Flagstar Reports Fourth Quarter 2015 Net Income of $33 million, or $0.44 per Diluted Share

Company makes continued progress in successfully executing business plan

Key Q4 Highlights

- Net interest income grew 4 percent from third quarter 2015, driven by a 5 percent increase in earning assets

- Gain on loan sales fell $22 million, or 32 percent, from prior quarter due to seasonal factors and TILA-RESPA Integrated Disclosure ("TRID")

- Net charge-offs and consumer delinquencies improved on solid credit performance

- Tier 1 leverage ratio remained strong at 11.5 percent

Jan 26, 2016, 06:30 ET from Flagstar Bancorp, Inc.

TROY, Mich., Jan. 26, 2016 /PRNewswire/ -- Flagstar Bancorp, Inc. (NYSE: FBC), the holding company for Flagstar Bank, FSB, today reported fourth quarter 2015 net income of $33 million, or $0.44 per diluted share, as compared to $47 million in the third quarter 2015, or $0.69 per diluted share, and net income of $11 million in the fourth quarter 2014, or $0.07 per diluted share. The full year 2015 net income was $158 million, or $2.24 per diluted share, as compared to a full year 2014 net loss of $70 million, or $1.72 loss per diluted share.

"Flagstar had a very good year in 2015, posting the highest level of pre-tax income since 2003," said Alessandro P. DiNello, president and chief executive officer of Flagstar Bancorp, Inc. "We made continued progress in the fourth quarter, generating higher net interest income through solid growth in earning assets and maintaining a clean credit profile."

"As we expected, our mortgage revenues were seasonally lower. We were also impacted by TRID. The Company took a careful approach with the implementation of TRID, taking greater control in creating and delivering disclosure documents. Given our predominantly third party business model, we experienced more of an impact than other bank originators. We are taking steps to address this issue while building market share in our distributed and direct-to-consumer retail channels."

"We look forward to 2016. Despite the economic uncertainties created by Fed tightening and the regulatory challenges the industry faces, we like our position. We have a solid business plan, a strong balance sheet, a more profitable and diversified business mix and the team we want. We continue to grow our businesses, our regulatory relationships are strong and we remain confident we will move toward optimizing our capital structure in 2016 with the expected redemption of our TARP preferred and the restoration of interest payments on our Trust Preferred securities."

Fourth Quarter 2015 Highlights:

Income Statement Highlights






Three Months Ended


December 31,
 2015

September 30,
 2015

June 30,
 2015

March 31,
 2015

December 31,
 2014


(Dollars in millions)

Consolidated Statements of Income






Net interest income

$

76


$

73


$

73


$

65


$

61


(Benefit) provision for loan losses

(1)


(1)


(13)


(4)


5


Noninterest income

97


128


126


119


98


Noninterest expense

129


131


138


138


139


Income before income taxes

45


71


74


50


15


Provision for income taxes

12


24


28


18


4


Net income

$

33


$

47


$

46


$

32


$

11








Income per share:






Basic

$

0.45


$

0.70


$

0.69


$

0.43


$

0.07


Diluted

$

0.44


$

0.69


$

0.68


$

0.43


$

0.07


 

 


Key Ratios






Three Months Ended

Change (bps)




December 31,
 2015

September 30,
 2015

June 30,
 2015

March 31,
 2015

December 31,
 2014

Seq


Yr/Yr


Net interest margin


2.69

%

2.75

%

2.79

%

2.75

%

2.80

%

(6)


(11)


Return on average assets


1.0

%

1.5

%

1.6

%

1.2

%

0.4

%

(50)


60


Return on average equity


8.6

%

12.4

%

12.7

%

8.9

%

3.2

%

(380)


540


 

 


Balance Sheet Highlights








Three Months Ended

% Change


December 31,
 2015

September 30,
 2015

June 30,
 2015

March 31,
 2015

December 31,
 2014

Seq

Yr/Yr


(Dollars in millions)



Average Balance Sheet








Average interest-earning assets

$

11,240


$

10,693


$

10,367


$

9,422


$

8,725


5

%

29

%

Average loans held-for-sale

2,484


2,200


2,218


1,842


1,687


13

%

47

%

Average loans held-for-investment

5,642


5,412


4,938


4,293


4,031


4

%

40

%

Average total deposits

8,132


8,260


7,736


7,368


7,146


(2)

%

14

%

 

Net Interest Income

Fourth quarter 2015 net interest income increased $3 million, or 4 percent, to $76 million, compared to $73 million for the third quarter 2015. The results were led by earning asset growth of 5 percent, partially offset by a slight drop in net interest margin.

Net interest margin decreased 6 basis points to 2.69 percent for the fourth quarter 2015, as compared to 2.75 percent for the third quarter 2015. The decrease from the prior quarter was primarily driven by a lower yield on mortgage loans and loans repurchased with government guarantees, partially offset by lower funding costs on FHLB advances. The net interest margin was also negatively impacted by a seasonal decline in company-controlled deposits due to tax payments.

Average loans held-for-investment totaled $5.6 billion for the fourth quarter 2015, increasing $230 million, or 4 percent, compared to the third quarter 2015. The increase was driven by higher commercial real estate and mortgage loans. Average commercial real estate loans grew $115 million, or 17 percent, and average residential mortgage loans rose $77 million, or 3 percent.

Average total deposits were $8.1 billion in the fourth quarter 2015, decreasing $128 million, or 2 percent, from the prior quarter. The decline was led by a seasonal drop in company-controlled deposits, partially offset by an increase in government and retail deposits. Average company-controlled deposits decreased $244 million, or 16 percent, due to tax payments. Average government deposits rose $49 million, or 5 percent, due to seasonal increases. Average retail deposits increased $67 million, or 1 percent, led by a 4 percent increase in demand deposits.

Provision for Loan Losses

The Company experienced a provision benefit in the fourth quarter 2015, resulting primarily from the full payoff of a commercial loan. The benefit for loan losses totaled $1 million for the fourth quarter 2015, unchanged from a benefit of $1 million for the third quarter 2015.

Net charge-offs in the fourth quarter 2015 were $9 million, or 0.62 percent of applicable loans, compared to $24 million, or 1.84 percent of applicable loans in the prior quarter. The fourth quarter 2015 amount included $2 million of net charge-offs associated with the sale of $11 million (unpaid principal balance) of nonperforming loans. The third quarter 2015 amount included $16 million of net charge-offs associated with the sale of $233 million (unpaid principal balance) of interest-only and lower performing loans. Excluding loan sales or transfers in both quarters, net charge-offs in the fourth quarter 2015 were $7 million, or 0.51 percent of applicable loans, compared to $8 million, or 0.61 percent of applicable loans in the prior quarter.

Noninterest Income

Fourth quarter 2015 noninterest income decreased $31 million, or 24 percent, to $97 million, as compared to $128 million for the third quarter 2015. The fourth quarter 2015 results were led by lower net gain on loan sales, a decline in loan fees and charges and a reduced net return on the mortgage servicing asset.

