TROY, Mich., July 26, 2016 /PRNewswire/ -- Flagstar Bancorp, Inc. (NYSE: FBC), the holding company for Flagstar Bank, FSB, today reported second quarter 2016 net income of $47 million, or $0.66 per diluted share, as compared to $39 million in the first quarter 2016, or $0.54 per diluted share, and net income of $46 million in the second quarter 2015, or $0.68 per diluted share.

"We're happy to report another solid quarter," said Alessandro P. DiNello, president and chief executive officer of Flagstar Bancorp, Inc. "Net income rose as mortgage volume increased 18 percent and net interest income remained relatively stable. We continued to rotate our lower spread consumer assets into relationship-focused commercial loans and this quarter marks the first time that our average commercial loans held for investment exceeded our consumer loans held for investment. Asset quality improved again, with nonperforming loans declining 17 percent to $44 million. Yet, while total revenue increased 11 percent, expenses increased only 2 percent, reflecting the franchise's operating leverage. As a result, our efficiency ratio improved to 68 percent and our return on assets was 1.4 percent.

"As we previously announced, we received regulatory approval to redeem our TARP preferred shares on June 23, 2016. Given the notice requirement prior to redemption, we will be redeeming these shares in full by the end of July. We've replaced this high-cost funding with senior notes and other bank-level sources of funds that cost, on average, only one-third of the TARP preferred on an after-tax basis. After this redemption, our regulatory capital remains strong on an adjusted basis as of June 30, 2016, with Tier 1 leverage at 8.59 percent and Common Equity Tier 1 at 12.17 percent.

"Our business model has been tested over the past few quarters, and it has generated strong earnings despite volatility in the interest rate, regulatory and mortgage environment. More recently, low rates have created an opportunity for us to demonstrate the power and profitability of our mortgage business. We believe we have built a solid business model that will continue to be successful."



    Second Quarter 2016 Highlights:
    -------------------------------


    Income Statement Highlights

                                                                      Three Months Ended
                                                                      ------------------

                                        June 30,  March 31,  December 31,   September 30,   June 30,
                                             2016       2016           2015             2015        2015
                                             ----       ----           ----             ----        ----

                                                                    (Dollars in millions)

    Consolidated Statements of Income

    Net interest income                                 $77                                       $79             $76            $73   $73

    Provision (benefit) for loan losses       (3)                    (13)                        (1)     (1)          (13)

    Noninterest income                        128                      105                          97      128            126

    Noninterest expense                       139                      137                         129      131            138
                                              ---                      ---                         ---      ---            ---

    Income before income taxes                 69                       60                          45       71             74

    Provision for income taxes                 22                       21                          12       24             28
                                              ---                      ---                         ---      ---            ---

    Net income                                          $47                                       $39             $33            $47   $46
                                                        ===                                       ===             ===            ===   ===


    Income per share:

    Basic                                             $0.67                                     $0.56           $0.45          $0.70 $0.69

    Diluted                                           $0.66                                     $0.54           $0.44          $0.69 $0.68



    Key Ratios

                                                     Three Months Ended                         Change (bps)
                                                     ------------------                         -----------

                             June 30, March 31,   December 31,   September 30,   June 30,     Seq            Yr/Yr
                                 2016        2016           2015             2015        2015
                                 ----        ----           ----             ----        ----

    Net interest margin         2.63%                    2.66%                      2.69%                       2.75% 2.79% (3) (16)

    Return on average assets     1.4%                     1.2%                       1.0%                        1.5%  1.6%  20  (20)

    Return on average equity    11.5%                    10.1%                       8.6%                       12.4% 12.7% 140 (120)

    Return on average common    13.8%                    12.2%                      10.4%                       15.1% 15.6% 160 (180)
    equity




    Balance Sheet Highlights

                                                                         Three Months Ended                               % Change
                                                                         ------------------                               --------

                                    June 30,   March 31,  December 31,   September 30,   June 30,      Seq Yr/Yr
                                          2016       2016           2015             2015         2015
                                          ----       ----           ----             ----         ----

                                                                       (Dollars in millions)

    Average Balance Sheet Data

    Average interest-earning assets              $11,639                                    $11,871                    $11,240           $10,693       $10,367 (2)% 12%

    Average loans held-for-sale          2,884                    2,909                        2,484             2,200             2,218      (1)% 30%

    Average loans held-for-              5,569                    5,668                        5,642             5,412             4,938      (2)% 13%
    investment

    Average total deposits               8,631                    8,050                        8,132             8,260             7,736        7% 12%

Net Interest Income

Second quarter 2016 net interest income remained relatively stable at $77 million, compared to $79 million for the first quarter 2016. The results reflected a 2 percent decline in average earning assets, primarily due to loan sales, and a slight drop in the net interest margin.

Net interest margin decreased 3 basis points to 2.63 percent for the second quarter 2016, as compared to 2.66 percent for the first quarter 2016. The decrease from the prior quarter was driven by lower interest income on loans held-for-sale due to a drop in market interest rates, partially offset by increased interest income from a rotation of lower spread residential mortgages into higher spread commercial loans.

Average loans held-for-investment totaled $5.6 billion for the second quarter 2016, largely unchanged from the first quarter 2016. During the second quarter 2016, relationship-based commercial loans increased while consumer loans declined. Average commercial loans increased $469 million, or 20 percent, led by a $351 million, or 36 percent increase in warehouse loans. Commercial & industrial and commercial real estate loans also registered solid gains. Average consumer loans fell $568 million, or 17 percent, due to the sale of $408 million (UPB) of performing residential mortgage loans and $14 million (UPB) of nonperforming, TDR, and other higher risk loans.

Average total deposits were $8.6 billion in the second quarter 2016, increasing $581 million, or 7 percent from the prior quarter. The increase was led by higher company-controlled and retail deposits, partially offset by a drop in government deposits. Average company-controlled deposits rose $403 million, or 35 percent, due to seasonal factors, higher refinance volume and an increase in loans serviced. Average retail deposits increased $253 million, or 4 percent, providing core deposits to support balance sheet growth.

Provision (Benefit) for Loan Losses

The Company experienced a provision benefit in the second quarter 2016, resulting primarily from the sale of $408 million (UPB) performing residential first mortgage loans. The provision benefit for loan losses totaled $3 million for the second quarter 2016, a decrease from a benefit of $13 million for the first quarter 2016.

Net charge-offs in the second quarter 2016 were $9 million, or 0.62 percent of applicable loans, compared to $12 million, or 0.86 percent of applicable loans in the prior quarter. The second quarter 2016 amount included $2 million of net charge-offs associated with the sale of $14 million (UPB) of nonperforming, TDR, and other higher risk loans and $4 million of net charge-offs associated with loans with government guarantees. The first quarter 2016 amount included $6 million of net charge-offs associated with the sale of $96 million (UPB) of nonperforming, TDR, and other higher risk loans and $3 million of net charge-offs associated with loans with government guarantees. Excluding the charge-offs associated with loan sales and loans with government guarantees in both quarters, net charge-offs in the second quarter 2016 were $3 million, or 0.18 percent of applicable loans, compared to $3 million, or 0.20 percent of applicable loans in the prior quarter.

Noninterest Income

Noninterest income increased $23 million, or 22 percent, to $128 million, as compared to $105 million for the first quarter 2016. The second quarter 2016 results were led primarily by higher net gain on loan sales and loan fees and charges.

Second quarter 2016 net gain on loan sales increased to $90 million, as compared to $75 million for the first quarter 2016. The increase from the prior quarter reflected higher fallout-adjusted locks and an improved gain on sale margin. Excluding gains from the sale of mortgage loans transferred from HFI, net gain on loan sales was $85 million, up $19 million, or 29 percent, from the first quarter 2016. In the second quarter 2016, fallout-adjusted locks increased 18 percent to $8.1 billion, led by higher purchase volumes. Excluding HFI loan sales, the net gain on loan sale margin was 1.04 percent, as compared to 0.96 percent for the first quarter 2016.



    Mortgage Metrics

                                                                                                                        Three Months Ended                                     Change (% / bps)
                                                                                                                        ------------------                                     ----------------

                                                                                      June 30,    March 31,   December 31,   September 30,   June 30,       Seq         Yr/Yr
                                                                                           2016         2016            2015             2015        2015
                                                                                           ----         ----            ----             ----        ----

                                                                                                                      (Dollars in millions)

    Mortgage rate lock commitments                                                                   $8,127                                     $6,863                               $5,027                                     $6,495             $6,804         18%      19%
    (fallout-adjusted) (1)

    GOS on HFS margin (change in                                                          1.04%                      0.96%                      0.92%                     1.05%                        1.22%                      8       (18)
    bps) (2)

    Gain on loan sales on HFS                                                                           $85                              66                                   $46                                        $68                  $83         29%         2%

    Net (loss) return on the mortgage                                                                  $(4)                                      $(6)                                  $9                                        $12                 $9       (33)%      N/M
    servicing asset ("MSA")

    Gain on loan sales + net (loss)                                                                     $81                                        $60                                  $55                                        $80                $92         35%    (12)%
    return on the MSA

    Residential loans serviced (number                                                      358                         340                         361                        369                           378                      5%      (5)%
    of accounts - 000's) (3)

    Capitalized value of mortgage                                                         0.99%                      1.06%                      1.13%                     1.12%                        1.15%                    (7)      (16)
    servicing rights (change in bps)

    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 serviced for own loan portfolio, serviced for others, and subserviced for others loans.

