Attached files
| file | filename |
|---|---|
| EX-99.1 - EXHIBIT 99.1 - FLAGSTAR BANCORP INC | pressrelease3q2016.htm |
| 8-K - 8-K - FLAGSTAR BANCORP INC | a8-kearningsrelease3q2016.htm |
3rd Quarter 2016
Flagstar Bancorp, Inc. (NYSE: FBC)
Earnings Presentation
3rd Quarter 2016
October 25, 2016
3rd Quarter 2016 Cautionary statements
This presentation contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, as
amended. Forward-looking statements are based on management’s current expectations and assumptions regarding the Company’s
business and performance, the economy and other future conditions, and forecasts of future events, circumstances and results. However,
they are not guarantees of future performance and are subject to known and unknown risks, uncertainties, contingencies and other factors.
Generally, forward-looking statements are not based on historical facts but instead represent our management’s beliefs regarding future
events. Such statements may be identified by words such as believe, expect, anticipate, intend, plan, estimate, may increase, may
fluctuate, and similar expressions or future or conditional verbs such as will, should, would and could. Such statements are based on
management’s current expectations and are subject to risks, uncertainties and changes in circumstances. Actual results and capital and
other financial conditions may differ materially from those included in these statements due to a variety of factors, including without
limitation those found in periodic Flagstar reports filed with the U.S. Securities and Exchange Commission, which are available on the
Company’s website (flagstar.com) and on the Securities and Exchange Commission's website (sec.gov).
Any forward-looking statements made by or on behalf of us speak only as to the date they are made, and we do not undertake to update
forward-looking statements to reflect the impact of circumstances or events that arise after the date the forward-looking statements were
made, except as required under United States securities laws.
In addition to results presented in accordance with GAAP, this presentation includes 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, which are not required to be uniformly applied. 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 these conference call slides.
Additional discussion of the use of non-GAAP measures can also be found in the Form 8-K Current Report related to this presentation 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.
2
3rd Quarter 2016 Executive Overview
Sandro DiNello, CEO
3rd Quarter 2016 3Q16 Strategic highlights
4
Unique
relationship-based
business model
• Continue to make progress on long-term financial targets:
- Adjusted return on average assets of 1.2%(1) vs. long-term target of 1.2 – 1.6%
- Adjusted return on average common equity of 12.6%(1) vs. long-term target of 13 – 18%
Expand mortgage
revenues
• Net gain on loan sales held-for-sale increased 11%(2) on higher margin (+9bps) and higher volumes (+2%)
- Improved margin driven by stronger market pricing on controlled capacity to maintain service levels
- Retail fallout-adjusted locks increased nearly $250 million or 77% year-over-year
Grow community
banking
• Average commercial loans grew 16%
• Average total deposits increased 6%, providing a funding base for balance sheet expansion
Highly profitable
operations
• Positive operating leverage (adjusted revenue up 3%(1) vs. expenses up 2%)
• Solid, consistent financial results with no surprises (EPS $0.69(1) 3Q16 vs. $0.66 2Q16)
• Adjusted efficiency ratio improved to 67.0%(1) from 68.2% in 2Q16
Positioned to thrive
in any market
• Strong credit metrics: NPLs at 0.63%, consumer delinquencies at 0.31% and ALLL coverage at 2.3%
• Relatively neutral interest rate risk position; strong liquidity
• Tier 1 leverage was 8.9 percent and remains strong after TARP redemption
• Continued strong risk management infrastructure and culture
1) Non-GAAP number. Number shown excludes DOJ benefit during 3Q16. Please see reconciliation on slide 41.
2) Net gain on loan sales has been adjusted to exclude the $5mm gain on HFI loans sold during 2Q16.