Fourth quarter 2015 net gain on loan sales decreased $22 million, or 32 percent, to $46 million, as compared to $68 million for the third quarter 2015, due to seasonal factors and the impact of TRID. In the fourth quarter 2015, fallout-adjusted locks decreased 23 percent to $5.0 billion. The Company took a careful approach with TRID implementation, taking greater control in creating and delivering disclosure documents. It experienced more of an impact than other bank originators due to its third party business model. The net gain on loan sale margin fell 13 basis points to 0.92 percent for the fourth quarter 2015, as compared to 1.05 percent for the third quarter 2015, led by price competition. The Company has initiated a plan to address its volume levels and continues to build a stronger distributed and direct-to-consumer retail business.

 

Mortgage Metrics








Three Months Ended

Change (% / bps)


December 31,
 2015

September 30,
 2015

June 30,
 2015

March 31,
 2015

December 31,
 2014

Seq

Yr/Yr


(Dollars in millions)



GOS margin (change in bps) (1)

0.92

%

1.05

%

1.21

%

1.27

%

0.87

%

(13)


5


Gain on loan sales

$

46


$

68


$

83


$

91


$

53


(32)

%

(13)

%

Mortgage rate lock commitments (fallout-adjusted) (2)

$

5,027


$

6,495


$

6,804


$

7,185


$

6,156


(23)

%

(18)

%

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

361


369


378


385


383


(2)

%

(6)

%

Capitalized value of mortgage servicing rights

1.13

%

1.12

%

1.15

%

1.03

%

1.01

%

1


12




(1)

Gain on sale margin is based on net gain on loan sales to fallout-adjusted mortgage rate lock commitments.

(2)

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.

(3)

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

 

Loan fees and charges fell to $14 million for the fourth quarter 2015, as compared to $17 million in the third quarter 2015. The decrease primarily reflected lower mortgage closings.

Net return on the mortgage servicing asset (including the impact of economic hedges) fell to $9 million for the fourth quarter 2015, as compared to $12 million for the third quarter 2015. The decrease from the prior quarter primarily reflected a smaller impact from the collection of contingencies held back by the purchaser relating to MSR sales in prior periods. Excluding the impact of net transaction costs, the return on the mortgage servicing asset was 11 percent, which was consistent with the prior quarter. The return in the fourth quarter 2015 was better than the Company's long-term return target as it benefited from slower prepayments and positive economic hedging results.

Noninterest Expense

Noninterest expense decreased $2 million, or 2 percent, to $129 million for the fourth quarter 2015, as compared to $131 million for the third quarter 2015. The fourth quarter 2015 results were driven by lower commissions and loan processing expense related to decreased business activity and lower federal insurance premiums, partially offset by higher asset resolution expense.

Commissions were $8 million for the fourth quarter 2015, as compared to $10 million for the third quarter 2015. The $2 million decrease in the fourth quarter 2015 was primarily attributable to lower mortgage closings.

Fourth quarter 2015 asset resolution expense was $2 million higher than third quarter 2015. The prior quarter reflected a benefit for reimbursements. The low level of asset resolution expense in the fourth quarter 2015 reflected the Company's success in de-risking the balance sheet.

Federal insurance premiums were $5 million for the fourth quarter 2015, as compared to $6 million for the third quarter 2015, reflecting the Company's improved risk profile.

Loan processing expense was $12 million for the fourth quarter 2015, as compared to $14 million for the third quarter 2015. The $2 million decline in the current quarter was primarily attributable to lower mortgage closings.

Income Taxes

The fourth quarter 2015 provision for income taxes totaled $12 million, as compared to $24 million in the third quarter 2015. The effective tax rate in the fourth quarter 2015 was 27 percent, as compared to 34 percent in the third quarter 2015. The decline in the marginal tax rate in the fourth quarter 2015 resulted primarily from benefits associated with state income taxes.

Asset Quality


Credit Quality Ratios








Three Months Ended

Change (% / bps)


December 31,
 2015

September 30,
 2015

June 30,
 2015

March 31,
 2015

December 31,
 2014

Seq

Yr/Yr


(Dollars in millions)



Allowance for loan loss to LHFI

3.0

%

3.7

%

4.3

%

5.7

%

7.0

%

(70)


(400)


Charge-offs, net of recoveries

$

9


$

24


$

18


$

41


$

9


(63)

%

%

Charge-offs, net of recoveries,

adjusted (1)

$

7


$

8


$

3


$

5


$

6


(13)

%

17

%

Total nonperforming loans held-for-
investment

$

66


$

63


$

65


$

84


$

120


5

%

(45)

%

Net charge-off ratio (annualized)

0.62

%

1.84

%

1.49

%

3.97

%

0.91

%

(122)


(29)


Net charge-off ratio, adjusted (annualized) (1)

0.51

%

0.61

%

0.26

%

0.45

%

0.60

%

(10)


(9)


Nonperforming loans to LHFI

1.05

%

1.15

%

1.22

%

1.81

%

2.71

%

(10)


(166)




(1)

Excludes charge-offs of $2 million, $16 million, $15 million, $36 million and $3 million related to the sale or transfer of nonperforming loans and    TDRs during the three months ended December 31, 2015, September 30, 2015, June 30, 2015, March 31, 2015, and December 31, 2014, respectively.

 

The allowance for loan losses was $187 million at December 31, 2015, covering 3.0 percent of loans held-for-investment. The allowance for loan losses was $197 million at September 30, 2015, covering 3.7 percent of loans held-for-investment. The decrease in the allowance for loan losses in the fourth quarter 2015 was largely due to charge-offs of residential mortgages, the sale of nonperforming loans and the addition of higher credit quality loans to the portfolio.

Fourth quarter 2015 net charge-offs were $9 million, representing 0.62 percent of applicable loans. This represented a decrease of $15 million from the third quarter 2015 net charge-offs of $24 million, or 1.84 percent of applicable loans. Excluding loan sales or transfers in both quarters, net charge-offs in the fourth quarter 2015 were $7 million, or 0.51 percent, compared to $8 million, or 0.61 percent in the prior quarter. Fourth quarter 2015 net charge-offs included $3 million of loans with government guarantees. The remaining $4 million of charge-offs accounted for 0.29 percent of applicable loans.

Nonperforming loans increased to $66 million at December 31, 2015 from $63 million at September 30, 2015. The ratio of nonperforming loans to loans held-for-investment decreased to 1.05 percent at December 31, 2015 from 1.15 percent at September 30, 2015. At December 31, 2015, consumer loan delinquencies (30-89 days past due) totaled $14 million, or 38 basis points, a decrease of 25 basis points from September 30, 2015 and a decrease of 129 basis points from the same period last year. There were no commercial loan delinquencies (30-89 days past due) at December 31, 2015.

