PR Newswire | Jul 28, 2021 06:31AM EDT

$2.74 Per Diluted Share

07/28 05:30 CDT

Flagstar Bancorp Reports Second Quarter 2021 Net Income of $147 million, or $2.74 Per Diluted Share TROY, Mich., July 28, 2021

TROY, Mich., July 28, 2021 /PRNewswire/ --

Key Highlights - Second Quarter 2021

* Generated net interest income of $183 million, with net interest margin increasing 8 basis points. * Produced mortgage revenue of $163 million as fallout adjusted locks remained strong at $12.4 billion. * Maintained solid asset quality with low levels of nonperforming loans; reduced allowance for credit loss reserve by $45 million. * Generated significant capital with total risk-based capital ratio increasing 95 basis points to 14.1 percent. * Produced exceptional return on average tangible common equity of 25.9 percent and return on average assets of 2.1 percent.

Flagstar Bancorp, Inc. (NYSE: FBC), the holding company for Flagstar Bank, today reported second quarter 2021 net income of $147 million, or $2.74 per diluted share, compared to first quarter 2021 net income of $149 million, or $2.80 per diluted share, which on an adjusted basis was $176 million, or $3.31 per diluted share. Second quarter 2020 net income was $116 million, or $2.03 per diluted share.

"We posted another solid quarter - our fifth consecutive quarter where diluted earnings exceeded $2.00 per share," said Alessandro DiNello, president and chief executive officer of Flagstar Bancorp. "Highlights included net interest margin expansion, strong asset quality, steady growth in our servicing portfolio, and excellent mortgage results that remain above historical averages. Of special note was our execution of four private label securitizations during the quarter, further demonstrating the versatility of our mortgage business and the optionality it provides - truly a differentiator for Flagstar in the industry. These positives combined to produce a 6 percent growth in tangible book value and continued a trend of achieving return on assets in excess of 2 percent. Our return on average tangible common equity in the last 12 months has been a remarkable 31 percent, and in the 12 months prior to that, an impressive 18 percent.

"Credit quality remained strong, and we continue to be encouraged by the low levels of nonperforming loans and net charge-offs. And I'm pleased to say that we have no commercial loans currently in deferral. This performance, along with an improved forecast for the macroeconomic environment, enabled us to release $45 million of our allowance for credit losses. Even with this release, excluding warehouse loans, our coverage ratio was 2.6 percent - among the strongest in the industry."

"As we move closer to completing our previously announced partnership with New York Community Bank, we are well positioned with strong fundamentals and a demonstrated power to generate capital. Until then, we are focusing on ensuring a smooth transition and continuing to execute on the business plan that has served our shareholders so well and brought us to this pivotal point in the history of our company."

Income Statement Highlights

Three Months Ended

June 30,March 31,December 31,September 30,June 30, 2021 2021 2020 2020 2020

(Dollars in millions, except per share data)

Net interest income $183 $189 $ 189 $ 180 $168

(Benefit) provision for credit losses(44) (28) 2 32 102

Noninterest income 252 324 332 448 375

Noninterest expense 289 347 314 301 293

Income before income taxes 190 194 205 295 148

Provision for income taxes 43 45 51 73 32

Net income $147 $149 $ 154 $ 222 $116



Income per share:

Basic $2.78 $2.83 $ 2.86 $ 3.90 $2.04

Diluted $2.74 $2.80 $ 2.83 $ 3.88 $2.03

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

Three Months Ended

June 30,March 31,December 31,September 30,June 30, 2021 2021 2020 2020 2020

(Dollars in millions, except per share data)

Net interest income $183 $189 $ 189 $ 180 $168

(Benefit) provision for credit losses (44) (28) 2 32 102

Noninterest income 252 324 332 448 375

Noninterest expense 290 312 314 301 293

Income before income taxes 189 229 205 295 148

Provision for income taxes 43 53 51 73 32

Net income $146 $176 $ 154 $ 222 $116



Income per share:

Basic $2.78 $3.34 $ 2.86 $ 3.90 $2.04

Diluted $2.73 $3.31 $ 2.83 $ 3.88 $2.03



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

Key Ratios

Three Months Ended

June 30,March 31, December 31, September 30, June 30, 2021 2021 2020 2020 2020

Net interest margin 2.90 %2.82 % 2.78 % 2.78 % 2.86 %

Adjusted net interest margin (1) 3.06 %3.02 % 2.98 % 2.94 % 2.88 %

Return on average assets 2.1 %2.0 % 2.1 % 3.1 % 1.8 %

Return on average common equity 24.0 %25.7 % 27.6 % 41.5 % 23.5 %

Efficiency ratio 66.6 %67.7 % 60.4 % 47.9 % 54.1 %

HFI loan-to-deposit ratio 71.8 %74.4 % 74.5 % 75.9 % 76.7 %

Adjusted HFI loan-to-deposit ratio (2) 64.3 %66.3 % 69.8 % 74.8 % 85.4 %



(1) Excludes loans with government guarantees available for repurchase. 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

June 30, March 31,December 31,September 30,June 30, Seq Yr/Yr 2021 2021 2020 2020 2020

(Dollars in millions)

Average interest-earning assets $25,269$27,178$27,100 $25,738 $23,692(7)%7 %

Average loans held-for-sale (LHFS) 6,902 7,464 5,672 5,602 5,645 (8)%22%

Average loans held-for-investment (LHFI)13,688 14,915 15,703 14,839 13,596 (8)%1 %

Average total deposits 19,070 20,043 21,068 19,561 17,715 (5)%8 %

Net Interest Income

Net interest income in the second quarter was $183 million, a decrease of $6 million, or 3 percent as compared to the first quarter 2021. The results primarily reflect lower earning assets, the result of lower warehouse and loans held-for-sale (LHFS) balances during the quarter. Average earning assets declined $1.9 billion, or 7 percent, as warehouse balances were $1.0 billion, or 15 percent lower and LHFS declined $0.6 billion. These declines were, partially offset by a favorable decrease in funding costs and broad-based increases in loan yields.

The net interest margin in the second quarter was 2.90 percent, an 8 basis point increase from the prior quarter. Excluding the impact from the loans with government guarantees that have not been repurchased and do not accrue interest, adjusted net interest margin expanded 4 basis points to 3.06 percent in the second quarter, compared to adjusted net interest margin of 3.02 percent in the prior quarter. The expansion in net interest margin was largely attributable to an increase in LHFS yields due to a mix shift to higher yielding products supporting our residential mortgage-backed securities program, higher LHFI yields and lower deposit costs. Retail banking deposit rates decreased 4 basis points primarily driven by the maturity of higher cost time deposits.

Average total deposits were $19.1 billion in the second quarter, decreasing $1.0 billion, or 5 percent from the first quarter 2021. Average custodial deposits decreased $1.0 billion, or 14 percent primarily driven by decreasing mortgage payoff rates and actions taken to manage internal liquidity measures.

