please dial (800) 474-8920 toll free or (719) 457-2640 and use passcode 1910792. 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 1910792.
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 $14.1 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 41 retail locations in 21 states. Flagstar is a leading national originator and servicer of mortgage loans, handling payments and record keeping for $80 billion of home loans representing 383,000 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 net income, adjusted return on average assets, adjusted return on average equity, adjusted return on common equity, adjusted noninterest income, 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)
December 31, 2016 September 30, 2016 December 31, 2015
----------------- ------------------ -----------------
Assets
Cash $84 $76 $54
Interest-earning deposits 74 98 154
--- --- ---
Total cash and cash equivalents 158 174 208
Investment securities available-for-sale 1,480 1,115 1,294
Investment securities held-to-maturity 1,093 1,156 1,268
Loans held-for-sale 3,177 3,393 2,576
Loans held-for-investment 6,065 6,290 6,352
Loans with government guarantees 365 404 485
Less: allowance for loan losses (142) (143) (187)
---- ---- ----
Total loans held-for-investment and loans with government guarantees, net 6,288 6,551 6,650
Mortgage servicing rights 335 302 296
Federal Home Loan Bank stock 180 172 170
Premises and equipment, net 275 271 250
Net deferred tax asset 286 305 364
Other assets 781 834 639
--- --- ---
Total assets $14,053 $14,273 $13,715
======= ======= =======
Liabilities and Stockholders' Equity
Noninterest-bearing $2,077 $2,544 $1,574
Interest-bearing 6,723 6,827 6,361
----- ----- -----
Total deposits 8,800 9,371 7,935
Short-term Federal Home Loan Bank advances and other 1,780 905 2,116
Long-term Federal Home Loan Bank advances 1,200 1,577 1,425
Other long-term debt 493 493 247
Representation and warranty reserve 27 32 40
Other liabilities 417 609 423
--- --- ---
Total liabilities 12,717 12,987 12,186
------ ------ ------
Stockholders' Equity
Preferred stock - - 267
Common stock 1 1 1
Additional paid in capital 1,502 1,494 1,486
Accumulated other comprehensive (loss) income (7) (20) 2
Accumulated deficit (160) (189) (227)
---- ---- ----
Total stockholders' equity 1,336 1,286 1,529
----- ----- -----
Total liabilities and stockholders' equity $14,053 $14,273 $13,715
======= ======= =======
Flagstar Bancorp, Inc.
Condensed Consolidated Statements of Operations
(Dollars in millions, except per share data)
(Unaudited)
Fourth Quarter 2016 Compared to:
Three Months Ended Third Quarter Fourth Quarter
2016 2015
December 31, September 30, June 30, March 31, December 31, Amount Percent Amount Percent
2016 2016 2016 2016 2015
---- ---- ---- ---- ----
Interest Income
Total interest income $111 $106 $99 $101 $95 $5 5% $16 17%
Total interest expense 24 26 22 22 19 (2) (8)% 5 26%
--- --- --- --- --- --- --- --- ---
Net interest income 87 80 77 79 76 7 9% 11 14%
Provision (benefit) for loan losses 1 7 (3) (13) (1) (6) (86)% $2 N/M
--- --- --- --- --- --- ---- --- ---
Net interest income after provision (benefit) for loan losses 86 73 80 92 77 13 18% 9 12%
--- --- --- --- --- --- --- --- ---
Noninterest Income
Net gain on loan sales 57 94 90 75 46 (37) (39)% $11 24%
Loan fees and charges 20 22 19 15 14 (2) (9)% 6 43%
Deposit fees and charges 5 5 6 6 6 - - % (1) (17)%
Loan administration income 4 4 4 6 7 - - % (3) (43)%
Net (loss) return on the mortgage servicing rights (5) (11) (4) (6) 9 6 (55) (14) N/M
Representation and warranty benefit 7 6 4 2 6 1 17% 1 17%
Other noninterest income 10 36 9 7 9 (26) (72)% 1 11%
--- ---
Total noninterest income 98 156 128 105 97 (58) (37)% 1 1%
--- --- --- --- --- --- ---- --- ---
Noninterest Expense
Compensation and benefits 66 69 66 68 59 (3) (4)% $7 12%
Commissions 15 16 14 10 8 (1) (6)% $7 88%
Occupancy and equipment 21 21 21 22 21 - - % $ - - %
Asset resolution 1 2 1 3 2 (1) (50)% $(1) (50)%
Federal insurance premiums 2 3 3 3 5 (1) (33)% $(3) (60)%
Loan processing expense 15 13 15 12 12 2 15% $3 25%
Legal and professional expense 9 5 6 9 9 4 80% $ - - %
Other noninterest expense 13 13 13 10 13 - - % $ - - %
--- --- --- --- --- --- ---
Total noninterest expense 142 142 139 137 129 - - % 13 10%
--- --- --- --- --- --- --- --- --- ---
Income before income taxes 42 87 69 60 45 (45) (52)% (3) (7)%
Provision for income taxes 14 30 22 21 12 (16) (53)% $2 17%
--- --- --- --- --- --- ---- --- ---
Net income $28 $57 $47 $39 $33 $(29) (51)% $(5) (15)%
=== === === === === ==== ==== === ====
Income per share
Basic $0.50 $0.98 $0.67 $0.56 $0.45 $(0.48) (49)% $0.05 11%
===== ===== ===== ===== ===== ====== ==== ===== ===
Diluted $0.49 $0.96 $0.66 $0.54 $0.44 $(0.47) (49)% $0.05 11%
===== ===== ===== ===== ===== ====== ==== ===== ===
N/M - Not meaningful
Flagstar Bancorp, Inc.