3rd Quarter 2016 Financial Overview
Jim Ciroli, CFO
3rd Quarter 2016 3Q16 Financial highlights
Strong
profitability
Positive
operating
leverage
• Adjusted revenue up 3%(1) vs. expenses up 2%
- Revenue growth led by higher earning assets and increased net gain on loan sales and loan fees and charges
- Low level of expense growth reflects the scalability of platform
Increased
noninterest
income
• Adjusted noninterest income increased $4 million(1) to $132 million(1), up 3%(1) from 2Q16
- Net gain on loan sales HFS(2) increased 11% on higher margin (+9bps)
- Loan fees and charges rose $3mm on higher mortgage loan closings
Improved asset
quality
• Nonperforming loans improved on solid credit performance
- Nonperforming loans fell $4 million to $40 million or 0.63% of loans held-for-investment
- Consumer loan delinquencies (30-89 days past due) steady at $8 million or 0.31% of loans held-for-investment
- No nonperforming loans or delinquencies in our commercial loan portfolio
Robust capital
• Tier 1 leverage was 8.9 percent and remains strong after TARP redemption
• DFAST stress test confirms capital strength under “severely adverse” scenario
1) Non-GAAP number. Number shown excludes DOJ benefit during 3Q16. Please see reconciliation on slide 41.
2) Net gain on loan sales has been adjusted to exclude the $5mm gain on HFI loans sold during 2Q16.
• Adjusted net income of $41 million(1), or $0.69(1) per diluted share, in 3Q16
- Up $0.03(1) per diluted share, or 5%(1) vs. 2Q16 on benefit of TARP redemption
- Adjusted return on average assets of 1.2%(1) and adjusted return on average common equity of 12.6%(1)
6
3rd Quarter 2016
3Q16 2Q16 $ Variance % Variance
Net interest income $80 $77 $3 4%
Provision (benefit) for loan losses ("PLL") 7 (3) 10 N/M
Net interest income after PLL 73 80 (7) (9%)
Net gain on loan sales 94 90 4 4%
Loan fees and charges 22 19 3 16%
Loan administration income 4 4 - 0%
Net return on the mortgage servicing asset (11) (4) (7) N/M
Representation and warranty benefit 6 4 2 50%
Adjusted other noninterest income 17 (1) 15 2 13%
Total noninterest income 132 (1) 128 4 3%
Net gain on loan sales / total revenue 44% (1) 44% 0%
Compensation and benefits 69 66 3 5%
Commissions and loan processing expense 29 29 - 0%
Other noninterest expenses 44 44 - 0%
Total noninterest expense 142 139 3 2%
Income before income taxes 63 (1) 69 (6) (9%)
Provision for income taxes 22 (1) 22 - 0%
Adjusted net income $41 (1) $47 ($6) (13%)
Adjusted diluted earnings per share $0.69 (1) $0.66 $0.03 5%
Profitability
Net interest margin 2.58% 2.63% -5 bps
Mortgage rate lock commitments, fallout adjusted $8,291 $8,127 $164 2%
Mortgage closings $9,193 $8,330 $863 10%
Gain on loan sale margin, HFS 1.13% 1.04% (2) 9 bps
Adjusted efficiency ratio 67.0% (1) 68.2% -120 bps
Provision (benefit) for loan losses
• $7mm provision expense vs. $3mm provision benefit
from the release of $12mm in 2Q16 primarily from the
sale of $408mm UPB performing mortgage loans
• NPLs fell $4mm to $40mm or 0.63% of loans HFI
B
Quarterly income comparison
$mm Observations
Noninterest income
• Adjusted noninterest income increased 3%(1)
- Net gain on loan sales held-for-sale rose 11% on
higher margin driven by stronger market pricing on
controlled capacity to maintain service levels
- Loan fees and charges increased $3mm on higher
mortgage closings
- Net MSR return declined $7mm on prepayments
and a decrease in fair value driven by MSR sales
C
Net interest income
• Net interest income increased 4%
- Earning assets rose 6%, led by solid growth in
loans HFS and commercial loans
- Net interest margin decreased 5 bps to 2.58%,
driven by interest expense on senior debt issued for
TARP redemption
A
1) Non-GAAP number. Number shown excludes DOJ benefit during 3Q16. Please see reconciliation on slide 41.