Provision for Credit Losses

The benefit for credit losses was $44 million for the second quarter, as compared to a $28 million benefit for credit losses for the first quarter 2021, reflecting the performance of our portfolio and improved economic forecasts. Additionally, net charge-offs remained low at $1 million for the quarter, or 1 basis point of LHFI.

Noninterest Income

Noninterest income decreased $72 million to $252 million in the second quarter, as compared to $324 million for the first quarter 2021, primarily due to lower mortgage revenues and loan fees and charges.

Second quarter net gain on loan sales decreased $59 million, to $168 million, as compared to $227 million in the first quarter 2021. Gain on sale margins decreased 49 basis points, to 1.35 percent for the second quarter 2021, as compared to 1.84 percent for the first quarter 2021. The decrease was primarily driven by competitive factors and channel-mix based margin compression.

Net loss on mortgage servicing rights was $5 million in the second quarter 2021, reflecting an $8 million write off of mortgage servicing right fair value for those loans with government guarantees that were repurchased during the quarter. In addition, mortgage refinance activity continued to be elevated compared to historical norms which impacted prepayment speeds and overall net return on mortgage servicing rights.

Loan fees and charges decreased $5 million, to $37 million for the second quarter, compared to $42 million for the first quarter 2021, primarily due to a 7 percent decrease in mortgage loans closed.

Mortgage Metrics

As of/Three Months Ended Change (% / bps)

June 30, March 31, December 31, September 30, June 30, Seq Yr/Yr 2021 2021 2020 2020 2020

(Dollars in millions)

Mortgage rate lock commitments (fallout- $12,400 $12,300 $ 12,000 $ 15,000 $13,800 1% (10)% adjusted) (1) (2)

Mortgage loans closed (1) $12,800 $13,800 $ 13,100 $ 14,400 $12,200 (7)% 5%

Net margin on mortgage rate lock commitments 1.35 %1.84 %1.93 % 2.31 % 2.19 %(49) (84) (fallout-adjusted) (2)

Net gain on loan sales $168 $227 $ 232 $ 346 $303 (26)% (45)%

Net return (loss) on mortgage servicing rights $(5) $- $ - $ 12 $(8) N/M (38)% (MSR)

Gain on loan sales + net return on the MSR $163 $227 $ 232 $ 358 $295 (28)% (45)%

Loans serviced (number of accounts - 000's) (3)1,182 1,148 1,085 1,105 1,042 3% 13%

Capitalized value of MSRs 1.00 %1.06 %0.86 % 0.85 % 0.87 %(6) 13



N/M - Not meaningful

(1)Rounded to the nearest hundred million

Fallout-adjusted mortgage rate lock commitments are adjusted by a percentage of (2)mortgage loans in the pipeline that are not expected to close based on previous historical experience and the level of interest rates.

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

Noninterest Expense

Noninterest expense decreased to $289 million for the second quarter, compared to $347 million for the first quarter 2021. Excluding the $35 million expense related to the DOJ settlement liability in the first quarter 2021 and $9 million of merger expenses in the second quarter 2021, noninterest expense decreased $32 million, or 10 percent. The decrease in noninterest expense primarily reflects lower commissions as mortgage loan closings decreased 7 percent compared to the prior quarter and the prior quarter included expenses associated with seasonally higher payroll taxes which did not reoccur. The second quarter included a $10 million benefit from an agreement to reduce the 2009 former CEO supplemental executive retirement plan liability.

Mortgage expenses were $131 million for the second quarter, a decrease of $17 million compared to the prior quarter. The ratio of mortgage noninterest expense to closings - our mortgage expense ratio - was 1.03 percent, a decrease of 5 basis points quarter over quarter, primarily driven by lower commissions.

The efficiency ratio was 67 percent for the second quarter, as compared to 68 percent for the first quarter 2021. Excluding the $35 million expense related to the DOJ settlement liability, the adjusted efficiency ratio was 61 percent for the first quarter, primarily driven by the strength of mortgage revenue in the first quarter.

Income Taxes

The second quarter provision for income taxes totaled $43 million, with an effective tax rate of 22.5 percent, compared to $45 million and an effective tax rate of 23.0 percent for the first quarter 2021.

Asset Quality

Credit Quality Ratios

As of/Three Months Ended Change (% / bps)

June 30,March 31,December 31,September 30,June 30,Seq Yr/Yr 2021 2021 2020 2020 2020

(Dollars in millions)

Allowance for credit losses (1) $220 $265 $280 $280 $250 (17)% (12)%

Credit reserves to LHFI 1.57 % 1.78 % 1.73 % 1.70 % 1.69 % (21) -12

Credit reserves to LHFI excluding warehouse 2.63 % 3.11 % 3.20 % 3.07 % 2.60 % (48) 3

Net (recoveries) charge-offs $1 $(13) $2 $2 $3 N/M (67)%

Total nonperforming LHFI and TDRs $74 $60 $56 $45 $33 23% N/M

Net (recoveries) charge-offs to LHFI ratio (annualized)0.01 % (0.35)% 0.04 % 0.05 % 0.11 % 36 (10)

Ratio of nonperforming LHFI and TDRs to LHFI 0.53 % 0.40 % 0.34 % 0.28 % 0.22 % 13 31



Net charge-offs/(recoveries) to LHFI ratio (annualized) by loan type (2):

Residential first mortgage 0.16 % 0.31 % 0.11 % 0.07 % 0.26 % (15) (10)

Home equity and other consumer 0.15 % 0.16 % 0.06 % 0.23 % 0.28 % (1) (13)

Commercial real estate - % (0.01)% - % (0.01)% 0.01 % 1 (1)

Commercial and industrial 0.04 % (4.12)% 0.21 % 0.06 % 0.08 % 416 (4)



N/M - Not meaningful

(1) Includes the allowance for loan losses and the reserve on unfunded commitments.

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

The allowance for credit losses was $220 million and covered 1.57 percent of loans held-for-investment at June 30, 2021, a 21 basis point decrease from March 31, 2021. Excluding warehouse loans, the allowance coverage ratio was 2.63 percent, a 48 basis point decrease from March 31, 2021. The lower allowance for credit losses primarily reflects improvements in our economic forecasts and the performance of the LHFI portfolio throughout the pandemic.

Net charge-offs in the second quarter 2021 were $1 million, compared to $13 million of net recoveries in the prior quarter. Net charge-offs for the second quarter were 1 basis point of LHFI, compared to 8 basis points in the prior quarter when excluding the $16 million commercial loan recovery obtained in the quarter.