Condensed Consolidated Statements of Operations
(Dollars in millions, except per share data)
(Unaudited)
Year Ended December 31, 2016
Year Ended Compared to:
Year Ended December 31, 2015
December 31, 2016 December 31, 2015 Amount Percent
----------------- ----------------- ------ -------
Interest Income
Total interest income $417 $355 $62 17%
Total interest expense 94 68 26 38%
--- --- ---
Net interest income 323 287 36 13%
Provision (benefit) for loan losses (8) (19) 11 (58)%
--- --- ---
Net interest income after provision (benefit)
for loan losses 331 306 25 8%
--- --- --- ---
Noninterest Income
Net gain on loan sales 316 288 28 10%
Loan fees and charges 76 67 9 13%
Deposit fees and charges 22 25 (3) (12)%
Loan administration income 18 26 (8) (31)%
Net (loss) return on the mortgage servicing
rights (26) 28 (54) N/M
Representation and warranty benefit 19 19 - - %
Other noninterest income 62 17 45 N/M
--- --- --- ---
Total noninterest income 487 470 17 4%
--- --- --- ---
Noninterest Expense
Compensation and benefits 269 237 32 14%
Commissions 55 39 16 41%
Occupancy and equipment 85 81 4 5%
Asset resolution 7 15 (8) (53)%
Federal insurance premiums 11 23 (12) (52)%
Loan processing expense 55 52 3 6%
Legal and professional expense 29 36 (7) (19)%
Other noninterest expense 49 53 (4) (8)%
--- ---
Total noninterest expense 560 536 24 4%
--- --- --- ---
Income before income taxes 258 240 18 8%
Provision for income taxes 87 82 5 6%
--- --- --- ---
Net income $171 $158 $13 8%
Income per share
Basic $2.71 $2.27 $0.44 19%
===== ===== ===== ===
Diluted $2.66 $2.24 $0.42 19%
===== ===== ===== ===
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 Year Ended
December 31, September 30, December 31, December 31, December 31,
2016 2016 2015 2016 2015
---- ---- ---- ---- ----
Mortgage loans originated (1) $8,573 $9,198 $5,824 $32,453 $29,402
Mortgage loans sold and securitized $8,422 $8,723 $5,164 $32,033 $26,307
Interest rate spread (2) 2.49% 2.36% 2.54% 2.45% 2.58%
Net interest margin 2.67% 2.58% 2.69% 2.64% 2.74%
Average common shares outstanding 56,607,933 56,580,238 56,449,596 56,569,307 56,426,977
Average fully diluted shares outstanding 57,824,854 57,933,806 57,502,017 57,597,667 57,164,523
Average interest-earning assets $12,817 $12,318 $11,240 $12,164 $10,436
Average interest-paying liabilities $10,222 $9,773 $9,078 $9,757 $8,305
Average stockholders' equity $1,312 $1,379 $1,547 $1,464 $1,486
Return on average assets (4) 0.78% 1.61% 1.03% 1.23% 1.32%
Return on average equity (4) 8.60% 16.53% 8.56% 11.69% 10.63%
Return on average common equity (4) 8.60% 17.45% 10.35% 13.03% 10.49%
Efficiency ratio (4) 76.7% 59.9% 75.2% 69.2% 70.9%
Equity-to-assets ratio (average for the period) 9.05% 9.75% 12.07% 10.52% 12.43%
December 31, September 30, December 31,
2016 2016 2015
---- ---- ----
Book value per common share $23.50 $22.72 $22.33
Number of common shares outstanding 56,824,802 56,597,271 56,483,258
Mortgage loans subserviced for others $43,127 $41,017 $40,287
Mortgage loans serviced for others $31,207 $31,372 $26,145
Weighted average service fee (basis points) 26.7 28.1 27.7
Capitalized value of mortgage servicing rights 1.07% 0.96% 1.13%
Mortgage servicing rights to Tier 1 capital 26.7% 24.6% 20.6%
Ratio of allowance for loan losses to LHFI (3) 2.37% 2.30% 3.00%
Ratio of allowance for loan losses to LHFI and loans with government guarantees
(3) 2.23% 2.16% 2.78%
Ratio of nonperforming assets to total assets 0.39% 0.39% 0.61%
Equity-to-assets ratio 9.50% 9.01% 11.14%
Common equity-to-assets ratio 9.50% 9.01% 9.20%
Number of bank branches 99 99 99
Number of FTE employees 2,886 2,881 2,713
(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.
