PR Newswire | Oct 27, 2021 06:31AM EDT

$2.83 Per Diluted Share

10/27 05:30 CDT

Flagstar Bancorp Reports Third Quarter 2021 Net Income of $152 Million, or $2.83 Per Diluted Share TROY, Mich., Oct. 27, 2021

TROY, Mich., Oct. 27, 2021 /PRNewswire/ --

Key Highlights - Third Quarter 2021

* Generated net interest income of $195 million, up $12 million from the prior quarter. * Produced mortgage revenue of $178 million -- sixth consecutive quarter over $150 million. * Grew capital significantly with total risk-based capital ratio increasing 42 basis points to 14.5 percent. * Delivered exceptional returns on average tangible common equity of 25.2 percent and on average assets of 2.2 percent.

Flagstar Bancorp, Inc. (NYSE: FBC), the holding company for Flagstar Bank, today reported third quarter 2021 net income of $152 million, or $2.83 per diluted share, compared to second quarter 2021 net income of $147 million, or $2.74 per diluted share, and third quarter 2020 net income of $222 million, or $3.88 per diluted share.

Flagstar reported year to date 2021 net income of $448 million, or $8.37 per diluted share, compared to year to date 2020 net income of $384 million, or $6.71 per diluted share.

On an adjusted basis, Flagstar reported net income of $156 million, or $2.94 per diluted share, for the third quarter 2021, compared to $146 million, or $2.73 per diluted share, for the second quarter 2021. Flagstar reported adjusted year to date 2021 net income of $478 million, or $8.92 per diluted share.

"Today we posted another quarter of outstanding earnings," said Alessandro DiNello, president and chief executive officer of Flagstar Bancorp. "Highlights include growth of net interest income with a stable net interest margin, steady growth in our servicing portfolio, and excellent mortgage results that were in line with our expectations.

"The results once again demonstrated the strength of all our key businesses. The increase in our net interest income, the discipline of our mortgage team to drive overall gain on sale revenues and capitalize on market opportunities to become the second-largest RMBS issuer in the country during the quarter, and the uptick in our servicing portfolio, all demonstrate how we can deliver strong results. We also excelled in expense discipline, lowering the efficiency ratio 6 percent and achieving positive operating leverage. This performance combined to produce a 6 percent growth in tangible book value, which now exceeds $47 per share, and a return on average assets of 2.2 percent -- our fifth consecutive quarter that return on average assets has exceeded 2 percent. Further, since the beginning of 2020, we have grown tangible book value by $18.64 per share -- a remarkable 63 percent.

"Credit quality remained high during the quarter, with just one charge-off and one credit going to non-accrual, for which we have a healthy reserve. Given our confidence in the quality of our portfolio and forecasts for an improving economic environment, we released $30 million of our allowance for credit losses. Even with this release, excluding warehouse loans, our coverage ratio was 2.3 percent.

"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

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

(Dollars in millions, except per share data)

Net interest income $ 195 $183 $189 $ 189 $ 180

(Benefit) provision for credit losses(23) (44) (28) 2 32

Noninterest income 266 252 324 332 448

Noninterest expense 286 289 347 314 301

Income before income taxes 198 190 194 205 295

Provision for income taxes 46 43 45 51 73

Net income $ 152 $147 $149 $ 154 $ 222



Income per share:

Basic $ 2.87 $2.78 $2.83 $ 2.86 $ 3.90

Diluted $ 2.83 $2.74 $2.80 $ 2.83 $ 3.88

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

Three Months Ended

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

(Dollars in millions, except per share data)

Net interest income $ 195 $183 $189 $ 189 $ 180

(Benefit) provision for credit losses(23) (44) (28) 2 32

Noninterest income 266 252 324 332 448

Noninterest expense 281 290 312 314 301

Income before income taxes 203 189 229 205 295

Provision for income taxes 47 43 53 51 73

Net income $ 156 $146 $176 $ 154 $ 222



Income per share:

Basic $ 2.98 $2.78 $3.34 $ 2.86 $ 3.90

Diluted $ 2.94 $2.73 $3.31 $ 2.83 $ 3.88

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

Key Ratios

Three Months Ended

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

Net interest margin 3.00 % 2.90% 2.82 % 2.78 % 2.78 %

Adjusted net interest margin (1) 3.04 % 3.06% 3.02 % 2.98 % 2.94 %

Return on average assets 2.2 % 2.1 % 2.0 % 2.1 % 3.1 %

Return on average common equity 23.4 % 24.0% 25.7 % 27.6 % 41.5 %

Efficiency ratio 62.2 % 66.6% 67.7 % 60.4 % 47.9 %

HFI loan-to-deposit ratio 68.8 % 71.8% 74.4 % 74.5 % 75.9 %

Adjusted HFI loan-to-deposit ratio (2)60.3 % 64.3% 66.3 % 69.8 % 74.8 %

(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

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

(Dollars in millions)

Average interest-earning assets $25,656 $25,269$27,178$27,100 $25,738 2 %- %

Average loans held-for-sale (LHFS) 7,839 6,902 7,464 5,672 5,602 14 %40 %

Average loans held-for-investment (LHFI)13,540 13,688 14,915 15,703 14,839 (1)%(9)%

Average total deposits 19,686 19,070 20,043 21,068 19,561 3 %1 %

Net Interest Income

Net interest income in the third quarter was $195 million, an increase of $12 million, or 7 percent, as compared to the second quarter 2021. The results primarily reflect higher earning assets, the result of higher loans held-for-sale during the quarter. Average earning assets increased $0.4 billion, or 2 percent, as average loans held-for-sale increased $0.9 billion. Net interest income further benefited from a decrease in funding costs, partially offset by decreases in certain yields in the loans held-for-investment portfolio.