Nonperforming loans and troubled debt restructurings (TDRs) were $74 million and our ratio of nonperforming loans and TDRs to loans held-for-investment was 53 basis points at June 30, 2021, a 13 basis point increase compared to March 31, 2021 as nonperforming loans remained low and LHFI balances decreased $0.8 billion. At June 30, 2021, early stage loan delinquencies totaled $12 million, or 9 basis points of total loans, compared to $15 million, or 10 basis points, at March 31, 2021.

Capital

Capital Ratios (Bancorp) Change (% / bps)

June 30, March 31,December 31,September 30,June 30, Seq Yr/Yr 2021 2021 2020 2020 2020

Tier 1 leverage (to adj. avg. total assets)9.21 %8.11 %7.71 % 8.04 % 7.76 %110 145

Tier 1 common equity (to RWA) 11.38 %10.31 %9.15 % 9.21 % 9.11 %107 227

Tier 1 capital (to RWA) 12.56 %11.45 %10.23 % 10.31 % 10.33 %111 223

Total capital (to RWA) 14.13 %13.18 %11.89 % 11.29 % 11.32 %95 281

Tangible common equity to asset ratio (1) 8.67 %7.48 %6.58 % 6.90 % 6.58 %119 209

Tangible book value per share (1) $44.38 $41.77 $ 38.80 $ 35.60 $31.74 6% 40%



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

The Company maintained a solid capital position with regulatory ratios above current regulatory quantitative guidelines for "well capitalized" institutions. The capital ratios are impacted by a 100 percent risk-weighting of the warehouse loan portfolio - the largest component of the Company's held-for-investment portfolio. Adjusting the risk-weighting of warehouse loans to 50 percent, because of the historically low level of losses from this loan portfolio and the fact that the portfolio is fully collateralized with assets that would receive a 50 percent risk weighting, the Company would have had a Tier 1 common equity ratio of 13.13 percent and a total risk-based capital ratio of 16.30 percent at June 30, 2021.

Importantly, tangible book value per share grew to $44.38, up $2.61, or 6 percent from last quarter.

About Flagstar

Flagstar Bancorp, Inc. (NYSE: FBC) is a $27.1 billion savings and loan holding company headquartered in Troy, Mich. Flagstar Bank, FSB, provides commercial, small business, and consumer banking services through 158 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 86 retail locations in 28 states. Flagstar is a leading national originator and servicer of mortgage and other consumer loans, handling payments and record keeping for $255.7 billion of loans representing almost 1.2 million 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 certain non-GAAP financial measures. 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 periodic Flagstar reports filed with the U.S. Securities and Exchange Commission, which are available on the Company's website at flagstar.com.

Cautionary Statements Regarding Forward-Looking Statements

Certain statements in this press release may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, with respect to New York Community Banks ("NYCB") and Flagstar's beliefs, goals, intentions, and expectations regarding revenues, earnings, loan production, asset quality, capital levels, and acquisitions, among other matters; NYCB's and Flagstar's estimates of future costs and benefits of the actions each company may take; NYCB's and Flagstar's assessments of probable losses on loans; NYCB's and Flagstar's assessments of interest rate and other market risks; and NYCB's and Flagstar's ability to achieve their respective financial and other strategic goals.

Forward-looking statements are typically identified by such words as "believe," "expect," "anticipate," "intend," "outlook," "estimate," "forecast," "project," "should," and other similar words and expressions, and are subject to numerous assumptions, risks, and uncertainties, which change over time. These forward-looking statements include, without limitation, those relating to the terms, timing and closing of the proposed transaction.

Additionally, forward-looking statements speak only as of the date they are made; NYCB and Flagstar do not assume any duty, and do not undertake, to update such forward-looking statements. Furthermore, because forward-looking statements are subject to assumptions and uncertainties, actual results or future events could differ, possibly materially, from those indicated in such forward-looking statements as a result of a variety of factors, many of which are beyond the control of NYCB and Flagstar. The factors that could cause actual results to differ materially include the following: the occurrence of any event, change or other circumstances that could give rise to the right of one or both of the parties to terminate the definitive merger agreement among NYCB, 615 Corp. and Flagstar; the outcome of any legal proceedings that may be instituted against NYCB or Flagstar; the possibility that the proposed transaction will not close when expected or at all because required regulatory, shareholder or other approvals are not received or other conditions to the closing are not satisfied on a timely basis or at all, or are obtained subject to conditions that are not anticipated; the ability of NYCB and Flagstar to meet expectations regarding the timing, completion and accounting and tax treatments of the proposed transaction; the risk that any announcements relating to the proposed transaction could have adverse effects on the market price of the common stock of NYCB or Flagstar; the possibility that the anticipated benefits of the proposed transaction will not be realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of the two companies or as a result of the strength of the economy and competitive factors in the areas where NYCB and Flagstar do business? certain restrictions during the pendency of the proposed transaction that may impact the parties' ability to pursue certain business opportunities or strategic transactions; the possibility that the proposed transaction may be more expensive to complete than anticipated, including as a result of unexpected factors or events? diversion of management's attention from ongoing business operations and opportunities? the possibility that the parties may be unable to achieve expected synergies and operating efficiencies in the proposed transaction within the expected timeframes or at all and to successfully integrate Flagstar's operations and those of NYCB; such integration may be more difficult, time consuming or costly than expected; revenues following the proposed transaction may be lower than expected; potential adverse reactions or changes to business or employee relationships, including those resulting from the announcement or completion of the proposed transaction? NYCB's and Flagstar's success in executing their respective business plans and strategies and managing the risks involved in the foregoing; the dilution caused by NYCB's issuance of additional shares of its capital stock in connection with the proposed transaction; and other factors that may affect future results of NYCB and Flagstar; and the other factors discussed in the "Risk Factors" section NYCB's Annual Report on Form 10-K for the year ended December 31, 2020 and in other reports NYCB files with the U.S. Securities and Exchange Commission (the "SEC"), which are available at http://www.sec.gov and in the "SEC Filings" section of NYCB's website, https://ir.mynycb.com, under the heading "Financial Information," and in Flagstar's Annual Report on Form 10-K for the year ended December 31, 2020 and in Flagstar's other filings with SEC, which are available at http://www.sec.gov and in the "Documents" section of Flagstar's website, https://investors.flagstar.com.

