PR Newswire | Jul 28, 2020 06:31AM EDT

$2.03 Per Diluted Share

07/28 05:30 CDT

Flagstar Bancorp Reports Second Quarter 2020 Net Income of $116 Million, or $2.03 Per Diluted Share TROY, Mich., July 28, 2020

TROY, Mich., July 28, 2020 /PRNewswire/ --

Key Highlights - Second Quarter 2020

* Posted best results in company history, validating strength of business model * Expanded net interest margin by 5 basis points and increased net interest income by $20 million * Achieved mortgage revenues of $295 million, driven by strong gain on sale margin * Increased the allowance for credit losses, driving the coverage ratio to 1.69 percent; 2.60 percent, excluding warehouse * Achieved stable capital ratios from balance sheet growth in low-risk asset categories

Flagstar Bancorp, Inc. (NYSE: FBC), the holding company for Flagstar Bank, today reported second quarter 2020 net income of $116 million, or $2.03 per diluted share, compared to first quarter 2020 net income of $46 million, or $0.80 per diluted share and second quarter 2019 net income of $61 million, or $1.06 per diluted share.

"We posted outstanding results for the quarter, the best in the company's history," said Alessandro DiNello, president and chief executive officer of Flagstar Bancorp, Inc. "All cylinders were firing in mortgage as we got a lift from a market that was super-charged and banking and servicing continued to provide stable and consistent earnings.

"Results were further bolstered by the strategic way we managed volume and sales channels to maximize revenue. Banking came in strong, too, with net interest margin up an impressive 5 basis points, and a $20 million increase in net interest income, despite a difficult interest rate backdrop. And we held our ground in servicing, despite high levels of prepayments.

"It's important to note that we earned over $2.00 per share even while setting aside $100 million for loan losses, which raised our credit reserves to $250 million. This pushed our coverage ratio to 1.69 percent overall and 2.60 percent, excluding our warehouse business which has a history of virtually no losses. This was a provision largely driven by the uncertainty around the pandemic and the conservative approach we took within the CECL framework of modeling-in economic variables.

"Our commercial customers are holding up well to this point and forbearance trends have been positive throughout the quarter. Also noteworthy is the growth in net interest margin in a challenging rate environment. Taken together, we believe these factors position us well for whatever COVID-19 may bring in the future.

"Mortgage took center stage with revenue of $295 million, largely on the strength of gain on sale margin which expanded 139 basis points, to 219 basis points and a 24 percent increase in fallout adjusted locks from the prior quarter. We capitalized on market opportunities, leveraged the diversity of our platform and shifted our product and channel mix to optimize results. This, along with stronger secondary market performance resulted in net gain on loan sales of $303 million.

"We closed the quarter servicing or subservicing slightly more than 1 million loans, which despite high prepayment activity, was generally consistent with the prior quarter. We did this by leveraging our ability to tap into our mortgage origination business to replace loans that prepaid.

"Additionally, our expense discipline contributed to $180 million of pre-provision net revenue growth compared to the prior quarter. The expense increases we did have this quarter were largely attributable to variable costs associated with the strong performance in mortgage leading to our efficiency ratio of 54 percent.

"Like the first quarter, our results in the second quarter reflect the power of our business model. Mortgage was a standout, but the contribution of our warehouse business, our net interest income and margin in banking, and the consistency of our servicing business and the related fee income highlight our unique and diversified business mix. The combination of these items drove strong capital generation, resulting in a tangible book value per share of $31.74 at quarter end.

"I would be remiss if I didn't comment on the horrific events that gripped the nation during the quarter and how they have inspired us as a company to open a dialogue about social and racial inequities and be a catalyst for change. For starters, we realized that in order to create a work environment where employees could be themselves and do their best work we had to acknowledge what was happening in the outside world. So, we listened to our employees and did everything from pulling our advertising from Facebook in July to support the Stop Hate for Profit initiative, to holding "Let's Talk About It" panel discussions about current events. We're pledging $1 million dollars in grants to minority owned small businesses and another $1 million to nonprofits that support diversity, equity and inclusion. Additionally, our board of directors has approved adding two new directors to the board who will be women representing minority groups. Reversing decades of systemic inequities is a marathon and not a sprint, but we are committed to making our company and our communities fairer and more equitable for all. We're off and running.

"As for our financial performance, we don't know what lies ahead, but we continue to show the strength of our unique business model in a range of economic environments. This quarter was extraordinary, but it stands on the shoulders of many other quarters where we turned in solid, consistent results from a business model designed to do just that."

Income Statement Highlights

Three Months Ended

June 30,March 31,December 31,September 30,June 30, 2020 2020 2019 2019 2019

(Dollars in millions)

Net interest income $ 168 $ 148 $152 $146 $138

Provision for credit losses102 14 - 1 17

Noninterest income 378 157 162 171 168

Noninterest expense 296 235 245 238 214

Income before income taxes 148 56 69 78 75

Provision for income taxes 32 10 11 15 14

Net income $ 116 $ 46 $58 $63 $61

Income per share:

Basic $ 2.04$ 0.80 $1.01 $1.12 $1.08

Diluted $ 2.03$ 0.80 $1.00 $1.11 $1.06

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

Three Months Ended

June 30, March 31,December 31,September 30,June 30, 2020 2020 2019 2019 2019

(Dollars in millions)

Net interest income $168 $148 $ 152 $ 146 $138

Provision for credit losses 102 14 - 1 17

Noninterest income 378 157 162 171 143

Noninterest expense 296 235 245 238 214

Income before income taxes 148 56 69 78 50

Provision for income taxes 32 10 11 15 9

Net income $116 $46 $ 58 $ 63 $41



Income per share:

Basic $2.04 $0.80 $ 1.01 $ 1.12 $0.72

Diluted $2.03 $0.80 $ 1.00 $ 1.11 $0.71



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

Key Ratios

Three Months Ended

June 30,March 31,December 31,September 30,June 30, 2020 2020 2019 2019 2019

Net interest margin 2.86 %2.81 % 2.91 % 3.05 % 3.08 %

Return on average assets 1.8 %0.8 % 1.0 % 1.2 % 1.2 %

Return on average common equity 23.5 %9.8 % 12.7 % 14.7 % 14.6 %

Efficiency ratio 54.3 %77.1 % 78.2 % 75.2 % 69.8 %

HFI loan-to-deposit ratio 76.7 %74.9 % 76.5 % 74.2 % 75.0 %

Adjusted HFI loan-to-deposit ratio (1)85.4 %86.3 % 84.6 % 82.0 % 80.6 %



(1) 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 2020 2020 2019 2019 2019

(Dollars in millions)

Average interest-earning assets $23,692$21,150$20,708 $18,997 $17,75912%33%

Average loans held-for-sale (LHFS) 5,645 5,248 5,199 3,786 3,539 8 %60%

Average loans held-for-investment (LHFI)13,596 11,823 12,168 11,743 10,613 15%28%

Average total deposits 17,715 15,795 15,904 15,817 14,159 12%25%

Net Interest Income

Net interest income in the second quarter of 2020 was $168 million, an increase of $20 million (14 percent) compared to the first quarter 2020. The increase was primarily driven by loan growth, the impact of lower interest rates on deposits, and lower borrowing costs, partially offset by lower yields on earnings assets. Average earnings assets increased $2.5 billion, reflecting increases of $2.2 billion in average total loans and $0.4 billion in average investment securities.

The net interest margin in the second quarter of 2020 was 2.86 percent, a 5 basis point increase from the prior quarter. The increase in the net interest margin was primarily driven by the expiration of promotional rates on some of our savings deposits and the maturity of higher cost time deposits, combined with lower short-term FHLB borrowing costs. This increase more than offset the impact declining interest rates and a lower yield curve had on the loans held-for-investment portfolio. Our cost of interest-bearing deposits in the second quarter of 2020 was 86 bps, which declined from 133 basis points in the prior quarter, representing a 47 basis point decrease.

Loans held-for-investment averaged $13.6 billion for the second quarter of 2020, increasing $1.8 billion (15 percent) from the prior quarter, primarily driven by $1.5 billion (64 percent) higher average warehouse loan balances as we grew our business and took advantage of the strong mortgage market and $0.3 billion of paycheck protection program loans.

Average total deposits were $17.7 billion in the second quarter 2020, increasing $1.9 billion (12 percent) from the first quarter 2020. Average custodial deposits increased $1.4 billion (30 percent) due to higher prepayments from refinancing and average retail deposits increased $0.4 billion (4 percent) largely due to COVID-19 pandemic impact on the behavior and spending patterns for consumers and conservative commercial depositors carrying higher cash balances.

Provision for Credit Losses

The provision for credit losses was $102 million for the second quarter 2020, as compared to $14 million for the first quarter 2020. The increase was primarily driven by our forecast of economic conditions. These forecasts reflect our view that the economy will continue to be challenged by the response to the COVID-19 pandemic, especially in the commercial real estate sector, for an extended period of time.

Noninterest Income

Noninterest income increased $221 million to $378 million in the second quarter 2020, as compared to $157 million for the first quarter 2020, primarily due to higher mortgage revenues.

Second quarter 2020 net gain on loan sales increased $213 million, to $303 million, as compared to $90 million in the first quarter 2020. The net gain on loan sale margin increased 139 basis points, to 2.19 percent for the second quarter 2020, as compared to 0.80 percent for the first quarter 2020. The extraordinary gain on sale margin increase was primarily driven by our response to market conditions and higher originations in our retail channel. Fallout-adjusted locks increased $2.7 billion, or 24 percent, to $13.8 billion, as historically low interest rates fueled a strong refinance market and state re-openings brought the purchase market to life.

Net return on mortgage servicing rights decreased $14 million, to an $8 million net loss for the second quarter of 2020, compared to a $6 million net gain for the first quarter 2020, primarily driven by higher prepayments.

Loan fees and charges increased $15 million, to $41 million for the second quarter of 2020, compared to $26 million for the first quarter 2020, resulting from a 41 percent increase in mortgage closings.

Mortgage Metrics

As of/Three months ended Change (% / bps)

June 30, March 31, December 31, September 30,June 30, Seq Yr/Yr 2020 2020 2019 2019 2019

(Dollars in millions)

Mortgage rate lock commitments (fallout-adjusted) (1) $13,811 $11,154 $8,179 $9,197 $8,344 24 %66 %

Mortgage loans closed $12,156 $8,591 $9,303 $9,263 $8,641 41 %41 %

Net margin on mortgage rate lock commitments (fallout-adjusted) (1) 2.19 %0.80 %1.23 %1.20 %0.89 %139 130

Net gain on loan sales $303 $90 $101 $110 $75 N/M N/M

Net return on mortgage servicing rights (MSR) $(8) $6 $(3) $(2) $5 N/M N/M

Gain on loan sales + net return on the MSR $295 $96 $98 $108 $80 N/M N/M

Loans serviced (number of accounts - 000's) (2) 1,042 1,082 1,091 994 983 (4) %6 %

Capitalized value of MSRs 0.87 %0.95 %1.21 %1.14 %1.23 %(8) (36)

N/M - Not meaningful

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

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

Noninterest Expense

Noninterest expense increased to $296 million for the second quarter 2020, compared to $235 million for the first quarter 2020, primarily reflecting a $53 million increase in mortgage-related expenses due to higher mortgage volumes. Mortgage expense relative to closings increased during the quarter due to higher retail channel mix. Additionally, compensation and benefits expense increased $14 million from the prior quarter, primarily driven by higher variable compensation attributed to stronger financial results.

The Company's efficiency ratio was 54 percent for the second quarter 2020, as compared to 77 percent for the first quarter 2020.

Income Taxes

The second quarter 2020 provision for income taxes totaled $32 million, with an effective tax rate of 21.5 percent, compared to $10 million and an effective tax rate of 18.4 percent for the first quarter 2020. The higher rate was the result of our higher level of income in the second quarter, which is taxed at higher marginal tax rates. Also contributing to the higher rate is a greater percentage of earnings in higher state tax jurisdictions, lower tax benefits for stock-based compensation and higher FDIC expenses, which are not deductible.