2) Expressed as a percent of fallout-adjusted locks and excludes gain on HFI loans during 2Q16.
N/M – not meaningful
Noninterest expense
• Noninterest expense was up 2%
- Compensation & benefits and commissions rose on
higher mortgage closings
- Other expense categories were flat
D
A
B
C2
D
C1
C3
7
3rd Quarter 2016 Average balance sheet highlights
$ $ %
Loans held-for-sale $3,416 $532 18%
Consumer loans
(2)
2,580 (166) (6%)
Commercial loans
(2)
3,268 445 16%
Total loans held-for-investment 5,848 279 5%
Other earning assets
(3)
3,054 (132) (4%)
Interest-earning assets 12,318 $679 6%
Other assets 1,830 31 2%
Total assets $14,148 $710 5%
Deposits $9,126 $495 6%
Short-term FHLB advances & other 1,073 238 28%
Long-term FHLB advances 1,576 (49) (3%)
Other long-term debt 467 220 89%
Other liabilities 527 33 7%
Total liabilities 12,769 $937 8%
Preferred Equity 72 (195) (73%)
Common Equity 1,307 (32) (2%)
Total liabilities and equity $14,148 $710 5%
Book value per common share (9/30/16)
(4)
$22.72 ($0.82) (3%)
Incr (Decr)
(1)
Average Balance Sheet
Equity(4)
• Common equity to asset ratio of 9.0%
• Book value per share of $22.72 (reflecting a
decrease of $1.84 for TARP dividends paid at
redemption)
1) Measured vs. the prior quarter.
2) Consumer loans include first and second mortgages, HELOC and other loans; commercial loans include commercial real estate, commercial & industrial and
warehouse loans.
3) Other earning assets include interest earning deposits, investment securities and loans with government guarantees.
4) Common equity and book value ratios are calculated on ending period balances.
Interest-bearing liabilities
• Average deposits increased 6%
- Company controlled deposits up 19% due to
increased loans serviced and higher refinance
volume
3Q16 ($mm) Observations
Interest-earning assets
• Average earning assets rose 6% led by solid
growth in loans HFS and commercial loans.
• Rotated into higher spread commercial loans from
lower spread consumer loans
- Commercial loans up 16% on organic growth;
CRE and warehouse loans
- Consumer loans down 6% on impact of loan
sales near end of 2Q16
8
3rd Quarter 2016 Asset quality
Performing TDRs and NPLs ($mm)
97 101
75 73 71
63 66
53 44 40
$160
$167
$128
$117 $111
9/30/2015 12/31/2015 3/31/2016 6/30/2016 9/30/2016
Peforming TDRs NPLs
1) Excludes loans carried under the fair value option and loans with government guarantees.
Allowance coverage(1) (% of loans HFI)
3.7%
3.0% 2.9%
2.6%
2.3%
5.2%
4.2%
4.5% 4.5%
3.8%
1.4% 1.4% 1.3% 1.2% 1.3%
9/30/2015 12/31/2015 3/31/2016 6/30/2016 9/30/2016
Total Consumer Commercial
Net charge-offs ($mm)
Representation & warranty reserve(2) ($mm)
$45
$40 $40
$36
$32
9/30/2015 12/31/2015 3/31/2016 6/30/2016 9/30/2016
8
4 3 3 2
11
2
6
2
3
3
4
5
$24
$9
$12
$9
$7
3Q15 4Q15 1Q16 2Q16 3Q16
Adj. charge-offs Loan sales Govt. guaranteed loans
9
2) Please see slide 40 in the appendix for further details on the representation and warranty reserve.
