Flagstar Bancorp Reports Third Quarter 2019 Net Income of $63 million, or $1.11 Per Diluted Share

TROY, Mich., Oct. 22, 2019 /PRNewswire/ --

Key Highlights - Third Quarter 2019

  • Mortgage revenues increased $28 million from prior quarter, led by margin expansion of 31 basis points and a $0.9 billion increase in fallout-adjusted locks.
  • Net interest income increased $8 million, driven by diversified loan growth and a stable net interest margin.
  • Strong asset quality -- minimal net charge-offs, low delinquencies, and no nonperforming commercial loans.

Flagstar Bancorp, Inc. FBC, the holding company for Flagstar Bank, FSB, today reported third quarter 2019 net income of $63 million, or $1.11 per diluted share, compared to second quarter 2019 net income of $61 million, or $1.06 per diluted share. On an adjusted basis, Flagstar reported net income of $41 million, or $0.71 per diluted share, for the second quarter 2019 and $49 million, or $0.85 per diluted share, for the third quarter 2018.

Third Quarter 2019 Highlights:

"The third quarter was a landmark quarter for Flagstar," said Alessandro DiNello, president and chief executive officer of Flagstar Bancorp, Inc. "Across the board, our businesses produced solid results, with mortgage banking taking advantage of market opportunities and our community banking and servicing segments again delivering strong, consistent earnings. The quarter also marked a milestone as the consent order with the CFPB expired, officially closing the book on our legacy regulatory matters.

"Community banking once again showed excellent growth, with net interest income climbing $8 million, or 6 percent, on an increase in earning assets of $1.2 billion, or 7 percent. Helping fuel the net interest income growth was a 12 percent increase in commercial loans, led by the continued success of our warehouse business. Also contributing to the growth were solid performances from our commercial real estate and homebuilder finance segments. Importantly, we achieved this growth while holding net interest margin nearly flat, despite two rate cuts, demonstrating strong margin management and the flexibility of our balance sheet.

"Our mortgage team had a strong quarter, with gain on sale rising to $110 million, a 47 percent increase over second quarter 2019 and a 156 percent increase over third quarter 2018. As a result of our continued focus on price discipline, combined with efforts to optimize volume and margin, gain on sale margin increased 31 basis points to 120 basis points in the third quarter 2019. Fallout-adjusted locks increased to $9.2 billion. These results highlight the diligence of our mortgage team to provide value to our customers at returns that maximize revenue for the company.

"We ended the quarter servicing or subservicing nearly 994,000 loans. The significant growth in this business over the past two years is testament to the quality platform and one-stop shop we offer our clients, underpinned by our industry-leading oversight, monitoring and compliance framework. We also successfully closed the default servicing transaction and integrated the business, further strengthening our servicing offering."

"This quarter's results demonstrated the earnings potential of our unique business model. Looking forward, we are confident that our business is well positioned to continue to generate strong risk-adjusted returns and create significant value for our shareholders in a variety of environments."

 

Income Statement Highlights











Three Months Ended



September 30,

2019

June 30,

2019

March 31,

2019

December 31,

2018

September 30,

2018



(Dollars in millions)

Net interest income

$

146



$

138



$

126



$

152



$

124



Provision (benefit) for loan losses

1



17





(5)



(2)



Noninterest income

171



168



109



98



107



Noninterest expense

238



214



191



189



173



Income before income taxes

78



75



44



66



60



Provision for income taxes

15



14



8



12



12



Net income

$

63



$

61



$

36



$

54



$

48















Income per share:











Basic

$

1.12



$

1.08



$

0.64



$

0.94



$

0.84



Diluted

$

1.11



$

1.06



$

0.63



$

0.93



$

0.83



 

Adjusted Income Statement Highlights (Non-GAAP) (1)











Three Months Ended



September 30,

2019

June 30,

2019

March 31,

2019

December 31,

2018

September 30,

2018



(Dollars in millions)

Net interest income

$

146



$

138



$

126



$

123



$

124



Provision (benefit) for loan losses

1



17





(5)



(2)



Noninterest income

171



143



109



98



107



Noninterest expense

238



214



190



175



172



Income before income taxes

78



50



45



51



61



Provision for income taxes

15



9



8



9



12



Net income

$

63



$

41



$

37



$

42



$

49















Income per share:











Basic

$

1.12



$

0.72



$

0.65



$

0.73



$

0.86



Diluted

$

1.11



$

0.71



$

0.64



$

0.72



$

0.85





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

 

Key Ratios











Three Months Ended



September 30,

2019

June 30,

2019

March 31,

2019

December 31,

2018

September 30,

2018

Net interest margin

3.05

%

3.08

%

3.09

%

3.70

%

2.93

%

Adjusted net interest margin (1)

3.05

%

3.08

%

3.09

%

2.99

%

2.93

%

Return on average assets

1.2

%

1.2

%

0.8

%

1.2

%

1.0

%

Return on average common equity

14.7

%

14.6

%

9.2

%

14.0

%

12.8

%

Efficiency ratio

75.2

%

69.8

%

81.3

%

75.7

%

74.6

%

HFI loan-to-deposit ratio

74.2

%

75.0

%

71.0

%

74.7

%

78.3

%

Adjusted HFI loan-to-deposit ratio (2)

82.0

%

80.6

%

77.0

%

77.3

%

77.8

%





(1)

The three months ended December 31, 2018, excludes $29 million of hedging gains reclassified from AOCI to net interest income in

conjunction with the payment of long-term FHLB advances. See Non-GAAP Reconciliation for further information.

(2)

Excludes warehouse loans and custodial deposits. See Non-GAAP Reconciliation for further information.

 

Average Balance Sheet Highlights















Three Months Ended

% Change



September 30,

2019

June 30,

2019

March 31,

2019

December 31,

2018

September 30,

2018

Seq

Yr/Yr



(Dollars in millions)





Average interest-earning assets

$

18,997



$

17,759



$

16,294



$

16,391



$

16,786



7

%

13

%

Average loans held-for-sale

(LHFS)

3,786



3,539



3,266



3,991



4,393



7

%

(14)

%

Average loans held-for-

investment (LHFI)

11,743



10,613



9,164



8,916



8,872



11

%

32

%

Average total deposits

15,817



14,159



12,906



11,942



11,336



12

%

40

%



 

Net Interest Income

Net interest income increased $8 million, or 6 percent, to $146 million for the third quarter 2019 as compared to the second quarter 2019. The results reflect a 7 percent increase in average earning assets, fueled by 12 percent growth in commercial loans. Net interest margin remained stable, decreasing only 3 basis points despite two rate cuts in the quarter, to 3.05 percent for the third quarter 2019 as compared to the second quarter 2019.