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 2020 2020 2019 2019 2019

(Dollars in millions)

Allowance for credit losses $250 $ 152 $110 $ 113 $113 64 %N/M

Credit reserves to LHFI 1.69 % 1.10 % 0.91 % 0.90 % 0.97 % 59 72

Charge-offs, net of recoveries $3 $ 2 $3 $ 1 $34 50 %(91) %

Total nonperforming LHFI and TDRs $33 $ 29 $26 $ 26 $63 14 %(48) %

Net charge-offs to LHFI ratio (annualized) 0.11 % 0.08 % 0.10 % 0.02 % 1.29 % 3 (118)

Ratio of nonperforming LHFI and TDRs to LHFI0.22 % 0.21 % 0.21 % 0.21 % 0.54 % 1 (32)



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

Residential first mortgage 0.26 % 0.08 % 0.08 % 0.07 % 0.11 % N/M N/M

Home equity and other consumer 0.28 % 0.28 % 0.49 % 0.27 % 0.71 % - (61)

Commercial real estate 0.01 % (0.01)% - % - % - % N/M N/M

Commercial and industrial 0.08 % 0.09 % 0.07 % (0.22)% 7.11 % (11) N/M

N/M - Not meaningful



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

The allowance for credit losses was $250 million and covered 1.69 percent of loans held-for-investment at June 30, 2020, a 59 basis point increase from March 31, 2020. The increase in the allowance coverage reflects our forecast of economic conditions and reflects our view that the economy will continue to be challenged by the response to the COVID-19 pandemic for an extended period of time. Excluding warehouse loans, the allowance coverage ratio was 2.60 percent, a 106 basis point increase from March 31, 2020.

Net charge-offs in the second quarter 2020 were negligible at $3 million, or 11 basis points of LHFI, compared to $2 million, or 8 basis points in the prior quarter.

Nonperforming loans were $33 million and our ratio of nonperforming loans to loans held-for-investment was 22 basis points at June 30, 2020, flat compared to March 31, 2020. There were no nonperforming commercial loans. At June 30, 2020, early stage loan delinquencies totaled $15 million, or 0.10 percent, of total loans, compared to $26 million, or 0.19 percent, at March 31, 2020.

Capital

Capital Ratios (Bancorp) Change (% / bps)

June 30, March 31,December 31,September 30,June 30, 2020 2019 2019 2019 Seq Yr/Yr 2020

Tier 1 leverage (to adj. avg. total assets)7.76 %8.09 %7.57 % 7.98 % 7.94 %(33) (18)

Tier 1 common equity (to RWA) 9.11 %9.17 %9.32 % 9.25 % 9.08 %(6) 3

Tier 1 capital (to RWA) 10.33 %10.52 %10.83 % 10.81 % 10.73 %(19) (40)

Total capital (to RWA) 11.32 %11.18 %11.52 % 11.54 % 11.51 %14 (19)

Tangible common equity to asset ratio (1) 6.58 %6.25 %6.95 % 7.08 % 7.31 %33 (73)

Tangible book value per share (1) $31.74 $29.52 $ 28.57 $ 27.62 $26.16 8 % 21 %



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

The Company maintained a solid capital position with regulatory ratios well above current regulatory quantitative guidelines for "well capitalized" institutions. At the end of the quarter, the balance sheet increased by $1.0 billion to include loans previously sold into GNMA securities. Although we have not repurchased these loans and they are not delinquent, they are in forbearance. At a certain point, the accounting rules require us to include these as "Loans with Government Guarantees" with an offsetting amount included in "Other Liabilities." The Company does not have exposure to credit risk from these loans. Excluding these loans that are in forbearance, the Company had a Tier 1 common equity ratio of 10.52 percent, a total risk-based capital ratio of 11.52 percent, and a tangible common equity to assets ratio of 7.47 percent at June 30, 2020.

Importantly, tangible book value per share grew to $31.74, up $2.22 from last quarter and $5.58 from one year ago, which represents a 21 percent increase.

Earnings Conference Call

As previously announced, the Company's second quarter 2020 earnings call will be held Tuesday, July 28, 2020 at 11 a.m. (ET).

To join the call, please dial (800) 458-4121 toll free or (323) 794-2597 and use passcode 8266062. Please call at least 10 minutes before the conference is scheduled to begin. A replay will be available for five business days by calling (888) 203-1112 toll free or (719) 457-0820 and using passcode 8266062.

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

About Flagstar

Flagstar Bancorp, Inc. (NYSE: FBC) is a $27.5 billion savings and loan holding company headquartered in Troy, Mich. Flagstar Bank, FSB, provides commercial, small business, and consumer banking services through 160 branches in Michigan, Indiana, California, Wisconsin and Ohio. It also provides home loans through a wholesale network of brokers and correspondents in all 50 states, as well as 89 retail locations in 28 states, representing the combined retail branches of Flagstar and its Opes Advisors mortgage division. Flagstar is a leading national originator and servicer of mortgage and other consumer loans, handling payments and record keeping for $214 billion of loans representing slightly over 1 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 non-GAAP financial measures for tangible book value per share, tangible common equity to assets ratio, return on average tangible equity, adjusted return on average tangible equity, adjusted return on average assets, adjusted HFI loan-to-deposit ratio, adjusted noninterest income, adjusted income before income taxes, adjusted provision for income taxes, adjusted net income, and adjusted basic and diluted earnings per share. The Company believes these non-GAAP financial measures provide additional information that is useful to investors in helping to understand the capital requirements Flagstar will face in the future and underlying performance and trends of Flagstar.

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

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

Forward-Looking Statements

This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the current beliefs and expectations of Flagstar Bancorp, Inc.'s management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. The Company's actual results could differ materially from those described in the forward-looking statements depending upon various factors as described in periodic Flagstar reports filed with the U.S. Securities and Exchange Commission, which are available on the Company's website (flagstar.com) and on the Securities and Exchange Commission's website (sec.gov). The COVID-19 pandemic is adversely affecting us, our customers, counterparties, employees, and third-party service providers, and the ultimate extent of the impacts on our business, financial position, results of operations, liquidity, and prospects is uncertain. Other than as required under United States securities laws, Flagstar Bancorp does not undertake to update the forward-looking statements to reflect the impact of circumstances or events that may arise after the date of the forward-looking statements.