Capital

Capital Ratios (Bancorp) (1)

Three Months Ended

Change (% / bps)


December 31,
 2015

September 30,
 2015

June 30,
 2015

March 31,
 2015

December 31,
 2014

Seq

Yr/Yr

Total capital

20.28

%

21.64

%

21.30

%

22.61

%

24.12

%

(136)


(384)


Tier 1 capital

18.98

%

20.32

%

19.97

%

21.26

%

22.81

%

(134)


(383)


Tier 1 leverage

11.51

%

11.65

%

11.47

%

12.02

%

12.59

%

(14)


(108)


Mortgage servicing rights to Tier 1
capital

20.63

%

21.12

%

24.20

%

22.20

%

21.80

%

(49)


(117)


Book value per common share (change in percent)

$

22.33


$

21.91


$

20.98


$

20.43


$

19.64


2

%

14

%


(1)

On January 1, 2015, the Basel III rules became effective, subject to transition provisions primarily related to regulatory deductions and adjustments impacting common equity Tier 1 capital and Tier 1 capital. We reported under Basel I (which included the Market Risk Final Rules) at December 31, 2014 and prior.






















 

The Company's regulatory capital ratios remain well above current regulatory quantitative guidelines for "well-capitalized" institutions. At December 31, 2015, the Company had a Tier 1 leverage ratio of 11.51 percent, as compared to 11.65 percent at September 30, 2015. The decrease in the ratio resulted from the deployment of capital for balance sheet growth. At December 31, 2015, the Company had a common equity-to-assets ratio of 9.20 percent.

Earnings Conference Call

As previously announced, the Company's fourth quarter 2015 earnings call will be held Tuesday, January 26, 2016 at 11 a.m. (ET).

To join the call, please dial (877) 780-3381 toll free or (719) 457-2621, and use passcode 4668782. Please call at least 10 minutes before the conference is scheduled to begin. A replay will be available for five business days by calling (888) 203-1112 toll free or (719) 457-0820, using passcode 4668782.

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

It will be archived on that site and will be available for replay and download. The slide presentation accompanying the conference call will be posted on the site.

About Flagstar

Flagstar Bancorp, Inc. (NYSE: FBC) is a $13.7 billion savings and loan holding company headquartered in Troy, Mich. Flagstar Bank, FSB, the largest bank headquartered in Michigan, provides commercial, small business, and consumer banking services through 99 branches in the state. It also provides home loans through a wholesale network of brokers and correspondents in all 50 states, as well as through 10 retail centers in nine states. Flagstar is the 10th largest national originator of mortgage loans and a top 20 mortgage servicer, handling payments and record keeping for over $72.5 billion home loans for over 360,000 borrowers. For more information, please visit flagstar.com.

Use of Non-GAAP Financial Measures

In addition to results presented in accordance with GAAP, this press release includes non-GAAP financial measures such as the ratio of total nonperforming assets to Tier 1 capital (to adjusted total assets) and estimated Basel III ratios. The Company believes these non-GAAP financial measures provide additional information that is useful to investors in helping to understand the underlying performance and trends of Flagstar.

Non-GAAP financial measures have inherent limitations, which are not required to be uniformly applied and are not audited. Readers should be aware of these limitations and should be cautious with respect to the use of such measures. To mitigate these limitations, there are practices in place to ensure that these measures are calculated using the appropriate GAAP or regulatory components in their entirety and to ensure that the Company's performance is properly reflected to facilitate consistent period-to-period comparisons. Although the Company believes the non-GAAP financial measures disclosed in this report enhance investors' understanding of our business and performance, these non-GAAP measures should not be considered in isolation, or as a substitute for those financial measures prepared in accordance with GAAP.

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

Forward-Looking Statements

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

 

 

Flagstar Bancorp, Inc.

Consolidated Statements of Financial Condition

(Dollars in millions)



December 31,
 2015


September 30,
 2015


December 31,
 2014


(Unaudited)


(Unaudited)



Assets






Cash and cash equivalents






Cash

$

54



$

65



$

47


Interest-earning deposits

154



130



89


Total cash and cash equivalents

208



195



136


    Investment securities available-for-sale

1,294



1,150



1,672


    Investment securities held-to-maturity

1,268



1,108




Loans held-for-sale

2,576



2,408



1,244


Loans with government guarantees

485



509



1,128


Loans held-for-investment, net






Loans held-for-investment

6,352



5,514



4,448


Less: allowance for loan losses

(187)



(197)



(297)


Total loans held-for-investment, net

6,165



5,317



4,151


    Mortgage servicing rights

296



294



258


    Federal Home Loan Bank stock

170



113



155


    Premises and equipment, net

250



243



238


    Net deferred tax asset

362



372



442


    Other assets

641



810



416


Total assets

$

13,715



$

12,519



$

9,840


Liabilities and Stockholders' Equity






Deposits






Noninterest-bearing

$

1,574



$

1,749



$

1,209


Interest-bearing

6,361



6,388



5,860


Total deposits

7,935



8,137



7,069


    Federal Home Loan Bank advances

3,541



2,024



514


    Long-term debt

247



279



331


    Representation and warranty reserve

40



45



53


Other liabilities

423



530



500


            Total liabilities

12,186



11,015



8,467


    Stockholders' Equity






Preferred stock

267



267



267


Common stock

1



1



1


    Additional paid in capital

1,486



1,484



1,482


    Accumulated other comprehensive income

2



12



8


    Accumulated deficit

(227)



(260)



(385)


Total stockholders' equity

1,529



1,504



1,373


Total liabilities and stockholders' equity

$

13,715



$

12,519



$

9,840


 

 

 


Flagstar Bancorp, Inc.

 Condensed Consolidated Statements of Operations

 (Dollars in millions, except per share data)

(Unaudited)




Fourth Quarter 2015 Compared to:


Three Months Ended


Third Quarter

2015

Fourth Quarter

2014


December 31,
 2015

September 30,
 2015

June 30,
 2015

March 31,
 2015

December 31,
 2014


Amount

Percent

Amount

Percent












Interest Income











Total interest income

$

95


$

91


$

90


$

79


$

72



$

4


4

%

$

23


32

%

Total interest expense

19


18


17


14


11



1


6

%

8


73

%

Net interest income

76


73


73


65


61



3


4

%

15


25

%

(Benefit) provision for loan losses

(1)


(1)


(13)


(4)


5




%

(6)


N/M


Net interest income after provision for loan losses

77


74


86


69


56



3


4

%

21


38

%

Noninterest Income











Net gain on loan sales

46


68


83


91


53



(22)


(32)

%

(7)


(13)

%

Loan fees and charges

14


17


19


17


17



(3)


(18)

%

(3)


(18)

%

Deposit fees and charges

6


7


6


6


6



(1)


(14)

%


%

Loan administration income

7


8


7


4


5



(1)


(13)

%

2


40

%

Net return (loss) on the mortgage servicing asset

9


12


9


(2)


2



(3)


(25)

%

7


N/M


Net gain (loss) on sale of assets


1


(2)



2



(1)


(100)

%

(2)


(100)