3rd Quarter 2016 Robust capital
8.8% 8.6%
8.2%
8.6%
2.9%
-41bps +25bps
2.9%
-49bps +42bps
2.8%
+8bps
+47bps
3.0%
-41bps +63bps
-40bps
-293bps
11.7% 11.5%
11.0%
11.6%
8.9%
9/30/2015 12/31/2015 3/31/2016 6/30/2016 9/30/2016
• Flagstar continues to have strong capital levels after its TARP
redemption
- 3Q16 earnings generated 63bps of Tier 1 leverage
- Capital ratios are consistent or higher than peers before
considering the low risk content of our business
• Flagstar has used excess capital to support balance sheet
growth
• Flagstar grows regulatory capital at a greater pace as it utilizes
its NOL-related DTAs and reduces its MSRs
• The balance sheet has trapped capital of:
- $176mm of NOL-related DTAs (127bps of Tier 1 leverage)
- $145mm of MSRs (105bps of Tier 1 leverage)
• Robust capital generation will support future growth
Observations 3Q16 Flagstar Bancorp Tier 1 leverage
Well
Capitalized
5.0%
Tier 1 CET-1 Tier 1 Total RBC
Leverage to RWA to RWA to RWA
3Q16 Actual 8.9% 12.0% 14.0% 15.3%
2 16 ctual 11.6 13.6 18.9 20.2
Higher rate capital generation (near-term)
Tier 1 equity less TARP incl. deferred dividends TARP incl. deferred dividends
Balance sheet impact Net earnings contribution
2016 phase-in under Basel III TARP redemption
10
3rd Quarter 2016 Business Segment Overview
Lee Smith, COO
3rd Quarter 2016 Community banking
Average commercial loans ($bn) Commercial loan total commitments ($bn)
Average consumer loans ($bn) Average deposit funding(1) ($bn)
0.4 0.4 0.6 0.6 0.6
0.7 0.8
0.8 0.9
1.1
0.9
1.0
1.0
1.3
1.6
$2.0
$2.2
$2.4
$2.8
$3.3
3Q15 4Q15 1Q16 2Q16 3Q16
Commercial and Industrial Commercial Real Estate Warehouse
0.8 0.7 0.7 0.8 [VALUE]
1.2 1.3 1.5
1.7
[VALUE]
2.1 2.2
2.3
2.4
[VALUE] $4.0
$4.2
$4.5
$4.9
[VALUE]
9/30/2015 12/31/2015 3/31/2016 6/30/2016 9/30/2016
Commercial and Industrial Commercial Real Estate Warehouse
2.8 2.9 2.8
2.2 2.1
0.6 0.5 0.5
0.5 0.5
$3.4 $3.4 $3.3
$2.7 $2.6
3Q15 4Q15 1Q16 2Q16 3Q16
Residential First Mortgages Other Consumer Loans
5.7 5.8 5.8 6.1 6.1
1.1 1.1 1.1
1.0 1.1
1.5 1.2 1.2
1.6
1.9
$8.3 $8.1 $8.1
$8.6
$9.1
3Q15 4Q15 1Q16 2Q16 3Q16
Retail Government Company-controlled deposits
1) Includes company-controlled deposits which are included as part of mortgage servicing.