Flagstar Bancorp, Inc. Consolidated Statements of Financial Condition (Dollars in millions) (Unaudited)



June 30, March 31,December 31,June 30, 2021 2021 2020 2020

Assets

Cash $168 $106 $251 $204

Interest-earning deposits 177 343 372 23

Total cash and cash equivalents 345 449 623 227

Securitized HFS loans not sold - - - -

Investment securities available-for-sale 1,823 1,764 1,944 2,348

Investment securities held-to-maturity 270 319 377 496

Loans held-for-sale 6,138 7,087 7,098 5,615

Loans held-for-investment 14,052 14,887 16,227 14,808

Loans with government guarantees 2,226 2,457 2,516 1,791

Less: allowance for loan losses (202) (241) (252) (229)

Total loans held-for-investment and loans with government guarantees, net16,076 17,103 18,491 16,370

Mortgage servicing rights 342 428 329 261

Federal Home Loan Bank stock 377 377 377 377

Premises and equipment, net 374 393 392 410

Goodwill and intangible assets 152 155 157 164

Other assets 1,168 1,374 1,250 1,200

Total assets $27,065$29,449$31,038 $27,468

Liabilities and Stockholders' Equity

Noninterest-bearing deposits $10,675$10,798$9,458 $7,921

Interest-bearing deposits 7,986 8,622 10,515 9,977

Total deposits 18,661 19,420 19,973 17,898

Short-term Federal Home Loan Bank advances and other 2,095 2,745 3,900 3,354

Long-term Federal Home Loan Bank advances 1,200 1,200 1,200 1,200

Other long-term debt 396 396 641 493

Loan with government guarantee repurchase options 989 1,780 1,851 1,067

Other liabilities 1,226 1,550 1,272 1,485

Total liabilities 24,567 27,091 28,837 25,497

Stockholders' Equity

Common stock 1 1 1 1

Additional paid in capital 1,356 1,350 1,346 1,488

Accumulated other comprehensive income 45 54 47 46

Retained earnings 1,096 953 807 436

Total stockholders' equity 2,498 2,358 2,201 1,971

Total liabilities and stockholders' equity $27,065$29,449$31,038 $27,468



Flagstar Bancorp, Inc. Condensed Consolidated Statements of Operations (Dollars in millions, except per share data) (Unaudited)

Change compared to:

Three Months Ended 1Q21 2Q20

June 30,March 31,December 31,September 30,June 30,Amount PercentAmount Percent 2021 2021 2020 2020 2020

Interest Income

Total interest income $198 $208 $212 $206 $201 $(10) (5) %$(3) (1) %

Total interest expense 15 19 23 26 33 (4) (21) %(18) (55) %

Net interest income 183 189 189 180 168 (6) (3) %15 9 %

(Benefit) provision for (44) (28) 2 32 102 (16) 57 %N/M N/M credit losses

Net interest income after 227 217 187 148 66 10 5 %161 244 % provision for credit losses

Noninterest Income

Net gain on loan sales 168 227 232 346 303 (59) (26) %(135) (45) %

Loan fees and charges 37 42 48 41 38 (5) (12) %(1) (3) %

Net return (loss) on the (5) - - 12 (8) (5) N/M 3 (38) %mortgage servicing rights

Loan administration income 28 27 25 26 21 1 4 %7 33 %

Deposit fees and charges 8 8 8 8 7 - - %1 14 %

Other noninterest income 16 20 19 15 14 (4) (20) %2 14 %

Total noninterest income 252 324 332 448 375 (72) (22) %N/M N/M

Noninterest Expense

Compensation and benefits 122 144 125 123 116 (22) (15) %6 5 %

Occupancy and equipment 50 46 44 47 44 4 9 %6 14 %

Commissions 51 62 70 72 61 (11) (18) %(10) (16) %

Loan processing expense 22 21 24 20 22 1 5 %- - %

Legal and professional 11 8 11 9 5 3 38 %6 N/M expense

Federal insurance premiums 4 6 5 6 7 (2) (33) %(3) (43) %

Intangible asset amortization3 3 3 3 4 - - %(1) (25) %

Other noninterest expense 26 57 32 21 34 (31) (54) %(8) (24) %

Total noninterest expense 289 347 314 301 293 (58) (17) %(4) (1) %

Income before income taxes 190 194 205 295 148 (4) (2) %42 28 %

Provision for income taxes 43 45 51 73 32 (2) (4) %11 34 %

Net income $147 $149 $154 $222 $116 $(2) (1) %$31 27 %

Income per share

Basic $2.78 $2.83 $2.86 $3.90 $2.04 $(0.05)(2) %$0.7436 %

Diluted $2.74 $2.80 $2.83 $3.88 $2.03 $(0.06)(2) %$0.7135 %



Cash dividends declared $0.06 $0.06 $0.05 $0.05 $0.05 $- - %$0.0120 %

N/M - Not meaningful

Flagstar Bancorp, Inc. Condensed Consolidated Statements of Operations (Dollars in millions, except per share data) (Unaudited)



Six Months Ended Change

June 30,June 30,Amount Percent 2021 2020

Interest Income

Total interest income $405 $402 $3 1 %

Total interest expense 34 86 (52) (60)%

Net interest income 371 316 55 17 %

(Benefit) provision for credit losses (72) 116 (188) N/M

Net interest income after provision for credit losses443 200 243 N/M

Noninterest Income

Net gain on loan sales 395 393 2 1 %

Loan fees and charges 79 61 18 30 %

Net return (loss) on the mortgage servicing rights (5) (2) (3) N/M

Loan administration income 54 33 21 64 %

Deposit fees and charges 17 16 1 6 %

Other noninterest income 36 28 8 29 %

Total noninterest income 576 529 47 9 %

Noninterest Expense

Compensation and benefits 266 218 48 22 %

Occupancy and equipment 95 85 10 12 %

Commissions 112 90 22 24 %

Loan processing expense 43 39 4 10 %

Legal and professional expense 20 11 9 82 %

Federal insurance premiums 10 13 (3) (23)%

Intangible asset amortization 5 7 (2) (29)%

Other noninterest expense 85 63 22 35 %

Total noninterest expense 636 526 110 21 %

Income before income taxes 383 203 180 89 %

Provision for income taxes 87 42 45 107 %

Net income $296 $161 $135 84 %

Income per share

Basic $5.61 $2.85 $2.7697 %

Diluted $5.54 $2.83 $2.7196 %



Cash dividends declared $0.12 $0.10 $0.0220 %

N/M - Not meaningful

Flagstar Bancorp, Inc. Summary of Selected Consolidated Financial and Statistical Data (Dollars in millions, except share data) (Unaudited)



Three Months Ended Six Months Ended

June 30, March 31, June 30, June 30, June 30, 2021 2021 2020 2021 2020

Selected Mortgage Statistics (1):

Mortgage rate lock commitments (fallout-adjusted) (2) $12,400 $12,300 $13,800 $24,800 $25,000

Mortgage loans closed $12,800 $13,800 $12,200 $26,600 $20,700

Mortgage loans sold and securitized $14,100 $13,700 $12,900 $27,800 $20,400

Selected Ratios:

Interest rate spread (3) 2.70 %2.55 %2.52 %2.62 %2.41 %

Net interest margin 2.90 %2.82 %2.86 %2.86 %2.83 %

Net margin on loans sold and securitized 1.20 %1.65 %2.35 %1.42 %1.93 %

Return on average assets 2.09 %1.98 %1.77 %2.04 %1.30 %

Adjusted return on average assets (4) (5) 2.09 %2.34 %1.77 %2.19 %1.30 %

Return on average common equity 23.97 %25.73 %23.47 %12.41 %16.86 %

Return on average tangible common equity (5) 25.92 %27.99 %26.16 %13.46 %19.07 %

Adjusted return on average tangible common equity (4) (5)25.68 %32.97 %26.16 %30.63 %19.07 %

Efficiency ratio 66.6 %67.7 %54.1 %67.2 %62.2 %

Adjusted efficiency ratio (4) 66.8 %60.8 %54.1 %70.7 %62.2 %

Common equity-to-assets ratio (average for the period) 8.74 %7.71 %7.53 %8.21 %15.42 %

Average Balances:

Average interest-earning assets $25,269 $27,178 $23,692 $26,218 $22,421

Average interest-bearing liabilities $14,641 $15,011 $15,119 $14,825 $14,800

Average stockholders' equity $2,448 $2,319 $1,977 $2,384 $1,915

(1) Rounded to nearest hundred million.

Fallout-adjusted mortgage rate lock commitments are adjusted by a(2) percentage of mortgage loans in the pipeline that are not expected to close based on previous historical experience and the level of interest rates.

Interest rate spread is the difference between rate of interest earned on(3) interest-earning assets and rate of interest paid on interest-bearing liabilities.

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

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

June 30, March 31, December 31,June 30, 2021 2021 2020 2020

Selected Statistics:

Book value per common share $ 47.26 $ 44.71 $ 41.79 $ 34.62

Tangible book value per share (1) $ 44.38 $ 41.77 $ 38.80 $ 31.74

Number of common shares outstanding 52,862,264 52,752,600 52,656,067 56,943,979

Number of FTE employees 5,503 5,418 5,214 4,641

Number of bank branches 158 158 158 160

Ratio of nonperforming assets to total assets (2)0.30 %0.23 %0.21 %0.14 %

Common equity-to-assets ratio 9.23 %8.01 %7.09 %7.18 %

MSR Key Statistics and Ratios:

Weighted average service fee (basis points) 32.6 33.2 34.3 37.0

Capitalized value of mortgage servicing rights 1.00 %1.06 %0.86 %0.87 %

(1) Excludes goodwill and intangibles. See Non-GAAP Reconciliation for further information.

(2) Ratio excludes LHFS.

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



Three Months Ended

June 30, 2021 March 31, 2021 June 30, 2020

Average AnnualizedAverage AnnualizedAverage Annualized Balance Interest Balance Interest Balance Interest Yield/Rate Yield/Rate Yield/Rate

Interest-Earning Assets

Loans held-for-sale $6,902 $ 53 3.05% $7,464 $ 53 2.83% $5,645 $48 3.42%

Loans held-for-investment

Residential first mortgage 1,887 15 3.27% 2,132 17 3.20% 2,822 24 3.41%

Home equity 748 7 3.64% 820 7 3.50% 1,001 9 3.78%

Other 1,101 13 4.80% 1,040 12 4.79% 881 12 5.42%

Total consumer loans 3,736 35 3.79% 3,992 36 3.68% 4,704 45 3.87%

Commercial real estate 3,093 26 3.37% 3,042 26 3.36% 3,101 28 3.64%

Commercial and industrial 1,449 14 3.72% 1,486 13 3.53% 2,006 17 3.34%

Warehouse lending 5,410 54 3.95% 6,395 64 4.00% 3,785 38 3.88%

Total commercial loans 9,952 94 3.74% 10,923 103 3.76% 8,892 83 3.67%

Total loans held-for-investment 13,688 129 3.75% 14,915 139 3.73% 13,596 128 3.74%

Loans with government guarantees 2,344 5 0.79% 2,502 4 0.56% 858 4 1.97%

Investment securities 2,123 12 2.19% 2,210 12 2.21% 3,417 21 2.42%

Interest-earning deposits 212 - 0.13% 87 - 0.14% 176 - 0.11%

Total interest-earning assets 25,269 $ 199 3.12% 27,178 $ 208 3.06% 23,692 $201 3.38%

Other assets 2,742 2,887 2,569

Total assets $28,011 $30,065 $26,261

Interest-Bearing Liabilities

Retail deposits

Demand deposits $1,686 $ - 0.06% $1,852 $ - 0.07% $1,800 $1 0.22%

Savings deposits 4,084 1 0.14% 3,945 1 0.14% 3,476 4 0.52%

Money market deposits 762 - 0.07% 685 - 0.06% 716 - 0.12%

Certificates of deposit 1,126 3 0.62% 1,293 4 0.96% 1,987 10 2.00%

Total retail deposits 7,658 4 0.18% 7,775 5 0.25% 7,979 15 0.78%

Government deposits 1,795 1 0.19% 1,773 1 0.22% 1,088 2 0.63%

Wholesale deposits and other 1,170 4 1.33% 1,031 4 1.59% 738 4 2.07%

Total interest-bearing deposits 10,623 9 0.31% 10,579 10 0.38% 9,805 21 0.86%

Short-term FHLB advances and other 2,422 1 0.17% 2,779 1 0.17% 3,753 2 0.26%

Long-term FHLB advances 1,200 3 1.03% 1,200 3 1.03% 1,068 3 1.13%

Other long-term debt 396 3 3.19% 453 5 4.11% 493 7 4.99%

Total interest-bearing liabilities 14,641 16 0.43% 15,011 19 0.51% 15,119 33 0.86%

Noninterest-bearing deposits

Retail deposits and other 2,259 2,270 1,687

Custodial deposits (1) 6,188 7,194 6,223

Total noninterest-bearing deposits 8,447 9,464 7,910

Other liabilities 2,476 3,271 1,255

Stockholders' equity 2,448 2,319 1,977

Total liabilities and stockholders' $28,012 $30,065 $26,261 equity

Net interest-earning assets $10,628 $12,167 $8,573

Net interest income $ 183 $ 189 $168

Interest rate spread (2) 2.70% 2.55% 2.52%

Net interest margin (3) 2.90% 2.82% 2.86%

Ratio of average interest-earning assets to 172.6% 181.1% 156.7% interest-bearing liabilities

Total average deposits $19,070 $20,043 $17,715



Approximately 80 percent of custodial deposits from loans subserviced which(1) pay interest is recognized as an offset in net loan administration income.

Interest rate spread is the difference between rate of interest earned on(2) interest-earning assets and rate of interest paid on interest-bearing liabilities.

