Flagstar Reports Second Quarter 2018 Net Income of $50 million, or $0.85 per Diluted Share

Flagstar Reports Second Quarter 2018 Net Income of $50 million, or $0.85 per Diluted Share

Company posts solid earnings with positive operating leverage

PR Newswire

TROY, Mich., July 24, 2018 /PRNewswire/ --

Key Highlights - Second Quarter 2018

  • Net interest income rose $9 million, or 8 percent from first quarter 2018, driven by earning asset growth and net interest margin expansion.
  • Mortgage revenues increased $8 million, or 13 percent from the prior quarter, led by a seasonal increase in mortgage originations and higher net return on MSR.
  • Total revenue increased $21 million, or 10 percent, while noninterest expense rose a modest $4 million, or 2 percent from last quarter, benefiting from expense discipline and variable cost model.
  • Strong asset quality with minimal net charge-offs and no commercial delinquencies.
  • Pending acquisition of 52 Wells Fargo branches accelerates banking transformation.

Flagstar Bancorp, Inc. FBC, the holding company for Flagstar Bank, FSB, today reported second quarter 2018 net income of $50 million, or $0.85 per diluted share, compared to first quarter 2018 net income of $35 million, or $0.60 per diluted share. For the second quarter 2017, the Company reported net income of $41 million, or $0.71 per diluted share.

"I'm pleased with our financial results this quarter," said Alessandro DiNello, president and chief executive officer of Flagstar Bancorp, Inc. "We produced solid earnings with positive operating leverage, despite a challenging mortgage environment. Earnings rose on both a sequential and year-over-year basis, achieving a level we haven't seen since the third quarter 2012 when we had $334 million of net gain on loan sales as compared to only $63 million in the second quarter 2018.

"Our banking business performed well, boosted by the acquisitions of the Desert Community Bank (DCB) branches and a warehouse business at the end of the first quarter 2018. Net interest income for the second quarter 2018 rose 8 percent to $115 million, led by a 4 percent rise in average earning assets and a 10 basis point increase in net interest margin. The core banking business delivered consistent growth with average commercial loans (excluding the impact of the DCB branch and warehouse business acquisitions) increasing 8 percent.

"We continued to build scale and profitability within our servicing business -- a segment that brings fee income, as well as ancillary benefits like deposits that fuel our loan growth. During the second quarter, we sold $6.4 billion of mortgage servicing rights with 100 percent of the servicing retained. Since the beginning of 2018, we've increased the number of loans serviced by 93,000 or 21 percent and are well positioned to add more scale later this year.

"Our mortgage business was softer than expected with fallout-adjusted locks and gain on sale margin coming in below our expectations. Locks rose 17 percent to $9 billion while the GOS margin fell 6 basis points to 0.71 percent due to the impact of wider spreads on the outcome of a securitization late in the quarter.

"A key highlight of the second quarter was our announcement of the pending acquisition of 52 Wells Fargo branches in Indiana, Michigan, Wisconsin and Ohio. This transaction will significantly expand our banking business, enhance our franchise value and provide compelling financial benefits -- all without the need to raise capital. Bringing these branches on board later this year will accelerate our banking transformation. Meanwhile, we will continue to leverage our strong asset generation capability, abundant liquidity and strong capital for the benefit of our shareholders."

Second Quarter 2018 Highlights:

Income Statement Highlights











Three Months Ended



June 30,

2018

March 31,

2018

December 31,

2017

September 30,

2017

June 30,

2017



(Dollars in millions)

Net interest income

$

115



$

106



$

107



$

103



$

97



Provision (benefit) for loan losses

(1)





2



2



(1)



Noninterest income

123



111



124



130



116



Noninterest expense

177



173



178



171



154



Income before income taxes

62



44



51



60



60



Provision for income taxes (1)

12



9



96



20



19



Net income (loss)

$

50



$

35



$

(45)



$

40



$

41















Income (loss) per share:











Basic

$

0.86



$

0.61



$

(0.79)



$

0.71



$

0.72



Diluted

$

0.85



$

0.60



$

(0.79)



$

0.70



$

0.71



(1)      The three months ended December 31, 2017 included an $80 million, or $1.37 per diluted share, non-cash charge to the provision for income taxes, resulting from the revaluation of the Company's net deferred tax asset at a lower statutory rate as a result of the Tax Cuts and Jobs Act. 

Key Ratios















Three Months Ended

 Change (bps)



June 30,

2018

March 31,

2018

December 31,

2017

September 30,

2017

June 30,

2017

Seq

Yr/Yr

Net interest margin

2.86

%

2.76

%

2.76

%

2.78

%

2.77

%

10

9

Return on average assets

1.1

%

0.8

%

(1.1)

%

1.0

%

1.0

%

30

10

Return on average equity

13.5

%

9.9

%

(12.1)

%

11.1

%

11.6

%

360

190

Efficiency ratio

74.4

%

79.7

%

77.1

%

73.5

%

72.0

%

(530)

240

 

 

Balance Sheet Highlights















Three Months Ended

% Change



June 30,

2018

March 31,

2018

December 31,

2017

September 30,

2017

June 30,

2017

Seq

Yr/Yr



(Dollars in millions)





Average Balance Sheet Data















Average interest-earning assets

$

15,993



$

15,354



$

15,379



$

14,737



$

14,020



4

%

14

%

Average loans held-for-sale (LHFS)

4,170



4,231



4,537



4,476



4,269



(1)

%

(2)

%

Average loans held-for-investment (LHFI)

8,380



7,487



7,295



6,803



6,224



12

%

35

%

Average total deposits

10,414



9,371



9,084



9,005



8,739



11

%

19

%



 

Net Interest Income

Net interest income rose $9 million to $115 million for the second quarter 2018, as compared to the first quarter 2018. The results reflected a 4 percent increase in average earning assets, led by continued solid growth in commercial loans. The net interest margin rose 10 basis points to 2.86 percent for the second quarter 2018 as higher yields on earning assets more than offset a modest increase in deposit costs.