12
3rd Quarter 2016
4.5
3.4 3.8
4.7 5.1
1.9
1.4
1.5
2.1
2.3
1.5
1.0
1.0
1.5
1.8
$7.9
$5.8
$6.3
$8.3
$9.2
3Q15 4Q15 1Q16 2Q16 3Q16
Conventional Government Jumbo
Mortgage originations
Closings by purpose ($bn)
4.4
2.9 2.7
3.8 3.9
3.5
2.9 3.7
4.5
5.3
$7.9
$5.8
$6.3
$8.3
$9.2
3Q15 4Q15 1Q16 2Q16 3Q16
Purchase originations Refinance originations
Closings by mortgage type ($bn) Net gain on loan sales – revenue and margin
Fallout-adjusted locks ($bn)
$6.5
$5.0
$6.9
$8.1 $8.3
3Q15 4Q15 1Q16 2Q16 3Q16
$66
$85 $68
$46
$75
$90
$94
1.05%
0.92%
0.96%
[VALUE]
[VALUE]
3Q15 4Q15 1Q16 2Q16 3Q16
Gain on loan sale (HFS) Gain on HFI transfer Gain on loan sale % (HFS)
13
3rd Quarter 2016
MSR / regulatory capital (Bancorp)
Loans serviced (‘000) $ UPB of MSRs sold ($bn)
6.7
2.5 2.6 2.1
0.8
1.7
2.5
2.2
3.2
$7.5
$4.2
$5.1
$2.2
$5.3
3Q15 4Q15 1Q16 2Q16 3Q16
Bulk Sales Flow Transactions
119 119 119 134 139
220 211 192 194
198
30 31
29
30 29
369 361
340
358 366
9/30/2015 12/31/2015 3/31/2016 6/30/2016 9/30/2016
Serviced for Others Subserviced for Others Flagstar Loans HFI
29%
28%
27% 28%
29%
21% 21%
19% 20%
25%
9/30/2015 12/31/2015 3/31/2016 6/30/2016 9/30/2016
MSR to Tier 1 Common MSR to Tier 1 Capital
Mortgage servicing
Average company-controlled deposits ($bn)
$1.5
$1.2
$1.2
$1.6
$1.9
3Q15 4Q15 1Q16 2Q16 3Q16
14
3rd Quarter 2016 Noninterest expense and efficiency ratio
Adjusted efficiency ratio(1)
65%
75%
75%
68%
67%
3Q15 4Q15 1Q16 2Q16 3Q16
Quarterly noninterest expense ($mm)
$131 $129
$137 $139
$142
3Q15 4Q15 1Q16 2Q16 3Q16
• Flagstar‘s long-term objective is to achieve an efficiency ratio in the mid-60’s
1) Non-GAAP number. Number shown excludes DOJ benefit during 3Q16. Please see
reconciliation on slide 41.
15
3rd Quarter 2016 Closing Remarks / Q&A
Sandro DiNello, CEO
3rd Quarter 2016 Guidance(1)
1) See cautionary statements on slide 2.
Net interest income
• Average earning assets up slightly; led by C&I, CRE and jumbo mortgage loan growth, partially offset by seasonal
decline in warehouse loans
• Net interest margin up modestly on rotation into higher spread loans
Mortgage originations
• Fallout-adjusted locks down approximately 15 percent on seasonal decline in mortgage market
• No notable change in market share expected
Gain on loan sales • Gain on loan sale margin down moderately on lower mortgage demand
Net servicing revenue
• Net return on the mortgage servicing asset realizes annualized loss of approximately 5%
• Mortgage servicing asset relatively flat at year-end
Provision for loan
losses
• Provision for loan losses slightly lower on continued strong asset quality
Noninterest expenses • Noninterest expenses to remain fairly stable between $140 - $145 million
2016 4th quarter outlook
17
3rd Quarter 2016 Appendix
Company overview 19
Financial performance 24
Community banking segment 27
Mortgage origination segment 33
Mortgage servicing segment 35
Capital and liquidity 36
Asset quality 40
Non-GAAP reconciliation 41
3rd Quarter 2016 Flagstar at a glance
COMPANY OVERVIEW
31
Retail home lending
offices in 21 states
99
Branches in
Michigan
Bank branches
Retail home lending
Community banking
• Leading Michigan-based bank with a balanced,
diversified lending platform
• $14.3bn of assets and $9.4bn of deposits
• 99 branches
• 105k household & 14k business relationships
Mortgage origination
• Leading national originator
• Originated $29.7bn of residential mortgage
loans during the last 12 months
• More than 1,200 TPO relationships
• Retail lending network included 31 locations
in 21 states
Mortgage servicing
• 7th largest sub-servicer of mortgage loans
nationwide
• Currently servicing approximately 366k loans
• Scalable platform with capacity to service
1mm loans
• Low cost deposits from escrow balances
Corporate Overview
• Traded on the NYSE (FBC)
• Headquartered in Troy, MI
• Market capitalization $1.6bn
• Member of the Russell 2000 Index
19
3rd Quarter 2016 Flagstar’s one-of-a-kind business model
… Originates mortgages in
multiple channels on a
national scale, which …
… Deploy excess funding into
lending opportunities where we
are a lender of choice, which …
… Cross-sell our banking
products to deepen our B2B
relationships, which …
… Leverages our
scalable sub-servicing
platform, which …
… Builds enduring net
interest margin driven
revenue, allowing us to …
… Generates stable, lower
cost, long-term funding,
which we are able to ...
