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%
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SOURCE Flagstar Bancorp, Inc.