Loans held-for-investment averaged $11.7 billion for the third quarter 2019, increasing $1.1 billion from the prior quarter. During the third quarter 2019, average warehouse loans increased $511 million, or 26 percent, benefiting from growth in the overall mortgage market. We also had solid growth in our commercial real estate portfolio as average balances increased $200 million, or 8 percent. Average consumer loans increased $396 million, or 9 percent, driven evenly by loan growth in non-auto indirect, mortgage and HELOCs.

Average total deposits were $15.8 billion in the third quarter 2019, increasing $1.7 billion, or 12 percent, from the second quarter 2019. The increase primarily reflects $1.1 billion higher custodial deposits driven by refinance activity and $328 million higher wholesale deposits.

Provision for Loan Losses

The provision for loan losses was $1 million for the third quarter 2019, as compared to $17 million for the second quarter 2019 reflecting strong asset quality, low delinquencies and no nonperforming commercial loans.

Noninterest Income

Noninterest income increased $3 million, or 2 percent, to $171 million in the third quarter 2019, as compared to $168 million for the second quarter 2019. Excluding the $25 million DOJ benefit in the second quarter, noninterest income rose $28 million, or 20 percent, primarily due to higher mortgage revenue.

Third quarter 2019 net gain on loan sales increased $35 million, or 47 percent, to $110 million, versus $75 million in the second quarter 2019. The net gain on loan sale margin expanded 31 basis points to 1.20 percent for the third quarter 2019, as compared to 0.89 percent for the second quarter 2019. Fallout-adjusted locks increased 10 percent to $9.2 billion, primarily reflecting increased refinance activity due to the continuation of lower mortgage rates.

This increased refinance activity accelerated prepayments, creating a net loss on mortgage servicing rights (including hedging) of $2 million for the third quarter 2019, compared to a $5 million net return for the second quarter 2019.

Loan fees and charges increased $5 million, or 21 percent, to $29 million for the third quarter 2019, as compared to $24 million for the second quarter 2019, driven by $621 million of higher mortgage loan closings.

Mortgage Metrics

















Change (% / bps)



September 30,

2019

June 30,

2019

March 31,

2019

December 31,

2018

September 30,

2018

Seq

Yr/Yr



(Dollars in millions)





For the three months ended:















Mortgage rate lock commitments (fallout-

adjusted) (1)

$

9,197



$

8,344



$

6,602



$

5,284



$

8,290



10%

11%

Net margin on mortgage rate lock

commitments (fallout-adjusted) (1) (2)

1.20

%

0.89

%

0.72

%

0.60

%

0.51

%

31

69

Net gain on loan sales

$

110



$

75



$

49



$

34



$

43



47%

156%

Net return on the mortgage servicing rights

(MSR)

$

(2)



$

5



$

6



$

10



$

13



NM

NM

Gain on loan sales + net return on the MSR

$

108



$

80



$

55



$

44



$

56



35%

93%

At the end of the period:















Loans serviced (number of accounts -

000's) (3)

994



983



962



851



619



1%

61%

Capitalized value of MSRs

1.14

%

1.23

%

1.27

%

1.35

%

1.43

%

(9)

(29)



(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)

Based on net gain on loan sales (excludes net gain on loan sales of $2 million from loans transferred from LHFI during both the three months

ended March 31, 2019 and December 31, 2018) to fallout-adjusted mortgage rate lock commitments.

(3)

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

NM - Not meaningful



 

Noninterest Expense

Noninterest expense increased to $238 million for the third quarter 2019, as compared to $214 million for the second quarter 2019, primarily reflecting higher mortgage-related expenses driven by an increase in mortgage closings.

The Company's efficiency ratio was 75 percent for the third quarter 2019, as compared to the second quarter 2019 adjusted efficiency ratio of 76 percent. The results reflect positive operating leverage as total adjusted revenue increased 13 percent while expenses rose 11 percent during the third quarter of 2019.

Income Taxes

The third quarter 2019 provision for income taxes totaled $15 million, compared to $14 million for the second quarter 2019. The effective tax rate was 18 percent for the third quarter 2019, compared to 19 percent for the second quarter 2019.

Asset Quality

Credit Quality Ratios















As of/Three Months Ended

Change (% / bps)



September 30,

2019

June 30,

2019

March 31,

2019

December 31,

2018

September 30,

2018

Seq

Yr/Yr



(Dollars in millions)





Allowance for loan loss to LHFI

0.9

%

0.9

%

1.3

%

1.4

%

1.5

%

0

(60)

Charge-offs, net of recoveries

$

1



$

34



$

1



$

1



$

1



N/M

—%

Total nonperforming LHFI and TDRs

$

26



$

63



$

24



$

22



$

25



N/M

4%

Net charge-offs to LHFI ratio (annualized)

0.02

%

1.29

%

0.05

%

0.04

%

0.05

%

N/M

(3)

Ratio of nonperforming LHFI and TDRs to LHFI

0.21

%

0.54

%

0.24

%

0.24

%

0.28

%

(33)

(7)



























N/M - Not meaningful

























 

The allowance for loan losses was $110 million and covered 0.9 percent of loans held-for-investment at September 30, 2019, consistent with reserve and coverage ratios as of June 30, 2019.

Net charge-offs in the third quarter 2019 were $1 million, or 2 basis points of LHFI, compared to $34 million, or 129 basis points in the prior quarter. The current period results reflect low net charge-offs, including a $1 million Live Well recovery. Charge-offs in the second quarter included the $30 million Live Well credit loss and $4 million in other net charge-offs primarily related to unsecured consumer credits acquired in the December branch acquisition.

Nonperforming loans were $26 million at September 30, 2019, compared to $63 million at June 30, 2019. Nonperforming loans at June 30, 2019 included the $37 million Live Well loan. The ratio of nonperforming loans to loans held-for-investment was 0.21 percent at September 30, 2019, compared to 0.54 percent at June 30, 2019. At September 30, 2019, early stage loan delinquencies totaled $12 million, or 0.10 percent, of total loans, compared to $8 million, or 0.07 percent, at June 30, 2019.