… Expands our key B2B
relationships to develop greater
mortgage origination referrals,
improving our ability to …
… Generates capital
with high ROE fee-based
activity and servicing
relationships, which …
COMPANY OVERVIEW
20
3rd Quarter 2016 Flagstar has a strong executive team
COMPANY OVERVIEW
Board of Directors
John Lewis
Chairman
Community
Banking
• Currently serving as
Director
Chief
Financial
Officer
• CFO since 8/14
• Nearly 30 years of
banking and
financial services
experience with
First Niagara,
Huntington and
KeyCorp
Chief
Operating Officer
• COO since 5/13
• Formerly a partner
of MatlinPatterson
Global Advisors and
a Senior Director at
Zolfo Cooper
• Extensive expe-
rience in financial
management and
operations
• Chartered Accoun-
tant in England and
Wales
Chief Risk
Officer
• CRO since 6/14
• Over 35 years of
financial services
experience with
Citizens Republic,
Fleet Boston
Financial, First
Union and Chase
Manhattan
Mortgage
Banking
• President of
Mortgage Banking
since 6/15
• 30 years of
mortgage industry
experience with
Mission Hills
Mortgage, IndyMac
and CitiMortgage
General
Counsel
• General Counsel
since 6/15
• 20 years of legal
experience with the
FDIC and Sidley
Austin LLP
• CEO since 5/13
• Over 35 years of banking experience with
Flagstar and its predecessors with a strong
emphasis on community banking, including the
management of retail operations and product
strategy
Patrick McGuirk Steve Figliuolo Sandro DiNello Len Israel Jim Ciroli Lee Smith
Drew Ottaway
• Managing Director
of Lending since
11/15
• Has over 25 years
of commercial
lending experience
in southeast
Michigan with
Comerica and NBD
Chief Audit
Officer
Sandro DiNello
President & CEO
David Colajezzi
21
3rd Quarter 2016
Karen Sabatowski
Chief Compliance
Officer
Sandro DiNello
President & CEO
Board of Directors
Steve Figliuolo
Chief Risk Officer
Risk
Committee
Enterprise
Risk
Committee
• Capital
planning /
stress test
modeling
• Mortgage
• Warehouse
• Commercial
• Consumer
• TPO’s
• Counterparty
• Model risk
management
• Risk
assessment/
deficiency
mgmt
• R&W reserve
• Market risk
• Effective
challenge
6 9 52 46 11 9 6 27 FTEs
Regulatory
Affairs
Modeling &
Analytics
ERM
Chief
Credit
Officer
QC /
Appraisal
Review
MFIU Fraud
Investigations
Loan
Review
Operational
Risk
AML /
BSA
Compliance
18
¹ Excludes 24 FTEs in internal audit and 3 FTEs in Sarbanes-Oxley compliance
Risk management
Best-in-class risk management platform with 184 FTEs(1)
COMPANY OVERVIEW
22
3rd Quarter 2016 Strong growth opportunities
Grow community banking
• Team lift outs
• Grow housing finance related relationships(1)
- Expand warehouse lending (400bps spreads)
- Launch builder finance lending (350bps spreads)
- Initiate MSR lending (500bps spreads; LTVs<60%)