%

Representation and warranty benefit

6


6


5


2


6




%


%

Other noninterest income (loss)

9


9


(1)


1


7




%

2


29

%

Total noninterest income

97


128


126


119


98



(31)


(24)

%

(1)


(1)

%

Noninterest Expense











Compensation and benefits

59


58


59


61


59



1


2

%


%

Commissions

8


10


11


10


9



(2)


(20)

%

(1)


(11)

%

Occupancy and equipment

21


20


20


20


20



1


5

%

1


5

%

Asset resolution

2



5


8


13



2


N/M


(11)


(85)

%

Federal insurance premiums

5


6


6


6


5



(1)


(17)

%


%

Loan processing expense

12


14


14


12


11



(2)


(14)

%

1


9

%

Legal and professional expense

9


10


8


9


11



(1)


(10)

%

(2)


(18)

%

Other noninterest expense

13


13


15


12


11




%

2


18

%

Total noninterest expense

129


131


138


138


139



(2)


(2)

%

(10)


(7)

%

Income before income taxes

45


71


74


50


15



(26)


(37)

%

30


N/M


Provision for income taxes

12


24


28


18


4



(12)


(50)

%

8


N/M


Net income

$

33


$

47


$

46


$

32


$

11



$

(14)


(30)

%

$

22


N/M


Income per share











Basic

$

0.45


$

0.70


$

0.69


$

0.43


$

0.07



$

(0.25)


(36)

%

$

0.38


N/M


Diluted

$

0.44


$

0.69


$

0.68


$

0.43


$

0.07



$

(0.25)


(36)

%

$

0.37


N/M



N/M - Not meaningful

 



 

 

Flagstar Bancorp, Inc.

 Condensed Consolidated Statements of Operations

(Dollars in millions, except per share data)






Year Ended


Year Ended December 31, 2015

Compared to

Year Ended December 31, 2014


December 31,
 2015

December 31,
 2014


Amount

Percent


(Unaudited)





Total interest income

$

355


$

286



$

69


24

%

Total interest expense

68


39



29


74

%

Net interest income

287


247



40


16

%

(Benefit) provision for loan losses

(19)


132



(151)


N/M


Net interest income after provision for loan losses

306


115



191


N/M


Noninterest Income






Net gain on loan sales

288


206



82


40

%

Loan fees and charges

67


73



(6)


(8)

%

Deposit fees and charges

25


22



3


14

%

Loan administration income

26


24



2


8

%

Net return on the mortgage servicing asset

28


24



4


17

%

Net (loss) gain on sale of assets

(1)


12



(13)


N/M


Representation and warranty benefit (provision)

19


(10)



29


N/M


Other noninterest income

18


10



8


80

%

Total noninterest income

470


361



109


30

%

Noninterest Expense






Compensation and benefits

237


233



4


2

%

Commissions

39


35



4


11

%

Occupancy and equipment

81


80



1


1

%

Asset resolution

15


57



(42)


(74)

%

Federal insurance premiums

23


23




%

Loan processing expense

52


37



15


41

%

Legal and professional expense

36


51



(15)


(29)

%

Other noninterest expense

53


63



(10)


(16)

%

Total noninterest expense

536


579



(43)


(7)

%

Income (loss) before income taxes

240


(103)



343


N/M


Provision (benefit) for income taxes

82


(34)



116


N/M


Net income (loss)

158


(69)



227


N/M


Preferred stock accretion


(1)



1


(100)

%

Net income (loss)

$

158


$

(70)



$

228


N/M


Income (loss) per share






Basic

$

2.27


$

(1.72)



$

3.99


N/M


Diluted

$

2.24


$

(1.72)



$

3.96


N/M



N/M - Not meaningful

 

 

 

Flagstar Bancorp, Inc.

Summary of Selected Consolidated Financial and Statistical Data

(Dollars in millions, except share data)

(Unaudited)



Three Months Ended


Year Ended


December 31,
 2015


September 30,
 2015


December 31,
 2014


December 31,
 2015


December 31,
 2014

Mortgage loans originated (1)

$

5,824



$

7,876



$

6,603



$

29,402



$

24,608


Mortgage loans sold and securitized

$

5,164



$

7,318



$

6,831



$

26,306



$

24,407


Interest rate spread (2)

2.54

%


2.56

%


2.67

%


2.58

%


2.80

%

Net interest margin

2.69

%


2.75

%


2.80

%


2.74

%


2.91

%

Average common shares outstanding


56,449,596




56,436,026




56,310,858




56,426,977




56,246,528


Average fully diluted shares outstanding


57,502,017




57,207,503




56,792,751




57,164,523




56,246,528


Average interest-earning assets

$

11,240



$

10,693



$

8,725



$

10,436



$

8,440


Average interest-paying liabilities

$

9,078



$

8,354



$

6,918



$

8,305



$

6,780


Average stockholders' equity

$

1,547



$

1,510



$

1,395



$

1,486



$

1,406


Return (loss) on average assets

1.03

%


1.52

%


0.44

%


1.32

%


(0.71)

%

Return (loss) on average equity

8.56

%


12.41

%


3.18

%


10.63

%


(4.97)

%

Efficiency ratio

75.15

%


65.00

%


87.20

%


70.89

%


95.40

%

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

12.07

%


12.27

%


13.74

%


12.43

%


14.22

%

Charge-offs to average LHFI (3)

0.62

%


1.84

%


0.91

%


1.85

%


1.07

%

 

 


December 31,
 2015


September 30,
 2015


December 31,
 2014

Book value per common share

$

22.33



$

21.91



$

19.64


Number of common shares outstanding


56,483,258




56,436,026




56,332,307


Mortgage loans subserviced for others

$

40,244



$

42,282



$

46,724


Mortgage loans serviced for others

$

26,145



$

26,306



$

25,427


Weighted average service fee (basis points)

27.7



28.3



27.2


Capitalized value of mortgage servicing rights

1.13

%


1.12

%


1.01

%

Mortgage servicing rights to Tier 1 capital

20.63

%


21.12

%


21.80

%

Ratio of allowance for loan losses to LHFI (3)

3.00

%


3.66

%


7.01

%

Ratio of nonperforming assets to total assets

0.61

%


0.64

%


1.41

%

Equity-to-assets ratio

11.14

%


12.01

%


13.95

%

Common equity-to-assets ratio

9.20

%


9.88

%


11.24

%

Number of bank branches

99



99



107


Number of FTE employees

2,713



2,677



2,739



(1)

Includes residential first mortgage and second mortgage loans. 

(2)

Interest rate spread is the difference between the annualized yield earned on average interest-earning assets for the period and the annualized rate of interest paid on average interest-bearing liabilities for the period.

(3)

Excludes loans carried under the fair value option.

 

 

 

Flagstar Bancorp, Inc.