Capital

Capital Ratios (Bancorp)



Change

(% / bps)



September 30,

2019

June 30,

2019

March 31,

2019

December 31,

2018

September 30,

2018

Seq

Yr/Yr

Tangible common equity to assets ratio (1)

7.09

%

7.31

%

7.16

%

7.45

%

7.74

%

(22)

(65)

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

7.98

%

7.94

%

8.37

%

8.29

%

8.36

%

4

(38)

Tier 1 common equity (to RWA)

9.25

%

9.08

%

9.69

%

10.54

%

11.01

%

17

(176)

Tier 1 capital (to RWA)

10.80

%

10.73

%

11.51

%

12.54

%

13.04

%

7

(224)

Total capital (to RWA)

11.53

%

11.51

%

12.49

%

13.63

%

14.20

%

2

(267)

Tangible book value per share (1)

$

27.62



$

26.16



$

24.65



$

23.90



$

25.13



6%

10%



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

 

The Company maintained a solid capital position with regulatory ratios well above current regulatory quantitative guidelines for "well capitalized" institutions. At September 30, 2019, the Company had a total risk-based capital ratio of 11.53 percent, as compared to 11.51 percent at June 30, 2019.

Under the terms of recently approved regulatory capital requirements, the Company's Tier 1 leverage ratio would have increased approximately 46 basis points and risk-based capital ratios would have increased by approximately 20 to 30 basis points at September 30, 2019 (pro forma basis).

Earnings Conference Call

As previously announced, the Company's third quarter 2019 earnings call will be held Tuesday, October 22, 2019 at 11 a.m. (ET).

To join the call, please dial (888) 254-3590 toll free or (786) 789-4797 and use passcode 2306380. 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 2306380.

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 $22.0 billion savings and loan holding company headquartered in Troy, Mich. Flagstar Bank, FSB, provides commercial, small business, and consumer banking services through 160 branches in Michigan, Indiana, California, Wisconsin and Ohio. It also provides home loans through a wholesale network of brokers and correspondents in all 50 states, as well as 88 retail locations in 26 states, representing the combined retail branches of Flagstar and its Opes Advisors mortgage division. Flagstar is a leading national originator and servicer of mortgage and other consumer loans, handling payments and record keeping for $204 billion of loans representing 994,000 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, tangible common equity to assets ratio, return on average tangible equity, adjusted return on average tangible equity, adjusted return on average assets, adjusted HFI loan-to-deposit ratio, adjusted net interest income, adjusted noninterest income, adjusted noninterest expense, adjusted income before income taxes, adjusted provision for income taxes, adjusted net income, adjusted basic and diluted earnings per share, adjusted net interest margin, and adjusted efficiency 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.

 

Flagstar Bancorp, Inc.

Consolidated Statements of Financial Condition

(Dollars in millions)

(Unaudited)





September 30,

2019



June 30,

2019



December 31,

2018



September 30,

2018

Assets















Cash

$

234





$

268





$

260





$

150



Interest-earning deposits

119





51





148





114



Total cash and cash equivalents

353





319





408





264



Investment securities available-for-sale

1,697





1,718





2,142





1,857



Investment securities held-to-maturity

635





661





703





724



Loans held-for-sale

4,196





3,345





3,869





4,835



Loans held-for-investment

12,548





11,655





9,088





8,966



Loans with government guarantees

607





507





392





305



Less: allowance for loan losses

(110)





(110)





(128)





(134)



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

13,045





12,052





9,352





9,137



Mortgage servicing rights

285





316





290





313



Net deferred tax asset

58





71





103





111



Federal Home Loan Bank stock

303





303





303





303



Premises and equipment, net

417





415





390





360



Goodwill and intangible assets

174





178





190





70



Other assets

860





828





781





723



Total assets

$

22,023





$

20,206





$

18,531





$

18,697



Liabilities and Stockholders' Equity















Noninterest bearing deposits

$

5,649





$

4,784





$

2,989





$

3,096



Interest bearing deposits

10,096





9,632





9,391





8,493



Total deposits

15,745





14,416





12,380





11,589



Short-term Federal Home Loan Bank advances and other

2,329





2,550





3,244





3,199



Long-term Federal Home Loan Bank advances

650





500





150





1,280



Other long-term debt

496





495





495





495



Other liabilities

1,069





589





692





616



Total liabilities

20,289





18,550





16,961





17,179



Stockholders' Equity















Common stock

1





1





1





1



Additional paid in capital

1,481





1,477





1,522





1,519



Accumulated other comprehensive income (loss)

5





(8)





(47)





(42)



Retained earnings

247





186





94





40



Total stockholders' equity

1,734





1,656





1,570





1,518



Total liabilities and stockholders' equity

$

22,023





$

20,206





$

18,531





$

18,697



 

Flagstar Bancorp, Inc.

 Condensed Consolidated Statements of Operations

 (Dollars in millions, except per share data)

(Unaudited)







Third Quarter 2019 Compared to:



Three Months Ended



Second Quarter

2019



Third Quarter

2018



September 30,

2019

June 30,

2019

March 31,

2019

December 31,

2018

September 30,

2018



Amount

Percent



Amount

Percent

Interest Income























Total interest income

$

203



$

198



$

180



$

181



$

183





$

5



3

%



$

20



11

%

Total interest expense

57



60



54



29



59





(3)



(5)

%



(2)



(3)

%

Net interest income

146



138



126



152



124





8



6

%



22



18

%

Provision (benefit) for loan losses

1



17





(5)



(2)





(16)



N/M





3



N/M



Net interest income after provision (benefit) for loan losses

145



121



126



157



126





24



20

%



19



15

%

Noninterest Income























Net gain on loan sales

110



75



49



34



43





35



47

%



67



156

%

Loan fees and charges

29



24



17



20



23





5



21

%



6



26

%

Net return on the mortgage servicing rights

(2)



5



6



10



13





(7)



(140)

%



(15)



(115)

%

Loan administration income

5



6



11



8



5





(1)



(17)

%





%

Deposit fees and charges

10



10



8



6



5







%



5



100

%

Other noninterest income

19



48



18



20



18





(29)



(60)