Loan fees and charges rose to $19 million for the second quarter 2016, as compared to $15 million in the first quarter 2016. The increase primarily reflected higher mortgage loan closings.

Net return on the mortgage servicing asset (including the impact of economic hedges) was a net loss of $4 million for the second quarter 2016, as compared to a net loss of $6 million for the first quarter 2016. The return on the mortgage servicing asset improved from the first quarter 2016, primarily due to higher service fee income and lower disposition costs from fewer bulk MSR sales, partially offset by an increase in anticipated and actual prepayments.

The representation and warranty benefit was $4 million for the second quarter 2016, as compared to a $2 million benefit in the first quarter 2016. The representation and warranty reserve fell to $36 million at June 30, 2016, from $40 million at March 31, 2016, based on a continued improvement in risk trends in the repurchase pipeline.

Noninterest Expense

The Company experienced modest expense growth in the second quarter 2016. Noninterest expense increased $2 million, or 2 percent, to $139 million for the second quarter 2016, as compared to $137 million for the first quarter 2016. The second quarter 2016 results were driven by higher commissions and loan processing expense related to increased business activity, and higher warrant expense, partially offset by lower compensation and benefits, asset resolution, and legal and professional expense. The Company's efficiency ratio improved to 68.2 percent for the second quarter 2016 as revenues grew without the addition of significant incremental expenses.

Overall, expenses related to higher mortgage volumes drove the quarter's increase in noninterest expense. Commissions increased $4 million and loan processing expense rose $3 million. Warrant expense, driven by a higher stock price, also increased $3 million. These increases were partially offset by decreased levels of expense in a number of other categories, including legal and professional expense, asset resolution expense, and compensation and benefits, which were seasonally lower.

Income Taxes

The second quarter 2016 provision for income taxes totaled $22 million, as compared to $21 million in the first quarter 2016. The effective tax rate in the second quarter 2016 was 33 percent, as compared to 34 percent in the first quarter 2016. The decrease in the marginal tax rate in the second quarter 2016 was largely due to a benefit for state tax settlements in the quarter.



    Asset Quality
    -------------


    Credit Quality Ratios

                                                                                                                       Three Months Ended                                Change (% / bps)
                                                                                                                       ------------------                                ----------------

                                                                                        June 30,    March 31,   December 31,      September 30,       June 30,     Seq       Yr/Yr
                                                                                             2016         2016            2015                2015          2015
                                                                                             ----         ----            ----                ----          ----

                                                                                                                     (Dollars in millions)

    Allowance for loan loss to LHFI                                                          2.6%                       2.9%                 3.0%                    3.7%                  4.3% (30)    (170)

    Allowance for loan loss to LHFI and                                                      2.4%                       2.7%                 2.8%                    3.3%                  3.9% (30)    (150)
    loans with government guarantees

    Charge-offs, net of recoveries                                                                         $9                                  $12                               $9                 $24       $18 (25)%   (50)%

    Charge-offs, net of recoveries,                                                                        $3                                   $3                               $4                  $8        $3     - %     - %

    adjusted (1)

    Total nonperforming loans held-for-                                                                   $44                                  $53                              $66                 $63       $65 (17)%   (32)%
    investment

    Net charge-off ratio (annualized)                                                       0.62%                      0.86%                0.62%                   1.84%                 1.49% (24)     (87)

    Net charge-off ratio, adjusted                                                          0.18%                      0.20%                0.29%                   0.61%                 0.26%  (2)      (8)
    (annualized) (1)

    Nonperforming loans to LHFI                                                             0.76%                      0.95%                1.05%                   1.15%                 1.22% (19)     (46)


    (1)   Excludes charge-offs of $2 million, $6 million, $2 million, $16 million and $15 million related to the sale or transfer of nonperforming loans and

            TDRs during the three months ended June 30, 2016, March 31, 2016, December 31, 2015, September 30, 2015 and June 30, 2015, respectively. Also

            excludes charge-offs related to loans with government guarantees of $4 million, $3 million and $3 million during the three months ended June 30, 2016,

            March 31, 2016 and December 31, 2015, respectively.

The Company maintained strong reserve coverage and solid credit quality in the second quarter 2016. The allowance for loan losses was $150 million at June 30, 2016, covering 2.6 percent of loans held-for-investment, as compared to an allowance for loan losses of $162 million at March 31, 2016, covering 2.9 percent of loans held-for-investment. The decrease in the allowance for loan losses resulted primarily from the provision benefit of selling residential first mortgage loans and charge-offs from the sale of $14 million (UPB) of lower quality loans.

Second quarter 2016 net charge-offs were $9 million, representing 0.62 percent of loans held-for-investment. This represented a decrease of $3 million from the first quarter 2016 net charge-offs of $12 million, or 0.86 percent of loans held-for-investment. Excluding the charge-offs associated with loan sales and loans with government guarantees in both quarters, net charge-offs in the second quarter 2016 were $3 million, or 0.18 percent of loans held-for-investment, compared to $3 million, or 0.20 percent of loans held-for-investment in the prior quarter.

Nonperforming loans held-for-investment decreased to $44 million at June 30, 2016 from $53 million at March 31, 2016. There were no nonperforming commercial loans at June 30, 2016. The ratio of nonperforming loans to loans held-for-investment decreased to 0.76 percent at June 30, 2016 from 0.95 percent at March 31, 2016. At June 30, 2016, consumer loan delinquencies (30-89 days past due) totaled $7 million, down $4 million from March 31, 2016. As in the prior quarter, there were no commercial loan delinquencies (30-89 days past due) at June 30, 2016.



    Capital
    -------


    Capital Ratios (Bancorp)                                           Three Months Ended                            Change (% / bps)
                                                                       ------------------                            ----------------

                                        June 30,  March 31,  December 31,   September 30,   June 30,     Seq Yr/Yr
                                             2016       2016           2015             2015        2015
                                             ----       ----           ----             ----        ----

    Total capital                          20.19%                  20.97%                     20.28%          21.64%              21.30% (78)    (111)

    Tier 1 capital                         18.89%                  19.67%                     18.98%          20.32%              19.97% (78)    (108)

    Tier 1 leverage                        11.59%                  11.04%                     11.51%          11.65%              11.47%   55        12

    Mortgage servicing rights to Tier 1     19.9%                   19.3%                      20.6%           21.1%               24.2%   60     (430)
    capital

    Book value per common share                      $23.48                                    $22.82                  $22.33             $21.91        $20.98 3% 12%

The Company maintained a robust capital position with regulatory capital ratios well above current regulatory quantitative guidelines for "well-capitalized" institutions. At June 30, 2016, the Company had a Tier 1 leverage ratio of 11.59 percent, as compared to 11.04 percent at March 31, 2016. The increase in the ratio resulted from earnings retention and a decrease in average assets. Adjusting for the expected TARP redemption in July, the Tier 1 leverage ratio was 8.59 percent at June 30, 2016.

At June 30, 2016, the Company had a common equity-to-assets ratio of 9.68 percent.

Earnings Conference Call

As previously announced, the Company's second quarter 2016 earnings call will be held Tuesday, July 26, 2016 at 11 a.m. (ET).

To join the call, please dial (800) 723-6604 toll free or (785) 830-7977, and use passcode 1789408. Please call at least 10 minutes before the conference is scheduled to begin. A replay will be available for five business days by calling (888) 203-1112 toll free or (719) 457-0820, using passcode 1789408.

The conference call will also be available as a live audiocast on the Investor Relations section of flagstar.com.

It will be archived on that site and will be 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 $13.7 billion savings and loan holding company headquartered in Troy, Mich. Flagstar Bank, FSB, the largest bank headquartered in Michigan, 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 29 retail locations in 21 states. Flagstar is a leading national originator and servicer of mortgage loans, handling payments and record keeping for nearly $75 billion of home loans for nearly 360,000 borrowers. For more information, please visit flagstar.com.

Use of Non-GAAP Financial Measures

In addition to results presented in accordance with GAAP, this press release includes non-GAAP financial measures such as the estimated Basel III ratios and ratios adjusted for TARP redemption. The Company believes these non-GAAP financial measures provide additional information that is useful to investors in helping to understand the underlying performance and trends of Flagstar.