Earnings Per Share

(Dollars in millions, except share data)

(Unaudited)



Three Months Ended


Year Ended


December 31,
 2015


September 30,
 2015


December 31,
 2014


December 31,
 2015


December 31,
 2014

Net income (loss)

$

33



$

47



$

11



$

158



$

(69)


Less: preferred stock accretion









(1)


Net income (loss) from continuing operations

33



47



11



158



(70)


Deferred cumulative preferred stock dividends

(8)



(8)



(7)



(30)



(26)


Net income (loss) applicable to Common Stockholders

$

25



$

39



$

4



$

128



$

(96)


Weighted Average Shares










Weighted average common shares
outstanding

56,449,596



56,436,026



56,310,858



56,426,977



56,246,528


Effect of dilutive securities










Warrants

348,939



339,478



248,202



305,484




Stock-based awards

703,482



431,999



233,691



432,062




Weighted average diluted common shares

57,502,017



57,207,503



56,792,751



57,164,523



56,246,528


Earnings (loss) per common share










Net income (loss) applicable to Common Stockholders

$

0.45



$

0.70



$

0.07



$

2.27



$

(1.72)


Effect of dilutive securities










Warrants







(0.01)




Stock-based awards

(0.01)



(0.01)





(0.02)




Diluted earnings (loss) per share

$

0.44



$

0.69



$

0.07



$

2.24



$

(1.72)


 

 

 

Average Balances, Yields and Rates

(Dollars in millions)

(Unaudited)



Three Months Ended


December 31, 2015


September 30, 2015


December 31, 2014


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

$

2,484


$

24


3.88

%


$

2,200


$

22


3.94

%


$

1,687


$

18


4.20

%

Loans with government guarantees

496


4


2.84

%


547


5


3.37

%


1,141


6


1.96

%

Loans held-for-investment












Consumer loans (1)

3,423


30


3.52

%


3,367


30


3.67

%


2,510


23


3.81

%

Commercial loans (1)

2,219


21


3.77

%


2,045


20


3.80

%


1,521


14


3.62

%

Total loans held-for-investment

5,642


51


3.62

%


5,412


50


3.72

%


4,031


37


3.74

%

Investment securities

2,441


16


2.55

%


2,313


14


2.50

%


1,621


11


2.66

%

Interest-earning deposits

177



0.49

%


221



0.53

%


245



0.23

%

Total interest-earning assets

11,240


$

95


3.36

%


10,693


$

91


3.42

%


8,725


$

72


3.30

%

Other assets

1,585





1,612





1,429




Total assets

$

12,825





$

12,305





$

10,154




Interest-Bearing Liabilities












Retail deposits












Demand deposits

$

431


$


0.13

%


$

429


$


0.14

%


$

421


$


0.14

%

Savings deposits

3,725


8


0.84

%


3,732


8


0.84

%


3,394


6


0.68

%

Money market deposits

272



0.39

%


262



0.33

%


257



0.22

%

Certificates of deposit

813


2


0.88

%


785


2


0.80

%


837


1


0.68

%

Total retail deposits

5,241


10


0.76

%


5,208


10


0.75

%


4,909


7


0.61

%

Government deposits












Demand deposits

304



0.40

%


286



0.39

%


230



0.39

%

Savings deposits

401


1


0.52

%


445


1


0.52

%


386


1


0.52

%

Certificates of deposit

410


1


0.45

%


335



0.40

%


373



0.36

%

Total government deposits

1,115


2


0.46

%


1,066


1


0.45

%


989


1


0.43

%

Total interest-bearing deposits

6,356


12


0.71

%


6,274


11


0.70

%


5,898


8


0.58

%

Federal Home Loan Bank advances

2,445


5


0.92

%


1,795


5


1.17

%


773


1


0.24

%

Other

277


2


2.66

%


285


2


2.51

%


247


2


2.84

%

Total interest-bearing liabilities

9,078


19


0.83

%


8,354


18


0.86

%


6,918


11


0.62

%

Noninterest-bearing deposits (2)

1,776





1,986





1,247




Other liabilities

424





455





594




Stockholders' equity

1,547





1,510





1,395




Total liabilities and stockholder's equity

$

12,825





$

12,305





$

10,154




Net interest-earning assets

$

2,162






$

2,339





$

1,807




Net interest income


$

76





$

73





$

61



Interest rate spread (3)



2.54

%




2.56

%




2.67

%

Net interest margin (4)



2.69

%




2.75

%




2.80

%

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



123.8

%




128.0

%




126.1

%

Total average deposits

$

8,132





$

8,260





$

7,146






(1)

Consumer loans include: residential first mortgage, second mortgage, HELOC and other consumer loans. Commercial loans include: commercial real estate, commercial and industrial, and warehouse lending loans.

(2)

Includes company-controlled deposits that arise due to the servicing of loans for others, which do not bear interest.

(3)

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

(4)

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

 

 

 

Average Balances, Yields and Rates

(Dollars in millions)

(Unaudited)



Year Ended


December 31, 2015


December 31, 2014


Average Balance

Interest

Annualized

Yield/Rate


Average Balance

Interest

Annualized

Yield/Rate



Interest-Earning Assets








Loans held-for-sale

$

2,188


$

85


3.90

%


$

1,534


$

65


4.24

%

Loans with government guarantees

633


18


2.86

%


1,216


29


2.39

%

Loans held-for-investment








Consumer loans (1)

3,083


114


3.68

%


2,681


103


3.85

%

Commercial loans (1)

1,993


78


3.88

%


1,294


49


3.70

%

Total loans held-for-investment

5,076


192


3.76

%


3,975


152


3.80

%

Investment securities

2,305


59


2.55

%


1,496


39


2.61

%

Interest-earning deposits

234


1


0.50

%


219


1


0.25

%

Total interest-earning assets

10,436


$

355


3.39

%


8,440


$

286


3.38

%

Other assets

1,520





1,446




Total assets

$

11,956





$

9,886




Interest-Bearing Liabilities








Retail deposits








Demand deposits

$

429


$

1


0.14

%


$

422


$

1


0.14

%

Savings deposits

3,693


30


0.82

%


3,139


18


0.61

%

Money market deposits

258


1


0.31

%


266


1


0.20

%

Certificates of deposit

787


6


0.77

%


915


6


0.73

%

Total retail deposits

5,167


38


0.73

%


4,742


26


0.57

%

Government deposits








Demand deposits

257


1


0.39

%


182


1


0.38

%

Savings deposits

405


2


0.52

%


320


2


0.51

%

Certificates of deposit

358


1


0.39

%


349


1


0.33

%

Total government deposits

1,020


4


0.44

%


851


4


0.41

%

Total interest-bearing deposits

6,187


42


0.68

%


5,593


30


0.54

%

Federal Home Loan Bank advances

1,811


19


1.00

%


939


2


0.23

%

Other

307


7


2.42

%


248


7


2.72

%

Total interest-bearing liabilities

8,305


68


0.82

%


6,780


39


0.58

%

Noninterest-bearing deposits (2)

1,690





1,141




Other liabilities

475





559




Stockholders' equity

1,486





1,406




Total liabilities and stockholder's equity

$

11,956





$

9,886




Net interest-earning assets

$

2,131





$

1,660




Net interest income


$

287





$

247



Interest rate spread (3)



2.58

%




2.80

%

Net interest margin (4)



2.74

%




2.91

%

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



125.7

%




124.5

%

Total average deposits

$

7,877





$

6,734












(1)

Consumer loans include: residential first mortgage, second mortgage, HELOC and other consumer loans. Commercial loans include: commercial real estate, commercial and industrial, and warehouse lending loans.