(4) See Non-GAAP Reconciliation in which applicable periods, three months ended September 30, 2016 and full year
ended December 31, 2016, have been adjusted.
Flagstar Bancorp, Inc.
Earnings Per Share
(Dollars in millions, except share data)
(Unaudited)
Three Months Ended Year Ended
December 31, September 30, December 31, December 31, December 31,
2016 2016 2015 2016 2015
---- ---- ---- ---- ----
Net income 28 57 33 171 158
Cumulative preferred stock dividends (1) - (2) (8) (18) (30)
--- --- --- --- ---
Net income applicable to Common Stockholders $28 $55 $25 $153 $128
=== === === ==== ====
Weighted Average Shares
Weighted average common shares outstanding 56,607,933 56,580,238 56,449,596 56,569,307 56,426,977
Effect of dilutive securities
Warrants 151,560 364,791 348,939 138,314 305,484
Stock-based awards 1,065,361 988,777 703,482 890,046 432,062
--------- ------- ------- ------- -------
Weighted average diluted common shares 57,824,854 57,933,806 57,502,017 57,597,667 57,164,523
========== ========== ========== ========== ==========
Earnings per common share
Net income applicable to Common Stockholders $0.50 $0.98 $0.45 $2.71 $2.27
Effect of dilutive securities
Warrants - - - (0.01) (0.01)
Stock-based awards (0.01) (0.02) (0.01) (0.04) (0.02)
----- ----- ----- ----- -----
Diluted earnings per share $0.49 $0.96 $0.44 $2.66 $2.24
===== ===== ===== ===== =====
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
(1) dividends.
Average Balances, Yields and Rates
(Dollars in millions)
(Unaudited)
Three Months Ended
December 31, 2016 September 30, 2016 December 31, 2015
Average Balance Interest Annualized Average Balance Interest Annualized Average Balance Interest Annualized
Yield/Rate
Yield/Rate Yield/Rate
--- ---
Interest-Earning Assets
Loans held-for-sale $3,321 $29 3.55% $3,416 $30 3.51% $2,484 $24 3.88%
Loans held-for-investment
Consumer loans (1) 2,691 24 3.55% 2,580 23 3.52% 3,423 30 3.52%
Commercial loans (1) 3,472 35 4.06% 3,268 33 3.96% 2,219 21 3.77%
----- --- ----- --- ----- ---
Total loans held-for-investment 6,163 59 3.84% 5,848 56 3.77% 5,642 51 3.62%
Loans with government guarantees 389 4 4.23% 432 4 3.88% 496 4 2.84%
Investment securities 2,845 18 2.53% 2,516 16 2.55% 2,441 16 2.55%
Interest-earning deposits 99 1 0.51% 106 - 0.48% 177 - 0.49%
--- --- --- --- --- ---
Total interest-earning assets 12,817 $111 3.46% 12,318 $106 3.42% 11,240 $95 3.36%
Other assets 1,672 1,830 1,585
----- ----- -----
Total assets $14,489 $14,148 $12,825
======= ======= =======
Interest-Bearing Liabilities
Retail deposits
Demand deposits $521 $ - 0.21% $509 $ - 0.20% $431 $ - 0.13%
Savings deposits 3,840 7 0.77% 3,751 8 0.77% 3,725 8 0.84%
Money market deposits 256 - 0.43% 250 - 0.41% 272 - 0.39%
Certificates of deposit 1,079 3 1.05% 1,071 3 1.05% 813 2 0.88%
----- --- ----- --- --- ---
Total retail deposits 5,696 10 0.75% 5,581 11 0.75% 5,241 10 0.76%
Government deposits
Demand deposits 211 - 0.39% 243 - 0.39% 304 - 0.40%
Savings deposits 470 1 0.52% 478 1 0.52% 401 1 0.52%
Certificates of deposit 352 1 0.60% 355 - 0.52% 410 1 0.45%
--- --- --- --- --- ---
Total government deposits 1,033 2 0.52% 1,076 1 0.49% 1,115 2 0.46%
Total interest-bearing deposits 6,729 12 0.72% 6,657 12 0.71% 6,356 12 0.71%