Non-GAAP financial measures have inherent limitations, which are not required to be uniformly applied. Readers should be aware of these limitations and should be cautious with respect to the use of such measures. To compensate for these limitations, we use non-GAAP measures as comparative tools, together with GAAP measures, to assist in the evaluation of our operating performance or financial condition. Also, we ensure that these measures are calculated using the appropriate GAAP or regulatory components in their entirety and that they are computed in a manner intended to facilitate consistent period-to-period comparisons. Flagstar's method of calculating these non-GAAP measures may differ from methods used by other companies. These non-GAAP measures should not be considered in isolation or as a substitute for those financial measures prepared in accordance with GAAP.

Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found in this earnings release, conference call slides, or the Form 8-K related to this press release. Additional discussion of the use of non-GAAP measures can also be found 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)


                                                                               June 30, 2016              March 31, 2016            December 31, 2015           June 30, 2015
                                                                               -------------              --------------            -----------------           -------------

                                                                                (Unaudited)                 (Unaudited)                                          (Unaudited)

    Assets

        Cash                                                                                        $64                                             $54                           $54       52

        Interest-earning deposits                                                        120                                    670                         154                    194
                                                                                         ---                                    ---                         ---                    ---

    Total cash and cash equivalents                                                      184                                    724                         208                    246

        Investment securities available-for-sale                                       1,145                                  1,314                       1,294                  2,272

        Investment securities held-to-maturity                                         1,211                                  1,253                       1,268                      -

    Loans held-for-sale                                                                3,091                                  2,591                       2,576                  2,038

        Loans held-for-investment
                                                                                       5,822                                  5,640                       6,352                  5,335

        Loans with government guarantees                                                 435                                    462                         485                    592

        Less: allowance for loan losses
                                                                                       (150)                                 (162)                      (187)                 (222)
                                                                                        ----                                   ----                        ----                   ----

    Total loans held-for-investment and loans with government guarantees, net          6,107                                  5,940                       6,650                  5,705

        Mortgage servicing rights                                                        301                                    281                         296                    317

        Federal Home Loan Bank stock                                                     172                                    172                         170                    113

        Premises and equipment, net                                                      259                                    256                         250                    240

        Net deferred tax asset                                                           335                                    352                         364                    400

        Other assets                                                                     920                                    854                         639                    808
                                                                                         ---                                    ---                         ---                    ---

    Total assets                                                                                $13,725                                         $13,737                       $13,715  $12,139
                                                                                                =======                                         =======                       =======  =======

    Liabilities and Stockholders' Equity

        Noninterest-bearing
                                                                                                 $2,109                                          $1,984                        $1,574   $1,417

        Interest-bearing                                                               6,462                                  6,485                       6,361                  6,231
                                                                                       -----                                  -----                       -----                  -----

    Total deposits                                                                     8,571                                  8,469                       7,935                  7,648

    Short-term Federal Home Loan Bank advances                                         1,069                                  1,250                       2,116                  1,323

    Long-term Federal Home Loan Bank advances                                          1,577                                  1,625                       1,425                    875

    Other long-term debt                                                                 247                                    247                         247                    283

        Representation and warranty reserve                                               36                                     40                          40                     48

    Other liabilities                                                                    629                                    548                         423                    511
                                                                                         ---                                    ---                         ---                    ---

                Total liabilities                                                     12,129                                 12,179                      12,186                 10,688
                                                                                      ------                                 ------                      ------                 ------

        Stockholders' Equity

    Preferred stock                                                                      267                                    267                         267                    267

    Common stock                                                                           1                                      1                           1                      1

        Additional paid in capital                                                     1,491                                  1,489                       1,486                  1,482

        Accumulated other comprehensive (loss) income                                   (22)                                  (11)                          2                      8

        Accumulated deficit                                                            (141)                                 (188)                      (227)                 (307)
                                                                                        ----                                   ----                        ----                   ----

    Total stockholders' equity                                                         1,596                                  1,558                       1,529                  1,451
                                                                                       -----                                  -----                       -----                  -----

    Total liabilities and stockholders' equity                                                  $13,725                                         $13,737                       $13,715  $12,139
                                                                                                =======                                         =======                       =======  =======




                                                                                                                     Flagstar Bancorp, Inc.

                                                                                                         Condensed Consolidated Statements of Operations

                                                                                                          (Dollars in millions, except per share data)

                                                                                                                           (Unaudited)

                                                                                                                                                                       Second Quarter 2016 Compared to:
                                                                                                                                                                       --------------------------------

                                                                                      Three Months Ended                                                  First Quarter         Second Quarter

                                                                                                                                                                           2016                     2015
                                                                                                                                                                      ----                     ----

                                                        June 30,  March 31,  December 31,   September 30,   June 30,                 Amount     Percent    Amount    Percent
                                                             2016       2016           2015             2015        2015
                                                             ----       ----           ----             ----        ----


    Interest Income

    Total interest income                                               $99                                      $101                                 $95                                 $91                     $90                                $(2)                  (2)%            $9    10%

    Total interest expense                                     22                       22                          19                        18                    17                                     -               -  %              5                   29%
                                                              ---                      ---                         ---                       ---                   ---                                   ---             ---  ---          ---                   ---

    Net interest income                                        77                       79                          76                        73                    73                                   (2)      (3)%               4                  5%

    Provision (benefit) for loan losses                       (3)                    (13)                        (1)                      (1)                 (13)                                   10      (77)%                       $10                 (77)%
                                                              ---                      ---                         ---                       ---                   ---                                   ---       ----                        ---                  ----

    Net interest income after provision for loan losses        80                       92                          77                        74                    86                                  (12)     (13)%             (6)               (7)%
                                                              ---                      ---                         ---                       ---                   ---                                   ---       ----              ---                 ---

    Noninterest Income

    Net gain on loan sales                                     90                       75                          46                        68                    83                                    15        20%                        $7                    8%

    Loan fees and charges                                      19                       15                          14                        17                    19                                     4        27%               $                -                     -   %

    Deposit fees and charges                                    6                        6                           6                         7                     6                                     -               -  %              $                  -                  - %

    Loan administration income                                  4                        6                           7                         8                     7                                   (2)     (33)%                      $(3)                (43)%

    Net (loss) return on the mortgage servicing asset         (4)                     (6)                          9                        12                     9                                     2      (33)%                     $(13)                          N/M

    Net (loss) gain on sale of assets                           -                     (2)                          -                        1                   (2)                                    2     (100)%               2              (100)%

    Representation and warranty benefit                         4                        2                           6                         6                     5                                     2       100%                      $(1)                (20)%

    Other noninterest income (loss)                             9                        9                           9                         9                   (1)                                    -               -  %                     $10                    N/M
                                                                                                                                                                                                                        ---

    Total noninterest income                                  128                      105                          97                       128                   126                                    23        22%               2                  2%
                                                              ---                      ---                         ---                       ---                   ---                                   ---        ---              ---                 ---

    Noninterest Expense

    Compensation and benefits                                  66                       68                          59                        58                    59                                   (2)      (3)%                        $7                   12%

    Commissions                                                14                       10                           8                        10                    11                                     4        40%                        $3                   27%

    Occupancy and equipment                                    21                       22                          21                        20                    20                                   (1)      (5)%                        $1                    5%

    Asset resolution                                            1                        3                           2                         -                    5                                   (2)     (67)%                      $(4)                (80)%

    Federal insurance premiums                                  3                        3                           5                         6                     6                                     -               -  %                    $(3)                 (50)%

    Loan processing expense                                    15                       12                          12                        14                    14                                     3        25%                        $1                    7%

    Legal and professional expense                              6                        9                           9                        10                     8                                   (3)     (33)%                      $(2)                (25)%

    Other noninterest expense                                  13                       10                          13                        13                    15                                     3        30%                      $(2)                (13)%
                                                              ---                      ---                         ---                       ---                   ---

    Total noninterest expense                                 139                      137                         129                       131                   138                                     2         2%               1                  1%
                                                              ---                      ---                         ---                       ---                   ---                                   ---        ---              ---                 ---

    Income before income taxes                                 69                       60                          45                        71                    74                                     9        15%             (5)               (7)%

    Provision for income taxes                                 22                       21                          12                        24                    28                                     1         5%                      $(6)                (21)%
                                                              ---                      ---                         ---                       ---                   ---                                   ---        ---                        ---

    Net income                                                          $47                                       $39                                 $33                                 $47                     $46                                  $8                    21%            $1     2%
                                                                        ===                                       ===                                 ===                                 ===                     ===                                 ===                    ===            ===    ===

    Income per share

    Basic                                                             $0.67                                     $0.56                               $0.45                               $0.70                   $0.69                               $0.11                    20%       $(0.02)  (3)%
                                                                      =====                                     =====                               =====                               =====                   =====                               =====                    ===         ======    ===

    Diluted                                                           $0.66                                     $0.54                               $0.44                               $0.69                   $0.68                               $0.12                    22%       $(0.02)  (3)%
                                                                      =====                                     =====                               =====                               =====                   =====                               =====                    ===         ======    ===


    N/M - Not meaningful





                                                      Flagstar Bancorp, Inc.