(2)

Includes company-controlled deposits that arise due to the servicing of loans for others, which do not bear interest.

(3)

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

(4)

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

 

 

 

Gain on Loan Sales

(Dollars in millions)

(Unaudited)



Three Months Ended


December 31,
 2015


September 30,
 2015


June 30,
 2015


March 31,
 2015


December 31,
 2014


(Dollars in millions)

Net gain on loan sales

$

46



$

68



$

83



$

91



$

53


Mortgage rate lock commitments (gross)

$

6,258



$

8,025



$

8,400



$

9,035



$

7,605


Loans sold and securitized

$

5,164



$

7,318



$

7,571



$

6,254



$

6,831


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

$

5,027



$

6,495



$

6,804



$

7,185



$

6,156


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

0.92

%


1.05

%


1.21

%


1.27

%


0.87

%




Year Ended


December 31,
 2015


December 31,
 2014


(Dollars in millions)

Net gain on loan sales

$

288



$

206


Mortgage rate lock commitments (gross)

$

31,718



$

29,546


Loans sold and securitized

$

26,306



$

24,407


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

$

25,512



$

24,007


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

1.13

%


0.86

%



(1)

Fallout-adjusted mortgage rate lock commitments are adjusted by a percentage of mortgage loans in the pipeline that are not expected to close based on previous historical experience and the level of interest rates. The net margin is based on net gain on loan sales to fallout-adjusted mortgage rate lock commitments.

 

 

 

Regulatory Capital - Bancorp

(Dollars in millions)

(Unaudited)



December 31,
 2015


September 30,
 2015


June 30,
 2015


March 31,
 2015


December 31,
 2014


Amount

Ratio


Amount

Ratio


Amount

Ratio


Amount

Ratio


Amount

Ratio

Tier 1 leverage (to adjusted
tangible assets) (1)

$

1,435


11.51

%


$

1,393


11.65

%


$

1,309


11.47

%


$

1,257


12.02

%


$

1,184


12.59

%

Total adjusted tangible asset base

$

12,474




$

11,957




$

11,406




$

10,453




$

9,403



Tier 1 common equity (to risk weighted assets) (1)

$

1,065


14.09

%


$

1,024


14.93

%


$

954


14.56

%


$

909


15.38

%


N/A


N/A


Tier 1 capital (to risk weighted assets) (1)

$

1,435


18.98

%


$

1,393


20.32

%


$

1,309


19.97

%


$

1,257


21.26

%


$

1,184


22.81

%

Total capital (to risk weighted assets)

$

1,534


20.28

%


$

1,483


21.64

%


$

1,396


21.30

%


$

1,336


22.61

%


$

1,252


24.12

%

Risk weighted asset base

$

7,561




$

6,857




$

6,553




$

5,909




$

5,190





(1)

On January 1, 2015, the Basel III rules became effective, subject to transition provisions primarily related to regulatory deductions and adjustments impacting common equity Tier 1 capital and Tier 1 capital. We reported under Basel I (which included the Market Risk Final Rules) at December 31, 2014 and prior.

N/A - Not applicable.

 

 

 

Regulatory Capital - Bank

(Dollars in millions)

(Unaudited)



December 31,
 2015


September 30,
 2015


June 30,
 2015


March 31,
 2015


December 31,
 2014


Amount

Ratio


Amount

Ratio


Amount

Ratio


Amount

Ratio


Amount

Ratio

Tier 1 leverage (to adjusted
tangible assets) (1)

$

1,472


11.79

%


$

1,426


11.91

%


$

1,337


11.70

%


$

1,278


12.21

%


$

1,167


12.43

%

Total adjusted tangible asset
base

$

12,491




$

11,975




$

11,424




$

10,471




$

9,392



Tier 1 common equity (to risk weighted assets) (1)

$

1,472


19.42

%


$

1,426


20.75

%


$

1,337


20.35

%


$

1,278


21.58

%



N/A


N/A


Tier 1 capital (to risk weighted assets) (1)

$

1,472


19.42

%


$

1,426


20.75

%


$

1,337


20.35

%


$

1,278


21.58

%


$

1,167


22.54

%

Total capital (to risk weighted assets)

$

1,570


20.71

%


$

1,516


22.05

%


$

1,423


21.66

%


$

1,357


22.91

%


$

1,235


23.85

%

Risk weighted asset base

$

7,582




$

6,874




$

6,570




$

5,925




$

5,179





(1)

On January 1, 2015, the Basel III rules became effective, subject to transition provisions primarily related to regulatory deductions and adjustments impacting common equity Tier 1 capital and Tier 1 capital. We reported under Basel I (which included the Market Risk Final Rules) at December 31, 2014 and prior.

N/A - Not applicable.

 

 

 

Loan Originations

(Dollars in millions)

(Unaudited)


Three Months Ended


December 31,
 2015


September 30,
 2015


December 31,
 2014

Consumer loans









    Mortgage (1)

$

5,824


96.0

%


$

7,876


97.9

%


$

6,603


98.5

%

    Other consumer (2)

39


0.6

%


39


0.5

%


27


0.4

%

Total consumer loans

5,863


96.6

%


7,915


98.4

%


6,630


98.9

%

Commercial loans (3)

205


3.4

%


131


1.6

%


76


1.1

%

Total loan originations

$

6,068


100.0

%


$

8,046


100.0

%


$

6,706


100.0

%




Year Ended


December 31,
 2015


December 31,
 2014

    Mortgage (1)

$

29,402


98.2

%


$

24,607


98.0

%

    Other consumer (2)

132


0.4

%


93


0.4

%

Total consumer loans

29,534


98.6

%


24,700


98.4

%

Commercial loans (3)

415


1.4

%


398


1.6

%

Total loan originations

$

29,949


100.0

%


$

25,098


100.0

%



(1)

Includes residential first mortgage and second mortgage loans. 

(2)

Other consumer loans include: HELOC and other consumer loans.

(3)

Commercial loans include: commercial real estate and commercial and industrial loans.