%



1



6

%

Total noninterest income

171



168



109



98



107





3



2

%



64



60

%

Noninterest Expense























Compensation and benefits

98



90



87



82



76





8



9

%



22



29

%

Occupancy and equipment

40



40



38



36



31







%



9



29

%

Commissions

38



25



13



16



21





13



52

%



17



81

%

Loan processing expense

22



21



17



16



14





1



5

%



8



57

%

Legal and professional expense

6



6



6



9



7







%



(1)



(14)

%

Federal insurance premiums

5



5



4



4



6







%



(1)



(17)

%

Intangible asset amortization

3



4



4



3



1





(1)



(25)

%



2



N/M



Other noninterest expense

26



23



22



23



17





3



13

%



9



53

%

Total noninterest expense

238



214



191



189



173





24



11

%



65



38

%

Income before income taxes

78



75



44



66



60





3



4

%



18



30

%

Provision for income taxes

15



14



8



12



12





1



7

%



3



25

%

Net income

$

63



$

61



$

36



$

54



$

48





$

2



3

%



$

15



31

%

Income per share























Basic

$

1.12



$

1.08



$

0.64



$

0.94



$

0.84





$

0.04



4

%



$

0.28



33

%

Diluted

$

1.11



$

1.06



$

0.63



$

0.93



$

0.83





$

0.05



5

%



$

0.28



34

%

























Cash dividends declared

$

0.04



$

0.04



$

0.04



$



$





$



%



$

0.04



100

%

























































N/M - Not meaningful

























































 

Flagstar Bancorp, Inc.

 Condensed Consolidated Statements of Operations

 (Dollars in millions, except per share data)

(Unaudited)





Nine Months Ended



Compared to:

Nine Months Ended

September 30, 2018



September 30,

2019



September 30,

2018



Amount

Percent

Interest Income













Total interest income

$

581





$

502





$

79



16

%

Total interest expense

171





157





14



9

%

Net interest income

410





345





65



19

%

Provision (benefit) for loan losses

18





(3)





21



N/M



Net interest income after provision (benefit) for loan losses

392





348





44



13

%

Noninterest Income













Net gain on loan sales

234





166





68



41

%

Loan fees and charges

70





67





3



4

%

Net return on the mortgage servicing rights

9





26





(17)



(65)

%

Loan administration income

22





15





7



47

%

Deposit fees and charges

28





15





13



87

%

Other noninterest income

85





52





33



63

%

Total noninterest income

448





341





107



31

%

Noninterest Expense













Compensation and benefits

275





236





39



17

%

Occupancy and equipment

118





91





27



30

%

Commissions

76





64





12



19

%

Loan processing expense

60





43





17



40

%

Legal and professional expense

18





19





(1)



(5)

%

Federal insurance premiums

14





18





(4)



(22)

%

Intangible asset amortization

11









11



N/M



Other noninterest expense

71





52





19



37

%

Total noninterest expense

643





523





120



23

%

Income before income taxes

197





166





31



19

%

Provision for income taxes

37





33





4



12

%

Net income

$

160





$

133





$

27



20

%

Income per share













Basic

$

2.83





$

2.32





$

0.51



22

%

Diluted

$

2.80





$

2.28





$

0.52



23

%















Cash dividends declared

$

0.12





$





$

0.12



100

%





























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



Nine Months Ended



September 30,

2019



June 30,

2019



September 30,

2018



September 30,

 2019



September 30,

2018

Selected Mortgage Statistics:



















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

$

9,197





$

8,344





$

8,290





$

24,143





$

25,024



Mortgage loans originated (2)

$

9,262





$

8,641





$

9,199





$

23,416





$

26,125



Mortgage loans sold and securitized

$

8,186





$

8,838





$

8,423





$

22,194





$

24,930



Selected Ratios:



















Interest rate spread (3)

2.48

%



2.57

%



2.57

%



2.57

%



2.57

%

Net interest margin

3.05

%



3.08

%



2.93

%



3.07

%



2.85

%

Net margin on loans sold and securitized

1.34

%



0.84

%



0.51

%



1.05

%



0.66

%

Return on average assets

1.20

%



1.22

%



1.04

%



1.08

%



1.00

%

Adjusted return on average assets (4) (5)

1.20

%



0.81

%



1.05

%



0.95

%



1.00

%

Return on average common equity

14.72

%



14.58

%



12.80

%



12.90

%



12.10

%

Return on average tangible common equity (6)

17.12

%



17.14

%



13.67

%



15.30

%



12.78

%

Adjusted return on average tangible common equity (4)(5)(6)

17.12

%



11.69

%



13.67

%



13.54

%



12.78

%

Efficiency ratio

75.2

%



69.8

%



74.6

%



75.0

%



76.2

%

Common equity-to-assets ratio (average for the period)

8.12

%



8.35

%



8.13

%



8.34

%



8.23

%

Average Balances:



















Average interest-earning assets

$

18,997





$

17,759





$

16,786





$

17,693





$

16,050



Average interest-bearing liabilities

$

12,893





$

12,898





$

13,308





$

12,767





$

13,150



Average stockholders' equity

$

1,722





$

1,668





$

1,514





$

1,658





$

1,468











(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.



(4)

Excludes acquisition-related expenses attributable to the Wells Fargo branch acquisition of $1 million for the three and nine months ended September 30, 2018 and the nine months ended September 30, 2019. See Non-GAAP Reconciliation for further information.



(5)

Excludes DOJ benefit of $25 million during the three months ended June 30, 2019 and the nine months ended September 30, 2019. See Non-GAAP Reconciliation for further information.



(6)

Excludes goodwill, intangible assets and the associated amortization. See Non-GAAP Reconciliation for further information.

 



September 30,

2019



June 30,

2019



December 31,

2018



September 30,

2018

Selected Statistics:















Book value per common share

$

30.69





$

29.31





$

27.19





$

26.34



Tangible book value per share (1)

$

27.62





$

26.16





$

23.90





$

25.13



Number of common shares outstanding



56,510,341







56,483,937







57,749,464







57,625,439



Number of FTE employees

4,171





4,147





3,938





3,496



Number of bank branches

160





160





160





108



Ratio of nonperforming assets to total assets (2)

0.16

%



0.36

%



0.16

%



0.17

%

Common equity-to-assets ratio

7.88

%



8.19

%



8.47

%



8.12

%

MSR Key Statistics and Ratios:















Weighted average service fee (basis points)

39.9





39.7





35.8





34.3



Capitalized value of mortgage servicing rights

1.14

%



1.23

%



1.35

%



1.43

%









(1)

Excludes goodwill and intangibles of $174 million, $178 million, $190 million and $70 million at September 30, 2019, June 30, 2019, December 31,2018 and September 30, 2018, respectively. See Non-GAAP Reconciliation for further information.