Loans held-for-investment averaged $8.4 billion for the second quarter 2018, increasing $893 million, or 12 percent, from the prior quarter. Excluding the impact of the DCB branch and warehouse business acquisitions, average loans HFI rose 6 percent in the quarter. During the second quarter 2018, average commercial loans rose 19 percent with average warehouse loans increasing $647 million, or 76 percent, average commercial real estate loans rising $63 million, or 3 percent and average commercial and industrial loans increasing $40 million, or 3 percent. Average consumer loans rose $143 million, or 4 percent, driven by an increase in mortgage loans.

Average total deposits were $10.4 billion in the second quarter 2018, increasing $1 billion, or 11 percent from the first quarter 2018. Excluding the impact of the DCB branch acquisition, average deposits rose 6 percent in the quarter. Average retail deposits increased $780 million, or 12 percent, as higher demand deposits and certificates of deposit were partially offset by a drop in savings deposits. Average custodial deposits rose $149 million, or 10 percent, while average government deposits rose $21 million, or 2 percent.

Provision for Loan Losses

The Company experienced a provision benefit in the second quarter 2018, resulting primarily from a continued decline in loss rates in the held-for-investment portfolio. The provision benefit for loan losses totaled $1 million for the second quarter 2018, as compared to no provision expense for the first quarter 2018.

Noninterest Income

Noninterest income rose $12 million, or 11 percent, to $123 million in the second quarter of 2018, as compared to $111 million for the first quarter 2018. The increase was primarily due to an increase in net gain on loan sales, loan fees and charges and the net return on the mortgage servicing rights.

Second quarter 2018 net gain on loan sales increased $3 million, or 5 percent, to $63 million, versus $60 million in the first quarter 2018. Fallout-adjusted locks rose 17 percent to $9 billion primarily due to a seasonal increase in mortgage originations. The net gain on loan sale margin fell 6 basis points to 0.71 percent for the second quarter 2018, as compared to 0.77 percent for the first quarter 2018.

Mortgage Metrics

















Change (% / bps)



June 30,

2018

March 31,

2018

December 31,

2017

September 30,

2017

June 30,

2017

Seq

Yr/Yr



(Dollars in millions)





For the three months ended:















Mortgage rate lock commitments (fallout-adjusted) (1)

$

9,011



$

7,722



$

8,631



$

8,898



$

9,002



17

%

%

Net margin on mortgage rate lock commitments (fallout-adjusted) (1) (2)

0.71

%

0.77

%

0.91

%

0.84

%

0.73

%

(6)



(2)



Net gain on loan sales

$

63



$

60



$

79



$

75



$

66



5

%

(5)

%

Net (loss) return on the mortgage servicing rights (MSR)

$

9



$

4



$

(4)



$

6



$

6



125

%

50

%

Gain on loan sales + net (loss) return on the MSR

$

72



$

64



$

75



$

81



$

72



13

%

%

At the end of the period:















Residential loans serviced (number of accounts - 000's) (3)

535



470



442



415



402



14

%

33

%

Capitalized value of MSRs

1.34

%

1.27

%

1.16

%

1.15

%

1.14

%

7



20



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 (excludes net gain on loan sales of $1 million from loans transferred from HFI in the three months ended December 31, 2017) to fallout-adjusted mortgage rate lock commitments.

(3)    Includes loans serviced for own loan portfolio, serviced for others, and subserviced for others.

 

Loan fees and charges rose to $24 million for the second quarter 2018, as compared to $20 million for the first quarter 2018. The increase primarily reflected higher mortgage loan closings.

Net return on mortgage servicing rights (including the impact of hedges) increased $5 million, resulting in a net gain of $9 million for the second quarter 2018, as compared to a net gain of $4 million for the first quarter 2018. The increase from the prior quarter largely reflected lower sale-related costs, reduced runoff due to increasing interest rates and higher service fee income.

Noninterest Expense

Noninterest expense increased to $177 million for the second quarter 2018, as compared to $173 million for the first quarter 2018, primarily due to an increase in mortgage-related expense from higher mortgage closings. During the second quarter 2018, commissions increased $7 million and loan processing expense rose $1 million.

The Company's total efficiency ratio improved to 74 percent for the second quarter 2018, as compared to 80 percent for the first quarter 2018, led by strong, positive operating leverage. Revenue increased 10 percent while expenses rose a modest 2 percent in the second quarter 2018.

Income Taxes

The second quarter 2018 provision for income taxes totaled $12 million, as compared to $9 million in the first quarter 2018. The Company's effective tax rate was 20 percent for the second quarter 2018, unchanged from the prior quarter.

Asset Quality

Credit Quality Ratios















Three Months Ended

Change (% / bps)



June 30,

2018

March 31,

2018

December 31,

2017

September 30,

2017

June 30,

2017

Seq

Yr/Yr



(Dollars in millions)





Allowance for loan loss to LHFI

1.5

%

1.7

%

1.8

%

2.0

%

2.1

%

(20)



(60)



Charge-offs, net of recoveries

$

1



$

1



$

2



$

2



$



%

N/M

Total nonperforming loans held-for-investment

$

27



$

29



$

29



$

31



$

30



(7)

%

(10)

%

Net charge-offs to LHFI ratio (annualized)

0.02

%

0.06

%

0.12

%

0.08

%

0.04

%

(4)



(2)



Ratio of nonperforming LHFI and TDRs to LHFI

0.30

%

0.35

%

0.38

%

0.44

%

0.44

%

(5)



(14)



N/M - Not meaningful

 

The allowance for loan losses was $137 million at June 30, 2018, compared to $139 million at March 31, 2018. The allowance for loan losses covered 1.5 percent of loans held-for-investment at June 30, 2018, as compared to 1.7 percent of loans held-for-investment at March 31, 2018.

Net charge-offs in the second quarter 2018 were $1 million, or 2 basis points of HFI loans, compared to $1 million, or 6 basis points in the prior quarter.

Nonperforming loans held-for-investment were $27 million at June 30, 2018, compared to $29 million at March 31, 2018. The ratio of nonperforming loans to loans held-for-investment was 0.30 percent at June 30, 2018, compared to 0.35 percent at March 31, 2018. At June 30, 2018, early stage consumer loan delinquencies totaled $3 million, or 0.08 percent of consumer loans, compared to $5 million, or 0.14 percent at March 31, 2018. There were no commercial loan delinquencies greater than 30 days at June 30, 2018.