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





June 30, March 31,December 31,June 30, 2020 2020 2019 2019

Assets

Cash $204 $216 $220 $268

Interest-earning deposits 23 126 206 51

Total cash and cash equivalents 227 342 426 319

Trading securities - 2,058 - -

Investment securities available-for-sale 2,348 2,446 2,116 1,718

Investment securities held-to-maturity 496 554 598 661

Loans held-for-sale 5,615 4,389 5,258 3,345

Loans held-for-investment 14,808 13,795 12,129 11,655

Loans with government guarantees 1,791 814 736 507

Less: allowance for loan losses (229) (132) (107) (110)

Total loans held-for-investment and loans with government guarantees, net16,370 14,477 12,758 12,052

Mortgage servicing rights 261 223 291 316

Federal Home Loan Bank stock 377 306 303 303

Premises and equipment, net 410 413 416 415

Goodwill and intangible assets 164 167 170 178

Other assets 1,200 1,430 930 899

Total assets $27,468$26,805$23,266 $20,206

Liabilities and Stockholders' Equity

Noninterest-bearing deposits $7,921 $6,551 $5,467 $4,784

Interest-bearing deposits 9,977 9,501 9,679 9,632

Total deposits 17,898 16,052 15,146 14,416

Short-term Federal Home Loan Bank advances and other 3,354 5,841 4,165 2,550

Long-term Federal Home Loan Bank advances 1,200 1,000 650 500

Other long-term debt 493 493 496 495

Other liabilities 2,552 1,577 1,021 589

Total liabilities 25,497 24,963 21,478 18,550

Stockholders' Equity

Common stock 1 1 1 1

Additional paid in capital 1,488 1,487 1,483 1,477

Accumulated other comprehensive income (loss) 46 31 1 (8)

Retained earnings 436 323 303 186

Total stockholders' equity 1,971 1,842 1,788 1,656

Total liabilities and stockholders' equity $27,468$26,805$23,266 $20,206

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





Change compared to:

Three Months Ended 1Q20 2Q19

June 30,March 31,December 31,September 30,June 30, 2020 2019 2019 2019 Amount PercentAmount Percent 2020

Interest Income

Total interest income $201 $201 $213 $203 $198 $- - %$3 2 %

Total interest expense 33 53 61 57 60 (20) (38) %(27) (45) %

Net interest income 168 148 152 146 138 20 14 %30 22 %

Provision for credit losses 102 14 - 1 17 88 N/M 85 N/M

Net interest income after provision for credit losses66 134 152 145 121 (68) (51) %(55) (45) %

Noninterest Income

Net gain on loan sales 303 90 101 110 75 213 N/M 228 N/M

Loan fees and charges 41 26 30 29 24 15 58 %17 71 %

Net return (loss) on the mortgage servicing rights (8) 6 (3) (2) 5 (14) N/M (13) N/M

Loan administration income 21 12 8 5 6 9 75 %15 N/M

Deposit fees and charges 7 9 10 10 10 (2) (22) %(3) (30) %

Other noninterest income 14 14 16 19 48 - - %(34) (71) %

Total noninterest income 378 157 162 171 168 221 N/M 210 N/M

Noninterest Expense

Compensation and benefits 116 102 102 98 90 14 14 %26 29 %

Occupancy and equipment 44 41 43 40 40 3 7 %4 10 %

Commissions 61 29 35 38 25 32 N/M 36 N/M

Loan processing expense 25 20 20 22 21 5 25 %4 19 %

Legal and professional expense 5 6 9 6 6 (1) (17) %(1) (17) %

Federal insurance premiums 7 6 6 5 5 1 17 %2 40 %

Intangible asset amortization 4 3 4 3 4 1 33 %- - %

Other noninterest expense 34 28 26 26 23 6 21 %11 48 %

Total noninterest expense 296 235 245 238 214 61 26 %82 38 %

Income before income taxes 148 56 69 78 75 92 164 %73 97 %

Provision for income taxes 32 10 11 15 14 22 N/M 18 N/M

Net income $116 $46 $58 $63 $61 $70 N/M $55 90 %

Income per share

Basic $2.04 $0.80 $1.01 $1.12 $1.08 $1.24155 %$0.9689 %

Diluted $2.03 $0.80 $1.00 $1.11 $1.06 $1.23154 %$0.9792 %



Cash dividends declared $0.05 $0.05 $0.04 $0.04 $0.04 $- - %$0.0125 %

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 2020 2019

Interest Income

Total interest income $402 $378 $24 6 %

Total interest expense 86 114 (28) (25)%

Net interest income 316 264 52 20 %

Provision for credit losses 116 17 99 N/M

Net interest income after provision for credit losses200 247 (47) (19)%

Noninterest Income

Net gain on loan sales 393 124 269 N/M

Loan fees and charges 67 41 26 63 %

Net return (loss) on the mortgage servicing rights (2) 11 (13) N/M

Loan administration income 33 17 16 94 %

Deposit fees and charges 16 18 (2) (11)%

Other noninterest income 28 66 (38) (58)%

Total noninterest income 535 277 258 93 %

Noninterest Expense

Compensation and benefits 218 177 41 23 %

Occupancy and equipment 85 78 7 9 %

Commissions 90 38 52 N/M

Loan processing expense 45 38 7 18 %

Legal and professional expense 11 12 (1) (8) %

Federal insurance premiums 13 9 4 44 %

Intangible asset amortization 7 8 (1) (13)%

Other noninterest expense 63 45 18 40 %

Total noninterest expense 532 405 127 31 %

Income before income taxes 203 119 84 71 %

Provision for income taxes 42 22 20 91 %

Net income $161 $97 $64 66 %

Income per share

Basic $2.85 $1.71 $1.1467 %

Diluted $2.83 $1.69 $1.1467 %



Cash dividends declared $0.10 $0.08 $0.0225 %

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, 2020March 31, 2020June 30, 2019June 30, 2020June 30, 2019