Short-term Federal Home Loan Bank advances and other 1,427 1 0.50% 1,073 1 0.44% 1,226 1 0.25%
Long-term Federal Home Loan Bank advances 1,573 5 1.24% 1,576 7 1.81% 1,219 4 1.60%
Other long-term debt 493 6 4.89% 467 6 4.86% 277 2 2.66%
--- --- --- --- --- ---
Total interest-bearing liabilities 10,222 24 0.97% 9,773 26 1.06% 9,078 19 0.83%
Noninterest-bearing deposits (2) 2,504 2,469 1,776
Other liabilities 451 527 424
Stockholders' equity 1,312 1,379 1,547
----- ----- -----
Total liabilities and stockholders' equity $14,489 $14,148 $12,825
======= ======= =======
Net interest-earning assets $2,595 $2,545 $2,162
====== ====== ======
Net interest income $87 $80 $76
=== === ===
Interest rate spread (3) 2.49% 2.36% 2.54%
==== ==== ====
Net interest margin (4) 2.67% 2.58% 2.69%
==== ==== ====
Ratio of average interest-earning assets to interest-bearing liabilities 125.4% 126.0% 123.8%
===== ===== =====
Total average deposits $9,233 $9,126 $8,132
====== ====== ======
(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.
Average Balances, Yields and Rates
(Dollars in millions)
(Unaudited)
Year Ended
December 31, 2016 December 31, 2015
Average Balance Interest Annualized Average Balance Interest Annualized
Yield/Rate Yield/Rate
--- --- ----------
Interest-Earning Assets
Loans held-for-sale $3,134 $113 3.62% $2,188 $85 3.90%
Loans held-for-investment
Consumer loans (1) 2,832 99 3.52% 3,083 114 3.68%
Commercial loans (1) 2,981 120 3.97% 1,993 78 3.88%
----- --- ----- ---
Total loans held-for-investment 5,813 219 3.75% 5,076 192 3.76%
Loans with government guarantees 435 16 3.59% 633 18 2.86%
Investment securities 2,653 68 2.56% 2,305 59 2.55%
Interest-earning deposits 129 1 0.50% 234 1 0.50%
--- --- --- ---
Total interest-earning assets 12,164 $417 3.42% 10,436 $355 3.39%
Other assets 1,743 1,520
----- -----
Total assets $13,907 $11,956
======= =======
Interest-Bearing Liabilities
Retail deposits
Demand deposits $489 $1 0.18% $429 $1 0.14%
Savings deposits 3,751 29 0.78% 3,693 30 0.82%
Money market deposits 278 1 0.44% 258 1 0.31%
Certificates of deposit 990 10 1.05% 787 6 0.77%
--- --- --- ---
Total retail deposits 5,508 41 0.76% 5,167 38 0.73%
Government deposits
Demand deposits 228 1 0.39% 257 1 0.39%
Savings deposits 442 2 0.52% 405 2 0.52%
Certificates of deposit 382 2 0.40% 358 1 0.39%
--- --- --- ---
Total government deposits 1,052 5 0.45% 1,020 4 0.44%
----- --- ----- ---
Total interest-bearing deposits 6,560 46 0.71% 6,187 42 0.68%
Short-term Federal Home Loan Bank advances and other 1,249 5 0.44% 311 1 0.30%
Long-term Federal Home Loan Bank advances 1,584 27 1.72% 1,500 18 1.17%
Other long-term debt 364 16 4.34% 307 7 2.42%
--- --- --- ---
Total interest-bearing liabilities 9,757 94 0.97% 8,305 68 0.82%
Noninterest-bearing deposits (2) 2,202 1,690
Other liabilities 484 475
Stockholders' equity 1,464 1,486
Total liabilities and stockholders' equity $13,907 $11,956
======= =======
Net interest-earning assets $2,407 $2,131
====== ======
Net interest income $323 $287
==== ====
Interest rate spread (3) 2.45% 2.58%
==== ====
Net interest margin (4) 2.64% 2.74%
==== ====
Ratio of average interest-earning assets to interest-bearing liabilities 124.7% 125.7%
===== =====
Total average deposits $8,762 $7,877
====== ======
(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.