                                         Condensed Consolidated Statements of Operations

                                           (Dollars in millions, except per share data)

                                                           (Unaudited)



                                                                       Six Months Ended June 30, 2016

                                 Six Months Ended                             Compared to:

                                                                       Six Months Ended June 30, 2015
                                                                       ------------------------------

                           June 30,    June 30,                    Amount          Percent
                                2016        2015
                                ----        ----


    Interest Income

    Total interest income                  $200                               $169                                 $31 18%

    Total interest expense        44                      31                                 13          42%
                                 ---                     ---                                ---

    Net interest income          156                     138                                 18          13%

    Provision (benefit)
     for loan losses            (16)                   (17)                                 1         (6)%
                                 ---                     ---                                ---

    Net interest income
     after provision for
     loan losses                 172                     155                                 17          11%
                                 ---                     ---                                ---          ---

    Noninterest Income

    Net gain on loan sales       165                     174                                (9)         (5)

                                                                                                          %

    Loan fees and charges         34                      36                                (2)        (6)%

    Deposit fees and
     charges                      12                      12                                  -           -   %

    Loan administration
     income                       10                      11                                (1)        (9)%

    Net (loss) return on
     the mortgage
     servicing asset            (10)                      7                               (17)         N/M

    Net loss on sale of
     assets                      (2)                    (2)                                 -           -   %

    Representation and
     warranty benefit              6                       7                                (1)       (14)%

    Other noninterest
     income                       18                       -                                18          N/M
                                 ---                     ---                               ---          ---

    Total noninterest
     income                      233                     245                               (12)        (5)%
                                 ---                     ---                                ---          ---

    Noninterest Expense

    Compensation and
     benefits                    134                     120                                 14          12%

    Commissions                   24                      21                                  3          14%

    Occupancy and
     equipment                    43                      40                                  3           8%

    Asset resolution               4                      13                                (9)       (69)%

    Federal insurance
     premiums                      6                      12                                (6)       (50)%

    Loan processing
     expense                      27                      26                                  1           4%

    Legal and professional
     expense                      15                      17                                (2)       (12)%

    Other noninterest
     expense                      23                      27                                (4)       (15)%
                                 ---                     ---

    Total noninterest
     expense                     276                     276                                  -           -   %
                                 ---                     ---                                ---         ---   ---

    Income before income
     taxes                       129                     124                                  5           4%

    Provision for income
     taxes                        43                      46                                (3)        (7)%
                                 ---                     ---                                ---          ---

    Net income                              $86                                $78                                  $8 10%
                                            ===                                ===                                 === ===

    Income per share

    Basic                                 $1.23                              $1.12                               $0.11 10%
                                          =====                              =====                               ===== ===

    Diluted                               $1.21                              $1.11                               $0.10  9%
                                          =====                              =====                               ===== ===


    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                                             Six Months Ended
                                                                           ------------------                                             ----------------

                                                    June 30,                March 31,                 June 30,                June 30,              June 30,
                                                          2016                     2016                      2015                     2016                   2015
                                                          ----                     ----                      ----                     ----                   ----

    Mortgage loans originated (1)                                  $8,330                                            $6,352                                          $8,448             $14,682 $15,702

    Mortgage loans sold and securitized                            $7,940                                            $6,948                                          $7,571             $14,888 $13,825

    Interest rate spread (2)                             2.43%                                2.50%                               2.63%                             2.46%     2.61%

    Net interest margin                                  2.63%                                2.66%                               2.79%                             2.64%     2.77%

    Average common shares outstanding               56,574,796                            56,513,715                           56,436,026                         56,544,256 56,410,880

    Average fully diluted shares outstanding        57,751,230                            57,600,984                           57,165,072                         57,623,081 56,971,133

    Average interest-earning assets                               $11,639                                           $11,871                                         $10,367             $11,755  $9,897

    Average interest-paying liabilities                            $9,205                                            $9,823                                          $8,265              $9,514  $7,887

    Average stockholders' equity                                   $1,606                                            $1,561                                          $1,462              $1,583  $1,443

    Return on average assets                             1.38%                                1.16%                               1.57%                             1.27%     1.38%

    Return on average equity                            11.53%                               10.08%                              12.71%                            10.81%    10.81%

    Return on average common equity                     13.83%                               12.15%                              15.55%                            13.00%    13.26%

    Efficiency ratio                                     68.2%                                74.5%                               69.6%                             71.2%     72.1%

    Equity-to-assets ratio (average for the period)     11.95%                               11.52%                              12.37%                            11.73%    12.73%



                                                                                                         June 30,                March 31,                 December 31,               June 30,
                                                                                                               2016                     2016                                                 2015
                                                                                                                                                                   2015
                                                                                                                                                                                     ---

    Book value per common share                                                                                         $23.48                                               $22.82                                           $22.33     $20.98

    Number of common shares outstanding                                                                  56,575,779                            56,557,895                              56,483,258                          56,436,026

    Mortgage loans subserviced for others                                                                              $38,000                                              $37,714                                          $40,244    $43,292

    Mortgage loans serviced for others                                                                                 $30,443                                              $26,613                                          $26,145    $27,679

    Weighted average service fee (basis points)                                                                28.2                                  28.2                                    27.7                                27.4

    Capitalized value of mortgage servicing rights                                                            0.99%                                1.06%                                  1.13%                              1.15%

    Mortgage servicing rights to Tier 1 capital                                                               19.9%                                19.3%                                  20.6%                              24.2%

    Ratio of allowance for loan losses to LHFI (3)                                                            2.62%                                2.93%                                  3.00%                              4.31%

    Ratio of allowance for loan losses to LHFI and loans with government guarantees
     (3)                                                                                                     2.43%                                2.70%                                  2.78%                              3.86%

    Ratio of nonperforming assets to total assets                                                             0.46%                                0.49%                                  0.61%                              0.69%

    Equity-to-assets ratio                                                                                   11.62%                               11.34%                                 11.14%                             11.95%

    Common equity-to-assets ratio                                                                             9.68%                                9.40%                                  9.20%                              9.76%

    Number of bank branches                                                                                      99                                    99                                      99                                 100

    Number of FTE employees                                                                                   2,894                                 2,771                                   2,713                               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.



                                                                                                Flagstar Bancorp, Inc.
                                                                                                  Earnings Per Share
                                                                                       (Dollars in millions, except share data)
                                                                                                      (Unaudited)


                                                                    Three Months Ended                                          Six Months Ended
                                                                    ------------------                                          ----------------

                                                  June 30, 2016         March 31, 2016              June 30, 2015             June 30, 2016      June 30, 2015
                                                  -------------         --------------              -------------             -------------      -------------

    Net income                                               47                                 39                                         46                          86         78

    Deferred cumulative preferred stock dividends           (8)                               (8)                                       (7)                       (16)      (15)
                                                            ---                                ---                                        ---                         ---        ---

    Net income applicable to Common Stockholders                  $39                                                    $31                                         $39               $70   $63
                                                                  ===                                                    ===                                         ===               ===   ===

    Weighted Average Shares

    Weighted average common shares outstanding       56,574,796                         56,513,715                                 56,436,026                  56,544,256 56,410,880

    Effect of dilutive securities

    Warrants                                            349,539                            305,219                                    299,391                     327,307    266,118

    Stock-based awards                                  826,895                            782,050                                    429,655                     751,518    294,135
                                                        -------                            -------                                    -------                     -------    -------

    Weighted average diluted common shares           57,751,230                         57,600,984                                 57,165,072                  57,623,081 56,971,133
                                                     ==========                         ==========                                 ==========                  ========== ==========

    Earnings per common share

    Net income applicable to Common Stockholders                $0.67                                                  $0.56                                       $0.69             $1.23 $1.12

    Effect of dilutive securities

    Warrants                                                  -                                 -                                         -                          -         -

    Stock-based awards                                   (0.01)                            (0.02)                                    (0.01)                     (0.02)    (0.01)
                                                          -----                              -----                                      -----                       -----      -----

    Diluted earnings per share                                  $0.66                                                  $0.54                                       $0.68             $1.21 $1.11
                                                                =====                                                  =====                                       =====             ===== =====



                                                                                                                                                      Average Balances, Yields and Rates
                                                                                                                                                            (Dollars in millions)
                                                                                                                                                                 (Unaudited)


                                                                                                                                                        Three Months Ended
                                                                                                                                                        ------------------