Selected Mortgage Statistics:

Mortgage rate lock commitments (fallout-adjusted) (1) $13,811 $11,154 $8,344 $24,965 $ 14,946

Mortgage loans closed $12,156 $8,591 $8,641 $20,747 $ 14,154

Mortgage loans sold and securitized $12,874 $7,487 $8,838 $20,361 $ 14,008

Selected Ratios:

Interest rate spread (2) 2.52 % 2.31 % 2.57 % 2.41 % 2.63 %

Net interest margin 2.86 % 2.81 % 3.08 % 2.83 % 3.08 %

Net margin on loans sold and securitized 2.35 % 1.19 % 0.84 % 1.93 % 0.87 %

Return on average assets 1.77 % 0.78 % 1.22 % 1.30 % 1.01 %

Adjusted return on average assets (3) (4) 1.77 % 0.78 % 0.81 % 1.30 % 0.81 %

Return on average common equity 23.47 % 9.82 % 14.58 % 16.86 % 11.94 %

Return on average tangible common equity (4) 26.16 % 11.46 % 17.14 % 19.07 % 14.33 %

Adjusted return on average tangible common equity (3) (4)26.16 % 11.46 % 11.69 % 19.07 % 11.63 %

Efficiency ratio 54.3 % 77.1 % 69.8 % 62.5 % 74.8 %

Common equity-to-assets ratio (average for the period) 7.53 % 7.92 % 8.35 % 15.42 % 16.93 %

Average Balances:

Average interest-earning assets $23,692 $21,150 $17,759 $22,421 $ 17,030

Average interest-bearing liabilities $15,119 $14,480 $12,898 $14,800 $ 12,702

Average stockholders' equity $1,977 $1,854 $1,668 $1,915 $ 1,626



Fallout-adjusted mortgage rate lock commitments are adjusted by a (1)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(2)interest-earning assets and rate of interest paid on interest-bearing liabilities.

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

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

June 30, March 31, December 31,June 30, 2020 2020 2019 2019

Selected Statistics:

Book value per common share $ 34.62 $ 32.46 $ 31.57 $ 29.31

Tangible book value per share (1) $ 31.74 $ 29.52 $ 28.57 $ 26.16

Number of common shares outstanding 56,943,979 56,729,789 56,631,236 56,483,937

Number of FTE employees 4,641 4,415 4,453 4,026

Number of bank branches 160 160 160 160

Ratio of nonperforming assets to total assets (2)0.14 %0.14 %0.15 %0.36 %

Common equity-to-assets ratio 7.18 %6.87 %7.68 %8.19 %

MSR Key Statistics and Ratios:

Weighted average service fee (basis points) 37.0 38.8 39.7 39.7

Capitalized value of mortgage servicing rights 0.87 %0.95 %1.21 %1.23 %



Excludes goodwill and intangibles of $164 million, $167 million, $170 (1)million and $182 million at June 30, 2020, March 31, 2020, December 31, 2019, and June 30, 2019, respectively. 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, 2020 March 31, 2020 June 30, 2019

Average InterestAnnualizedAverage InterestAnnualizedAverage InterestAnnualized Balance Yield/RateBalance Yield/RateBalance Yield/Rate

Interest-Earning Assets

Loans held-for-sale $5,645 $48 3.42 % $5,248 $ 49 3.72 % $3,539 $40 4.55 %

Loans held-for-investment

Residential first mortgage 2,822 24 3.41 % 3,062 27 3.51 % 3,146 28 3.61 %

Home equity 1,001 9 3.78 % 1,019 12 4.73 % 814 11 5.54 %

Other 881 12 5.42 % 816 12 5.77 % 518 9 6.78 %

Total consumer loans 4,704 45 3.87 % 4,897 51 4.14 % 4,478 48 4.33 %

Commercial real estate 3,101 28 3.64 % 2,949 34 4.61 % 2,394 35 5.65 %

Commercial and industrial 2,006 17 3.34 % 1,667 19 4.52 % 1,744 23 5.26 %

Warehouse lending 3,785 38 3.88 % 2,310 25 4.30 % 1,997 27 5.21 %

Total commercial loans 8,892 83 3.67 % 6,926 78 4.48 % 6,135 85 5.40 %

Total loans held-for-investment 13,596 128 3.74 % 11,823 129 4.34 % 10,613 133 4.97 %

Loans with government guarantees 858 4 1.97 % 811 3 1.38 % 502 4 2.94 %

Investment securities 3,417 21 2.42 % 3,060 19 2.47 % 2,907 20 2.75 %

Interest-earning deposits 176 - 0.11 % 208 1 1.75 % 198 1 2.23 %

Total interest-earning assets 23,692 201 3.38 % 21,150 $ 201 3.78 % 17,759 $198 4.42 %

Other assets 2,569 2,263 2,207

Total assets $26,261 $23,413 $19,966

Interest-Bearing Liabilities

Retail deposits

Demand deposits $1,800 $1 0.22 % $1,587 $ 3 0.75 % $1,323 $3 0.84 %

Savings deposits 3,476 4 0.52 % 3,384 9 1.07 % 3,191 9 1.16 %

Money market deposits 716 - 0.12 % 687 1 0.32 % 745 1 0.32 %

Certificates of deposit 1,987 11 2.00 % 2,254 12 2.24 % 2,611 15 2.34 %

Total retail deposits 7,979 16 0.78 % 7,912 25 1.28 % 7,870 28 1.42 %

Government deposits 1,088 2 0.63 % 1,131 3 1.15 % 1,128 5 1.51 %

Wholesale deposits and other 738 4 2.07 % 581 4 2.39 % 417 2 2.35 %

Total interest-bearing deposits 9,805 22 0.86 % 9,624 32 1.33 % 9,415 35 1.47 %

Short-term FHLB advances and other 3,753 2 0.26 % 3,566 12 1.35 % 2,633 17 2.53 %