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

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



Six Months Ended

June 30, 2021 June 30, 2020

Average AnnualizedAverage Annualized Balance Interest Balance Interest Yield/Rate Yield/Rate

Interest-Earning Assets

Loans held-for-sale $7,181 $ 105 2.94% $5,447 $ 97 3.56%

Loans held-for-investment

Residential first mortgage 2,009 33 3.23% 2,942 51 3.46%

Home equity 784 14 3.56% 1,010 21 4.26%

Other 1,071 25 4.80% 848 24 5.59%

Total consumer loans 3,864 72 3.73% 4,800 96 4.01%

Commercial real estate 3,068 52 3.36% 3,025 63 4.11%

Commercial and industrial 1,467 27 3.62% 1,836 36 3.88%

Warehouse lending 5,900 118 3.98% 3,048 62 4.04%

Total commercial loans 10,435 197 3.75% 7,909 161 4.03%

Total loans held-for-investment 14,299 269 3.74% 12,709 257 4.02%

Loans with government guarantees 2,422 8 0.67% 834 7 1.68%

Investment securities 2,166 24 2.20% 3,239 40 2.45%

Interest-earning deposits 150 - 0.14% 192 1 1.00%

Total interest-earning assets 26,218 $ 406 3.09% 22,421 $ 402 3.57%

Other assets 2,814 2,416

Total assets $29,032 $24,837

Interest-Bearing Liabilities

Retail deposits

Demand deposits $1,768 $ - 0.07% $1,693 $ 4 0.47%

Savings deposits 4,015 3 0.14% 3,433 14 0.79%

Money market deposits 724 - 0.06% 701 1 0.22%

Certificates of deposit 1,209 5 0.80% 2,120 22 2.13%

Total retail deposits 7,716 8 0.22% 7,947 41 1.03%

Government deposits 1,784 2 0.21% 1,110 5 0.89%

Wholesale deposits and other 1,101 8 1.47% 659 7 2.21%

Total interest-bearing deposits 10,601 18 0.35% 9,716 53 1.09%

Short-term FHLB advances and other 2,600 2 0.17% 3,659 14 0.79%

Long-term FHLB advances 1,200 6 1.03% 931 6 1.20%

Other long-term debt 424 8 3.68% 494 13 5.16%

Total interest-bearing liabilities 14,825 34 0.47% 14,800 86 1.16%

Noninterest-bearing deposits

Retail deposits and other 2,264 1,541

Custodial deposits (1) 6,688 5,499

Total noninterest-bearing deposits 8,952 7,040

Other liabilities 2,871 1,082

Stockholders' equity 2,384 1,915

Total liabilities and stockholders' equity $29,032 $24,837

Net interest-earning assets $11,393 $7,621

Net interest income $ 372 $ 316

Interest rate spread (2) 2.62% 2.41%

Net interest margin (3) 2.86% 2.83%

Ratio of average interest-earning assets to interest-bearing 176.9% 145.9% liabilities

Total average deposits $19,554 $16,755



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

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

c. 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 Six Months Ended

June 30, March 31 June 30, June 30, June 30, 2021 2021 2020 2021 2020

Net income $147 $149 $116 $296 $161

Weighted average common shares outstanding52,763,86852,675,56256,790,64252,719,95956,723,254

Stock-based awards 772,801 622,241 333,064 697,937 433,561

Weighted average diluted common shares 53,536,66953,297,80357,123,70653,417,89657,156,815

Basic earnings per common share $2.78 $2.83 $2.04 $5.61 $2.85

Stock-based awards (0.04) (0.03) (0.01) (0.07) (0.02)

Diluted earnings per common share $2.74 $2.80 $2.03 $5.54 $2.83

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



June 30, 2021 March 31, 2021 December 31, 2020June 30, 2020

Amount Ratio Amount Ratio Amount Ratio Amount Ratio

Tier 1 leverage (to adjusted avg. total assets)$2,562 9.21 %$2,423 8.11 %$2,270 7.71 %$2,021 7.76 %

Total adjusted avg. total asset base $27,828 $29,881 $29,444 $26,040

Tier 1 common equity (to risk weighted assets) $2,322 11.38%$2,183 10.31%$2,030 9.15 %$1,781 9.11 %

Tier 1 capital (to risk weighted assets) $2,562 12.56%$2,423 11.45%$2,270 10.23%$2,021 10.33%

Total capital (to risk weighted assets) $2,882 14.13%$2,790 13.18%$2,638 11.89%$2,214 11.32%

Risk-weighted asset base $20,399 $21,164 $22,190 $19,562

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



June 30, 2021 March 31, 2021 December 31, 2020June 30, 2020

Amount Ratio Amount Ratio Amount Ratio Amount Ratio

Tier 1 leverage (to adjusted avg. total assets)$2,464 8.88 %$2,523 8.45 %$2,390 8.12 %$1,969 7.57 %

Total adjusted avg. total asset base $27,767 $29,866 $29,437 $26,020

Tier 1 common equity (to risk weighted assets) $2,464 12.08%$2,523 11.93%$2,390 10.77%$1,969 10.07%

Tier 1 capital (to risk weighted assets) $2,464 12.08%$2,523 11.93%$2,390 10.77%$1,969 10.07%

Total capital (to risk weighted assets) $2,634 12.92%$2,740 12.96%$2,608 11.75%$2,161 11.05%

Risk-weighted asset base $20,395 $21,141 $22,194 $19,559

Loans Serviced (Dollars in millions) (Unaudited)

June 30, 2021 March 31, 2021 December 31, 2020 June 30, 2020

Unpaid Number of Unpaid Number of Unpaid Number of Unpaid Number of Principal accounts Principal accounts Principal accounts Principal accounts Balance (1) Balance (1) Balance (1) Balance (1)

Subserviced for others (2) $211,775 975,467 $197,053 921,126 $178,606 867,799 $174,517 854,693

Serviced for others (3) 34,263 139,029 40,402 160,511 38,026 151,081 29,846 122,779

Serviced for own loan portfolio (4)9,685 67,988 9,965 66,363 10,079 66,519 9,211 64,142

Total loans serviced $255,723 1,182,484$247,420 1,148,000$226,711 1,085,399$213,574 1,041,614

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

Loans subserviced for a fee for non-Flagstar owned loans or MSRs. Includes(2) temporary short-term subservicing performed as a result of sales of servicing-released MSRs.

(3) Loans for which Flagstar owns the MSR.

Includes LHFI (residential first mortgage, home equity and other consumer),(4) LHFS (residential first mortgage), loans with government guarantees (residential first mortgage), and repossessed assets.