Capital

Capital Ratios (Bancorp)

Three Months Ended

Change (% / bps)



June 30,

2018

March 31,

2018

December 31,

2017

September 30,

2017

June 30,

2017

Seq

Yr/Yr

Tangible common equity to assets ratio (1)

7.74

%

7.65

%

8.15

%

8.47

%

8.70

%

9



(96)



Tier 1 leverage (to adj. avg. total assets)

8.65

%

8.72

%

8.51

%

8.80

%

9.10

%

(7)



(45)



Tier 1 common equity (to RWA)

10.84

%

10.80

%

11.50

%

11.65

%

12.45

%

4



(161)



Tier 1 capital (to RWA)

12.86

%

12.90

%

13.63

%

13.72

%

14.65

%

(4)



(179)



Total capital (to RWA)

14.04

%

14.14

%

14.90

%

14.99

%

15.92

%

(10)



(188)



MSRs to Tier 1 capital

16.9

%

16.2

%

20.1

%

17.3

%

13.1

%

70



N/M



Tangible book value per share (1)

$

24.37



$

23.62



$

24.04



$

25.01



$

24.29



3

%

%









































(1)      See Non-GAAP Reconciliation for further information.

N/M - Not meaningful

 

The Company maintained a robust capital position with regulatory ratios well above current regulatory quantitative guidelines for "well capitalized" institutions. At June 30, 2018, the Company had a Tier 1 leverage ratio of 8.65 percent, as compared to 8.72 percent at March 31, 2018. The decrease in the ratio resulted primarily from balance sheet growth driven by the impact of the DCB branch and warehouse business acquisitions, largely offset by earnings retention.

Under the terms of recently proposed changes to regulatory capital requirements, the Company's Tier 1 leverage ratio would have increased approximately 50 basis points and risk-based capital ratios by approximately 15-25 basis points at June 30, 2018 (pro forma basis).

Earnings Conference Call

As previously announced, the Company's second quarter 2018 earnings call will be held Tuesday, July 24, 2018 at 11 a.m. (ET).

To join the call, please dial (800) 667-5617 toll free or (334) 323-0505 and use passcode 2373953. Please call at least 10 minutes before the conference is scheduled to begin. A replay will be available for five business days by calling (888) 203-1112 toll free or (719) 457-0820 and using passcode 2373953.

The conference call will also be available as a live audiocast on the Investor Relations section of flagstar.com, where it will be archived and available for replay and download. The slide presentation accompanying the conference call will be posted on the site.

About Flagstar

Flagstar Bancorp, Inc. FBC is an $18.1 billion savings and loan holding company headquartered in Troy, Mich. Flagstar Bank, FSB, provides commercial, small business, and consumer banking services through 107 branches in Michigan and California. It also provides home loans through a wholesale network of brokers and correspondents in all 50 states, as well as 88 retail locations in 31 states, representing the combined retail branches of Flagstar and its Opes Advisors mortgage division. Flagstar is a leading national originator and servicer of mortgage loans, handling payments and record keeping for $120 billion of home loans representing over 535,000 borrowers. For more information, please visit flagstar.com.

Use of Non-GAAP Financial Measures

In addition to results presented in accordance with GAAP, this news release includes non-GAAP financial measures, such as tangible book value per share and tangible common equity to assets ratio. The Company believes these non-GAAP financial measures provide additional information that is useful to investors in helping to understand the capital requirements Flagstar will face in the future and underlying performance and trends of Flagstar.

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

Where non-GAAP financial measures are used, the most directly comparable GAAP or regulatory financial measure, as well as the reconciliation to the most directly comparable GAAP or regulatory financial measure, can be found in this news release. Additional discussion of the use of non-GAAP measures can also be found in conference call slides, the Form 8-K Current Report related to this news release and in periodic Flagstar reports filed with the U.S. Securities and Exchange Commission. These documents can all be found on the Company's website at flagstar.com.

Forward-Looking Statements

This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the current beliefs and expectations of Flagstar Bancorp, Inc.'s management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. The Company's actual results could differ materially from those described in the forward-looking statements depending upon various factors as described in periodic Flagstar reports filed with the U.S. Securities and Exchange Commission, which are available on the Company's website (flagstar.com) and on the Securities and Exchange Commission's website (sec.gov). Other than as required under United States securities laws, Flagstar Bancorp does not undertake to update the forward-looking statements to reflect the impact of circumstances or events that may arise after the date of the forward-looking statements.  

For more information, contact:                  

David L. Urban

david.urban@flagstar.com

(248) 312-5970

 

Flagstar Bancorp, Inc.

Consolidated Statements of Financial Condition

(Dollars in millions)

(Unaudited)





June 30,

2018



March 31,

2018



December 31,

2017



June 30,

2017

Assets















Cash

$

139





$

121





$

122





$

80



Interest-earning deposits

220





122





82





103



Total cash and cash equivalents

359





243





204





183



Investment securities available-for-sale

1,871





1,918





1,853





1,614



Investment securities held-to-maturity

748





771





939





1,014



Loans held-for-sale

4,291





4,743





4,321





4,506



Loans held-for-investment

8,904





8,134





7,713





6,776



Loans with government guarantees

278





286





271





278



Less: allowance for loan losses

(137)





(139)





(140)





(140)



Total loans held-for-investment and loans with government guarantees, net

9,045





8,281





7,844





6,914



Mortgage servicing rights

257





239





291





184



Federal Home Loan Bank stock

303





303





303





260



Premises and equipment, net

355





348





330





299



Net deferred tax asset

119





130





136





266



Goodwill and intangible assets

71





72





21





20



Other assets

711





688





670





705



Total assets

$

18,130





$

17,736





$

16,912





$

15,965



Liabilities and Stockholders' Equity















Noninterest-bearing

$

2,781





$

2,391





$

2,049





$

2,012



Interest-bearing

7,807





7,595





6,885





6,683



Total deposits

10,588





9,986





8,934





8,695



Short-term Federal Home Loan Bank advances

3,840





4,153





4,260





3,670



Long-term Federal Home Loan Bank advances

1,280





1,280





1,405





1,200



Other long-term debt

494





494





494





493



Other liabilities

453





396





420





499



Total liabilities

16,655





16,309





15,513





14,557



Stockholders' Equity















Common stock

1





1





1





1



Additional paid in capital

1,514





1,514





1,512





1,509



Accumulated other comprehensive loss

(32)





(30)





(16)





(9)



Accumulated deficit

(8)





(58)





(98)





(93)



Total stockholders' equity

1,475





1,427





1,399





1,408



Total liabilities and stockholders' equity

$

18,130





$

17,736





$

16,912





$

15,965



 

 

Flagstar Bancorp, Inc.