Long-term FHLB advances 1,068 3 1.13 % 794 3 1.29 % 354 1 1.72 %

Other long-term debt 493 6 4.99 % 496 6 5.33 % 496 7 5.77 %

Total interest-bearing liabilities 15,119 33 0.86 % 14,480 53 1.46 % 12,898 60 1.85 %

Noninterest-bearing deposits

Retail deposits and other 1,687 1,395 1,275

Custodial deposits (1) 6,223 4,776 3,469

Total noninterest-bearing deposits 7,910 6,171 4,744

Other liabilities 1,255 908 656

Stockholders' equity 1,977 1,854 1,668

Total liabilities and stockholders' equity $26,261 $23,413 $19,966

Net interest-earning assets $8,573 $6,671 $4,861

Net interest income $ 168 $ 148 $138

Interest rate spread (2) 2.52 % 2.31 % 2.57 %

Net interest margin (3) 2.86 % 2.81 % 3.08 %

Ratio of average interest-earning assets to interest-bearing liabilities 156.7 % 146.1 % 137.7 %

Total average deposits $17,715 $15,795 $14,159



Approximately 80 percent of custodial deposits from loans subserviced (1)which 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, 2020 June 30, 2019

Average InterestAnnualizedAverage InterestAnnualized Balance Yield/RateBalance Yield/Rate

Interest-Earning Assets

Loans held-for-sale $5,447 $ 97 3.56 % $3,403 $ 79 4.63 %

Loans held-for-investment

Residential first mortgage 2,942 51 3.46 % 3,095 56 3.63 %

Home equity 1,010 21 4.26 % 780 22 5.58 %

Other 848 24 5.59 % 438 15 6.91 %

Total consumer loans 4,800 96 4.01 % 4,313 93 4.32 %

Commercial real estate 3,025 63 4.11 % 2,322 66 5.66 %

Commercial and industrial 1,836 36 3.88 % 1,669 45 5.32 %

Warehouse lending 3,048 62 4.04 % 1,589 42 5.30 %

Total commercial loans 7,909 161 4.03 % 5,580 153 5.46 %

Total loans held-for-investment 12,709 257 4.02 % 9,893 246 4.96 %

Loans with government guarantees 834 7 1.68 % 478 7 2.95 %

Investment securities 3,239 40 2.45 % 3,081 44 2.83 %

Interest-earning deposits 192 1 1.00 % 175 2 2.47 %

Total interest-earning assets 22,421 402 3.57 % 17,030 378 4.43 %

Other assets 2,416 2,176

Total assets $24,837 $19,206

Interest-Bearing Liabilities

Retail deposits

Demand deposits $1,693 $ 4 0.47 % $1,271 $ 5 0.76 %

Savings deposits 3,433 14 0.79 % 3,140 17 1.06 %

Money market deposits 701 1 0.22 % 762 1 0.30 %

Certificates of deposit 2,120 22 2.13 % 2,550 28 2.24 %

Total retail deposits 7,947 41 1.03 % 7,723 51 1.32 %

Government deposits 1,110 5 0.89 % 1,149 9 1.51 %

Wholesale deposits and other 659 7 2.21 % 402 4 2.30 %

Total interest-bearing deposits 9,716 53 1.09 % 9,274 64 1.39 %

Short-term FHLB advances and other 3,659 14 0.79 % 2,679 34 2.53 %

Long-term FHLB advances 931 6 1.20 % 254 2 1.67 %

Other long-term debt 494 13 5.16 % 495 14 5.84 %

Total interest-bearing liabilities 14,800 86 1.16 % 12,702 114 1.80 %

Noninterest-bearing deposits

Retail deposits and other 1,541 1,258

Custodial deposits (1) 5,499 3,004

Total noninterest-bearing deposits 7,040 4,262

Other liabilities 1,082 616

Stockholders' equity 1,915 1,626

Total liabilities and stockholders' equity $24,837 $19,206

Net interest-earning assets $7,622 $4,328

Net interest income $ 316 $ 264

Interest rate spread (2) 2.41 % 2.63 %

Net interest margin (3) 2.83 % 3.08 %

Ratio of average interest-earning assets to interest-bearing liabilities 145.9 % 134.1 %

Total average deposits 16,755 13,536



Approximately 80 percent of custodial deposits from loans subserviced (1)which 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.

Earnings Per Share (Dollars in millions, except share data) (Unaudited)





Three Months Ended Six Months Ended

June 30, 2020March 31, 2020June 30, 2019June 30, 2020June 30, 2019

Net Income $ 116 $ 46 $ 61 $161 $97

Weighted average common shares outstanding56,790,642 56,655,865 56,446,077 56,723,254 56,670,690

Stock-based awards 333,064 534,058 615,745 433,561 651,823

Weighted average diluted common shares 57,123,706 57,189,923 57,061,822 218,156,815 154,322,513

Basic earnings per common share $ 2.04 $ 0.80 $ 1.08 $2.85 $1.71

Stock-based awards (0.01) - (0.02) (0.02) (0.02)

Diluted earnings per common share $ 2.03 $ 0.80 $ 1.06 $2.83 $1.69

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





June 30, 2020 March 31, 2020 December 31, 2019June 30, 2019

Amount Ratio Amount Ratio Amount Ratio Amount Ratio

Tier 1 leverage (to adjusted avg. total assets)$2,021 7.76 %$1,879 8.09 %$1,826 8.00 %$1,561 7.94 %

Total adjusted avg. total asset base $26,040 $23,212 $22,830 $19,659

Tier 1 common equity (to risk weighted assets) $1,781 9.11 %$1,639 9.17 %$1,586 9.62 %$1,321 9.08 %

Tier 1 capital (to risk weighted assets) $2,021 10.33%$1,879 10.52%$1,826 11.07%$1,561 10.73%

Total capital (to risk weighted assets) $2,214 11.32%$1,997 11.18%$1,936 11.74%$1,674 11.51%

Risk-weighted asset base $19,562 $17,863 $16,493 $14,551

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





June 30, 2020 March 31, 2020 December 31, 2019 June 30, 2019

Amount Ratio Amount Ratio Amount Ratio Amount Ratio

Tier 1 leverage (to adjusted avg. total assets)$1,969 7.57 %$1,900 8.19 %$1,752 7.71 %$1,632 8.32 %