                                                                                                         June 30, 2016                                               March 31, 2016                                               June 30, 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                                                                                   $2,884                               $26                 3.64%                                                $2,909                           $28              3.81%                      $2,218         $21    3.80%

    Loans held-for-investment

    Consumer loans (1)                                                                          2,746                       24                3.48%                               3,314                           29                    3.52%                     2,913                  27    3.74%

    Commercial loans (1)                                                                        2,823                       28                3.94%                               2,354                           23                    3.91%                     2,025                  21    4.03%
                                                                                                -----                      ---                                                    -----                          ---                                              -----                 ---

    Total loans held-for-investment                                                             5,569                       52                3.71%                               5,668                           52                    3.68%                     4,938                  48    3.86%

    Loans with government guarantees                                                              444                        4                3.33%                                 475                            4                    3.05%                       630                   5    2.97%

    Investment securities                                                                       2,558                       17                2.66%                               2,692                           17                    2.51%                     2,350                  15    2.55%

    Interest-earning deposits                                                                     184                        -               0.50%                                 127                            -                   0.52%                       231                   1    0.55%
                                                                                                  ---                      ---                                                     ---                          ---                                               ---                 ---

    Total interest-earning assets                                                              11,639                                  $99              3.40%                              11,871                                       $101            3.39%                       10,367               $90  3.42%

    Other assets                                                                                1,799                                                  1,672                                                             1,444
                                                                                                -----                                                  -----                                                             -----

    Total assets                                                                                         $13,438                                                                       $13,543                                                              $11,811
                                                                                                         =======                                                                       =======                                                              =======

    Interest-Bearing Liabilities

    Retail deposits

    Demand deposits                                                                                         $482                         $       -                0.17%                                                  $445                         $   -             0.13%                        $431      $    -   0.14%

    Savings deposits                                                                            3,691                        7                0.79%                               3,722                            7                    0.79%                     3,752                   8    0.83%

    Money market deposits                                                                         363                        1                0.52%                                 243                            -                   0.36%                       242                   -   0.26%

    Certificates of deposit                                                                       951                        2                1.00%                                 856                            2                    0.92%                       763                   2    0.71%
                                                                                                  ---                      ---                                                      ---                          ---                                                ---                 ---

    Total retail deposits                                                                       5,487                       10                0.75%                               5,266                            9                    0.74%                     5,188                  10    0.73%

    Government deposits

    Demand deposits                                                                               203                        -               0.39%                                 256                            -                   0.39%                       210                   -   0.40%

    Savings deposits                                                                              398                        -               0.52%                                 419                            1                    0.52%                       401                   1    0.52%

    Certificates of deposit                                                                       410                        1                0.50%                                 412                            1                    0.47%                       331                   -   0.34%
                                                                                                  ---                      ---                                                      ---                          ---                                                ---                 ---

    Total government deposits                                                                   1,011                        1                0.49%                               1,087                            2                    0.47%                       942                   1    0.43%


    Total interest-bearing deposits                                                             6,498                       11                0.71%                               6,353                           11                    0.69%                     6,130                  11    0.68%

    Short-term debt                                                                               835                        1                0.41%                               1,662                            2                    0.38%                         -                  -              -   %

    Long-term debt                                                                              1,625                        8                1.93%                               1,560                            7                    1.86%                     1,828                   4    0.90%

    Other                                                                                         247                        2                3.31%                                 248                            2                    3.22%                       307                   2    2.38%
                                                                                                  ---                      ---                                                      ---                          ---                                                ---                 ---

    Total interest-bearing liabilities                                                          9,205                       22                0.97%                               9,823                           22                    0.89%                     8,265                  17    0.79%

    Noninterest-bearing deposits (2)                                                            2,133                                                  1,697                                                             1,606

    Other liabilities                                                                             494                                                    462                                                               478

    Stockholders' equity                                                                        1,606                                                  1,561                                                             1,462
                                                                                                -----                                                  -----                                                             -----

    Total liabilities and stockholders' equity                                                           $13,438                                                                       $13,543                                                              $11,811
                                                                                                         =======                                                                       =======                                                              =======

    Net interest-earning assets                                                                           $2,434                                                                        $2,048                                                               $2,102
                                                                                                          ======                                                                        ======                                                               ======

    Net interest income                                                                                                 $77                                                                                $79                                                                  $73
                                                                                                                        ===                                                                                ===                                                                  ===

    Interest rate spread (3)                                                                                          2.43%                                                   2.50%                                                           2.63%
                                                                                                                       ====                                                     ====                                                             ====

    Net interest margin (4)                                                                                           2.63%                                                   2.66%                                                           2.79%
                                                                                                                       ====                                                     ====                                                             ====

    Ratio of average interest-earning assets to interest-bearing liabilities                                         126.4%                                                  120.9%                                                          125.4%
                                                                                                                      =====                                                    =====                                                            =====

    Total average deposits                                                                                $8,631                                                                        $8,050                                                               $7,736
                                                                                                          ======                                                                        ======                                                               ======


    (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)


                                                                                                                                Six Months Ended
                                                                                                                                ----------------

                                                                                                               June 30, 2016                                               June 30, 2015
                                                                                                               -------------                                               -------------

                                                                                           Average Balance   Interest   Annualized               Average Balance   Interest    Annualized

                                                                                                                      Yield/Rate                                           Yield/Rate
                                                                                                                  ---                                            ---         ----------


    Interest-Earning Assets

    Loans held-for-sale                                                                                        $2,897                               $54                 3.72%                                          $2,031                $40    3.89%

    Loans held-for-investment

    Consumer loans (1)                                                                               3,030                       53                3.50%                               2,765                     52             3.79%

    Commercial loans (1)                                                                             2,588                       52                3.93%                               1,852                     37             3.99%
                                                                                                     -----                      ---                                                    -----                    ---

    Total loans held-for-investment                                                                  5,618                      105                3.70%                               4,617                     89             3.87%

    Loans with government guarantees                                                                   460                        7                3.18%                                 747                     10             2.67%

    Investment securities                                                                            2,625                       34                2.59%                               2,232                     29             2.56%

    Interest-earning deposits                                                                          155                        -               0.50%                                 270                      1             0.49%
                                                                                                       ---                      ---                                                     ---                    ---

    Total interest-earning assets                                                                   11,755                                 $200              3.39%                               9,897                          $169        3.40%

    Other assets                                                                                     1,736                                                  1,439
                                                                                                     -----                                                  -----

    Total assets                                                                                              $13,491                                                               $11,336
                                                                                                              =======                                                               =======

    Interest-Bearing Liabilities

    Retail deposits

    Demand deposits                                                                                              $463                         $       -                0.15%                                            $428            $     -   0.14%

    Savings deposits                                                                                 3,706                       15                0.79%                               3,657                     15             0.80%

    Money market deposits                                                                              303                        1                0.45%                                 249                      -            0.26%

    Certificates of deposit                                                                            904                        4                0.96%                                 775                      3             0.69%
                                                                                                       ---                      ---                                                      ---                    ---

    Total retail deposits                                                                            5,376                       20                0.74%                               5,109                     18             0.70%

    Government deposits

    Demand deposits                                                                                    230                        -               0.39%                                 218                      -            0.39%

    Savings deposits                                                                                   409                        1                0.52%                                 387                      1             0.52%

    Certificates of deposit                                                                            411                        1                0.71%                                 344                      1             0.35%
                                                                                                       ---                      ---                                                      ---                    ---

    Total government deposits                                                                        1,050                        2                0.57%                                 949                      2             0.43%
                                                                                                     -----                      ---                                                      ---                    ---

    Total interest-bearing deposits                                                                  6,426                       22                0.70%                               6,058                     20             0.66%

    Short-term debt                                                                                  1,249                        3                0.40%                                   -                     -                    -   %

    Long-term debt                                                                                   1,592                       15                1.91%                               1,497                      7             0.97%

    Other                                                                                              247                        4                3.27%                                 332                      4             2.28%
                                                                                                       ---                      ---                                                      ---                    ---

    Total interest-bearing liabilities                                                               9,514                       44                0.93%                               7,887                     31             0.79%

    Noninterest-bearing deposits (2)                                                                 1,915                                                  1,495

    Other liabilities                                                                                  479                                                    511

    Stockholders' equity                                                                             1,583                                                  1,443

    Total liabilities and stockholders' equity                                                                $13,491                                                               $11,336
                                                                                                              =======                                                               =======

    Net interest-earning assets                                                                                $2,241                                                                $2,010
                                                                                                               ======                                                                ======

    Net interest income                                                                                                     $156                                                               $138
                                                                                                                            ====                                                               ====

    Interest rate spread (3)                                                                                               2.46%                                                   2.61%
                                                                                                                            ====                                                     ====

    Net interest margin (4)                                                                                                2.64%                                                   2.77%
                                                                                                                            ====                                                     ====