Condensed Consolidated Statements of Operations

(Dollars in millions, except per share data)

(Unaudited)







Second Quarter 2018 Compared to:



Three Months Ended



First Quarter

2018



Second Quarter

2017



June 30,

2018

March 31,

2018

December 31,

2017

September 30,

2017

June 30,

2017



Amount

Percent



Amount

Percent

Interest Income























Total interest income

$

167



$

152



$

148



$

140



$

129





$

15



10

%



$

38



29

%

Total interest expense

52



46



41



37



32





6



13

%



20



63

%

Net interest income

115



106



107



103



97





9



8

%



18



19

%

Provision (benefit) for loan losses

(1)





2



2



(1)





(1)



N/M





%

Net interest income after provision (benefit) for loan losses

116



106



105



101



98





10



9

%



18



18

%

Noninterest Income























Net gain on loan sales

63



60



79



75



66





3



5

%



(3)



(5)

%

Loan fees and charges

24



20



24



23



20





4



20

%



4



20

%

Deposit fees and charges

5



5



4



5



5







%





%

Loan administration income

5



5



5



5



6







%



(1)



(17)

%

Net (loss) return on the mortgage servicing rights

9



4



(4)



6



6





5



125

%



3



50

%

Other noninterest income

17



17



16



16



13







%



4



31

%

Total noninterest income

123



111



124



130



116





12



11

%



7



6

%

Noninterest Expense























Compensation and benefits

80



80



80



76



71







%



9



13

%

Commissions

25



18



23



23



16





7



39

%



9



56

%

Occupancy and equipment

30



30



28



28



25







%



5



20

%

Federal insurance premiums

6



6



5



5



4







%



2



50

%

Loan processing expense

15



14



16



15



14





1



7

%



1



7

%

Legal and professional expense

6



6



8



7



8







%



(2)



(25)

%

Other noninterest expense

15



19



18



17



16





(4)



(21)

%



(1)



(6)

%

Total noninterest expense

177



173



178



171



154





4



2

%



23



15

%

Income before income taxes

62



44



51



60



60





18



41

%



2



3

%

Provision for income taxes

12



9



96



20



19





3



33

%



(7)



(37)

%

Net income (loss)

$

50



$

35



$

(45)



$

40



$

41





$

15



43

%



$

9



22

%

Income (loss) per share























Basic

$

0.86



$

0.61



$

(0.79)



$

0.71



$

0.72





$

0.25



41

%



$

0.14



19

%

Diluted

$

0.85



$

0.60



$

(0.79)



$

0.70



$

0.71





$

0.25



42

%



$

0.14



20

%





N/M - Not meaningful



 



 

Flagstar Bancorp, Inc.

Consolidated Statements of Operations

(Dollars in millions, except per data share)

(Unaudited)







Six Months Ended June 30, 2018



Six Months Ended



Compared to:

Six Months Ended June 30, 2017



June 30, 2018

June 30, 2017



Amount

Percent

Total interest income

$

319



$

239





$

80



33

%

Total interest expense

98



59





39



66

%

Net interest income

221



180





41



23

%

Provision (benefit) for loan losses

(1)



2





(3)



N/M

Net interest income after provision (benefit) for loan losses

222



178





44



25

%

Noninterest Income











Net gain on loan sales

123



114





9



8

%

Loan fees and charges

44



35





9



26

%

Deposit fees and charges

10



9





1



11

%

Loan administration income

10



11





(1)



(9)

%

Net (loss) return on the mortgage servicing rights

13



20





(7)



(35)

%

Other noninterest income

34



27





7



26

%

Total noninterest income

234



216





18



8

%

Noninterest Expense











Compensation and benefits

160



143





17



12

%

Commissions

43



26





17



65

%

Occupancy and equipment

60



47





13



28

%

Federal insurance premiums

12



7





5



71

%

Loan processing expense

29



26





3



12

%

Legal and professional expense

12



15





(3)



(20)

%

Other noninterest expense

34



30





4



13

%

Total noninterest expense

350



294





56



19

%

Income before income taxes

106



100





6



6

%

Provision for income taxes

21



32





(11)



(34)

%

Net income

$

85



$

68





$

17



25

%

Income per share











Basic

$

1.47



$

1.18





$

0.29



25

%

Diluted

$

1.45



$

1.16





$

0.29



25

%



 

 

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, 2018



March 31, 2018



June 30, 2017



June 30, 2018



June 30, 2017

Selected Mortgage Statistics:



















Mortgage rate lock commitments (fallout-adjusted) (1)

$

9,011





$

7,722





$

9,002





$

16,734





$

14,998



Mortgage loans originated (2)

$

9,040





$

7,886





$

9,184





$

16,926





$

15,087



Mortgage loans sold and securitized

$

9,260





$

7,247





$

8,989





$

16,506





$

13,473



Selected Ratios:



















Interest rate spread (3)

2.58

%



2.54

%



2.59

%



2.56

%



2.55

%

Net interest margin

2.86

%



2.76

%



2.77

%



2.81

%



2.72

%

Net margin on loans sold and securitized

0.69

%



0.82

%



0.73

%



0.75

%



0.84

%

Return on average assets

1.12

%



0.82

%



1.04

%



0.97

%



0.91

%

Return on average equity

13.45

%



9.94

%



11.57

%



11.73

%



9.77

%

Efficiency ratio

74.4

%



79.7

%



72.0

%



76.9

%



74.2

%

Equity-to-assets ratio (average for the period)

8.29

%



8.27

%



9.02

%



8.28

%



9.29

%

Average Balances:



















Average common shares outstanding

57,491,714





57,356,654





57,101,816





57,424,557





57,012,208



Average fully diluted shares outstanding

58,258,577





58,314,385





58,138,938





58,286,327





58,106,070



Average interest-earning assets

$

15,993





$

15,354





$

14,020





$

15,675





$

13,187



Average interest-paying liabilities

$

13,164





$

12,974





$

11,804





$

13,069





$

11,066



Average stockholders' equity

$

1,475





$

1,414





$

1,418





$

1,445





$

1,382





(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)

Includes residential first mortgage. 