Gain on Loan Sales on Loans Held-for-Sale
(Dollars in millions)
(Unaudited)
Three Months Ended
December 31, September 30, June 30, March 31, December 31,
2016 2016 2016 2016 2015
---- ---- ---- ---- ----
(Dollars in millions)
Mortgage rate lock commitments (fallout-adjusted) (1) $6,091 $8,291 $8,127 $6,863 $5,027
Gain on sale margin (change in bps) (1) 0.93% 1.13% 1.04% 0.96% 0.92%
Net gain on loan sales on HFS $57 $94 $85 $66 $46
Net (loss) return on the mortgage servicing rights $(5) $(11) $(4) $(6) $9
Gain on loan sales HFS + net (loss) return on the MSR $52 $83 $81 $60 $55
Residential loans serviced (number of accounts - 000's) (2) 383 375 358 354 361
Capitalized value of mortgage servicing rights 1.07% 0.96% 0.99% 1.06% 1.13%
Mortgage rate lock commitments (gross) $7,611 $10,328 $10,168 $8,762 $6,258
Mortgage loans sold and securitized $8,422 $8,723 $7,940 $6,948 $5,164
Net margin on loan sales 0.68% 1.08% 1.07% 0.94% 0.90%
(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. The net margin is based on net gain on loan sales to fallout-adjusted mortgage rate lock commitments.
(2) Includes serviced for own loan portfolio, serviced for others and subserviced for others loans.
Year Ended
December 31, December 31,
2016 2015
---- ----
Mortgage rate lock
commitments
(fallout-
adjusted) (1) $29,372 $25,511
Gain on sale margin
(change in bps)
(1) 1.03% 1.13%
Net gain on loan
sales on HFS $301 $288
Net (loss) return
on the mortgage
servicing rights $(26) $28
Gain on loan sales
HFS + net (loss)
return on the MSR $275 $316
Residential loans
serviced (number
of accounts -
000's) (2) 383 361
Capitalized value
of mortgage
servicing rights 1.07% 1.13%
Mortgage rate lock
commitments
(gross) $36,869 $31,718
Mortgage loans sold
and securitized $32,033 $26,307
Net margin on loan
sales 0.94% 1.09%
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.
The net margin is based on net
gain on loan sales to fallout-
adjusted mortgage rate lock
(1) commitments.
(2) Includes serviced for own loan
portfolio, serviced for others
and subserviced for others
loans.
Regulatory Capital - Bancorp
(Dollars in millions)
(Unaudited)
December 31, 2016 September 30, 2016 June 30, 2016 March 31, 2016 December 31, 2015
Amount Ratio Amount Ratio Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Tier 1 leverage (to adjusted tangible assets) $1,256 8.88% $1,225 8.88% $1,514 11.59% $1,453 11.04% $1,435 11.51%
------ ------ ------ ------ ------
Total adjusted tangible asset base $14,149 $13,798 $13,068 $13,167 $12,474
======= ======= ======= ======= =======
Tier 1 common equity (to risk weighted assets) $1,084 13.07% $1,056 12.04% $1,086 13.55% $1,032 13.96% $1,065 14.09%
Tier 1 capital (to risk weighted assets) $1,256 15.14% $1,225 13.98% $1,514 18.89% $1,453 19.67% $1,435 18.98%
Total capital (to risk weighted assets) $1,363 16.42% $1,338 15.26% $1,618 20.19% $1,549 20.97% $1,534 20.28%
------ ------ ------ ------ ------
Risk weighted asset base $8,298 $8,767 $8,014 $7,387 $7,561
====== ====== ====== ====== ======
Regulatory Capital - Bank
(Dollars in millions)
(Unaudited)
December 31, 2016 September 30, 2016 June 30, 2016 March 31, 2016 December 31, 2015
Amount Ratio Amount Ratio Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Tier 1 leverage (to adjusted tangible assets) $1,491 10.52% $1,459 10.55% $1,576 12.03% $1,509 11.43% $1,472 11.79%
------ ------ ------ ------ ------
Total adjusted tangible asset base $14,177 $13,824 $13,102 $13,200 $12,491
======= ======= ======= ======= =======
Tier 1 common equity (to risk weighted assets) $1,491 17.91% $1,459 16.59% $1,576 19.58% $1,509 20.34% $1,472 19.42%
Tier 1 capital (to risk weighted assets) $1,491 17.91% $1,459 16.59% $1,576 19.58% $1,509 20.34% $1,472 19.42%
Total capital (to risk weighted assets) $1,597 19.19% $1,571 17.87% $1,679 20.86% $1,605 21.63% $1,570 20.71%
------ ------ ------ ------ ------