Net interest margin in the third quarter was 3.00 percent, a 10 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 decreased 2 basis points to 3.04 percent in the third quarter, compared to adjusted net interest margin of 3.06 percent in the prior quarter. This compression was largely attributable to pricing actions we took to maintain warehouse balances. Retail banking deposit rates decreased 1 basis point primarily driven by the maturity of higher cost time deposits.

Average total deposits were $19.7 billion in the third quarter, up $0.6 billion, or 3 percent, from the second quarter 2021, largely due to $0.4 billion, or 20 percent, higher average government deposits resulting from seasonal tax collections and average retail deposits that increased $0.1 billion, or 1 percent. Average custodial deposits remained steady at $6.2 billion.

Provision for Credit Losses

The benefit for credit losses was $23 million for the third quarter, as compared to a $44 million benefit for the second quarter 2021, reflecting the performance of our portfolio and improved economic forecasts.

Noninterest Income

Noninterest income increased $14 million to $266 million in the third quarter, as compared to $252 million for the second quarter 2021, primarily due to higher mortgage revenues.

Third quarter net gain on loan sales increased $1 million, to $169 million, as compared to $168 million in the second quarter 2021. Gain on sale margins increased 15 basis points to 150 basis points for the third quarter 2021, compared to 135 basis points for the second quarter 2021. Fallout adjusted lock volume declined slightly, to $11.3 billion from $12.4 billion for the second quarter 2021.

Net return on mortgage servicing rights increased $14 million, to $9 million for the third quarter 2021, compared to a $5 million net loss for the second quarter 2021. This was driven by the improved valuation of our MSR portfolio at September 30, 2021.

Loan fees and charges decreased $4 million, to $33 million for the third quarter, compared to $37 million for the second quarter 2021, primarily due to a 2 percent decrease in mortgage loans closed.

Mortgage Metrics

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

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

(Dollars in millions)

Mortgage rate lock commitments (fallout- $ 11,300 $12,400 $12,300 $ 12,000 $ 15,000 (9)% (25)% adjusted) (1) (2)

Mortgage loans closed (1) $ 12,500 $12,800 $13,800 $ 13,100 $ 14,400 (2)% (13)%

Net margin on mortgage rate lock commitments 1.50 % 1.35 %1.84 %1.93 % 2.31 % 15 (81) (fallout-adjusted) (2)

Net gain on loan sales $ 169 $168 $227 $ 232 $ 346 1% (51)%

Net return (loss) on mortgage servicing rights $ 9 $(5) $- $ - $ 12 N/M (25)% (MSR)

Gain on loan sales + net return on the MSR $ 178 $163 $227 $ 232 $ 358 9% (50)%

Loans serviced (number of accounts - 000's) (3)1,203 1,182 1,148 1,085 1,105 2% 9%

Capitalized value of MSRs 1.08 % 1.00 %1.06 %0.86 % 0.85 % 8 23



N/MNot meaningful

(1)Rounded to the 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.

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

Noninterest Expense

Noninterest expense decreased to $286 million for the third quarter, compared to $289 million for the second quarter 2021. Excluding $5 million of merger costs in the third quarter of 2021 and $9 million of merger expenses in the second quarter 2021, and adjusting for the $10 million benefit from an agreement to reduce the 2009 former

CEO supplemental executive retirement plan liability in the second quarter 2021, noninterest expense decreased $9 million, or 3 percent. The decrease in noninterest expense primarily reflects lower commissions as mortgage loan closings decreased 2 percent compared to the prior quarter and seasonally lower benefit costs.

Mortgage expenses were $125 million for the third quarter, a decrease of $6 million compared to the prior quarter. The ratio of mortgage noninterest expense to closings -- our mortgage expense ratio -- was 1.00 percent, a decrease of 3 basis points from the second quarter 2021.

The efficiency ratio was 62 percent for the third quarter, as compared to 67 percent for the second quarter 2021. Excluding $5 million of merger expenses in the third quarter 2021, and $9 million of merger expenses in the second quarter 2021, and adjusting for the $10 million benefit from an agreement to reduce the 2009 former CEO supplemental executive retirement plan liability in the second quarter 2021, the adjusted efficiency ratio was 61 percent and 67 percent, respectively.

Income Taxes

The third quarter provision for income taxes totaled $46 million, with an effective tax rate of 23.2 percent, compared to $43 million and an effective tax rate of 22.5 percent for the second quarter 2021. The prior quarter's effective tax rate benefited from deductions associated with restricted stock vesting in that quarter.

Asset Quality

Credit Quality Ratios

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

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

(Dollars in millions)

Allowance for credit losses (1) $190 $220 $265 $280 $280 (14)% (32)%

Credit reserves to LHFI 1.33 % 1.57 % 1.78 % 1.73 % 1.70 % (24) -37

Credit reserves to LHFI excluding warehouse 2.29 % 2.63 % 3.11 % 3.20 % 3.07 % (34) (78)

Net (recoveries) charge-offs $6 $1 $(13) $2 $2 N/M N/M

Total nonperforming LHFI and TDRs $96 $75 $60 $56 $45 28% N/M

Net (recoveries) charge-offs to LHFI ratio (annualized)0.19 % 0.01 % (0.35)% 0.04 % 0.05 % 18 14

Ratio of nonperforming LHFI and TDRs to LHFI 0.66 % 0.53 % 0.40 % 0.34 % 0.28 % 13 38



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

Residential first mortgage - % 0.16 % 0.31 % 0.11 % 0.07 % (16) (7)

Home equity and other consumer 0.01 % 0.15 % 0.16 % 0.06 % 0.23 % (14) (22)

Commercial real estate 0.03 % - % (0.01)% - % (0.01)% 3 4

Commercial and industrial 1.87 % 0.04 % (4.12)% 0.21 % 0.06 % 183 181

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.