(3)

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.



















June 30, 2018



March 31, 2018



December 31, 2017



June 30, 2017

Selected Statistics:















Book value per common share

$

25.61





$

24.87





$

24.40





$

24.64



Tangible book value per share (1)

24.37





23.62





24.04





24.29



Number of common shares outstanding

57,598,406





57,399,993





57,321,228





57,161,431



Number of FTE employees

3,682





3,659





3,525





3,432



Number of bank branches

107





107





99





99



Ratio of nonperforming assets to total assets

0.19

%



0.19

%



0.22

%



0.24

%

Common equity-to-assets ratio

8.14

%



8.05

%



8.27

%



8.82

%

MSR Key Statistics and Ratios:















Weighted average service fee (basis points)

32.4





30.4





28.9





27.8



Capitalized value of mortgage servicing rights

1.34

%



1.27

%



1.16

%



1.14

%

Mortgage servicing rights to Tier 1 capital

16.9

%



16.2

%



20.1

%



13.1

%

























(1)

Excludes goodwill and intangibles of $71 million, $72 million, $21 million, and $20 million at June 30, 2018, March 31, 2018, December 31, 2017, and June 30, 2017, respectively. See Non-GAAP Reconciliation for further information.

 

 

Average Balances, Yields and Rates

(Dollars in millions)

(Unaudited)





Three Months Ended



June 30, 2018



March 31, 2018



June 30, 2017



Average

Balance

Interest

Annualized

Yield/Rate



Average

Balance

Interest

Annualized

Yield/Rate



Average

Balance

Interest

Annualized

Yield/Rate

Interest-Earning Assets



Loans held-for-sale

$

4,170



$

47



4.50

%



$

4,231



$

44



4.12

%



$

4,269



$

42



4.00

%

Loans held-for-investment























Residential first mortgage

2,875



25



3.53

%



2,773



23



3.41

%



2,495



21



3.38

%

Home equity

679



8



5.05

%



668



9



5.21

%



439



6



4.91

%

Other

57



1



5.39

%



27





4.56

%



27





4.54

%

  Total Consumer loans

3,611



34



3.85

%



3,468



32



3.76

%



2,961



27



3.61

%

Commercial Real Estate

2,017



26



5.09

%



1,954



24



4.87

%



1,477



16



4.16

%

Commercial and Industrial

1,257



17



5.30

%



1,217



16



5.21

%



936



11



4.77

%

Warehouse Lending

1,495



19



5.03

%



848



11



5.14

%



850



10



4.71

%

  Total Commercial loans

4,769



62



5.13

%



4,019



51



5.03

%



3,263



37



4.48

%

  Total loans held-for-investment

8,380



96



4.58

%



7,487



83



4.44

%



6,224



64



4.07

%

Loans with government guarantees

280



2



3.66

%



291



3



3.72

%



295



3



4.02

%

Investment securities

3,049



21



2.72

%



3,233



22



2.69

%



3,166



20



2.57

%

Interest-earning deposits

114



1



1.72

%



112





1.67

%



66





1.07

%

  Total interest-earning assets

15,993



$

167



4.17

%



15,354



$

152



3.95

%



14,020



$

129



3.69

%

Other assets

1,791









1,736









1,690







  Total assets

$

17,784









$

17,090









$

15,710







Interest-Bearing Liabilities























Retail deposits























Demand deposits

$

704



$

1



0.60

%



$

548



$



0.26

%



$

510



$



0.15

%

Savings deposits

3,412



8



0.86

%



3,490



7



0.81

%



3,933



8



0.75

%

Money market deposits

247





0.54

%



205





0.44

%



239





0.42

%

Certificates of deposit

2,006



8



1.63

%



1,619



6



1.45

%



1,094



3



1.08

%

  Total retail deposits

6,369



17



1.06

%



5,862



13



0.92

%



5,776



11



0.75

%

Government deposits























Demand deposits

243





0.47

%



241





0.55

%



200





0.39

%

Savings deposits

488



2



1.26

%



483



2



1.11

%



411



1



0.56

%

Certificates of deposit

380



1



1.35

%



401



1



1.19

%



291





0.68

%

  Total government deposits

1,111



3



1.12

%



1,125



3



1.02

%



902



1



0.56

%

Wholesale deposits and other

264



1



1.96

%



171



1



1.91

%



4





0.48

%

  Total interest-bearing deposits

7,744



21



1.10

%



7,158



17



0.96

%



6,682



12



0.72

%

Short-term Federal Home Loan Bank advances and other

3,646



17



1.85

%



4,032



15



1.53

%



3,429



8



0.98

%

Long-term Federal Home Loan Bank advances

1,280



7



2.25

%



1,290



7



2.10

%



1,200



6



1.91

%

Other long-term debt

494



7



5.60

%



494



7



5.37

%



493



6



5.06

%

  Total interest-bearing liabilities

13,164



52



1.58

%



12,974



46



1.41

%



11,804



32



1.10

%

Noninterest-bearing deposits (1)

2,670









2,213









2,057







Other liabilities

475









489









431







Stockholders' equity

1,475









1,414









1,418







  Total liabilities and stockholders' equity

$

17,784









$

17,090









$

15,710







  Net interest-earning assets

$

2,829









$

2,380









$

2,216







  Net interest income



$

115









$

106









$

97





Interest rate spread (2)





2.58

%







2.54

%







2.59

%

Net interest margin (3)





2.86

%







2.76

%







2.77

%

Ratio of average interest-earning assets to interest-bearing liabilities





121.5

%







118.3

%







118.8

%

  Total average deposits

$

10,414









$

9,371









$

8,739











































(1)

Includes noninterest-bearing custodial deposits that arise due to the servicing of loans for others.