Total adjusted avg. total asset base $26,020 $23,194 22,727 $19,614

Tier 1 common equity (to risk weighted assets) $1,969 10.07%$1,900 10.64%$1,752 11.04 %$1,632 11.23%

Tier 1 capital (to risk weighted assets) $1,969 10.07%$1,900 10.64%$1,752 11.04 %$1,632 11.23%

Total capital (to risk weighted assets) $2,161 11.05%$2,019 11.30%$1,862 11.73 %$1,745 12.00%

Risk-weighted asset base $19,559 $17,857 15,873 $14,538

Loans Serviced (Dollars in millions) (Unaudited)





June 30, 2020 March 31, 2020 December 31, 2019 June 30, 2019

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

Subserviced for others (2) $174,517 854,693 $193,037 916,989 $194,638 918,662 $170,139 816,743

Serviced for others 29,846 122,779 23,439 102,338 24,003 105,469 25,774 106,334

Serviced for own loan portfolio (3)9,211 64,142 8,539 63,085 9,536 66,526 7,264 59,873

Total loans serviced $213,574 1,041,614$225,015 1,082,412$228,177 1,090,657$203,177 982,950



(1)Unpaid principal balance, net of write downs, does not include premiums or discounts.

Includes temporary short-term subservicing performed as a result of sales(2)of servicing-released mortgage servicing rights. Includes repossessed assets.

Includes LHFI (residential first mortgage, home equity and other (3)consumer), LHFS (residential first mortgage), loans with government guarantees (residential first mortgage), and repossessed assets.

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





June 30, 2020 March 31, 2020 December 31, 2019June 30, 2019

Consumer loans

Residential first mortgage $2,716 18.3 %$2,964 21.5 %$3,154 26.0%$3,241 27.8 %

Home equity 978 6.6 %1,028 7.5 %1,024 8.4 %922 7.9 %

Other 898 6.1 %858 6.2 %729 6.0 %576 4.9 %

Total consumer loans 4,592 31.0 %4,850 35.2 %4,907 40.4%4,739 40.7 %

Commercial loans

Commercial real estate 3,016 20.4 %3,092 22.4 %2,828 23.3%2,463 21.1 %

Commercial and industrial 1,968 13.3 %1,880 13.6 %1,634 13.5%1,821 15.6 %

Warehouse lending 5,232 35.3 %3,973 28.8 %2,760 22.8%2,632 22.5 %

Total commercial loans 10,216 69.0 %8,945 64.8 %7,222 59.5%6,916 59.3 %

Total loans held-for-investment$14,808100.0%$13,795100.0%$12,129 100 %$11,655100.0%

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





June 30, 2020 March 31, 2020December 31, 2019 June 30, 2019

Indirect Lending $64772.0 %$62072.3 %$ 57879.3 % $40870.8 %

Point of Sale 181 20.2 %159 18.5 %63 8.6 % 51 8.9 %

Other 70 7.8 %79 9.2 %88 12.1 % 117 20.3 %

Total other consumer loans$898100.0%$858100.0%$ 729100.0 % $576100.0%

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





June 30, March 31, 2020June 30, 2020 2019

Residential first mortgage $ 60 $ 46 $ 26

Home equity 28 23 16

Other 34 16 5

Total consumer loans 122 85 47

Commercial real estate 83 28 34

Commercial and industrial 23 18 24

Warehouse lending 1 1 5

Total commercial loans 107 47 63

Allowance for loan losses 229 132 110

Reserve for unfunded 21 20 3 commitments

Allowance for credit losses $ 250 $ 152 $ 113

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





Three Months Ended June 30, 2020

ResidentialHome Other Commercial CommercialWarehouseTotal LHFI Unfunded First ConsumerReal Estateand Lending Portfolio (2)Commitments Mortgage Equity Industrial

Beginning balance $ 46 $23 $ 16 $ 28 $ 18 $ 1 $ 132 $ 20

Provision (benefit) for credit losses:

Loan volume (2) (1) 4 - 1 - 2 -

Economic forecast 9 3 6 14 (2) - 30 1

Credit (1) 5 2 7 10 - - 24 -

Qualitative factor adjustments 2 - - 31 6 - 39 -

Charge-offs (2) (1) (2) - - - (5) -

Provision for charge-offs 2 1 2 - - - 5 -

Recoveries - 1 1 - - - 2 -

Ending allowance balance $ 60 $28 $ 34 $ 83 $ 23 $ 1 $ 229 $ 21



(1) Includes changes in the individually evaluated reserve (2) Excludes loans carried under the fair value option

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





June 30,March 31,December 31,June 30, 2020 2020 2019 2019

Nonperforming LHFI $23 $ 19 16 52

Nonperforming TDRs 4 4 3 4

Nonperforming TDRs at inception but performing for less than six months6 6 7 7

Total nonperforming LHFI and TDRs (1) 33 29 26 63

Other nonperforming assets, net 7 10 10 9

LHFS 7 5 5 15

Total nonperforming assets $47 $ 44 $41 $87



Ratio of nonperforming assets to total assets (2) 0.14% 0.14 % 0.15 % 0.36%

Ratio of nonperforming LHFI and TDRs to LHFI 0.22% 0.21 % 0.21 % 0.54%

Ratio of nonperforming assets to LHFI and repossessed assets (2) 0.27% 0.28 % 0.30 % 0.62%



(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 Past Past Due Past Due Due Total LHFI 90 days (1)