Our portfolio has held up well following the economic stress posed by the pandemic, resulting in net charge-offs of $6 million, or 19 basis points of LHFI in the third quarter 2021, primarily from one commercial borrower, compared to net charge-offs of $1 million, or 1 basis point in the prior quarter.

Nonperforming loans held-for-investment and troubled debt restructurings (TDRs) were $96 million and our ratio of nonperforming loans held-for-investment and TDRs to loans held-for-investment was 66 basis points at September 30, 2021, a 13 basis point increase compared to June 30, 2021. At September 30, 2021, early stage loan delinquencies totaled $14 million, or 10 basis points of total loans, compared to $12 million, or 9 basis points, at June 30, 2021.

The allowance for credit losses was $190 million and covered 1.33 percent of loans held-for-investment at September 30, 2021, a 24 basis point decrease from June 30, 2021. Excluding warehouse loans, the allowance coverage ratio was 2.29 percent, a 34 basis point decrease from June 30, 2021. The lower allowance for credit losses primarily reflects improvements in our economic forecasts and our evaluation of the performance of the LHFI portfolio as borrowers continue to recover from the economic stress caused by the pandemic. Overall, the portfolio quality has remained solid as shown by the relatively low levels of charge-offs, TDRs, nonperforming loans and early stage delinquencies.

Capital

Capital Ratios (Bancorp) Change (% / bps)

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

Tier 1 leverage (to adj. avg. total assets)9.72 % 9.21 %8.11 %7.71 % 8.04 % 51 168

Tier 1 common equity (to RWA) 11.95 % 11.38 %10.31 %9.15 % 9.21 % 57 274

Tier 1 capital (to RWA) 13.11 % 12.56 %11.45 %10.23 % 10.31 % 55 280

Total capital (to RWA) 14.55 % 14.13 %13.18 %11.89 % 11.29 % 42 326

Tangible common equity to asset ratio (1) 9.23 % 8.67 %7.48 %6.58 % 6.90 % 56 233

Tangible book value per share (1) $ 47.21 $44.38 $41.77 $ 38.80 $ 35.60 6% 33%



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

We 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 our held-for-investment portfolio. Adjusting the risk-weighting of warehouse loans to 50 percent, because of historically low level of losses from this portfolio, coupled with the fact that the portfolio is fully collateralized with assets that would receive a 50 percent risk weighting, we would have had a Tier 1 common equity ratio of 13.91 percent and a total risk-based capital ratio of 16.94 percent at September 30, 2021.

Importantly, tangible book value per share grew to $47.21, up $2.83, or 6 percent from last quarter.

About Flagstar

Flagstar Bancorp, Inc. (NYSE: FBC) is a $27.0 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 84 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 $272 billion of loans representing over 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, 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)



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

Assets

Cash $103 $168 $251 $194

Interest-earning deposits 46 177 372 86

Total cash and cash equivalents 149 345 623 280

Investment securities available-for-sale 1,802 1,823 1,944 2,165

Investment securities held-to-maturity 236 270 377 440

Loans held-for-sale 6,378 6,138 7,098 5,372

Loans held-for-investment 14,268 14,052 16,227 16,476

Loans with government guarantees 1,945 2,226 2,516 2,500

Less: allowance for loan losses (171) (202) (252) (255)

Total loans held-for-investment and loans with government16,042 16,076 18,491 18,721 guarantees, net

Mortgage servicing rights 340 342 329 323

Federal Home Loan Bank stock 377 377 377 377

Premises and equipment, net 370 374 392 410

Goodwill and intangible assets 149 152 157 160

Other assets 1,199 1,168 1,250 1,228

Total assets $27,042 $27,065$31,038 $29,476

Liabilities and Stockholders' Equity

Noninterest-bearing deposits $8,108 $7,986 $9,458 $9,429

Interest-bearing deposits 11,228 10,675 10,515 10,516

Total deposits 19,336 18,661 19,973 19,945

Short-term Federal Home Loan Bank advances and other 1,870 2,095 3,900 2,226

Long-term Federal Home Loan Bank advances 1,400 1,200 1,200 1,200

Other long-term debt 396 396 641 493

Loan with government guarantee repurchase options 163 989 1,851 1,783

Other liabilities 1,232 1,226 1,272 1,634

Total liabilities 24,397 24,567 28,837 27,281

Stockholders' Equity

Common stock 1 1 1 1

Additional paid in capital 1,362 1,356 1,346 1,493

Accumulated other comprehensive income 38 45 47 46

Retained earnings 1,244 1,096 807 655

Total stockholders' equity 2,645 2,498 2,201 2,195

Total liabilities and stockholders' equity $27,042 $27,065$31,038 $29,476



Flagstar Bancorp, Inc.

Condensed Consolidated Statements of Operations

(Dollars in millions, except per share data)

(Unaudited)



Change compared to:

Three Months Ended 2Q21 3Q20

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

Interest Income

Total interest income $209 $198 $208 $212 $ 206 $11 6 %$3 1 %

Total interest expense 14 15 19 23 26 (1) (7) %(12) (46) %

Net interest income 195 183 189 189 180 12 7 %15 8 %

(Benefit) provision for (23) (44) (28) 2 32 21 (48) %(55) N/M credit losses

Net interest income after 218 227 217 187 148 (9) (4) %70 47 %provision for credit losses