Risk weighted asset base $8,325 $8,794 $8,048 $7,421 $7,582
====== ====== ====== ====== ======
Loan Originations
(Dollars in millions)
(Unaudited)
Three Months Ended
December 31, 2016 September 30, 2016 December 31, 2015
Consumer loans
Mortgage (1) $8,573 97.3% $9,198 96.9% $5,824 96.0%
Other consumer (2) 46 0.5% 44 0.5% 39 0.6%
--- --- --- --- --- ---
Total consumer loans 8,619 97.8% 9,242 97.4% 5,863 96.6%
Commercial loans (3) 191 2.2% 248 2.6% 205 3.4%
--- --- --- --- --- ---
Total loan originations $8,810 100.0% $9,490 100.0% $6,068 100.0%
====== ===== ====== ===== ====== =====
Year Ended
December 31, 2016 December 31, 2015
Mortgage (1) $32,453 97.5% $29,402 98.2%
Other consumer (2) 159 0.5% 132 0.4%
--- --- --- ---
Total consumer
loans 32,612 97.9% 29,534 98.6%
Commercial loans
(3) 687 2.1% 415 1.4%
--- --- --- ---
Total loan
originations $33,299 100.0% $29,949 100.0%
======= ===== ======= =====
(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)
December 31, 2016 September 30, 2016 December 31, 2015
Consumer loans
Residential first mortgage $2,327 38.3% $2,136 33.9% $3,100 48.9%
Second mortgage 126 2.1% 127 2.0% 135 2.1%
HELOC 317 5.2% 326 5.2% 384 6.0%
Other 28 0.5% 30 0.5% 31 0.5%
--- --- --- --- --- ---
Total consumer loans 2,798 46.1% 2,619 41.6% 3,650 57.5%
----- ---- ----- ---- ----- ----
Commercial loans
Commercial real estate 1,261 20.8% 1,168 18.6% 814 12.8%
Commercial and industrial 769 12.7% 708 11.3% 552 8.7%
Warehouse lending 1,237 20.4% 1,795 28.5% 1,336 21.0%
----- ---- ----- ---- ----- ----
Total commercial loans 3,267 53.9% 3,671 58.4% 2,702 42.5%
----- ---- ----- ---- ----- ----
Total loans held-for-investment $6,065 100.0% $6,290 100.0% $6,352 100.0%
====== ===== ====== ===== ====== =====
Residential Loans Serviced
(Dollars in millions)
(Unaudited)
December 31, 2016 September 30, 2016 December 31, 2015
Unpaid Number of Unpaid Number of Unpaid
Principal Principal Principal
Balance Balance Balance Number of
accounts accounts accounts
--- --- --------
Serviced for own loan portfolio (1) $5,816 29,244 $5,645 29,052 $6,088 30,683
Serviced for others 31,207 133,270 31,372 138,771 26,145 118,662
Subserviced for others (2) 43,127 220,075 41,017 207,039 40,287 211,937
------ ------- ------ ------- ------ -------
Total residential loans serviced $80,150 382,589 $78,034 374,862 $72,520 361,282
======= ======= ======= ======= ======= =======
(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 Year Ended
December 31, September 30, December 31, December 31, December 31,
2016 2016 2015 2016 2015
Allowance for loan losses $142 $143 $187 $142 $187
Charge-offs
Consumer loans
Residential first mortgage (3) (7) (7) (29) (87)
Second mortgage - - (2) (2) (4)
HELOC - (1) (1) (2) (3)
Other (1) (1) (1) (3) (4)
---
Total consumer loans (4) (9) (11) (36) (98)
Commercial loans
Commercial and industrial - - - - (3)
Total commercial loans - - - - (3)
Total charge-offs $(4) $(9) $(11) $(36) $(101)
Recoveries
Consumer loans
Residential first mortgage 1 - - 2 3
Second mortgage - - 1 - 2
HELOC - 1 - - -
Other - 1 1 3 3
--- ---
Total consumer loans 1 2 2 5 8
Commercial loans
Commercial real estate 1 - - 1 2
Total commercial loans 1 - - 1 2
--- --- --- --- ---
Total recoveries 2 2 2 6 10
--- --- --- --- ---
Charge-offs, net of recoveries $(2) $(7) $(9) $(30) $(91)
Net charge-offs to LHFI ratio (annualized) (1) 0.13% 0.51% 0.62% 0.52% 1.85%
Net charge-offs ratio, adjusted (annualized) (1)(2) 0.07% 0.15% 0.29% 0.15% 0.40%
Net charge-offs to LHFI ratio (annualized) by loan type (1)
Residential first mortgage 0.38% 1.33% 1.03% 1.18% 3.34%
Second mortgage (0.92)% 1.03% 1.89% 1.34% 1.72%
HELOC and consumer 0.50% 0.23% 0.86% 0.53% 1.18%
Commercial real estate (0.05)% - % - % (0.02)% (0.29)%
Commercial and industrial (0.12)% (0.01)% (0.01)% (0.04)% 0.71%
(1) Excludes loans carried under the fair value option.