 

 

 


Loans Held-for-Investment

(Dollars in millions)

(Unaudited)



December 31,
 2015


September 30,
 2015


December 31,
 2014

Consumer loans









Residential first mortgage

$

3,100


48.8

%


$

2,726


49.5

%


$

2,193


49.2

%

Second mortgage

135


2.1

%


140


2.5

%


149


3.4

%

HELOC

384


6.0

%


405


7.3

%


257


5.8

%

Other

31


0.5

%


32


0.6

%


31


0.7

%

    Total consumer loans

3,650


57.5

%


3,303


59.9

%


2,630


59.1

%

Commercial loans









Commercial real estate

814


12.8

%


707


12.8

%


620


13.9

%

Commercial and industrial

552


8.7

%


493


8.9

%


429


9.7

%

Warehouse lending

1,336


21.0

%


1,011


18.4

%


769


17.3

%

    Total commercial loans

2,702


42.5

%


2,211


40.1

%


1,818


40.9

%

Total loans held-for-investment

$

6,352


100.0

%


$

5,514


100.0

%


$

4,448


100.0

%

 

 

 


Residential Loans Serviced

(Dollars in millions)

(Unaudited)



December 31,
 2015


September 30,
 2015


December 31,
 2014


Unpaid Principal Balance

Number of
accounts


Unpaid Principal Balance

Number of
accounts


Unpaid Principal Balance

Number of
accounts

Serviced for own loan portfolio (1)

$

6,088


30,683



$

5,707


29,764



$

4,521


26,268


Serviced for others

26,145


118,662



26,306


118,702



25,427


117,881


Subserviced for others (2)

40,244


211,740



42,282


220,648



46,724


238,498


Total residential loans serviced

$

72,477


361,085



$

74,295


369,114



$

76,672


382,647




(1)

Includes loans held-for-investment (residential first mortgage, second mortgage and HELOC), loans-held-for-sale (residential first mortgage), loans with government guarantees (residential first mortgage), and repossessed assets.

(2)

Does not include temporary short-term subservicing performed as a result of sales of servicing-released mortgage servicing rights. Includes repossessed assets.

 

 

Allowance for Loan Losses

(Dollars in millions)

(Unaudited)



Three Months Ended


Year Ended


December 31,
 2015


September 30,
 2015


December 31,
 2014


December 31,
 2015


December 31,
 2014

Beginning balance

$

197



$

222



$

301



$

297



$

207


Provision (benefit) for loan losses

(1)



(1)



5



(19)



132


Charge-offs










Consumer loans










     Residential first mortgage

(7)



(21)



(9)



(87)



(38)


     Second mortgage

(2)



(1)





(4)



(3)


     HELOC

(1)



(1)



(1)



(3)



(6)


     Other

(1)



(1)





(4)



(2)


 Total consumer loans

(11)



(24)



(10)



(98)



(49)


Commercial loans










     Commercial real estate









(3)


     Commercial and industrial



(3)





(3)




 Total commercial loans



(3)





(3)



(3)


Total charge-offs

(11)



(27)



(10)



(101)



(52)


Recoveries










Consumer loans










     Residential first mortgage



1





3



3


     Second mortgage

1



1





2



1


     Other

1



1



1



3



3


Total consumer loans

2



3



1



8



7


Commercial loans










     Commercial real estate







2



3


Total commercial loans







2



3


Total recoveries

2



3



1



10



10


Charge-offs, net of recoveries

(9)



(24)



(9)



(91)



(42)


Ending balance

$

187



$

197



$

297



$

187



$

297


Net charge-off ratio (annualized) (1)

0.62

%


1.84

%


0.91

%


1.85

%


1.07

%

Net charge-off ratio, adjusted (annualized) (1)(2)

0.51

%


0.61

%


0.60

%


0.45

%


0.77

%

Net charge-off ratio (annualized) by loan type (1)










Residential first mortgage

1.03

%


2.88

%


1.58

%


3.34

%


1.47

%

Second mortgage

1.89

%


1.04

%


1.07

%


1.72

%


2.73

%

HELOC and consumer

0.86

%


1.35

%


0.78

%


1.18

%


3.39

%

Commercial real estate

%


(0.03)

%


(0.08)

%


(0.29)

%


(0.16)

%

Commercial and industrial

(0.01)

%


2.69

%


(0.03)

%


0.71

%


(0.05)

%



(1)

Excludes loans carried under the fair value option.

(2)

Excludes charge-offs of $2 million, $16 million and $3 million, related to the sale of nonperforming loans and TDRs during the three months ended December 31, 2015, September 30, 2015 and December 31, 2014, respectively, and $69 million and $11 million during the years ended December 31, 2015 and 2014, respectively.

 

 

 


Representation and Warranty Reserve

(Dollars in millions)

(Unaudited)




Three Months Ended


Year Ended


December 31,
 2015


September 30,
 2015


December 31,
 2014


December 31,
 2015


December 31,
 2014

 Balance, beginning of period

$

45



$

48



$

57



$

53



$

54


 Provision (release)











Charged to gain on sale for
current loan sales

1



2



2



7



7



Charged to representation and warranty (benefit) provision

(6)



(6)



(6)



(19)



10



Total

(5)



(4)



(4)



(12)



17


 Charge-offs, net



1





(1)



(18)


 Balance, end of period

$

40



$

45



$

53



$

40



$

53
























 

 

 

Composition of Allowance for Loan Losses

(Dollars in millions)

(Unaudited)


December 31, 2015

Collectively Evaluated Reserves


Individually Evaluated Reserves


Total

Consumer loans






   Residential first mortgage

$

93



$

22



$

115


   Second mortgage

5



6



11


   HELOC

20



1



21


   Other

2



1



3


Total consumer loans

120



30



150


Commercial loans






   Commercial real estate

18





18


   Commercial and industrial

13





13


   Warehouse lending

6





6


Total commercial loans

37





37


Total allowance for loan losses

$

157



$

30



$

187


 

 


September 30, 2015

Collectively Evaluated Reserves


Individually Evaluated Reserves


Total

Consumer loans






   Residential first mortgage

$

108



$

21



$

129


   Second mortgage

6



7



13


   HELOC

22



1



23


   Other

1





1


Total consumer loans

137



29



166


Commercial loans






   Commercial real estate

13





13


   Commercial and industrial

14





14


   Warehouse lending

4





4


Total commercial loans

31





31


Total allowance for loan losses

$

168



$

29



$

197


 

 

 


Nonperforming Loans and Assets

(Dollars in millions)

(Unaudited)



December 31,
 2015


September 30,
 2015


December 31,
 2014

Nonperforming loans

$

31



$

37



$

74


Nonperforming TDRs

7



6



29


Nonperforming TDRs at inception but performing for less than six months

28



20



17


Total nonperforming loans held-for-investment

66



63



120


Real estate and other nonperforming assets, net

17



17



19


Nonperforming assets held-for-investment, net (1)

$

83



$

80



$

139








Ratio of nonperforming assets to total assets

0.61

%


0.64

%


1.41

%

Ratio of nonperforming loans held-for-investment to loans held-for-investment

1.05

%


1.15

%


2.71

%

Ratio of nonperforming assets to loans held-for-investment and repossessed assets

1.32

%


1.45

%


3.12

%



(1)

Does not include nonperforming loans held-for-sale of $12 million, $14 million and $15 million at December 31, 2015, September 30, 2015, December 31, 2014, respectively.