Noninterest Income

Net gain on loan sales 169 168 227 232 346 1 1 %(177) (51) %

Loan fees and charges 33 37 42 48 41 (4) (11) %(8) (20) %

Net return (loss) on the 9 (5) - - 12 14 N/M (3) (25) %mortgage servicing rights

Loan administration income 31 28 27 25 26 3 11 %5 19 %

Deposit fees and charges 9 8 8 8 8 1 13 %1 13 %

Other noninterest income 15 16 20 19 15 (1) (6) %- - %

Total noninterest income 266 252 324 332 448 14 6 %(182) (41) %

Noninterest Expense

Compensation and benefits 130 122 144 125 123 8 7 %7 6 %

Occupancy and equipment 46 50 46 44 47 (4) (8) %(1) (2) %

Commissions 44 51 62 70 72 (7) (14) %(28) (39) %

Loan processing expense 22 22 21 24 20 - - %2 10 %

Legal and professional 12 11 8 11 9 1 9 %3 33 %expense

Federal insurance premiums 6 4 6 5 6 2 50 %- - %

Intangible asset 3 3 3 3 3 - - %- - %amortization

Other noninterest expense 23 26 57 32 21 (3) (12) %2 10 %

Total noninterest expense 286 289 347 314 301 (3) (1) %(15) (5) %

Income before income taxes 198 190 194 205 295 8 4 %(97) (33) %

Provision for income taxes 46 43 45 51 73 3 7 %(27) (37) %

Net income $152 $147 $149 $154 $ 222 $5 3 %$(70) (32) %

Income per share

Basic $2.87 $2.78 $2.83 $2.86 $ 3.90 $0.093 %$(1.03)(26) %

Diluted $2.83 $2.74 $2.80 $2.83 $ 3.88 $0.093 %$(1.05)(27) %



Cash dividends declared $0.06 $0.06 $0.06 $0.05 $ 0.05 $- - %$0.01 20 %

N/M - Not meaningful

Flagstar Bancorp, Inc.

Condensed Consolidated Statements of Operations

(Dollars in millions, except per share data)

(Unaudited)