(2) Excludes charge-offs of zero, zero, and $2 million related to the sale of nonperforming loans, TDRs and non-agency loans during the
three months ended December 31, 2016, September 30, 2016 and December 31, 2015, respectively and $8 million and $69 million
during the years ended December 31, 2016 and 2015, respectively. Also excludes charge-offs related to loans with government
guarantees of $1 million, $5 million, and $3 million during the three months ended December 31, 2016, September 30, 2016 and
December 31, 2015, respectively, and $13 million and $3 million during the years ended December 31, 2016 and December 31, 2015,
respectively.
Representation and Warranty Reserve
(Dollars in millions)
(Unaudited)
Three Months Ended Year Ended
December 31, September 30, December 31, December 31, December 31,
2016 2016 2015 2016 2015
---- ---- ---- ---- ----
Balance, beginning of period $32 $36 $45 $40 $53
Provision (release)
Charged to gain on sale for current loan sales 1 1 1 5 7
Charged to representation and warranty benefit (7) (6) (6) (19) (19)
----------
Total (6) (5) (5) (14) (12)
Charge-offs, net 1 1 - 1 (1)
--- --- --- --- ---
Balance, end of period $27 $32 $40 $27 $40
=== === === === ===
Composition of Allowance for Loan Losses
(Dollars in millions)
(Unaudited)
December 31, 2016 Collectively Individually
Evaluated Evaluated
Reserves Reserves Total
----------------- ------------ ------------ -----
Consumer loans
Residential first mortgage $60 $5 $65
Second mortgage 2 6 8
HELOC 14 2 16
Other 1 - 1
--- ---
Total consumer loans 77 13 90
Commercial loans
Commercial real estate 28 - 28
Commercial and industrial 17 - 17
Warehouse lending 7 - 7
--- --- ---
Total commercial loans 52 - 52
--- --- ---
Total allowance for loan losses $129 $13 $142
==== === ====
September 30, 2016 Collectively Individually
Evaluated Evaluated
Reserves Reserves Total
------------------ ------------ ------------ -----
Consumer loans
Residential first mortgage $63 $7 $70
Second mortgage 3 6 9
HELOC 15 1 16
Other 1 - 1
--- ---
Total consumer loans 82 14 96
Commercial loans
Commercial real estate 25 - 25
Commercial and industrial 14 - 14
Warehouse lending 8 - 8
--- --- ---
Total commercial loans 47 - 47
--- --- ---
Total allowance for loan losses $129 $14 $143
==== === ====
Nonperforming Loans and Assets
(Dollars in millions)
(Unaudited)
December 31, September 30, December 31,
2016 2016 2015
---- ---- ----
Nonperforming loans $22 $23 $31
Nonperforming TDRs 8 8 7
Nonperforming TDRs at inception but performing for less than six months 10 9 28
--- --- ---
Total nonperforming loans held-for-investment 40 40 66
Real estate and other nonperforming assets, net 14 15 17
--- --- ---
Nonperforming assets held-for-investment, net (1) $54 $55 $83
=== === ===
Ratio of nonperforming assets to total assets 0.39% 0.39% 0.61%
Ratio of nonperforming loans held-for-investment to loans held-for-investment 0.67% 0.63% 1.05%
Ratio of nonperforming assets to loans held-for-investment and repossessed assets 0.90% 0.87% 1.32%
Ratio of nonperforming assets to Tier 1 capital + allowance for loan losses 3.93% 4.03% 5.12%
(1) Does not include nonperforming loans held-for-sale of $6 million, $5 million, and $12 million at December 31, 2016,
September 30, 2016, and December 31, 2015, respectively.
Asset Quality - Loans Held-for-Investment
(Dollars in millions)
(Unaudited)
30-59 Days 60-89 Days Greater Total Past Total
Past Due Past Due than 90 Due Investment
days (1) Loans
---------- ---------- -------- ---------- ----------
December 31, 2016
Consumer loans $8 $2 $40 $50 $2,798
Commercial loans - - - - 3,267
--- --- --- --- -----
Total loans $8 $2 $40 $50 $6,065
=== === === === ======
September 30, 2016
Consumer loans $6 $2 $40 $48 $2,619
Commercial loans - - - - 3,671
--- --- --- -----
Total loans $6 $2 $40 $48 $6,290
=== === === === ======
December 31, 2015
Consumer loans $10 $4 $64 $78 $3,650
Commercial loans - - 2 2 2,702
--- --- --- --- -----
Total loans $10 $4 $66 $80 $6,352
=== === === === ======
Includes performing
nonaccrual loans that are
less than 90 days delinquent
and for which interest
(1) cannot be accrued.