(2)

Ratio excludes LHFS.



 

Average Balances, Yields and Rates

(Dollars in millions)

(Unaudited)





Three Months Ended



September 30, 2019



June 30, 2019



September 30, 2018



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

$

3,786



$

40



4.22

%



$

3,539



$

40



4.55

%



$

4,393



$

52



4.69

%

Loans held-for-investment























Residential first mortgage

3,282



29



3.58

%



3,146



28



3.61

%



3,027



27



3.63

%

Home equity

934



13



5.37

%



814



11



5.54

%



695



9



5.12

%

Other

658



10



5.99

%



518



9



6.78

%



128



2



5.54

%

Total Consumer loans

4,874



52



4.24

%



4,478



48



4.33

%



3,850



38



3.96

%

Commercial Real Estate

2,594



35



5.39

%



2,394



35



5.65

%



2,106



29



5.37

%

Commercial and Industrial

1,767



22



4.97

%



1,744



23



5.26

%



1,330



18



5.28

%

Warehouse Lending

2,508



32



5.00

%



1,997



27



5.21

%



1,586



21



5.10

%

Total Commercial loans

6,869



89



5.14

%



6,135



85



5.40

%



5,022



68



5.26

%

Total loans held-for-investment

11,743



141



4.77

%



10,613



133



4.95

%



8,872



106



4.70

%

Loans with government guarantees

574



4



2.78

%



502



4



2.94

%



292



3



4.20

%

Investment securities

2,713



17



2.63

%



2,907



20



2.75

%



3,100



21



2.81

%

Interest-earning deposits

181



1



2.22

%



198



1



2.23

%



129



1



2.38

%

Total interest-earning assets

18,997



$

203



4.27

%



17,759



$

198



4.42

%



16,786



$

183



4.32

%

Other assets

2,200









2,207









1,825







Total assets

$

21,197









$

19,966









$

18,611







Interest-Bearing Liabilities























Retail deposits























Demand deposits

$

1,388



$

3



0.88

%



$

1,323



$

3



0.84

%



$

727



$

3



1.62

%

Savings deposits

3,262



10



1.20

%



3,191



9



1.16

%



3,229



7



0.90

%

Money market deposits

722



1



0.34

%



745



1



0.32

%



252





0.62

%

Certificates of deposit

2,583



15



2.40

%



2,611



15



2.34

%



2,150



10



1.78

%

Total retail deposits

7,955



29



1.45

%



7,870



28



1.42

%



6,358



20



1.27

%

Government deposits

1,253



4



1.45

%



1,128



5



1.51

%



1,174



4



1.28

%

Wholesale deposits and other

744



5



2.42

%



417



2



2.35

%



537



3



2.03

%

Total interest-bearing deposits

9,952



38



1.52

%



9,415



35



1.47

%



8,069



27



1.32

%

Short-term FHLB advances and other

1,910



10



2.24

%



2,633



17



2.53

%



3,465



18



2.10

%

Long-term FHLB advances

536



2



1.72

%



354



1



1.72

%



1,280



7



2.11

%

Other long-term debt

495



7



5.60

%



496



7



5.77

%



494



7



5.62

%

Total interest-bearing liabilities

12,893



57



1.79

%



12,898



60



1.85

%



13,308



59



1.75

%

Noninterest-bearing deposits























Retail deposits and other

1,315









1,275









1,298







Custodial deposits (1)

4,550









3,469









1,969







Total Noninterest-bearing deposits

5,865









4,744









3,267







Other liabilities

717









656









522







Stockholders' equity

1,722









1,668









1,514







Total liabilities and stockholders' equity

$

21,197









$

19,966









$

18,611







Net interest-earning assets

$

6,104









$

4,861









$

3,478







Net interest income



$

146









$

138









$

124





Interest rate spread (2)





2.48

%







2.57

%







2.57

%

Net interest margin (3)





3.05

%







3.08

%







2.93

%

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





147.3

%







137.7

%







126.1

%

Total average deposits

$

15,817









$

14,159









$

11,336















(1)

Approximately 80 percent includes custodial deposits from loans subserviced which pay interest that is recognized as an offset in net loan administration income.  



(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)





Nine Months Ended



September 30, 2019



September 30, 2018



Average

Balance

Interest

Annualized

Yield/Rate



Average

Balance

Interest

Annualized

Yield/Rate

Interest-Earning Assets



Loans held-for-sale

$

3,532



$

119



4.48

%



$

4,265



$

142



4.44

%

Loans held-for-investment















Residential first mortgage

3,158



85



3.61

%



2,893



76



3.52

%

Home equity

832



34



5.50

%



681



26



5.13

%

Other

512



25



6.51

%



71



3



5.37

%

Total Consumer loans

4,502



144



4.29

%



3,645



105



3.86

%

Commercial Real Estate

2,414



102



5.56

%



2,026



79



5.12

%

Commercial and Industrial

1,702



67



5.20

%



1,269



51



5.26

%

Warehouse Lending

1,898



74



5.17

%



1,312



51



5.08

%

Total Commercial loans

6,014



243



5.34

%



4,607



181



5.15

%

Total loans held-for-investment

10,516



387



4.89

%



8,252



286



4.58

%

Loans with government guarantees

511



11



2.88

%



288



8



3.86

%

Investment securities

2,957



61



2.77

%



3,127



64



2.74

%

Interest-earning deposits

177



3



2.38

%



118



2



1.95

%

Total interest-earning assets

17,693



$

581



4.37

%



16,050



$

502



4.15

%

Other assets

2,184









1,784







Total assets

$

19,877









$

17,834







Interest-Bearing Liabilities















Retail deposits















Demand deposits

$

1,311



$

8



0.80

%



$

660



$

4



0.89

%

Savings deposits

3,181



26



1.10

%



3,376



21



0.85

%

Money market deposits

748



2



0.31

%



235



1



0.54

%

Certificates of deposit

2,561



44



2.29

%



1,927



24



1.64

%

Total retail deposits

7,801



80



1.37

%



6,198



50



1.09

%

Government deposits















Government deposits

1,184



13



1.49

%



1,137



10



1.14

%

Wholesale deposits and other

518



9



2.35

%



325



5



1.99

%

Total interest-bearing deposits

9,503



102



1.44

%



7,660



65



1.13

%

Short-term FHLB advances and other

2,420



44



2.45

%



3,713



50



1.81

%

Long-term FHLB advances

349



4



1.71

%



1,283



21



2.15

%

Other long-term debt

495



21



5.76

%



494



21



5.53

%

Total interest-bearing liabilities

12,767



171



1.80

%



13,150



157



1.58

%

Noninterest-bearing deposits















Retail deposits and other

1,278









1,043







Custodial deposits (1)