Nine Months Ended Change

September 30,September 30, Amount Percent 2021 2020

Interest Income

Total interest income $614 $608 $6 1 %

Total interest expense 48 112 (64) (57)%

Net interest income 566 496 70 14 %

(Benefit) provision for credit losses (95) 148 (243) N/M

Net interest income after provision for credit losses 661 348 313 N/M

Noninterest Income

Net gain on loan sales 564 739 (175) (24)%

Loan fees and charges 112 102 10 10 %

Net return on the mortgage servicing rights 4 10 (6) N/M

Loan administration income 85 59 26 44 %

Deposit fees and charges 26 24 2 8 %

Other noninterest income 51 44 7 16 %

Total noninterest income 842 978 (136) (14)%

Noninterest Expense

Compensation and benefits 396 341 55 16 %

Occupancy and equipment 141 132 9 7 %

Commissions 156 162 (6) (4) %

Loan processing expense 65 59 6 10 %

Legal and professional expense 32 20 12 60 %

Federal insurance premiums 16 19 (3) (16)%

Intangible asset amortization 8 10 (2) (20)%

Other noninterest expense 108 84 24 29 %

Total noninterest expense 922 827 95 11 %

Income before income taxes 581 499 82 16 %

Provision for income taxes 133 115 18 16 %

Net income $448 $384 $64 17 %

Income per share

Basic $8.48 $6.76 $1.7225 %

Diluted $8.37 $6.71 $1.6625 %



Cash dividends declared $0.18 $0.15 $0.0320 %

N/M - Not meaningful

Flagstar Bancorp, Inc. Summary of Selected Consolidated Financial and Statistical Data (Dollars in millions, except share data) (Unaudited) Three Months Ended Nine Months Ended September 30, June 30, September 30, September 30, September 30, 2021 2021 2020 2021 2020 Selected Mortgage Statistics (1): Mortgage rate lock commitments (fallout-adjusted) (2) $ 11,300 $12,400 $ 15,000 $ 36,000 $ 40,000 Mortgage loans closed $ 12,500 $12,800 $ 14,400 $ 39,100 $ 35,200 Mortgage loans sold and securitized $ 12,400 $14,000 $ 14,500 $ 40,100 $ 34,900 Selected Ratios: Interest rate spread (3) 2.84 % 2.70 %2.44 % 2.70 % 2.41 % Net interest margin 3.00 % 2.90 %2.78 % 2.90 % 2.81 % Net margin on loans sold and securitized 1.36 % 1.20 %2.39 % 1.41 % 2.12 % Return on average assets 2.16 % 2.09 %3.15 % 2.08 % 1.97 % Adjusted return on average assets (4) 2.21 % 2.08 %3.15 % 2.22 % 1.97 % Return on average common equity 23.40 % 23.97 %41.54 % 24.32 % 25.71 % Return on average tangible common equity (5) 25.18 % 25.92 %45.42 % 24.65 % 28.58 % Adjusted return on average tangible common equity (4) (5)26.16 % 25.67 %45.42 % 27.23 % 28.58 % Efficiency ratio 62.2 % 66.6 %47.9 % 65.5 % 56.1 % Adjusted efficiency ratio (4) 61.1 % 66.8 %47.9 % 62.8 % 56.1 % Common equity-to-assets ratio (average for the period) 9.24 % 8.74 %7.57 % 8.55 % 7.66 % Average Balances: Average interest-earning assets $ 25,656 $25,269 $ 25,738 $ 26,029 $ 23,535 Average interest-bearing liabilities $ 15,590 $14,641 $ 14,281 $ 15,083 $ 14,625 Average stockholders' equity $ 2,592 $2,448 $ 2,141 $ 2,454 $ 1,991 (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. September 30,June 30, December 31,September 30, 2021 2021 2020 2020 Selected Statistics: Book value per common share $ 50.04 $ 47.26 $ 41.79 $ 38.41 Tangible book value per share (1) $ 47.21 $ 44.38 $ 38.80 $ 35.60 Number of common shares outstanding 52,862,383 52,862,264 52,656,067 57,150,470 Number of FTE employees 5,461 5,503 5,214 4,871 Number of bank branches 158 158 158 160 Ratio of nonperforming assets to total assets (2)0.37 % 0.30 %0.21 %0.17 % Common equity-to-assets ratio 9.78 % 9.23 %7.09 %7.45 % MSR Key Statistics and Ratios: Weighted average service fee (basis points) 32.1 32.6 34.3 35.0 Capitalized value of mortgage servicing rights 1.08 % 1.00 %0.86 %0.85 % (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 September 30, 2021 June 30, 2021 September 30, 2020 Annualized Annualized Annualized Average BalanceInterest Average BalanceInterest Average BalanceInterest Yield/Rate Yield/Rate Yield/Rate Interest-Earning Assets Loans held-for-sale $ 7,839 $ 63 3.22% $6,902 $53 3.05% $5,602 $45 3.21% Loans held-for-investment Residential first mortgage 1,706 14 3.14% 1,887 15 3.27% 2,584 21 3.24% Home equity 686 6 3.64% 748 7 3.64% 951 9 3.77% Other 1,177 14 4.76% 1,101 13 4.80% 950 13 5.28% Total consumer loans 3,569 34 3.77% 3,736 35 3.79% 4,485 43 3.78% Commercial real estate 3,238 28 3.43% 3,093 26 3.37% 3,007 27 3.47% Commercial and industrial 1,341 12 3.56% 1,449 14 3.72% 1,650 14 3.25% Warehouse lending 5,392 52 3.76% 5,410 53 3.95% 5,697 56 3.92% Total commercial loans 9,971 92 3.62% 9,952 93 3.74% 10,354 97 3.68% Total loans held-for-investment 13,540 126 3.66% 13,688 128 3.75% 14,839 140 3.71% Loans with government guarantees 2,046 8 1.61% 2,344 5 0.79% 2,122 5 0.89% Investment securities 2,058 12 2.15% 2,123 12 2.19% 2,807 16 2.29% Interest-earning deposits 173 - 0.18% 212 - 0.13% 368 - 0.11% Total interest-earning assets 25,656 $ 209 3.22% 25,269 $198 3.12% 25,738 $206 3.16% Other assets 2,391 2,742 2,539 Total assets $ 28,047 $28,011 $28,277 Interest-Bearing Liabilities Retail deposits Demand deposits $ 1,603 $ - 0.05% $1,686 $- 0.06% $1,824 $- 0.09% Savings deposits 4,144 2 0.14% 4,084 1 0.14% 3,675 3 0.34% Money market deposits 840 - 0.08% 762 - 0.07% 733 - 0.09% Certificates of deposit 1,038 1 0.50% 1,126 2 0.62% 1,672 8 1.62% Total retail deposits 7,625 3 0.16% 7,658 3 0.18% 7,904 11 0.53% Government deposits 2,148 1 0.17% 1,795 1 0.19% 1,403 1 0.35% Wholesale