Troubled Debt Restructurings
(Dollars in millions)
(Unaudited)
TDRs
Nonperforming
TDRs at
inception but
performing for
less than six
Performing Nonperforming months Total
---------- ------------- -------------- -----
December 31, 2016
Consumer loans $67 $8 $10 $85
Total TDR loans $67 $8 $10 $85
=== === === ===
September 30, 2016
Consumer loans $70 $8 $9 $87
Commercial loans 1 - - 1
Total TDR loans $71 $8 $9 $88
=== === === ===
December 31, 2015
Consumer loans $101 $7 $28 $136
Total TDR loans $101 $7 $28 $136
==== === === ====
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.
December 31, 2016 Common Equity Tier 1 Tier 1 Leverage (to Tier 1 Capital (to Total Risk-Based
(to Risk Weighted Adjusted Tangible Risk Weighted Capital (to Risk
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) $1,084 $1,256 $1,256 $1,363
Increased deductions related to deferred tax assets, mortgage servicing assets and other capital components (230) (162) (162) (160)
---- ---- ---- ----
Basel III (fully phased-in) capital $854 $1,094 $1,094 $1,203
---- ------ ------ ------
Risk-weighted assets - Basel III (transitional) to Basel III (fully phased-in)
Basel III assets (transitional) $8,298 $14,149 $8,298 $8,298
Net change in assets 35 (161) 35 35
--- ---- --- ---
Basel III (fully phased-in) assets $8,333 $13,988 $8,333 $8,333
------ ------- ------ ------
Capital ratios
Basel III (transitional) 13.07% 8.88% 15.14% 16.42%
Basel III (fully phased-in) 10.25% 7.82% 13.13% 14.44%
December 31, 2016 Common Equity Tier 1 Tier 1 Leverage (to Tier 1 Capital (to Total Risk-Based
(to Risk Weighted Adjusted Tangible Risk Weighted Capital (to Risk
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) $1,491 $1,491 $1,491 $1,597
Increased deductions related to deferred tax assets, mortgage servicing assets and other capital components (119) (119) (119) (116)
---- ---- ---- ----
Basel III (fully phased-in) capital $1,372 $1,372 $1,372 $1,481
------ ------ ------ ------
Risk-weighted assets - Basel III (transitional) to Basel III (fully phased-in)
Basel III assets (transitional) $8,325 $14,177 $8,325 $8,325
Net change in assets 196 (120) 196 196
--- ---- --- ---
Basel III (fully phased-in) assets $8,521 $14,057 $8,521 $8,521
------ ------- ------ ------
Capital ratios
Basel III (transitional) 17.91% 10.52% 17.91% 19.19%
Basel III (fully phased-in) 16.10% 9.76% 16.10% 17.39%
Adjusted Net Income and Adjusted Income per Share. 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 net income and adjusted non-interest income and ratios 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 Year Ended
------------- ----------
September 30, December 31,
2016 2016
-------------- -------------
(Dollars in millions)
(Unaudited)
Net income $57 $171
Adjustment to remove DOJ adjustment (24) (24)
Tax impact of adjusting item 8 8
--- ---
Adjusted net income $41 $155
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Diluted income per share $0.96 $2.66
Adjustment to remove DOJ adjustment (0.41) (0.42)
Tax impact of adjusting item 0.14 0.14
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Diluted adjusted income per share $0.69 $2.38
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Return on average assets 1.61% 1.23%
Adjustment to remove DOJ adjustment including tax impact (0.45)% (0.12)%
Adjusted return on average assets 1.16% 1.11%
Return on average equity 16.53% 11.69%
Adjustment to remove DOJ adjustment including tax impact (4.64)% (1.10)%
Adjusted return on average equity 11.89% 10.59%
Return on average common equity 17.45% 13.03%
Adjustment to remove DOJ adjustment including tax impact (4.89)% (1.22)%
Adjusted return on average common equity 12.56% 11.81%
Total noninterest expense $142 $560
Net interest income $80 $323
Total noninterest income $156 $487
Adjustment to remove DOJ adjustment (24) (24)
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Adjusted total noninterest income $132 $463
Efficiency Ratio 59.9% 69.2%
Adjustment to remove DOJ adjustment 7.1% 2.0%
Adjusted Efficiency Ratio 67.0% 71.2%
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/flagstar-reports-fourth-quarter-2016-net-income-of-28-million-or-049-per-diluted-share-300395333.html
SOURCE Flagstar Bancorp, Inc.