June 30, 2020

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

Commercial loans - - - - 10,216

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

March 31, 2020

Consumer loans $ 14 $ 5 $ 29 $ 48 $ 4,850

Commercial loans 7 - - 7 8,945

Total loans$ 21 $ 5 $ 29 $ 55 $ 13,795

December 31, 2019

Consumer loans $ 9 $ 5 $ 26 $ 40 $ 4,907

Commercial loans - - - - 7,222

Total loans $ 9 $ 5 $ 26 $ 40 $ 12,129

June 30, 2019

Consumer loans $ 5 $ 2 $ 26 $ 33 $ 4,739

Commercial loans 1 - 37 38 6,916

Total loans $ 6 $ 2 $ 63 $ 71 $ 11,655



(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, 2020

Consumer loans $35 $ 10 $45

Commercial loans 5 $ - 5

Total TDR loans$40 $ 10 $50

March 31, 2020

Consumer loans $37 $ 10 $47

Total TDR loans$37 $ 10 $47

December 31, 2019

Consumer loans $38 $ 10 $48

Total TDR loans$38 $ 10 $48

June 30, 2019

Consumer loans $41 $ 11 $52

Total TDR loans$41 $ 11 $52

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 acquisition related expenses recognized in conjunction with the Well Fargo branch acquisition from 2018 are not reflective of our ongoing operations and, therefore, have been excluded from our U.S. GAAP results. The Company believes that tangible book value per share, tangible common equity to assets ratio, return on average tangible common equity, adjusted return on average tangible common equity, adjusted return on average assets, adjusted HFI loan-to-deposit ratio, adjusted noninterest income, adjusted income before income taxes, adjusted provision for income taxes, adjusted net income, and adjusted basic and diluted earnings per share 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, 2020 2020 2019 2019 2019

(Dollars in millions, except share data)

Total stockholders' equity $1,971 $1,842 $1,788 $1,734 $1,656

Less: Goodwill and intangible assets 164 167 170 174 178

Tangible book value $1,807 $1,675 $1,618 $1,560 $1,478



Number of common shares outstanding 56,943,979 56,729,789 56,631,236 56,510,341 56,483,937

Tangible book value per share $31.74 $29.52 $28.57 $27.62 $26.16



Total assets $27,468 $26,805 $23,266 $22,048 $20,206

Tangible common equity to assets ratio6.58 %6.25 %6.95 %7.08 %7.31 %

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, 2020December 31, 2019June 30, 2019June 30, 2020June 30, 2019

(Dollars in millions)

Net income $ 116 $ 58 $ 61 $ 161 $ 97

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

Tangible net income $ 119 $ 61 $ 64 $ 167 $ 103



Total average equity $ 1,977 $ 1,803 $ 1,668 $ 1,915 $ 1,626

Less: Average goodwill and intangible assets 165 172 180 167 184

Total tangible average equity $ 1,812 $ 1,631 $ 1,488 $ 1,748 $ 1,442



Return on average common equity 23.47 % 12.69 % 14.58 % 16.86 % 11.94 %

Adjustment to remove DOJ adjustment - % - % (1.22) % - % (2.49) %

Adjustment to remove Wells Fargo acquisition costs- % - % - % - % 0.10 %

Adjusted return on average common equity 23.47 % 12.69 % 13.36 % 16.86 % 9.55 %



Return on average tangible common equity 26.16 % 14.76 % 17.14 % 19.07 % 14.33 %

Adjustment to remove DOJ adjustment - % - % (5.45) % - % (2.81) %

Adjustment to remove Wells Fargo acquisition costs- % - % - % - % 0.11 %

Adjusted return on average tangible common equity 26.16 % 14.76 % 11.69 % 19.07 % 11.63 %



Return on average assets 1.77 % 0.99 % 1.22 % 1.30 % 1.01 %

Adjustment to remove DOJ adjustment - % - % (0.41) % - % (0.21) %

Adjustment to remove Wells Fargo acquisition costs- % - % - % - % 0.01 %

Adjusted return on average assets 1.77 % 0.99 % 0.81 % 1.30 % 0.81 %

Adjusted HFI loan-to-deposit ratio.



June 30, March 31, December 31, September 30, June 30, 2020 2020 2019 2019 2019

(Dollars in millions, except share data)

Average LHFI $13,596 $11,823 $ 12,168 $ 11,743 $10,613

Less: Average warehouse loans 3,785 2,310 2,747 2,508 1,997

Adjusted average LHFI $9,811 $9,513 $ 9,421 $ 9,235 $8,616



Average deposits $17,715 $15,795 $ 15,904 $ 15,817 $14,159

Less: Average custodial deposits 6,223 4,776 4,772 4,550 3,469

Adjusted average deposits $11,492 $11,019 $ 11,132 $ 11,267 $10,690



HFI loan-to-deposit ratio 76.7 %74.9 %76.5 % 74.2 % 75.0 %

Adjusted HFI loan-to-deposit ratio85.4 %86.3 %84.6 % 82.0 % 80.6 %

Adjusted noninterest income, income before income taxes, provision for income taxes, net income, and basic earnings per share, diluted earnings per share.



Three Months Ended

June 30, March 31, December 31,September 30,June 30, 2020 2020 2019 2019 2019

(Dollars in millions)

Noninterest income $ 378 $ 157 $ 162 $ 171 $ 168

DOJ benefit - - - - (25)

Adjusted noninterest income $ 378 $ 157 $ 162 $ 171 $ 143



Income before income taxes $ 148 $ 56 $ 69 $ 78 $ 75

Adjustment for DOJ benefit - - - - (25)

Adjusted income before income taxes $ 148 $ 56 $ 69 $ 78 $ 50



Provision for income taxes $ 32 $ 10 $ 11 $ 15 $ 14

Tax impact on adjustment for DOJ benefit - - - - (5)

Adjusted provision for income taxes $ 32 $ 10 $ 11 $ 15 $ 9



Net income $ 116 $ 46 $ 58 $ 63 $ 61

Adjusted net income $ 116 $ 46 $ 58 $ 63 $ 41



Weighted average common shares outstanding 56,790,642 56,655,865 56,513,890 56,484,499 56,446,077

Weighted average diluted common shares 57,123,706 57,189,923 57,198,734 57,110,796 57,061,822

Adjusted basic earnings per share $ 2.04 $ 0.80 $ 1.01 $ 1.12 $ 0.72

Adjusted diluted earnings per share $ 2.03 $ 0.80 $ 1.00 $ 1.11 $ 0.71

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

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SOURCE Flagstar Bancorp, Inc.