deposits and other 1,342 3 0.99% 1,170 4 1.33% 953 4 1.77% Total interest-bearing deposits 11,115 7 0.26% 10,623 8 0.31% 10,260 16 0.62% Short-term FHLB advances and other 2,736 1 0.18% 2,422 1 0.17% 2,328 2 0.20% Long-term FHLB advances 1,343 3 0.92% 1,200 3 1.03% 1,200 3 1.03% Other long-term debt 396 3 3.16% 396 3 3.19% 493 5 4.52% Total interest-bearing liabilities 15,590 14 0.38% 14,641 15 0.43% 14,281 26 0.72% Noninterest-bearing deposits Retail deposits and other 2,391 2,259 1,954 Custodial deposits (1) 6,180 6,188 7,347 Total noninterest-bearing deposits 8,571 8,447 9,301 Other liabilities 1,294 2,476 2,554 Stockholders' equity 2,592 2,448 2,141 Total liabilities and stockholders' $ 28,047 $28,012 $28,277 equity Net interest-earning assets $ 10,066 $10,628 $11,457 Net interest income $ 195 $183 $180 Interest rate spread (2) 2.84% 2.70% 2.44% Net interest margin (3) 3.00% 2.90% 2.78% Ratio of average interest-earning assets to 164.6 % 172.6 % 180.2 % interest-bearing liabilities Total average deposits $ 19,686 $19,070 $19,561 Approximately 80 percent of custodial deposits from loans subserviced for (1) which LIBOR based fees are 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) Nine Months Ended September 30, 2021 September 30, 2020 Annualized Annualized Average BalanceInterest Average BalanceInterest Yield/Rate Yield/Rate Interest-Earning Assets Loans held-for-sale $ 7,403 $169 3.04% $5,499 $142 3.44% Loans held-for-investment Residential first mortgage 1,907 46 3.21% 2,822 72 3.40% Home equity 751 20 3.59% 990 30 4.10% Other 1,106 40 4.78% 882 36 5.47% Total consumer loans 3,764 106 3.75% 4,694 138 3.94% Commercial real estate 3,125 80 3.38% 3,019 90 3.90% Commercial and industrial 1,425 39 3.60% 1,774 50 3.68% Warehouse lending 5,729 170 3.91% 3,937 119 3.98% Total commercial loans 10,279 289 3.71% 8,730 259 3.89% Total loans held-for-investment 14,043 395 3.72% 13,424 397 3.91% Loans with government guarantees 2,295 15 0.95% 1,267 12 1.23% Investment securities 2,130 35 2.19% 3,094 56 2.40% Interest-earning deposits 158 - 0.15% 251 1 0.56% Total interest-earning assets 26,029 $614 3.13% 23,535 $608 3.42% Other assets 2,672 2,457 Total assets $ 28,701 $25,992 Interest-Bearing Liabilities Retail deposits Demand deposits $ 1,713 $1 0.06% $1,737 $4 0.33% Savings deposits 4,058 4 0.14% 3,513 17 0.63% Money market deposits 763 - 0.07% 712 1 0.17% Certificates of deposit 1,152 6 0.71% 1,970 29 1.98% Total retail deposits 7,686 11 0.20% 7,932 51 0.86% Government deposits 1,907 3 0.19% 1,208 6 0.68% Wholesale deposits and other 1,182 11 1.27% 758 12 2.03% Total interest-bearing deposits 10,775 25 0.32% 9,898 69 0.93% Short-term FHLB advances and other 2,646 3 0.17% 3,212 16 0.65% Long-term FHLB advances 1,248 9 0.99% 1,021 9 1.13% Other long-term debt 414 11 3.50% 494 18 4.94% Total interest-bearing liabilities 15,083 48 0.43% 14,625 112 1.01% Noninterest-bearing deposits Retail deposits and other 2,307 1,680 Custodial deposits (1) 6,517 6,120 Total noninterest-bearing deposits 8,824 7,800 Other liabilities 2,340 1,576 Stockholders' equity 2,454 1,991 Total liabilities and stockholders' equity $ 28,701 $25,992 Net interest-earning assets $ 10,946 $8,910 Net interest income $566 $496 Interest rate spread (2) 2.70% 2.41% Net interest margin (3) 2.90% 2.81% Ratio of average interest-earning assets to 172.6 % 160.9 % interest-bearing liabilities Total average deposits $ 19,598 $17,698 Approximately 80 percent of custodial deposits are from subserviced loans a. for which LIBOR based fees are recognized as an offset in net loan administration income. Interest rate spread is the difference between rate of interest earned on b. 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 Nine Months Ended September 30,June 30 September 30,September 30,September 30, 2021 2021 2020 2021 2020 Net income $ 152 $ 147 $ 222 $ 448 $ 384 Weighted average common shares outstanding 52,862,288 52,763,868 57,032,746 52,767,923 56,827,171 Stock-based awards 797,134 772,801 347,063 731,366 404,518 Weighted average diluted common shares 53,659,422 53,536,669 57,379,809 53,499,289 57,231,689 Basic earnings per common share $ 2.87 $ 2.78 $ 3.90 $ 8.48 $ 6.76 Stock-based awards (0.04) (0.04) (0.02) (0.11) (0.05) Diluted earnings per common share $ 2.83 $ 2.74 $ 3.88 $ 8.37 $ 6.71 Regulatory Capital - Bancorp (Dollars in millions) (Unaudited) September 30, 2021June 30, 2021 December 31, 2020September 30, 2020 Amount Ratio Amount Ratio Amount Ratio Amount Ratio Tier 1 leverage (to adjusted avg. total assets)$2,709 9.72 %$2,562 9.21 %$2,270 7.71 %$2,256 8.04 % Total adjusted avg. total asset base $27,863 $27,828 $29,444 $28,069 Tier 1 common equity (to risk weighted assets) $2,469 11.95%$2,322 11.38%$2,030 9.15 %$2,016 9.21 % Tier 1 capital (to risk weighted assets) $2,709 13.11%$2,562 12.56%$2,270 10.23%$2,256 10.31% Total capital (to risk weighted assets) $3,006 14.55%$2,882 14.13%$2,638 11.89%$2,471 11.29% Risk-weighted asset base $20,664 $20,399 $22,190 $21,882 Regulatory Capital - Bank (Dollars in millions) (Unaudited) September 30, 2021June 30, 2021 December 31, 2020September 30, 2020 Amount Ratio Amount Ratio Amount Ratio Amount Ratio Tier 1 leverage (to adjusted avg. total assets)$2,619 9.40 %$2,464 8.88 %$2,390 8.12 %$2,212 7.89 % Total adjusted avg. total asset base $27,851 $27,767 $29,437 $28,051 Tier 1 