(2)

Interest rate spread is the difference between rate of interest earned on interest-earning assets and rate of interest paid on interest-bearing liabilities.

(3)

Net interest margin is net interest income divided by average interest-earning assets.

 

 

Average Balances, Yields and Rates

(Dollars in millions)

(Unaudited)





Six Months Ended



June 30, 2018



June 30, 2017



Average

Balance

Interest

Annualized

Yield/Rate



Average

Balance

Interest

Annualized

Yield/Rate

Interest-Earning Assets















Loans held-for-sale

$

4,201



$

90



4.31

%



$

3,780



$

74



3.94

%

Loans held-for-investment















Residential first mortgage

2,824



49



3.47

%



2,447



41



3.35

%

Home equity

674



17



5.13

%



436



11



5.01

%

Other

42



1



5.12

%



26





4.52

%

  Total Consumer loans

3,540



67



3.80

%



2,909



52



3.61

%

Commercial Real Estate

1,986



50



4.98

%



1,399



28



3.99

%

Commercial and Industrial

1,237



33



5.25

%



855



20



4.67

%

Warehouse Lending

1,173



30



5.07

%



770



18



4.62

%

  Total Commercial loans

4,396



113



5.08

%



3,024



66



4.34

%

  Total loans held-for-investment

7,936



180



4.51

%



5,933



118



3.98

%

Loans with government guarantees

285



5



3.69

%



318



7



4.34

%

Investment securities

3,140



43



2.71

%



3,090



39



2.54

%

Interest-earning deposits

113



1



1.69

%



66



1



0.97

%

  Total interest-earning assets

15,675



$

319



4.06

%



13,187



$

239



3.63

%

Other assets

1,764









1,694







  Total assets

$

17,439









$

14,881







Interest-Bearing Liabilities















Retail deposits















Demand deposits

$

626



$

1



0.46

%



$

509



$



0.17

%

Savings deposits

3,451



14



0.83

%



3,930



15



0.76

%

Money market deposits

226



1



0.49

%



258



1



0.44

%

Certificates of deposit

1,814



14



1.55

%



1,083



6



1.07

%

  Total retail deposits

6,117



30



0.99

%



5,780



22



0.75

%

Government deposits















Demand deposits

242



1



0.51

%



217





0.39

%

Savings deposits

485



3



1.18

%



435



1



0.54

%

Certificates of deposit

391



2



1.27

%



305



1



0.65

%

  Total government deposits

1,118



6



1.07

%



957



2



0.54

%

Wholesale deposits and other

217



2



1.94

%



6





0.42

%

  Total interest-bearing deposits

7,452



38



1.03

%



6,743



24



0.72

%

Short-term Federal Home Loan Bank advances and other

3,838



32



1.68

%



2,630



12



0.89

%

Long-term Federal Home Loan Bank advances

1,285



14



2.17

%



1,200



11



1.89

%

Other long-term debt

494



14



5.49

%



493



12



5.05

%

  Total interest-bearing liabilities

13,069



98



1.50

%



11,066



59



1.08

%

Noninterest-bearing deposits (1)

2,443









2,024







Other liabilities

482









409







Stockholders' equity

1,445









1,382







Total liabilities and stockholders' equity

$

17,439









$

14,881







Net interest-earning assets

$

2,606









$

2,121







  Net interest income



$

221









$

180





Interest rate spread (2)





2.56

%







2.55

%

Net interest margin (3)





2.81

%







2.72

%

Ratio of average interest-earning assets to interest-bearing liabilities





119.9

%







119.2

%

Total average deposits

$

9,895









$

8,767































(1)

Includes noninterest-bearing custodial deposits that arise due to the servicing of loans for others.

(2)

Interest rate spread is the difference between rate of interest earned on interest-earning assets and rate of interest paid on interest-bearing liabilities.

(3)

Net interest margin is net interest income divided by average interest-earning assets.

 

 

Flagstar Bancorp, Inc.

Earnings Per Share

(Dollars in millions, except share data)

(Unaudited)









Three Months Ended



Six Months Ended



June 30, 2018



March 31, 2018



June 30, 2017



June 30, 2018



June 30, 2017

Net income

50





35





41





85





68



Weighted average shares



















Weighted average common shares outstanding

57,491,714





57,356,654





57,101,816





57,424,557





57,012,208



Effect of dilutive securities



















May Investor warrants

















24,575



Stock-based awards

766,863





957,731





1,037,122





861,770





1,069,287



  Weighted average diluted common shares

58,258,577





58,314,385





58,138,938





58,286,327





58,106,070



Earnings per common share



















Basic earnings per common share

$

0.86





$

0.61





$

0.72





$

1.47





$

1.18



Effect of dilutive securities



















May Investor warrants



















Stock-based awards

(0.01)





(0.01)





(0.01)





(0.02)





(0.02)



  Diluted earnings per common share

$

0.85





$

0.60





$

0.71





$

1.45





$

1.16



 

 

Regulatory Capital - Bancorp

(Dollars in millions)

(Unaudited)





June 30, 2018



March 31, 2018



December 31, 2017



June 30, 2017



Amount

Ratio



Amount

Ratio



Amount

Ratio



Amount

Ratio

Tier 1 leverage (to adjusted avg. total assets)

$

1,525



8.65

%



$

1,475



8.72

%



$

1,442



8.51

%



$

1,408



9.10

%

Total adjusted avg. total asset base

$

17630







$

16,918







$

16,951







$

15,468





Tier 1 common equity (to risk weighted assets)

$

1,285



10.84

%



$

1,235



10.80

%



$

1,216



11.50

%



$

1,196



12.45

%

Tier 1 capital (to risk weighted assets)

$

1,525



12.86

%



$

1,475



12.90

%



$

1,442



13.63

%



$

1,408



14.65

%

Total capital (to risk weighted assets)