    Ratio of average interest-earning assets to interest-bearing liabilities                                              123.6%                                                  125.5%
                                                                                                                           =====                                                    =====

    Total average deposits                                                                                     $8,341                                                                $7,553
                                                                                                               ======                                                                ======


    (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
                                                                                                                                                                                    ------------------

                                                                                                                                       June 30,               March 31,                December 31,             September 30,                June 30,
                                                                                                                                            2016                     2016                        2015                       2015                      2015
                                                                                                                                            ----                     ----                        ----                       ----                      ----

                                                                                                                                                                                (Dollars in millions)

    Mortgage rate lock commitments (fallout-adjusted) (1)                                                                                            $8,127                                             $6,863                                              $5,027                                           $6,495                   $6,804

    Net margin on mortgage rate lock commitments (fallout-adjusted) (1)                                                                    1.04%                               0.96%                                    0.92%                              1.05%                                 1.22%

    Net gain on loan sales on HFS                                                                                                                       $85                                                $66                                                 $46                                              $68                      $83

    Net (loss) return on the mortgage servicing rights                                                                                                 $(4)                                              $(6)                                                 $9                                              $12                       $9

    Gain on loan sales HFS + net (loss) return on the MSR                                                                                               $81                                                $60                                                 $55                                              $80                      $92

    Residential loans serviced (number of accounts - 000's) (2)                                                                              358                                  340                                       361                                 369                                    378

    Capitalized value of mortgage servicing rights                                                                                         0.99%                               1.06%                                    1.13%                              1.12%                                 1.15%

    Mortgage rate lock commitments (gross)                                                                                                          $10,168                                             $8,762                                              $6,258                                           $8,025                   $8,400

    Loans sold and securitized                                                                                                                       $7,940                                             $6,948                                              $5,164                                           $7,318                   $7,571

    Net margin on loan sales                                                                                                               1.07%                               0.94%                                    0.90%                              0.93%                                 1.09%


    (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.




                                                                                                                                                               Six Months Ended
                                                                                                                                                               ----------------

                                                                                                                                                       June 30,                June 30,
                                                                                                                                                            2016                     2015
                                                                                                                                                            ----                     ----


    Mortgage rate lock commitments (fallout-adjusted) (1)                                                                                                           $14,990                                           $13,989

    Net margin on mortgage rate lock commitments (fallout-adjusted) (1)                                                                                    1.00%                               1.24%

    Net gain on loan sales on HFS                                                                                                                                      $151                                              $174

    Net (loss) return on the mortgage servicing rights                                                                                                                $(10)                                               $7

    Gain on loan sales HFS + net (loss) return on the MSR                                                                                                              $141                                              $181

    Residential loans serviced (number of accounts - 000's) (2)                                                                                              358                                  378

    Capitalized value of mortgage servicing rights                                                                                                         0.99%                               1.15%

    Mortgage rate lock commitments (gross)                                                                                                                          $18,930                                           $17,435

    Loans sold and securitized                                                                                                                                      $14,888                                           $13,825

    Net margin on loan sales                                                                                                                               1.01%                               1.26%


    (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.



                                                                                                      Regulatory Capital - Bancorp
                                                                                                         (Dollars in millions)
                                                                                                              (Unaudited)


                                                          June 30, 2016           March 31, 2016                  December 31, 2015                  September 30, 2015              June 30, 2015
                                                          -------------           --------------                  -----------------                  ------------------              -------------

                                                   Amount      Ratio    Amount   Ratio           Amount      Ratio              Amount    Ratio           Amount      Ratio
                                                   ------      -----    ------   -----           ------      -----              ------    -----           ------      -----

    Tier 1 leverage (to adjusted tangible assets)              $1,514     11.59%                              $1,453               11.04%                               $1,435 11.51%              $1,393  11.65% $1,309 11.47%
                                                               ------                                         ------                                                    ------                     ------         ------

    Total adjusted tangible asset base                        $13,068                             $13,167                                       $12,474                                    $11,957        $11,406
                                                              =======                             =======                                       =======                                    =======        =======

    Tier 1 common equity (to risk weighted assets)             $1,086     13.55%                              $1,032               13.96%                               $1,065 14.09%              $1,024  14.93%   $954 14.56%

    Tier 1 capital (to risk weighted assets)                   $1,514     18.89%                              $1,453               19.67%                               $1,435 18.98%              $1,393  20.32% $1,309 19.97%

    Total capital (to risk weighted assets)                    $1,618     20.19%                              $1,549               20.97%                               $1,534 20.28%              $1,483  21.64% $1,396 21.30%
                                                               ------                                         ------                                                    ------                     ------         ------

    Risk weighted asset base                                   $8,014                              $7,387                                        $7,561                                     $6,857         $6,553
                                                               ======                              ======                                        ======                                     ======         ======



                                                                                                       Regulatory Capital - Bank
                                                                                                         (Dollars in millions)
                                                                                                              (Unaudited)


                                                          June 30, 2016           March 31, 2016                  December 31, 2015                  September 30, 2015              June 30, 2015
                                                          -------------           --------------                  -----------------                  ------------------              -------------

                                                   Amount      Ratio    Amount   Ratio           Amount      Ratio              Amount    Ratio           Amount      Ratio
                                                   ------      -----    ------   -----           ------      -----              ------    -----           ------      -----

    Tier 1 leverage (to adjusted tangible assets)              $1,576     12.03%                              $1,509               11.43%                               $1,472 11.79%              $1,426  11.91% $1,337 11.70%
                                                               ------                                         ------                                                    ------                     ------         ------

    Total adjusted tangible asset base                        $13,102                             $13,200                                       $12,491                                    $11,975        $11,424
                                                              =======                             =======                                       =======                                    =======        =======

    Tier 1 common equity (to risk weighted assets)             $1,576     19.58%                              $1,509               20.34%                               $1,472 19.42%              $1,426  20.75% $1,337 20.35%

    Tier 1 capital (to risk weighted assets)                   $1,576     19.58%                              $1,509               20.34%                               $1,472 19.42%              $1,426  20.75% $1,337 20.35%

    Total capital (to risk weighted assets)                    $1,679     20.86%                              $1,605               21.63%                               $1,570 20.71%              $1,516  22.05% $1,423 21.66%
                                                               ------                                         ------                                                    ------                     ------         ------

    Risk weighted asset base                                   $8,048                              $7,421                                        $7,582                                     $6,874         $6,570
                                                               ======                              ======                                        ======                                     ======         ======



                                                       Loan Originations

                                                     (Dollars in millions)

                                                          (Unaudited)

                                                          Three Months Ended
                                                          ------------------

                                June 30, 2016                   March 31, 2016              June 30, 2015
                              -------------               --------------           -------------

    Consumer loans

        Mortgage (1)                 $8,330          97.6%                            $6,352               98.3%                  $8,448    99.1%

        Other consumer (2)     42              0.5%                            27        0.4%                        33    0.4%
                              ---               ---                            ---         ---                        ---     ---

    Total consumer loans    8,372             98.1%                         6,379       98.7%                     8,481   99.5%

    Commercial loans (3)      164              1.9%                            84        1.3%                        40    0.5%
                              ---               ---                            ---         ---                        ---     ---

    Total loan originations          $8,536         100.0%                            $6,463              100.0%                  $8,521   100.0%
                                     ======          =====                             ======               =====                   ======    =====



                                                                  Six Months Ended

                                                     June 30, 2016                    June 30, 2015
                                                     -------------                    -------------

        Mortgage (1)                                     $14,682                97.8%                    $15,702    99.2%

        Other consumer (2)                         69                  0.5%                          54      0.3%
                                                  ---                   ---                          ---       ---

    Total consumer loans                       14,751                 98.3%                      15,756     99.5%

    Commercial loans (3)                          248                  1.7%                          79      0.5%
                                                  ---                   ---                          ---       ---

    Total loan
     originations                                        $14,999               100.0%                    $15,835   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)


                                        June 30, 2016              March 31, 2016                       December 31, 2015                June 30, 2015
                                        -------------              --------------                       -----------------                -------------

    Consumer loans

    Residential first mortgage               $2,075          35.6%                                  $2,410                42.8%                          $3,100    48.9%             $2,495     46.7%

    Second mortgage                   127              2.2%                      129                   2.3%                        135            2.1%               143     2.7%

    HELOC                             346              5.9%                      366                   6.5%                        384            6.0%               422     7.9%

    Other                              32              0.5%                       31                   0.5%                         31            0.5%                31     0.6%
                                      ---               ---                       ---                    ---                         ---             ---                ---      ---

        Total consumer loans        2,580             44.2%                    2,936                  52.1%                      3,650           57.5%             3,091    57.9%
                                    -----              ----                     -----                   ----                       -----            ----              -----     ----