3,524









1,678







Total Noninterest-bearing deposits

4,802









2,721







Other liabilities

650









495







Stockholders' equity

1,658









1,468







Total liabilities and stockholders' equity

$

19,877









$

17,834







Net interest-earning assets

$

4,926









$

2,900







Net interest income



$

410









$

345





Interest rate spread (2)





2.57

%







2.57

%

Net interest margin (3)





3.07

%







2.85

%

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





138.6

%







122.1

%

Total average deposits

$

14,305









$

10,381















(1)

Approximately 80 percent includes custodial deposits from loans subserviced which pay interest that is recognized as an offset in net loan administration income.  



(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.

 

Earnings Per Share

(Dollars in millions, except share data)

(Unaudited)





Three Months Ended



Nine Months Ended



September 30,

2019



June 30,

2019



September 30,

2018



September 30,

2019



September 30,

2018

Net income

$

63





$

61





$

48





$

160





$

133



Weighted average shares



















Weighted average common shares outstanding



56,484,499







56,446,077







57,600,360







56,607,944







57,483,802



Effect of dilutive securities



















Stock-based awards

626,297





615,745





732,238





644,596





818,118



Weighted average diluted common shares

57,110,796





57,061,822





58,332,598





57,252,540





58,301,920



Earnings per common share



















Basic earnings per common share

$

1.12





$

1.08





$

0.84





$

2.83





$

2.32



Effect of dilutive securities



















Stock-based awards

(0.01)





(0.02)





(0.01)





(0.03)





(0.04)



Diluted earnings per common share

$

1.11





$

1.06





$

0.83





$

2.80





$

2.28





 

Regulatory Capital - Bancorp

(Dollars in millions)

(Unaudited)





September 30, 2019



June 30, 2019



December 31, 2018



September 30, 2018



Amount

Ratio



Amount

Ratio



Amount

Ratio



Amount

Ratio

Tier 1 leverage (to adjusted avg. total assets)

$

1,668



7.98

%



$

1,561



7.86

%



$

1,505



8.29

%



$

1,540



8.36

%

Total adjusted avg. total asset base

$

20,901







$

19,663







$

18,158







$

18,426





Tier 1 common equity (to risk weighted assets)

$

1,428



9.25

%



$

1,321



9.08

%



$

1,265



10.54

%



$

1,300



11.01

%

Tier 1 capital (to risk weighted assets)

$

1,668



10.80

%



$

1,561



10.73

%



$

1,505



12.54

%



$

1,540



13.04

%

Total capital (to risk weighted assets)

$

1,781



11.53

%



$

1,674



11.51

%



$

1,637



13.63

%



$

1,677



14.20

%

Risk-weighted asset base

$

15,442







$

14,525







$

12,006







$

11,811





 

Regulatory Capital - Bank

(Dollars in millions)

(Unaudited)





September 30, 2019



June 30, 2019



December 31, 2018



September 30, 2018



Amount

Ratio



Amount

Ratio



Amount

Ratio



Amount

Ratio

Tier 1 leverage (to adjusted avg. total assets)

$

1,747



8.35

%



$

1,633



8.32

%



$

1,574



8.67

%



$

1,617



8.77

%

Total adjusted avg. total asset base

$

20,914







$

19,614







$

18,151







$

18,433





Tier 1 common equity (to risk weighted assets)

$

1,747



11.30

%



$

1,633



11.23

%



$

1,574



13.12

%



$

1,617



13.68

%

Tier 1 capital (to risk weighted assets)

$

1,747



11.31

%



$

1,633



11.23

%



$

1,574



13.12

%



$

1,617



13.68

%

Total capital (to risk weighted assets)

$

1,860



12.04

%



$

1,745



12.00

%



$

1,705



14.21

%



$

1,753



14.84

%

Risk-weighted asset base

$

15,452







$

14,508







$

11,997







$

11,818







 

Loans Serviced

(Dollars in millions)

(Unaudited)





September 30, 2019



June 30, 2019



December 31, 2018



September 30, 2018



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

Subserviced for others (2)

$

171,145



826,472





$

170,139



816,743





$

146,040



705,149





$

106,297



494,950



Serviced for others

25,039



106,992





25,774



106,334





21,592



88,434





21,835



88,410



Serviced for own loan portfolio (3)

8,058



60,088





7,264



59,873





7,438



57,401





8,033



35,185



Total loans serviced

$

204,242



993,552





$

203,177



982,950





$

175,070



850,984





$

136,165



618,545











(1)

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



(2)

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



(3)

Includes loans held-for-investment (residential first mortgage, home equity and other consumer), loans-held-for-sale (residential first mortgage), loans with government guarantees (residential first mortgage), and repossessed assets.