common equity (to risk weighted assets) $2,619 12.71%$2,464 12.08%$2,390 10.77%$2,212 10.11% Tier 1 capital (to risk weighted assets) $2,619 12.71%$2,464 12.08%$2,390 10.77%$2,212 10.11% Total capital (to risk weighted assets) $2,766 13.42%$2,634 12.92%$2,608 11.75%$2,427 11.09% Risk-weighted asset base $20,609 $20,395 $22,194 $21,882 Loans Serviced (Dollars in millions) (Unaudited) September 30, 2021 June 30, 2021 December 31, 2020 September 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) $230,045 1,007,557$211,775 975,467 $178,606 867,799 $180,981 893,559 Serviced for others (3) 31,354 124,665 34,263 139,029 38,026 151,081 37,908 148,868 Serviced for own loan portfolio (4)10,410 70,738 9,685 67,988 10,079 66,519 8,469 62,486 Total loans serviced $271,809 1,202,960$255,723 1,182,484$226,711 1,085,399$227,358 1,104,913 (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) September 30, 2021June 30, 2021 December 31, 2020September 30, 2020 Consumer loans Residential first mortgage $1,626 11.5 %$1,794 12.8 %$2,266 14.0 %$2,472 15.0 % Home equity 657 4.6 %717 5.1 %856 5.3 %924 5.6 % Other 1,203 8.3 %1,133 8.0 %1,004 6.1 %973 5.9 % Total consumer loans 3,486 24.4 %3,644 25.9 %4,126 25.4 %4,369 26.5 % Commercial loans Commercial real estate 3,216 22.6 %3,169 22.6 %3,061 18.9 %2,996 18.2 % Commercial and industrial 1,387 9.7 %1,376 9.8 %1,382 8.5 %1,520 9.2 % Warehouse lending 6,179 43.3 %5,863 41.7 %7,658 47.2 %7,591 46.1 % Total commercial loans 10,782 75.6 %10,408 74.1 %12,101 74.6 %12,107 73.5 % Total loans held-for-investment$14,268 100.0%$14,052100.0%$16,227100.0%$16,476 100.0% Other Consumer Loans Held-for-Investment (Dollars in millions) (Unaudited) September 30, 2021June 30, 2021 December 31, 2020 September 30, 2020 Indirect lending $916 76.1 % $866 76.4 %$ 713 71.0 % $710 73.0 % Point of sale 248 20.6 % 225 19.9 %211 21.0 % 202 20.7 % Other 39 3.2 % 42 3.7 %80 8.0 % 61 6.3 % Total other consumer loans$1,203100.0 % $1,133100.0%$ 1,004100.0% $973 100.0 % Allowance for Credit Losses (Dollars in millions) (Unaudited) September 30, 2021June 30, 2021September 30, 2020 Residential first mortgage $ 43 $48 $52 Home equity 15 17 29 Other 32 38 38 Total consumer loans 90 103 119 Commercial real estate 35 58 89 Commercial and industrial 43 38 42 Warehouse lending 3 3 5 Total commercial loans 81 99 136 Allowance for loan losses 171 202 255 Reserve for unfunded commitments19 18 25 Allowance for credit losses $ 190 $220 $280 Allowance for Credit Losses (Dollars in millions) (Unaudited) Three Months Ended September 30, 2021 ResidentialHome Other Commercial CommercialWarehouseTotal LHFI Unfunded First EquityConsumerReal Estateand Lending Portfolio (1)Commitments Mortgage Industrial Beginning balance $ 48 $17 $ 38 $ 58 $ 38 $ 3 $ 202 $ 18 Provision (benefit) for credit losses: Loan volume (1) (1) 2 1 - - 1 1 Economic forecast (2) (2) (1) - (3) (4) - (10) - Credit (3) (1) 1 - (11) 17 - 6 - Qualitative factor adjustments (4) (1) (1) (8) (10) (8) - (28) - Charge-offs (1) - (1) - (6) - (8) - Recoveries 1 1 - - - - 2 - Provision for net charge-offs - (1) 1 - 6 - 6 - Ending allowance balance $ 43 $15 $ 32 $ 35 $ 43 $ 3 $ 171 $ 19 (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 $6 million of unallocated reserves attributed to various portfolios for presentation purposes. Allowance for Credit Losses (Dollars in millions) (Unaudited) Nine Months Ended September 30, 2021 ResidentialHome Other Commercial CommercialWarehouseTotal LHFI Unfunded First EquityConsumerReal Estateand Lending Portfolio (1)Commitments Mortgage Industrial Beginning balance $ 49 $25 $ 39 $ 84 $ 51 $ 4 $ 252 $ 28 Provision (benefit) for credit losses: Loan volume 2 (3) 5 4 1 (1) 8 (9) Economic forecast (2) (6) (4) (1) (5) (13) - (29) - Credit (3) 5 3 1 (33) 16 - (8) - Qualitative factor adjustments (4) (7) (6) (12) (15) (12) - (52) - Charge-offs (4) (1) (3) - (7) - (15) - Recoveries 2 1 2 - 16 - 21 - Provision for net charge-offs 2 - 1 - (9) - (6) - Ending allowance balance $ 43 $15 $ 32 $ 35 $ 43 $ 3 $ 171 $ 19 (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 $6 million of unallocated reserves attributed to various portfolios for presentation purposes. Nonperforming Loans and Assets (Dollars in millions) (Unaudited) September 30,June 30,December 31,September 30, 2021 2021 2020 2021 Nonperforming LHFI $82 $63 $46 $36 Nonperforming TDRs 5 6 4 4 Nonperforming TDRs at inception but performing for less than six9 7 6 5 months Total nonperforming LHFI and TDRs (1) 96 76 56 45 Other nonperforming assets, net 6 6 8 6 LHFS 10 9 9 6 Total nonperforming assets $112 $91 $73 $57 Ratio of nonperforming assets to total assets (2) 0.37 % 0.30% 0.21 % 0.17 % Ratio of nonperforming LHFI and TDRs to LHFI 0.66 % 0.53% 0.34 % 0.28 % Ratio of nonperforming assets to LHFI and repossessed assets (2)0.70 % 0.57% 0.40 % 0.31 % (1) Includes less than 90 day past due performing loans placed on nonaccrual. Interest is not being accrued on these loans. (2) Ratio excludes nonperforming 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 September 30, 2021 Consumer loans $ 12 $ 2 $ 58 $ 72 $ 3,486 Commercial loans - - 35 35 10,782 Total loans $ 12 $ 2 $ 93 $ 107 $ 14,268 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 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 September 30, 2020 Consumer loans $ 9 $ 4 $ 36 $ 49 $ 4,369 Commercial loans - - 10 10 12,107 Total loans $ 9 $ 4 $ 46 $ 59 $ 16,476 (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 September 30, 2021 Consumer loans $34 $14 $48 Commercial loans - 2 2 Total TDR loans $34 $14 $50 June 30, 2021 Consumer loans $31 $11 $42 Commercial loans - 2 2 Total TDR loans $31 $13 $44 December 31, 2020 Consumer loans $31 $10 $41 Commercial loans 5 - 5 Total TDR loans $36 $10 $46 September 30, 2020 Consumer loans $34 $9 $43 Commercial loans 5 - 5 Total TDR loans $39 $9 $48 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 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. September 30, June 30, March 31, December 31, September 30, 2021 2021 2021 2020 2020 (Dollars in millions, except share data) Total stockholders' equity $ 2,645 $ 2,498 $ 2,358 $ 2,201 $ 2,195 Less: Goodwill and intangible assets 149 152 155 157 160 Tangible book value $ 2,496 $ 2,346 $ 2,203 $ 2,044 $ 2,035 Number of common shares outstanding 52,862,383 52,862,264 52,752,600 52,656,067 57,150,470 Tangible book value per share $ 47.21 $ 44.38 $ 41.77 $ 38.80 $ 35.60 Total assets $ 27,042 $ 27,065 $ 29,449 $ 31,038 $ 29,476 Tangible common equity to assets ratio 9.23 % 8.67 % 7.48 % 6.58 % 6.90 % Adjusted return on average tangible common equity and adjusted return on average assets. Three Months Ended Nine Months Ended September 30,June 30, September 30,September 30,September 30, 2021 2021 2020 2021 2020 (Dollars in millions) Net income $152 $147 $ 222 $ 448 $ 384 Add: Intangible asset amortization, net of tax2 2 3 6 7 Tangible net income $154 $149 $ 225 $ 454 $ 391 Total average equity $2,592 $2,448 $ 2,141 $ 2,454 $ 1,991 Less: Average goodwill and intangible assets 151 153 162 - 165 Total tangible average equity $2,441 $2,295 $ 1,979 $ 2,454 $ 1,826 Return on average tangible common equity 25.18 % 25.92 %45.42 % 24.65 % 28.58 % Adjustment to remove DOJ settlement expense - % - %- % 2.34 % - % Adjustment for former CEO SERP agreement - % (2.14) %- % (0.67) % - % Adjustment for merger costs 0.98 % 1.89 %- % 0.91 % - % Adjusted return on average tangible common 26.16 % 25.67 %45.42 % 27.23 % 28.58 % equity Return on average assets 2.16 % 2.09 %3.15 % 2.08 % 1.97 % Adjustment to remove DOJ - % - %- % 0.13 % - % Adjustment for former CEO SERP settlement - % (0.11) %- % (0.04) % - % agreement Adjustment for merger costs 0.05 % 0.10 %- % 0.05 % - % Adjusted return on average assets 2.21 % 2.08 %3.15 % 2.22 % 1.97 % Adjusted HFI loan-to-deposit ratio. September 30, June 30, March 31, December 31, September 30, 2020 2021 2021 2021 2020 (Dollars in millions) Average LHFI $ 13,540 $ 13,688 $ 14,915 $ 15,703 $ 14,839 Less: Average warehouse loans 5,392 5,410 6,395 6,948 5,697 Adjusted average LHFI $ 8,148 $ 8,278 $ 8,520 $ 8,755 $ 9,142 Average deposits $ 19,686 $ 19,070 $ 20,043 $ 21,068 $ 19,561 Less: Average custodial deposits 6,180 6,188 7,194 8,527 7,347 Adjusted average deposits $ 13,506 $ 12,882 $ 12,849 $ 12,541 $ 12,214 HFI loan-to-deposit ratio 68.8 % 71.8 % 74.4 % 74.5 % 75.9 % Adjusted HFI loan-to-deposit ratio 60.3 % 64.3 % 66.3 % 69.8 % 74.8 % Adjusted noninterest expense, income before income taxes, provision for income taxes, net income, basic earnings per share, diluted earnings per share, and efficiency ratio. Three Months Ended Nine Months Ended September 30, June 30, March 31, September 30, 2021 2021 2021 2021 (Dollar in millions) Noninterest expense $ 286 $ 289 $ 347 $ 922 Adjustment to remove DOJ settlement expense - - 35 35 Adjustment for former CEO SERP agreement - (10) - (10) Adjustment for merger costs 5 9 - 14 Adjusted noninterest expense $ 281 $ 290 $ 312 $ 883 Income before income taxes $ 198 $ 190 $ 194 $ 581 Adjustment to remove DOJ settlement expense - - 35 35 Adjustment for former CEO SERP agreement - (10) - (10) Adjustment for merger costs 5 9 - 14 Adjusted income before income taxes $ 203 $ 189 $ 229 $ 620 Provision for income taxes $ 46 $ 43 $ 45 $ 133 Adjustment to remove DOJ settlement expense - - (8) (8) Adjustment for former CEO SERP agreement - 2 - 2 Adjustment for merger costs (1) (2) - (3) Adjusted provision for income taxes $ 47 $ 43 $ 53 $ 142 Net income $ 152 $ 147 $ 149 $ 448 Adjusted net income $ 156 $ 146 $ 176 $ 478 Weighted average common shares outstanding 52,862,288 52,763,868 52,675,562 52,767,923 Weighted average diluted common shares 53,659,422 53,536,669 53,297,803 53,499,289 Adjusted basic earnings per share $ 2.98 $ 2.78 $ 3.34 $ 9.04 Adjusted diluted earnings per share $ 2.94 $ 2.73 $ 3.31 $ 8.92 Efficiency ratio 62.2 % 66.6 % 67.7 % 65.5 % Adjustment to remove DOJ settlement expense - % - % (6.8) % (2.5) % Adjustment for former CEO SERP agreement - % 1.6 % - % 0.7 % Adjustment for merger costs (1.1) % (1.4) % - % (1.0) % Adjusted efficiency ratio 61.1 % 66.8 % 60.9 % 62.7 % Adjusted net interest margin Three Months Ended September 30, June 30, March 31, December 31, September 30, 2021 2021 2021 2020 2020 Average interest earning assets $ 25,656 $25,269 $27,178 $ 27,100 $ 25,738 Net interest margin 3.00 % 2.90 %2.82 %2.78 % 2.78 % Adjustment to LGG loans available for repurchase0.04 % 0.16 %0.20 %0.20 % 0.16 % Adjusted net interest margin 3.04 % 3.06 %3.02 %2.98 % 2.94 % For more information, contact:Kenneth SchellenbergFBCInvestorRelations@flagstar.com(248) 312-5741

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SOURCE Flagstar Bancorp, Inc.