$

1,665



14.04

%



$

1,617



14.14

%



$

1,576



14.90

%



$

1,530



15.92

%

Risk-weighted asset base

$

11,855







$

11,440







$

10,579







$

9,610





 

 

Regulatory Capital - Bank

(Dollars in millions)

(Unaudited)





June 30, 2018



March 31, 2018



December 31, 2017



June 30, 2017



Amount

Ratio



Amount

Ratio



Amount

Ratio



Amount

Ratio

Tier 1 leverage (to adjusted avg. total assets)

$

1,594



9.04

%



$

1,537



9.08

%



$

1,531



9.04

%



$

1,590



10.26

%

Total adjusted avg. total asset base

$

17,637







$

16,926







$

16,934







$

15,504





Tier 1 common equity (to risk weighted assets)

$

1,594



13.44

%



$

1,537



13.42

%



$

1,531



14.46

%



$

1,590



16.49

%

Tier 1 capital (to risk weighted assets)

$

1,594



13.44

%



$

1,537



13.42

%



$

1,531



14.46

%



$

1,590



16.49

%

Total capital (to risk weighted assets)

$

1,734



14.62

%



$

1,679



14.66

%



$

1,664



15.72

%



$

1,712



17.75

%

Risk-weighted asset base

$

11,863







$

11,449







$

10,589







$

9,645





 

 



Loan Originations

(Dollars in millions)

(Unaudited)





Three Months Ended



June 30, 2018



March 31, 2018



June 30, 2017

Residential first mortgage

$

9,040



95.2

%



$

7,886



97.1

%



$

9,184



95.0

%

Home equity (1)

141



1.5

%



65



0.8

%



75



0.8

%

  Total consumer loans

9,181



96.7

%



7,951



97.9

%



9,259



95.8

%

Commercial loans (2)

317



3.3

%



169



2.1

%



400



4.2

%

  Total loan originations

$

9,498



100.0

%



$

8,120



100.0

%



$

9,659



100.0

%





































(1)

Includes second mortgage loans, HELOC loans, and other consumer loans.

(2)

Includes CRE and C&I loans that were net funded within the period.

 

 

Loan Originations

(Dollars in millions)

(Unaudited)





Six Months Ended



June 30, 2018



June 30, 2017

Residential first mortgage

$

16,926



96.0

%



$

15,087



95.0

%

Home equity (1)

206



1.2

%



131



0.8

%

  Total consumer loans

17,132



97.2

%



15,218



95.8

%

Commercial loans (2)

486



2.8

%



671



4.2

%

  Total loan originations

$

17,618



100.0

%



$

15,889



100.0

%

























(1)

Includes second mortgage loans, HELOC loans, and other consumer loans.

(2)

Includes CRE and C&I loans that were net funded within the period.

 

 

Residential Loans Serviced

(Dollars in millions)

(Unaudited)





June 30, 2018



March 31, 2018



December 31, 2017



June 30, 2017



Unpaid

Principal

Balance
(1)

Number of

accounts



Unpaid

Principal

Balance (1)

Number of

accounts



Unpaid

Principal

Balance (1)

Number of

accounts



Unpaid

Principal

Balance (1)

Number of

accounts

Serviced for own loan portfolio (2)

$

7,303



32,012





$

7,629



32,185





$

7,013



29,493





$

7,156



30,875



Serviced for others

19,249



78,898





18,767



77,426





25,073



103,137





16,144



66,106



Subserviced for others (3)

93,761



424,331





77,748



360,396





65,864



309,814





63,991



304,830



Total residential loans serviced

$

120,313



535,241





$

104,144



470,007





$

97,950



442,444





$

87,291



401,811



















































(1)

UPB, net of write downs, does not include premiums or discounts.

(2)

Includes loans held-for-investment (residential first mortgage and home equity), loans-held-for-sale (residential first mortgage), loans with

government guarantees (residential first mortgage), and repossessed assets.

(3)

Includes temporary short-term subservicing performed as a result of sales of servicing-released mortgage servicing rights. Includes repossessed

assets.

 

 

Loans Held-for-Investment

(Dollars in millions)

(Unaudited)





June 30, 2018



March 31, 2018



December 31, 2017



June 30, 2017

Consumer loans























Residential first mortgage

$

2,986



33.5

%



$

2,818



34.6

%



$

2,754



35.7

%



$

2,538



37.5

%

Home equity

685



7.7

%



671



8.3

%



664



8.6

%



459



6.7

%

Other

88



1.0

%



25



0.3

%



25



0.3

%



27



0.4

%

  Total consumer loans

3,759



42.2

%



3,514



43.2

%



3,443



44.6

%



3,024



44.6

%

Commercial loans























Commercial real estate

2,020



22.7

%



1,985



24.4

%



1,932



25.1

%



1,557



23.1

%

Commercial and industrial

1,324



14.9

%



1,228



15.1

%



1,196



15.5

%



1,040



15.3

%

Warehouse lending

1,801



20.2

%



1,407



17.3

%



1,142



14.8

%



1,155



17.0

%

  Total commercial loans

5,145



57.8

%



4,620



56.8

%



4,270



55.4

%



3,752



55.4

%

  Total loans held-for-investment

$

8,904



100.0

%



$

8,134



100.0

%



$

7,713



100.0

%



$

6,776



100.0

%



 

 

Allowance for Loan Losses

(Dollars in millions)

(Unaudited)





As of/For the Three Months Ended



June 30,

2018



March 31,

2018



June 30,

2017

Allowance for loan losses











Residential first mortgage

$

45





$

47





$

56



Home equity

19





21





19



Other

1





1





1



Total consumer loans

65





69





76



Commercial real estate

45





44





37



Commercial and industrial

21





20





21



Warehouse lending

6





6





6



Total commercial loans

72





70





64



Total allowance for loan losses

$

137





$

139





$

140



Charge-offs











 Total consumer loans

(2)





(2)





(2)



 Total commercial loans











Total charge-offs

$

(2)





$

(2)





$

(2)



Recoveries











Total consumer loans

1





1





2



Total commercial loans











Total recoveries

1





1





2



Charge-offs, net of recoveries

$

(1)





$

(1)





$



Net charge-offs to LHFI ratio (annualized) (1)

0.02

%



0.06

%



0.04

%

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





Residential first mortgage

0.04

%



0.11

%



0.09

%

Home equity and other consumer

0.10

%



0.28

%



0.02

%

Commercial real estate

%



(0.01)

%



%

Commercial and industrial

(0.01)

%



(0.01)

%



(0.01)

%



















(1)

Excludes loans carried under the fair value option.