 

Loans Held-for-Investment

(Dollars in millions)

(Unaudited)





September 30, 2019



June 30, 2019



December 31, 2018



September 30, 2018

Consumer loans























Residential first mortgage

$

3,258



26.0

%



$

3,241



27.8

%



$

2,999



33.0

%



$

3,085



34.4

%

Home equity

985



7.8

%



922



7.9

%



731



8.0

%



704



7.9

%

Other

693



5.5

%



576



4.9

%



314



3.5

%



150



1.7

%

Total consumer loans

4,936



39.3

%



4,739



40.7

%



4,044



44.5

%



3,939



43.9

%

Commercial loans























Commercial real estate

2,697



21.5

%



2,463



21.1

%



2,152



23.7

%



2,160



24.1

%

Commercial and industrial

1,700



13.6

%



1,821



15.6

%



1,433



15.8

%



1,317



14.7

%

Warehouse lending

3,215



25.6

%



2,632



22.6

%



1,459



16.0

%



1,550



17.3

%

Total commercial loans

7,612



60.7

%



6,916



59.3

%



5,044



55.5

%



5,027



56.1

%

Total loans held-for-investment

$

12,548



100.0

%



$

11,655



100.0

%



$

9,088



100.0

%



$

8,966



100.0

%

 

Other Consumer Loans Held-for-Investment

(Dollars in millions)

(Unaudited)





September 30, 2019



June 30, 2019



December 31, 2018



September 30, 2018



UPB

% of

Total



UPB

% of

Total



UPB

% of

Total



UPB

% of

Total

Indirect Lending

$

519



74.9

%



$

408



70.8

%



$

153



48.7

%



$

121



81.2

%

Point of Sale

58



8.4

%



51



8.9

%



28



8.9

%



1



0.7

%

Other

116



16.7

%



117



20.3

%



133



42.4

%



27



18.1

%

Total other consumer loans

$

693



100.0

%



$

576



100.0

%



$

314



100.0

%



$

149



100.0

%



 

Allowance for Loan Losses

(Dollars in millions)

(Unaudited)





As of/For the Three Months Ended



September 30,

2019

June 30,

2019

September 30,

2018

Allowance for loan losses











Residential first mortgage

$

28





$

26





$

40



Home equity

15





16





20



Other

6





5





2



Total consumer loans

49





47





62



Commercial real estate

34





35





46



Commercial and industrial

22





23





20



Warehouse lending

5





5





6



Total commercial loans

61





63





72



Total allowance for loan losses

$

110





$

110





$

134



 

Allowance for Loan Losses

(Dollars in millions)

(Unaudited)





Three Months Ended



Nine Months Ended



September 30,

2019

June 30,

2019

September 30,

2018

September 30,

2019



September 30,

2018

Beginning balance

$

110





$

127





$

137





$

129





$

140



Provision (benefit) for loan losses

1





17





(2)





17





(3)



Charge-offs



















 Total consumer loans

(3)





(4)





(2)





(9)





(6)



 Total commercial loans





(31)









(31)







Total charge-offs

(3)





(35)





(2)





(40)





(6)



Recoveries



















Total consumer loans

1





1





1





3





3



Total commercial loans

1













1







Total recoveries

2





1





1





4





3



Charge-offs, net of recoveries

(1)





(34)





(1)





(36)





(3)



Ending balance

$

110





$

110





$

134





$

110





$

134



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



















Residential first mortgage

0.07

%



0.11

%



0.10

%



0.09

%



0.09

%

Home equity and other consumer

0.27

%



0.71

%



0.21

%



1.39

%



0.58

%

Commercial real estate

%



%



%



%



(0.01)

%

Commercial and industrial

(0.22)

%



7.11

%



%



2.66

%



(0.01)

%



     (1)     Excludes loans carried under the fair value option.

 



Nonperforming Loans and Assets

(Dollars in millions)

(Unaudited)





September 30,

2019



June 30,

2019

December 31,

2018



September 30,

2018

Nonperforming LHFI

$

16





$

52





$

12





$

12



Nonperforming TDRs

3





4





3





4



Nonperforming TDRs at inception but performing for less than six months

7





7





7





9



Total nonperforming LHFI and TDRs (1)

26





63





22





25



Real estate and other nonperforming assets, net

9





9





7





7



LHFS

17





15





10





10



Total nonperforming assets

$

52





$

87





$

39





$

42



















Ratio of nonperforming assets to total assets (2)

0.16

%



0.36

%



0.16

%



0.17

%

Ratio of nonperforming LHFI and TDRs to LHFI

0.21

%



0.54

%



0.24

%



0.28

%

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

0.29

%



0.62

%



0.32

%



0.35

%









(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

September 30, 2019



















Consumer loans

$

9





$

3





$

26





$

38





$

4,936



Commercial loans

















7,612



Total loans

$

9





$

3





$

26





$

38





$

12,548



June 30, 2019



















Consumer loans

$

5





$

2





$

26





$

33





$

4,739



Commercial loans

1









37





38





6,916



     Total loans

$

6





$

2





$

63





$

71





$

11,655



December 31, 2018



















Consumer loans

$

5





$

2





$

22





$

29





$

4,044



Commercial loans

















5,044



Total loans

$

5





$

2





$

22





$

29





$

9,088



September 30, 2018



















Consumer loans

2





1





25





$

28





$

3,939



Commercial loans

















5,027



Total loans

$

2





$

1





$

25





$

28





$

8,966











(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

September 30, 2019



Consumer loans

$

39





$

10





$

49



Total TDR loans

$

39





$

10





$

49



June 30, 2019











Consumer loans

$

41





$

11





$

52



Total TDR loans

$

41





$

11





$

52



December 31, 2018











Consumer loans

$

44





$

10





$

54



Total TDR loans

$

44





$

10





$

54



September 30, 2018











Consumer loans

$

43





$

13





$

56



Total TDR loans

$

43





$

13





$

56





 

Non-GAAP Reconciliation

(Dollars in millions)

(Unaudited)



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. The non-GAAP measures presented in the tables below reflect 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 DOJ benefit and acquisition related expenses and hedging gains recognized in conjunction with the Well Fargo branch acquisition from 2018 are not reflective of our ongoing operations and, therefore, have been excluded from our U.S. GAAP results. The Company believes that tangible book value per share, tangible common equity to assets ratio, return on average tangible equity, adjusted return on average tangible equity, adjusted return on average assets, adjusted HFI loan-to-deposit ratio, adjusted net income, adjusted basic and diluted earnings per share, adjusted noninterest expense, adjusted net interest income, adjusted net interest margin, adjusted income before taxes, adjusted provision for income taxes, and adjusted efficiency ratio provide a meaningful representation of its operating performance on an ongoing basis.