Loans Held-for-Investment (Dollars in millions) (Unaudited)



June 30, 2021 March 31, 2021 December 31, 2020June 30, 2020

Consumer loans

Residential first mortgage $1,794 12.8 %$1,998 13.4 %$2,266 14.0 %$2,716 18.3 %

Home equity 717 5.1 %781 5.2 %856 5.3 %978 6.6 %

Other 1,133 8.0 %1,049 7.0 %1,004 6.1 %898 6.1 %

Total consumer loans 3,644 25.9 %3,828 25.6 %4,126 25.4 %4,592 31.0 %

Commercial loans

Commercial real estate 3,169 22.6 %3,084 20.7 %3,061 18.9 %3,016 20.4 %

Commercial and industrial 1,376 9.8 %1,424 9.6 %1,382 8.5 %1,968 13.3 %

Warehouse lending 5,863 41.7 %6,551 44.1 %7,658 47.2 %5,232 35.3 %

Total commercial loans 10,408 74.1 %11,059 74.4 %12,101 74.6 %10,216 69.0 %

Total loans held-for-investment$14,052100.0%$14,887100.0%$16,227100.0%$14,808100.0%

Other Consumer Loans Held-for-Investment (Dollars in millions) (Unaudited)



June 30, 2021 March 31, 2021 December 31, 2020 June 30, 2020

Indirect lending $866 76.4 %$791 75.4 %$713 71.0 %$64772.0 %

Point of sale 225 19.9 %214 20.4 %211 21.0 %181 20.2 %

Other 42 3.7 %44 4.2 %80 8.0 %70 7.8 %

Total other consumer loans$1,133100.0%$1,049100.0%$1,004 100.0 %$898100.0%

Allowance for Credit Losses (Dollars in millions) (Unaudited)



June 30, 2021March 31, 2021June 30, 2020

Residential first mortgage $ 48 $45 $ 60

Home equity 17 20 28

Other 38 33 34

Total consumer loans 103 98 122

Commercial real estate 58 84 83

Commercial and industrial 38 55 23

Warehouse lending 3 4 1

Total commercial loans 99 143 107

Allowance for loan losses 202 241 229

Reserve for unfunded commitments18 24 21

Allowance for credit losses $ 220 $265 $ 250

Allowance for Credit Losses (Dollars in millions) (Unaudited)



Three Months Ended June 30, 2021

ResidentialHome Other Commercial CommercialWarehouseTotal LHFI Unfunded First EquityConsumerReal Estateand Lending Portfolio (1)Commitments Mortgage Industrial

Adjusted beginning balance $ 45 $20 $ 33 $ 84 $ 55 $ 4 $ 241 $ 24

Provision (benefit) for credit losses:

Loan volume 6 (1) 2 2 - (1) 8 (6)

Economic forecast (2) (1) (1) 2 (13) (4) - (17) -

Credit (3) 3 1 1 (14) - - (9) -

Qualitative factor adjustments (4) (5) (2) - (1) (13) - (21) -

Charge-offs (1) - (1) - - - (2) -

Recoveries - 1 - - - - 1 -

Provision for net charge-offs 1 (1) 1 - - - 1 -

Ending allowance balance $ 48 $17 $ 38 $ 58 $ 38 $ 3 $ 202 $ 18

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

(2) Includes changes in the lifetime loss rate based on current economic forecasts as compared to forecasts used in the prior quarter.

Includes changes in the probability of default and severity of default(3) based on current borrower and guarantor characteristics, as well as individually evaluated reserves.

(4) Includes $9 million of unallocated reserves attributed to various portfolios for presentation purposes.

Allowance for Credit Losses (Dollars in millions) (Unaudited)



Six Months Ended June 30, 2021

ResidentialHome Other Commercial CommercialWarehouseTotal LHFI Unfunded First EquityConsumerReal Estateand Lending Portfolio (1)Commitments Mortgage Industrial

Adjusted beginning balance $ 49 $25 $ 39 $ 84 $ 51 $ 4 $ 252 $ 28

Provision (benefit) for credit losses:

Loan volume 3 (2) 3 3 1 (1) 7 (10)

Economic forecast (2) (4) (3) (1) (2) (9) - (19) -

Credit (3) 6 2 1 (22) (1) - (14) -

Qualitative factor adjustments (4) (6) (5) (4) (5) (4) - (24) -

Charge-offs (3) - (2) - (1) - (6) -

Recoveries 1 (1) 2 - 16 - 18 -

Provision for net charge-offs 2 1 - - (15) - (12) -

Ending allowance balance $ 48 $17 $ 38 $ 58 $ 38 $ 3 $ 202 $ 18

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

(2) Includes changes in the lifetime loss rate based on current economic forecasts as compared to forecasts used in the prior quarter.

Includes changes in the probability of default and severity of default(3) based on current borrower and guarantor characteristics, as well as individually evaluated reserves.

(4) Includes $9 million of unallocated reserves attributed to various portfolios for presentation purposes.

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



June 30,March 31,December 31,June 30, 2021 2021 2020 2021

Nonperforming LHFI $63 $ 49 $46 $23

Nonperforming TDRs 6 5 4 4

Nonperforming TDRs at inception but performing for less than six months5 6 6 6

Total nonperforming LHFI and TDRs (1) 74 60 56 33

Other nonperforming assets, net 6 7 8 7

LHFS 9 9 9 7

Total nonperforming assets $89 $ 76 $73 $47



Ratio of nonperforming assets to total assets (2) 0.30% 0.23 % 0.21 % 0.14%

Ratio of nonperforming LHFI and TDRs to LHFI 0.53% 0.40 % 0.34 % 0.22%

Ratio of nonperforming assets to LHFI and repossessed assets (2) 0.57% 0.45 % 0.40 % 0.27%

(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 Days60-89 DaysGreater thanTotal PastTotal LHFI Past Due Past Due 90 days (1) Due

June 30, 2021

Consumer loans $ 8 $ 4 $ 55 $ 67 $ 3,644

Commercial loans - - 20 20 10,408

Total loans $ 8 $ 4 $ 75 $ 87 $ 14,052

March 31, 2021

Consumer loans $ 10 $ 5 $ 42 $ 57 $ 3,828

Commercial loans - - 18 18 11,059

Total loans$ 10 $ 5 $ 60 $ 75 $ 14,887

December 31, 2020

Consumer loans $ 9 $ 6 $ 38 $ 53 $ 4,126

Commercial loans 21 - 18 39 12,101

Total loans$ 30 $ 6 $ 56 $ 92 $ 16,227

June 30, 2020

Consumer loans $ 9 $ 6 $ 33 $ 48 $ 4,592

Commercial loans - - - - 10,216

Total loans $ 9 $ 6 $ 33 $ 48 $ 14,808

(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

PerformingNonperformingTotal

June 30, 2021

Consumer loans $31 $11 $42

Commercial loans 2 - 2

Total TDR loans$33 $11 $44

March 31, 2021

Consumer loans $31 $11 $42

Commercial loans 5 - 5

Total TDR loans$36 $11 $47

December 31, 2020

Consumer loans $31 $10 $41

Commercial loans 5 - 5

Total TDR loans$36 $10 $46

June 30, 2020

Consumer loans $35 $10 $45

Commercial loans 5 - 5

Total TDR loans$40 $10 $50

Non-GAAP Reconciliation (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 loans with government guarantees that have not been repurchased and don't accrue interest 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, adjusted return on average tangible common equity, adjusted return on average tangible common equity, adjusted return on average assets, adjusted HFI loan-to-deposit ratio, adjusted noninterest expense, adjusted income before income taxes, adjusted provision for income taxes, adjusted net income, adjusted basic earnings per share, adjusted diluted earnings per share, adjusted net interest margin 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.