 

 

Allowance for Loan Losses

(Dollars in millions)

(Unaudited)





As of/For the Six Months Ended



June 30,

 2018



June 30,

 2017

Total allowance for loan losses

$

137





$

140



Charge-offs







 Total consumer loans

(4)





(7)



 Total commercial loans







Total charge-offs

$

(4)





$

(7)



Recoveries







Total consumer loans

2





3



Total commercial loans







Total recoveries

2





3



Charge-offs, net of recoveries

$

(2)





$

(4)



Net charge-offs to LHFI ratio (annualized) (1)

0.04

%



0.15

%

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







Residential first mortgage

0.08

%



0.34

%

Home equity and other consumer

0.19

%



0.15

%

Commercial real estate

(0.01)

%



(0.01)

%

Commercial and industrial

(0.01)

%



(0.01)

%













(1)

Excludes loans carried under the fair value option.



 

 

Nonperforming Loans and Assets

(Dollars in millions)

(Unaudited)





June 30,

2018



March 31,

2018



December 31,

2017



June 30,

2017

Nonperforming LHFI

$

13





$

14





$

13





$

18



Nonperforming TDRs

4





5





5





5



Nonperforming TDRs at inception but performing for less than six months

10





10





11





7



Total nonperforming LHFI and TDRs (1)

27





29





29





30



Real estate and other nonperforming assets, net

7





5





8





9



LHFS

$

7





$

11





$

9





$

7



Total nonperforming assets

$

41





$

45





$

46





$

46



















Ratio of nonperforming assets to total assets (2)

0.19

%



0.19

%



0.22

%



0.24

%

Ratio of nonperforming LHFI and TDRs to LHFI

0.30

%



0.35

%



0.38

%



0.44

%

Ratio of nonperforming assets to LHFI and repossessed assets (2)

0.38

%



0.42

%



0.48

%



0.57

%

























(1)

Includes less than 90 day past due performing loans placed on nonaccrual. Interest is not being accrued on these loans.

(2)

Ratio excludes LHFS.



 

 

Asset Quality - Loans Held-for-Investment

(Dollars in millions)

(Unaudited)





30-59 Days

Past Due



60-89 Days

Past Due



Greater than

90 days (1)



Total Past

Due



Total Loans

Held-for-

Investment

June 30, 2018



















Consumer loans

$

3





$





$

27





$

30





$

3,759



Commercial loans

















5,145



  Total loans

$

3





$





$

27





$

30





$

8,904



March 31, 2018



















Consumer loans

$

4





$

1





$

29





$

34





$

3,514



Commercial loans

















4,620



      Total loans

$

4





$

1





$

29





$

34





$

8,134



December 31, 2017



















Consumer loans

$

3





$

2





$

29





$

34





$

3,443



Commercial loans

















4,270



 Total loans

$

3





$

2





$

29





$

34





$

7,713



June 30, 2017



















Consumer loans

2





3





30





$

35





$

3,024



Commercial loans

1













1





3,752



  Total loans

$

3





$

3





$

30





$

36





$

6,776











































(1)

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



 

 

Troubled Debt Restructurings

(Dollars in millions)

(Unaudited)





TDRs



Performing



Nonperforming



Total

June 30, 2018



Consumer loans

$

43





$

14





$

57



  Total TDR loans

$

43





$

14





$

57



March 31, 2018











Consumer loans

$

44





$

15





$

59



Commercial loans

5







5



  Total TDR loans

$

49





$

15





$

64



December 31, 2017











Consumer loans

$

43





$

16





$

59



  Total TDR loans

$

43





$

16





$

59



June 30, 2017











Consumer loans

$

46





$

12





$

58



  Total TDR loans

$

46





$

12





$

58





 

 

Non-GAAP Reconciliation

(Dollars in millions)

(Unaudited)

Tangible book value per share and tangible common equity to assets ratio. In addition to analyzing the Company's results on a reported basis, management reviews the Company's results and the results on an adjusted basis. This non-GAAP measure reflects the adjustments of the reported U.S.GAAP results for significant items that management does not believe are reflective of the Company's current and ongoing operations. The Company believes that tangible book value per share and tangible common equity to assets provide a meaningful representation of its operating performance on an ongoing basis. Management uses these measures to assess performance of the Company against its peers and evaluate overall performance. The Company believes these non-GAAP financial measures provide useful information for investors, securities analysts and others because it provides a tool to evaluate the Company's performance on an ongoing basis and compared to its peers.   

                The following tables provide a reconciliation of non-GAAP financial measures.

Tangible book value per share and tangible common equity to assets ratio



June 30, 2018



March 31, 2018



December 31, 2017



September 30, 2017



June 30, 2017



(Dollars in millions, except share data)

Total stockholders' equity

$

1,475





$

1,427





$

1,399





$

1,451





$

1,408



Goodwill and intangibles

71





72





21





21





20



Tangible book value

$

1,404





$

1,355





$

1,378





$

1,430





$

1,388























Number of common shares outstanding

57,598,406





57,399,993





57,321,228





57,181,536





57,161,431



Tangible book value per share

$

24.37





$

23.62





$

24.04





$

25.01





$

24.29























Total Assets

$

18,130





$

17,736





$

16,912





$

16,880





$

15,965



Tangible common equity to assets ratio

7.74

%



7.65

%



8.15

%



8.47

%



8.70

%

 

 

Cision View original content:http://www.prnewswire.com/news-releases/flagstar-reports-second-quarter-2018-net-income-of-50-million-or-0-85-per-diluted-share-300685166.html

SOURCE Flagstar Bancorp, Inc.

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