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



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





September 30,

2019



June 30,

2019



March 31,

2019



December 31,

2018



September 30,

2018



(Dollars in millions, except share data)

Total stockholders' equity

$

1,734





$

1,656





$

1,574





$

1,570





$

1,518



Less: Goodwill and intangible assets

174





178





182





190





70



Tangible book value

$

1,560





$

1,478





$

1,392





$

1,380





$

1,448























Number of common shares outstanding



56,510,341







56,483,937







56,480,086







57,749,464







57,625,439



Tangible book value per share

$

27.62





$

26.16





$

24.65





$

23.90





$

25.13























Total assets

$

22,023





$

20,206





$

19,445





$

18,531





$

18,697



Tangible common equity to assets ratio

7.09

%



7.31

%



7.16

%



7.45

%



7.74

%

 

Return on average tangible equity, adjusted return on average tangible equity and adjusted return on average assets.





Three Months Ended



Nine Months Ended



September 30,

2019



June 30,

 2019



September 30,

2018



September 30,

2019



September 30,

2018



(Dollars in millions)









Net income

$

63





$

61





$

48





$

160





$

133



Add: Intangible asset amortization, net of tax

2





$

4





1





10







Tangible net income

$

65





$

65





$

49





$

170





$

133























Total average equity

$

1,722





1,668





$

1,514





$

1,658





$

1,468



Less: Average goodwill and intangible assets

176





180





71





184





54



Total tangible average equity

$

1,546





$

1,488





$

1,443





$

1,474





$

1,414























Return on average common equity

14.72

%



14.58

%



12.80

%



12.90

%



12.10

%

Return on average tangible common equity

17.12

%



17.14

%



13.67

%



15.30

%



12.78

%

Adjustment to remove DOJ benefit

%



(5.45)

%



%



(1.76)

%



%

Adjustment to remove Wells Fargo acquisition costs

%



%



%



%



%

Adjustment to remove hedging gains

%



%



%



%



%

Adjusted return on average tangible common equity

17.12

%



11.69

%



13.67

%



13.54

%



12.78

%





















Return on average assets

1.20

%



1.22

%



1.04

%



1.08

%



1.00

%

Adjustment to remove DOJ benefit

%



(0.41)

%



%



(0.13)

%



%

Adjustment to remove Wells Fargo acquisition costs

%



%



0.01

%



%



%

Adjustment to remove hedging gains

%



%



%



%



%

Adjusted return on average assets

1.20

%



0.81

%



1.05

%



0.95

%



1.00

%

 

Adjusted HFI loan-to-deposit ratio.





September 30,

 2019



June 30,

 2019



March 31,

 2019



December 31,

 2018



September 30,

 2018



(Dollars in millions, except share data)

Average LHFI

$

11,743





$

10,613





$

9,164





$

8,916





$

8,872



Less: Average warehouse loans

2,508





1,997





1,175





1,337





1,586



Adjusted average LHFI

$

9,235





$

8,616





$

7,989





$

7,579





$

7,286























Average deposits

$

15,817





$

14,159





$

12,906





$

11,942





$

11,336



Less: Average custodial deposits

4,551





3,471





2,535





2,133





1,971



Adjusted average deposits

$

11,266





$

10,688





$

10,371





$

9,809





$

9,365























HFI loan-to-deposit ratio

74.2

%



75.0

%



71.0

%



74.7

%



78.3

%

Adjusted HFI loan-to-deposit ratio

82.0

%



80.6

%



77.0

%



77.3

%



77.8

%

 

Adjusted net interest income, noninterest income, noninterest expense, income before income taxes, provision for income taxes, net income, basic earnings per share, diluted earnings per share, net interest margin and efficiency ratio.





Three Months Ended



September 30,

2019



June 30,

2019



March 31,

 2019



December 31,

2018



September 30,

2018



(Dollars in millions)

Net interest income

$

146





$

138





$

126





$

152





$

124



Hedging gains













(29)







Adjusted net interest income

$

146





$

138





$

126





$

123





$

124























Noninterest income

$

171





$

168





$

109





$

98





$

107



DOJ benefit





(25)















Adjusted noninterest income

$

171





$

143





$

109





$

98





$

107























Noninterest expense

$

238





$

214





$

191





$

189





$

173



Wells Fargo acquisition costs









1





14





1



Adjusted noninterest expense

$

238





$

214





$

190





$

175





$

172























Income before income taxes

$

78





$

75





$

44





$

66





$

60



Adjustment for hedging gains













(29)







Adjustment for DOJ benefit





(25)















Adjustment for Wells Fargo acquisition costs









1





14





1



Adjusted income before income taxes

$

78





$

50





$

45





$

51





$

61























Provision for income taxes

$

15





$

14





$

8





$

12





$

12



Tax impact on adjustment for hedging gains













(5)







Tax impact on adjustment for DOJ benefit





(5)















Tax impact on adjustment for Wells Fargo acquisition costs













2







Adjusted provision for income taxes

$

15





$

9





$

8





$

9





$

12























Net income

$

63





$

61





$

36





$

54





$

48



Adjusted net income

$

63





$

41





$

37





$

42





$

49























Weighted average common shares outstanding



56,484,499







56,446,077





$

57,897,799







57,628,561







57,600,360



Weighted average diluted common shares

57,110,796





57,061,822





$

57,856,100





58,385,354





58,332,598



Adjusted basic earnings per share

$

1.12





$

0.72





$

0.65





$

0.73





$

0.86



Adjusted diluted earnings per share

$

1.11





$

0.71





$

0.64





$

0.72





$

0.85























Average interest earning assets

$

18,997





$

17,759





$

16,294





$

16,391





$

16,786



Net interest margin

3.05

%



3.08

%



3.09

%



3.70

%



2.93

%

Adjusted net interest margin

3.05

%



3.08

%



3.09

%



2.99

%



2.93

%





















Efficiency ratio

75.2

%



69.8

%



81.3

%



75.7

%



74.6

%

Adjustment to remove hedging gains

%



%



%



9.2

%



%

Adjustment to remove DOJ benefit

%



6.3

%



%



%



%

Adjustment to remove Wells Fargo acquisition costs

%



%



(0.5)

%



(5.7)

%



(0.5)

%

Adjusted efficiency ratio

75.2

%



76.1

%



80.8

%



79.2

%



74.1

%

 

For more information, contact:             

Kenneth Schellenberg

FBCInvestorRelations@flagstar.com

(248) 312-5741

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/flagstar-bancorp-reports-third-quarter-2019-net-income-of-63-million-or-1-11-per-diluted-share-300942594.html

SOURCE Flagstar Bancorp, Inc.

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