 

 

 

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 Investment
Loans

December 31, 2015






Consumer loans

$

10


$

4


$

64


$

78


$

3,650


Commercial loans



2


2


2,702


     Total loans

$

10


$

4


$

66


$

80


$

6,352


September 30, 2015






Consumer loans

$

13


$

8


$

60


$

81


$

3,303


Commercial loans



3


3


2,211


     Total loans

$

13


$

8


$

63


$

84


$

5,514


December 31, 2014






Consumer loans

$

34


$

10


$

120


$

164


$

2,630


Commercial loans





1,818


     Total loans

$

34


$

10


$

120


$

164


$

4,448




(1)

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

 

 

 


Troubled Debt Restructurings

(Dollars in millions)

(Unaudited)



TDRs


Performing


Nonperforming


Nonperforming TDRs at inception but performing for less than six months


Total

December 31, 2015


Consumer loans

$

101



$

7



$

28



$

136


Commercial loans








     Total TDR loans

$

101



$

7



$

28



$

136


September 30, 2015








Consumer loans

$

97



$

6



$

20



$

123


Commercial loans








     Total TDR loans

$

97



$

6



$

20



$

123


December 31, 2014








Consumer loans

$

361



$

29



$

17



$

407


Commercial loans

1







1


     Total TDR loans

$

362



$

29



$

17



$

408








 

 

Non-GAAP Reconciliation

(Dollars in millions)

(Unaudited)


Nonperforming assets / Tier 1 + Allowance for Loan Losses. The ratio of nonperforming assets to Tier 1 capital and allowance for loan losses divides the total level of nonperforming assets held for investment by Tier 1 capital (to adjusted total assets), as defined by bank regulations, plus allowance for loan losses. We believe these measurements are meaningful measures of capital adequacy used by investors, regulators, management, and others to evaluate the adequacy of capital in comparison to other companies within the industry.



December 31,
 2015


September 30,
 2015


December 31,
 2014

Nonperforming assets / Tier 1 capital + allowance for loan losses

(Dollars in millions)

(Unaudited)

Nonperforming assets

$

83



$

80



$

139


Tier 1 capital

1,435



1,393



1,184


Allowance for loan losses

(187)



(197)



(297)


Tier 1 capital + allowance for loan losses

$

1,622



$

1,590



$

1,481


Nonperforming assets / Tier 1 capital + allowance for loan losses

5.1

%


5.0

%


9.4

%



Basel III (transitional) to Basel III (fully phased-in) reconciliation. On January 1, 2015, the Basel III rules became effective, subject to transition provisions primarily related to regulatory deductions and adjustments impacting common equity Tier 1 capital and Tier 1 capital. We reported under Basel I (which included the Market Risk Final Rules) at December 31, 2014 and prior. When fully phased-in, Basel III will increase capital requirements through higher minimum capital levels as well as through increases in risk-weights for certain exposures. Additionally, the final Basel III rules place greater emphasis on common equity. In October 2013, the OCC and Federal Reserve released final rules detailing the U.S. implementation of Basel III and the application of the risk-based and leverage capital rules to top-tier savings and loan holding companies. We have transitioned to the Basel III framework beginning in January 2015 and are subject to a phase-in period extending through 2018. Accordingly, the calculations provided below are estimates. These measures are considered to be non-GAAP financial measures because they are not formally defined by GAAP and the Basel III implementation regulations will not be fully phased-in until January 1, 2019. The regulations are subject to change as clarifying guidance becomes available and the calculations currently include our interpretations of the requirements including informal feedback received through the regulatory process. Other entities may calculate the Basel III ratios differently from our calculations based on their interpretation of the guidelines. Since analysts and banking regulators may assess our capital adequacy using the Basel III framework, we believe that it is useful to provide investors information enabling them to assess our capital adequacy on the same basis.

 

 

 

December 31, 2015

Common Equity
Tier 1 (to Risk
Weighted Assets)


Tier 1 Leverage (to
Adjusted Tangible
Assets)


Tier 1 Capital (to
Risk Weighted
Assets)


Total Risk-Based
Capital (to Risk
Weighted Assets)


(Dollars in millions)

(Unaudited)

Flagstar Bancorp (the Company)








Regulatory capital – Basel III (transitional) to Basel III (fully
phased-in)
(1)








Basel III (transitional)

$

1,065



$

1,435



$

1,435



$

1,534


Increased deductions related to deferred tax assets, mortgage servicing assets and other capital components

(360)



(209)



(209)



(209)


Basel III (fully phased-in) capital (1)

$

705



$

1,226



$

1,226



$

1,325


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








Basel III assets (transitional)

$

7,561



$

12,474



$

7,561



$

7,561


Net change in assets

(60)



(224)



(60)



(60)


Basel III (fully phased-in) assets (1)

$

7,501



$

12,250



$

7,501



$

7,501


Capital ratios








Basel III (transitional)

14.09

%


11.51

%


18.98

%


20.28

%

Basel III (fully phased-in) (1)

9.40

%


10.01

%


16.35

%


17.67

%









(1)

On January 1, 2015, the Basel III rules became effective, subject to transition provisions primarily related to regulatory deductions and adjustments impacting common equity Tier 1 capital and Tier 1 capital. We reported under Basel I (which included the Market Risk Final Rules) at December 31, 2014.

 

 

 

December 31, 2015

Common Equity
Tier 1 (to Risk
Weighted Assets)


Tier 1 Leverage (to
Adjusted Tangible
Assets)


Tier 1 Capital (to
Risk Weighted
Assets)


Total Risk-Based
Capital (to Risk
Weighted Assets)

Flagstar Bank (the Bank)

(Dollars in millions)

(Unaudited)

Regulatory capital – Basel III (transitional) to Basel III (fully
phased-in)
(1)








Basel III (transitional)

$

1,472



$

1,472



$

1,472



$

1,570


Increased deductions related to deferred tax assets, mortgage servicing assets and other capital components

(160)



(160)



(160)



(159)


Basel III (fully phased-in) capital (1)

$

1,312



$

1,312



$

1,312



$

1,411


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








Basel III assets (transitional)

$

7,582



$

12,491



$

7,582



$

7,582


Net change in assets

148



(160)



148



148


Basel III (fully phased-in) assets (1)

$

7,730



$

12,331



$

7,730



$

7,730


Capital ratios








Basel III (transitional)

19.42

%


11.79

%


19.42

%


20.71

%

Basel III (fully phased-in) (1)

16.98

%


10.64

%


16.98

%


18.25

%











(1)

On January 1, 2015, the Basel III rules became effective, subject to transition provisions primarily related to regulatory deductions and adjustments impacting common equity Tier 1 capital and Tier 1 capital. We reported under Basel I (which included the Market Risk Final Rules) at December 31, 2014.

 

For more information, contact:                    

David L. Urban
david.urban@flagstar.com
(248) 312-5970

SOURCE Flagstar Bancorp, Inc.



RELATED LINKS

http://www.flagstar.com