    Commercial loans

    Commercial real estate            976             16.8%                      851                  15.1%                        814           12.8%               629    11.8%

    Commercial and industrial         615             10.6%                      571                  10.1%                        552            8.7%               412     7.7%

    Warehouse lending               1,651             28.4%                    1,282                  22.7%                      1,336           21.0%             1,203    22.6%
                                    -----              ----                     -----                   ----                       -----            ----              -----     ----

        Total commercial loans      3,242             55.8%                    2,704                  47.9%                      2,702           42.5%             2,244    42.1%
                                    -----              ----                     -----                   ----                       -----            ----              -----     ----

    Total loans held-for-investment          $5,822         100.0%                                  $5,640               100.0%                          $6,352   100.0%             $5,335    100.0%
                                             ======          =====                                   ======                =====                           ======    =====              ======     =====



                                                                                                                                            Residential Loans Serviced
                                                                                                                                               (Dollars in millions)
                                                                                                                                                    (Unaudited)


                                                                                               June 30, 2016                               March 31, 2016                            December 31, 2015                            June 30, 2015
                                                                                               -------------                               --------------                            -----------------                            -------------

                                                                                        Unpaid    Number of               Unpaid    Number of               Unpaid    Number of               Unpaid    Number of

                                                                                      Principal   accounts              Principal   accounts              Principal   accounts              Principal   accounts

                                                                                       Balance                           Balance                           Balance                           Balance
                                                                                       -------                           -------                           -------                           -------

    Serviced for own loan portfolio (1)                                                              $5,379                 29,520                                         $5,293                 29,078                                        $6,088  30,683           $5,211  28,106

    Serviced for others                                                                  30,443                134,266                             26,613                  118,768                             26,145                118,662             27,679 124,299

    Subserviced for others (2)                                                           38,000                194,209                             37,714                  192,423                             40,244                211,740             43,292 225,268
                                                                                         ------                -------                             ------                  -------                             ------                -------             ------ -------

    Total residential loans serviced                                                                $73,822                357,995                                        $69,620                340,269                                       $72,477 361,085          $76,182 377,673
                                                                                                    =======                =======                                        =======                =======                                       ======= =======          ======= =======


    (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)  Does not include 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                                        Six Months Ended
                                                                                                                                      ------------------                                        ----------------

                                                                                                                    June 30,             March 31,                 June 30,              June 30,                 June 30,
                                                                                                                         2016                   2016                      2015                   2016                      2015
                                                                                                                         ----                   ----                      ----                   ----                      ----

    Beginning balance                                                                                                             $162                                            $187                                             $253                                            $187                                 $297

    Provision (benefit) for loan losses                                                                                   (3)                              (13)                               (13)                               (16)                                  (17)

    Charge-offs

    Consumer loans

         Residential first mortgage                                                                                       (8)                              (11)                               (19)                               (19)                                  (60)

         Second mortgage                                                                                                  (1)                               (1)                                (1)                                (2)                                   (2)

         HELOC                                                                                                              -                               (1)                                  -                                (1)                                   (1)

         Other                                                                                                            (1)                               (1)                                (1)                                (2)                                   (1)
                                                                                                                          ---

    Total charge-offs                                                                                                    (10)                              (14)                               (21)                               (24)                                  (64)

    Recoveries

    Consumer loans

         Residential first mortgage                                                                                         1                                  -                                  1                                   1                                      2

         Second mortgage                                                                                                    1                                  -                                  1                                   1                                      1

         HELOC                                                                                                            (1)                                 1                                   -                                  -                                     -

         Other                                                                                                              -                                 1                                   1                                   1                                      1
                                                                                                                          ---                                                                                                                                           ---

    Total consumer loans                                                                                                    1                                  2                                   3                                   3                                      4

    Commercial loans

         Commercial real estate                                                                                             -                                 -                                  -                                  -                                     2

    Total recoveries                                                                                                        1                                  2                                   3                                   3                                      6
                                                                                                                          ---                                ---                                 ---                                 ---                                    ---

    Charge-offs, net of recoveries                                                                                        (9)                              (12)                               (18)                               (21)                                  (58)
                                                                                                                          ---                                ---                                 ---                                 ---                                    ---

    Ending balance                                                                                                                $150                                            $162                                             $222                                            $150                                 $222
                                                                                                                                  ====                                            ====                                             ====                                            ====                                 ====

    Net charge-offs to LHFI ratio (annualized) (1)                                                                      0.62%                             0.86%                              1.49%                              0.74%                                 2.63%

    Net charge-offs ratio, adjusted (annualized) (1)(2)                                                                 0.18%                             0.20%                              0.26%                              0.44%                                 0.34%

    Net charge-offs to LHFI ratio (annualized) by loan type (1)

    Residential first mortgage                                                                                          1.42%                             1.50%                              2.91%                              1.46%                                 5.09%

    Second mortgage                                                                                                     0.32%                             4.72%                              1.02%                              2.55%                                 1.97%

    HELOC and consumer                                                                                                  0.69%                             0.69%                              0.41%                              0.69%                                 1.32%

    Commercial real estate                                                                                                  -   %                       (0.02)%                            (0.16)%                            (0.01)%                               (0.61)%

    Commercial and industrial                                                                                         (0.02)%                           (0.01)%                              0.15%                            (0.02)%                                 0.07%


    (1)  Excludes loans carried under the fair value option.
    (2)  Excludes charge-offs of $2 million, $6 million, and $15 million related to the sale of nonperforming loans, TDRs and non-agency loans during the three months ended June 30, 2016, March 31, 2016 and June 30, 2015, respectively and $8 million and $51 million during the six months ended June 30, 2016 and
     2015, respectively. Also excludes charge-offs related to loans with government guarantees of $4 million and $3 million during the three months ended June 30, 2016 and March 31, 2016, respectively, and $7 million during the six months ended June 30, 2016.




                                  Representation and Warranty Reserve
                                         (Dollars in millions)
                                              (Unaudited)


                                                                                    Three Months Ended                   Six Months Ended
                                                                                    ------------------                   ----------------

                                                                                       June 30, 2016                         March 31,
                                                                                                                                2016          June 30, 2015     June 30, 2016      June 30, 2015
                                                                                                       -------------        ----------        -------------     -------------      -------------

     Balance, beginning of period                                                                                    $40                                    $40                                    $53            $40  $53

     Provision (release)

                                                                      Charged to gain on sale for current loan sales   1                                  2                      2                        3          4

                                                                      Charged to representation and warranty benefit (4)                                (2)                   (5)                      (6)        (7)
                                                                      ---------

                                                                      Total                                          (3)                                  -                   (3)                      (3)        (3)

     Charge-offs, net                                                                                            (1)                       -                             (2)                     (1)        (2)
                                                                                                                 ---                      ---                             ---                      ---        ---

     Balance, end of period                                                                                          $36                                    $40                                    $48            $36  $48
                                                                                                                     ===                                    ===                                    ===            ===  ===



                                  Composition of Allowance for Loan Losses
                                           (Dollars in millions)
                                                (Unaudited)


    June 30, 2016                        Collectively             Individually
                                           Evaluated                Evaluated
                                           Reserves                 Reserves       Total
    -------------                       -------------            ------------      -----

    Consumer loans

       Residential first mortgage                          $74                            $7       $81

       Second mortgage                              4                            6             10

       HELOC                                       17                            3             20

       Other                                        1                            -             1
                                                  ---                          ---

    Total consumer loans                           96                           16            112

    Commercial loans

       Commercial real estate                      19                            -            19

       Commercial and industrial                   11                            -            11

       Warehouse lending                            8                            -             8
                                                  ---                          ---           ---

    Total commercial loans                         38                            -            38
                                                  ---                          ---           ---

    Total allowance for loan
     losses                                               $134                           $16      $150
                                                          ====                           ===      ====




    March 31, 2016                  Collectively       Individually
                                      Evaluated          Evaluated
                                      Reserves           Reserves       Total
    --------------                  ------------      ------------      -----

    Consumer loans

       Residential first mortgage                 $86                          $9       $95

       Second mortgage                         5                      5             10

       HELOC                                  18                      2             20

       Other                                   2                      -             2
                                             ---                    ---

    Total consumer loans                     111                     16            127

    Commercial loans

       Commercial real estate                 19                      -            19

       Commercial and industrial              10                      -            10

       Warehouse lending                       6                      -             6
                                             ---                    ---           ---

    Total commercial loans                    35                      -            35
                                             ---                    ---           ---

    Total allowance for loan losses              $146                         $16      $162
                                                 ====                         ===      ====



                                                                            Nonperforming Loans and Assets
                                                                                (Dollars in millions)
                                                                                     (Unaudited)


                                            June 30,           March 31,                 December 31,                  June 30,
                                                 2016                 2016                                                   2015
                                                                                                 2015
                                                                                                                         ---