June 30, March 31, December 31, September 30,June 30, 2021 2021 2020 2020 2020

(Dollars in millions, except share data)

Total stockholders' equity $2,498 $2,358 $2,201 $2,195 $1,971

Less: Goodwill and intangible assets 152 155 157 160 164

Tangible book value $2,346 $2,203 $2,044 $2,035 $1,807



Number of common shares outstanding 52,862,264 52,752,600 52,656,067 57,150,470 56,943,979

Tangible book value per share $44.38 $41.77 $38.80 $35.60 $31.74



Total assets $27,065 $29,449 $31,038 $29,476 $27,468

Tangible common equity to assets ratio8.67 %7.48 %6.58 %6.90 %6.58 %

Adjusted return on average common equity, adjusted return on average tangible common equity and adjusted return on average assets.



Three Months Ended Six Months Ended

June 30, March 31, June 30, June 30, June 30, 2021 2021 2020 2021 2020

(Dollars in millions)

Net income $147 $149 $116 $296 $161

Add: Intangible asset amortization, net of tax 2 2 3 2 6

Tangible net income $149 $151 $119 $298 $167



Total average equity $2,448 $2,319 $1,977 $2,384 $1,915

Less: Average goodwill and intangible assets 153 156 165 155 167

Total tangible average equity $2,295 $2,163 $1,812 $2,229 $1,748



Return on average tangible common equity 25.92 %27.99 %26.16 %26.89 %19.07 %

Adjustment to remove DOJ settlement expense - %4.98 %- %3.86 %- %

Adjustment for former CEO SERP agreement (2.14) %- %- %(1.10) %- %

Adjustment for merger costs 1.89 %- %- %0.97 %- %

Adjusted return on average tangible common 25.67 %32.97 %26.16 %30.62 %19.07 %equity



Return on average assets 2.09 %1.98 %1.77 %2.04 %1.30 %

Adjustment to remove DOJ - %0.36 %- %0.16 %- %

Adjustment for former CEO SERP settlement (0.11) %- %- %(0.05) %- %agreement

Adjustment for merger costs 0.10 %- %- %0.04 %- %

Adjusted return on average assets 2.08 %2.34 %1.77 %2.19 %1.30 %

Adjusted HFI loan-to-deposit ratio.



June 30, March 31, December 31, September 30, June 30, 2021 2021 2020 2020 2020

(Dollars in millions)

Average LHFI $13,688 $14,915 $ 15,703 $ 14,839 $13,596

Less: Average warehouse loans 5,410 6,395 6,948 5,697 3,785

Adjusted average LHFI $8,278 $8,520 $ 8,755 $ 9,142 $9,811



Average deposits $19,070 $20,043 $ 21,068 $ 19,561 $17,715

Less: Average custodial deposits 6,188 7,194 8,527 7,347 6,223

Adjusted average deposits $12,882 $12,849 $ 12,541 $ 12,214 $11,492



HFI loan-to-deposit ratio 71.8 %74.4 %74.5 % 75.9 % 76.7 %

Adjusted HFI loan-to-deposit ratio64.3 %66.3 %69.8 % 74.8 % 85.4 %

Adjusted 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

June 30, March 31, December 31,September 30,June 30, 2021 2021 2020 2020 2020

(Dollar in millions)

Noninterest expense $ 289 $ 347 $ 314 $ 301 $ 293

Adjustment to remove DOJ settlement expense - 35 - - -

Adjustment for former CEO SERP agreement (10) - - - -

Adjustment for merger costs 9 - - - -

Adjusted noninterest expense $ 290 $ 312 $ 314 $ 301 $ 293



Income before income taxes $ 190 $ 194 $ 205 $ 295 $ 148

Adjustment to remove DOJ settlement expense $ - $ 35 $ - $ - $ -

Adjustment for former CEO SERP agreement (10) - - - -

Adjustment for merger costs 9 - - - -

Adjusted income before income taxes $ 189 $ 229 $ 205 $ 295 $ 148



Provision for income taxes $ 43 $ 45 $ 51 $ 73 $ 32

Adjustment to remove DOJ settlement expense - (8) - - -

Adjustment for former CEO SERP agreement 2 - - - -

Adjustment for merger costs (2) - - - -

Adjusted provision for income taxes $ 43 $ 53 $ 51 $ 73 $ 32



Net income $ 147 $ 149 $ 154 $ 222 $ 116

Adjusted net income $ 146 $ 176 $ 154 $ 222 $ 116



Weighted average common shares outstanding 52,763,868 52,675,562 53,912,584 57,032,746 56,790,642

Weighted average diluted common shares 53,536,669 53,297,803 54,343,966 57,379,809 57,123,706

Adjusted basic earnings per share $ 2.78 $ 3.34 $ 2.86 $ 3.90 $ 2.04

Adjusted diluted earnings per share $ 2.73 $ 3.31 $ 2.83 $ 3.88 $ 2.03



Average interest earning assets $ 25,269 $ 27,178 $ 27,100 $ 25,738 $ 23,692

Net interest margin 2.90 %2.82 %2.78 %2.78 % 2.86 %

Adjustment to LGG loans available for repurchase0.16 %0.20 %0.20 %0.16 % 0.02 %

Adjusted net interest margin 3.06 %3.02 %2.98 %2.94 % 2.88 %



Efficiency ratio 66.6 %67.7 %60.4 %47.9 % 54.1 %

Adjustment to remove DOJ settlement expense - %(6.8) %- %- % 0.1 %

Adjustment for former CEO SERP agreement 1.6 %- %- %- % - %

Adjustment for merger costs (1.4) %- %- %- % - %

Adjusted efficiency ratio 66.8 %60.9 %60.4 %47.9 % 54.2 %

Twelve Months Ended

June 30, June 30, 2021 2020

(Dollar in millions)

Average Equity 2,285,768,506 1,838,956,372

Average GW/Intangible 156,156,714 168,585,196

Adjusted Average Equity 2,129,611,792 1,670,371,176



Tangible Net Income 681,175,736 293,106,675

Adjustments for DOJ, CEO SERP, and merger costs (net of tax effect)26,048,207 -

Adjusted Tangible Net Income 655,127,529 293,106,675



Adjusted return on average common equity 31 %18 %

For more information, contact: Kenneth SchellenbergFBCInvestorRelations@flagstar.com(248) 312-5741

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SOURCE Flagstar Bancorp, Inc.