    Nonperforming loans                                  $23                                        $27                                           $31                               $41

    Nonperforming TDRs                              6                              6                                7                               11

    Nonperforming TDRs at
     inception but
     performing for less
     than six months                               15                             20                               28                               13
                                                  ---                            ---                              ---                              ---

    Total nonperforming
     loans held-for-
     investment                                    44                             53                               66                               65

    Real estate and other
     nonperforming
     assets, net                                   19                             14                               17                               18
                                                  ---                            ---                              ---                              ---

    Nonperforming assets
     held-for-
     investment, net (1)                                 $63                                        $67                                           $83                               $83
                                                         ===                                        ===                                           ===                               ===


    Ratio of
     nonperforming assets
     to total assets                            0.46%                         0.49%                           0.61%                           0.69%

    Ratio of
     nonperforming loans
     held-for-
     investment to loans
     held-for-
     investment                                 0.76%                         0.95%                           1.05%                           1.22%

    Ratio of
     nonperforming assets
     to loans held-for-
     investment and
     repossessed assets                         1.09%                         1.20%                           1.32%                           1.55%

    Ratio of
     nonperforming assets
     to Tier 1 capital +
     allowance for loan
     losses                                     3.79%                         4.15%                           5.12%                           5.42%


    (1)  Does not include nonperforming loans held-for-sale of $5 million, $6 million, $12 million and $14 million at June 30, 2016, March 31, 2016, December 31, 2015 and June 30,
     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
                                      -----------    ----------   --------    -----------     -----------

    June 30, 2016

    Consumer loans                                           $5                               $2                           $44            $51  $2,580

    Commercial
     loans                                      -                         -                   -                     -           3,242
                                              ---                       ---                 ---                   ---           -----

         Total loans                                         $5                               $2                           $44            $51  $5,822
                                                            ===                              ===                           ===            ===  ======

    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
                                                            ===                              ===                           ===            ===  ======

    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
                                                            ===                              ===                           ===            ===  ======

    June 30, 2015

    Consumer loans                             10                          6                   65                           $81         $3,091

    Commercial
     loans                                      -                         -                   -                     -           2,244
                                              ---                       ---                 ---                   ---           -----

         Total loans                                        $10                               $6                           $65            $81  $5,335
                                                            ===                              ===                           ===            ===  ======


    (1)  Includes performing nonaccrual loans that are less than 90 days delinquent and for which interest cannot be accrued.




                                                     Troubled Debt Restructurings
                                                         (Dollars in millions)
                                                              (Unaudited)


                                                        TDRs
                                                        ----

                         Performing      Nonperforming                          Nonperforming        Total

                                                                       TDRs at inception

                                                                       but performing for

                                                                       less than six months
                                                                                                 ---

    June 30, 2016

    Consumer loans                   $72                                        $6                         $15  $93

    Commercial loans              1                     -                                      -            1

         Total TDR loans             $73                                        $6                         $15  $94
                                     ===                                       ===                         ===  ===

    March 31, 2016

    Consumer loans                   $75                                        $6                         $19 $100

    Commercial loans              -                    -                                      1             1


         Total TDR loans             $75                                        $6                         $20 $101
                                     ===                                       ===                         === ====

    December 31, 2015

    Consumer loans                  $101                                        $7                         $28 $136

         Total TDR loans            $101                                        $7                         $28 $136
                                    ====                                       ===                         === ====

    June 30, 2015

    Consumer loans                  $108                                       $11                         $13 $132

         Total TDR loans            $108                                       $11                         $13 $132
                                    ====                                       ===                         === ====



                                                                                                                                                                           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 reported under Basel I (which included the Market Risk Final Rules) at December 31, 2014 and
     prior. When fully phased-in, Basel III will increase capital requirements through higher minimum capital levels as well as through increases in risk-weights for certain exposures. Additionally, the final Basel III rules place greater emphasis on common equity. In October 2013, the OCC and Federal Reserve released final rules detailing the U.S. implementation of Basel III and
     the application of the risk-based and leverage capital rules to top-tier savings and loan holding companies. 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. The Common Equity Tier 1, Tier 1, Total Capital and Leverage ratios, will not be fully phased-in until January 1, 2018 and the Capital Conservation buffer 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 our calculations 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.



    June 30, 2016                                                                                                                                                                             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) (1)

    Basel III (transitional)                                                                                                                                                                                      $1,086                                                            $1,514                                                   $1,514                                            $1,618

    Increased deductions related to deferred tax assets, mortgage servicing assets and other capital components                                                                                        (233)                                         (154)                                             (154)                                (153)
                                                                                                                                                                                                        ----                                           ----                                               ----                                  ----

    Basel III (fully phased-in) capital                                                                                                                                                                             $853                                                            $1,360                                                   $1,360                                            $1,465
                                                                                                                                                                                                                    ----                                                            ------                                                   ------                                            ------

    Risk-weighted assets - Basel III (transitional) to Basel III (fully phased-in) (1)

    Basel III assets (transitional)                                                                                                                                                                               $8,014                                                           $13,068                                                   $8,014                                            $8,014

    Net change in assets                                                                                                                                                                                  40                                          (155)                                                40                                    40
                                                                                                                                                                                                         ---                                           ----                                                ---                                   ---

    Basel III (fully phased-in) assets                                                                                                                                                                            $8,054                                                           $12,913                                                   $8,054                                            $8,054
                                                                                                                                                                                                                  ------                                                           -------                                                   ------                                            ------

    Capital ratios

    Basel III (transitional)                                                                                                                                                                          13.55%                                        11.59%                                            18.89%                               20.19%

    Basel III (fully phased-in)                                                                                                                                                                       10.59%                                        10.53%                                            16.88%                               18.19%



    June 30, 2016                                                                                                 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) (1)

    Basel III (transitional)                                                                                                     $1,576                                                  $1,576                      $1,576  $1,679

    Increased deductions related to deferred tax assets, mortgage servicing assets and other capital components            (105)                                  (105)                                    (105)    (102)
                                                                                                                            ----                                    ----                                      ----      ----

    Basel III (fully phased-in) capital                                                                                          $1,471                                                  $1,471                      $1,471  $1,577
                                                                                                                                 ------                                                  ------                      ------  ------

    Risk-weighted assets - Basel III (transitional) to Basel III (fully phased-in) (1)

    Basel III assets (transitional)                                                                                              $8,048                                                 $13,102                      $8,048  $8,048

    Net change in assets                                                                                                     230                                   (105)                                      230       230
                                                                                                                             ---                                    ----                                       ---       ---

    Basel III (fully phased-in) assets                                                                                           $8,278                                                 $12,997                      $8,278  $8,278
                                                                                                                                 ------                                                 -------                      ------  ------

    Capital ratios

    Basel III (transitional)                                                                                              19.58%                                 12.03%                                   19.58%   20.86%

    Basel III (fully phased-in)                                                                                           17.76%                                 11.31%                                   17.76%   19.05%



    TARP Redemption. As announced on June 29, 2016, we plan to redeem $267 million of our Fixed Rate Cumulative Perpetual Preferred Stock, Series C (the "TARP Preferred") plus accrued and unpaid
     dividends of $104 million by July 29, 2016 which will have a material impact on our capital ratios presented below.  These measures are considered to be non-GAAP financial measures because
     they are not formally defined by GAAP. Since analysts and banking regulators may assess our capital adequacy based on this redemption, we believe that it is useful to provide investors
     information enabling them to assess our capital adequacy on the same basis.


    June 30, 2016                                                                                                           Common Equity              Tier 1 Leverage

                                                                                                                          Tier 1 (to Risk                (to Adjusted

                                                                                                                          Weighted Assets)             Tangible Assets)
                                                                                                                          ----------------             ---------------

    Flagstar Bancorp (the Company)                                                                                                  (Dollars in millions)

                                                                                                                                         (Unaudited)


    Regulatory capital                                                                                                                        $1,086                                                $1,514

    TARP redemption                                                                                                                  (112)                                    (378)
                                                                                                                                      ----                                      ----

    Adjusted regulatory capital                                                                                                                 $974                                                $1,136
                                                                                                                                                ----                                                ------


    Risk-weighted assets                                                                                                                      $8,014                                               $13,068

    TARP redemption                                                                                                                    (9)                                      150
                                                                                                                                       ---                                       ---

    Adjusted risk-weighted assets                                                                                                             $8,005                                               $13,218
                                                                                                                                              ------                                               -------


    Regulatory capital ratio                                                                                                        13.55%                                   11.59%

    Adjusted regulatory capital ratio for TARP Redemption                                                                           12.17%                                    8.59%

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/flagstar-reports-second-quarter-2016-net-income-of-47-million-or-066-per-diluted-share-300303391.html

SOURCE Flagstar Bancorp, Inc.