• Cultivate middle-market commercial relationships in
foot-print
Expand mortgage business
• Recruit experienced talent to increase share of
origination market
- Distributed and direct-to-consumer retail
- TPO account executives
• Grow servicing operations
- Acquire new sub-servicing relationships
- Cross-sell additional revenue capabilities
23
B
u
il
d
B
u
y
• Buyers of size in Michigan are engaged on other
projects for the foreseeable future
• Michigan is a highly fragmented banking market
• Focused on our share in metro markets
• Acquiring deposit oriented franchises that lag in
profitability because of lack of asset generation
• No strategic buyers of size
• Highly fragmented industry with aging individual
ownership
• Regulatory and interest rate environment is
accelerating exits
• Will consider accretive transactions that add
incrementally to annual origination volume
COMPANY OVERVIEW
1. Indicated spreads are targets and may not be reflective of actual spreads.
23
3rd Quarter 2016 DOJ litigation settlement
FINANCIAL PERFORMANCE
Settlement
• In 2012, FBC entered into a settlement agreement with DOJ relating to certain underwriting practices
associated with loans insured by FHA.
• After making an initial $15mm payment, the Company agreed to make additional future payments in the
amount of $118 million.
• With the redemption of TARP, additional payments occur if Bank-level Tier 1 leverage capital ratio
reaches 11% or the Company is acquired and represents less than 33.3% of the combined entity.
Accounting
Treatment
• The Company has elected the fair value option to account for this financial liability and considers it a level
3 fair value estimate.
• As of September 30, 2016, the remaining future payments totaled $118 million. The Company used a
discounted cash flow model to estimate the current fair value. Multiple scenarios were probability weighted
and considered from the perspective of a market participant to estimate the fair value of the liability.
• As of September 30, 2016, the fair value of the liability was $60 million, a reduction of $24 million from the
June 30, 2016 valuation of $84 million.
Factors Driving
Lower Fair Value
Change in expectation on timing of payments reduced fair value
• The lower fair value resulted from a change in the expectation as to the timing of payments to DOJ.
Payments occur when the Bank's Tier 1 leverage ratio is 11% or greater at the end of any quarter.
• The $200 million dividend paid by Bank to Bancorp during the third quarter 2016 combined with an
expectation of management for additional dividends in the future from Bank to Bancorp resulted in an
expectation of a longer time period before this remaining criterion is met.
24
3rd Quarter 2016
$25 $25 $25 $25
$18
$25 $25 $25 $25
$18
FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28
Estimated payments at 6/30/16 Estimated payments at 9/30/16
• Paid $200 million dividend from Bank to Bancorp to
partially fund TARP redemption
• Expectation for additional intercompany dividends in the
future for the payment of:
- Interest expense on Senior Notes
- Interest expense on Trust Preferred Securities
- General corporate expenses and liquidity
• Resulted in a projection of a longer time period before Tier
1 capital reaches 11% at the Bank
DOJ litigation settlement
FINANCIAL PERFORMANCE
Fair value of DOJ liability payments ($mm) Effect of TARP redemption
• TARP redemption initiated dividends from Bank to Bancorp, extending estimated time horizon on DOJ
payments and reducing fair value of liability
25
3rd Quarter 2016 Long-term targets
• Long-term target of 1.2 - 1.6%
- Add incremental revenue with low incremental cost
- Improved risk management will deliver long-run
savings
- Adjusted return on average assets of 1.2%(1) (top
quartile of banks $10bn - $50bn of assets(2))
• Long-term target of 13 - 18%
- Add / increase high ROE businesses
- Adjusted return on average equity of 11.9%(1)
(top quintile of banks $10bn - $50bn of assets(2))
Financial Performance
Return on assets Return on equity
• Lender of choice in key markets (Michigan,
national housing finance)
• Long-term target of 50% of revenue
• Growth trajectory 10 - 15%
- Every additional $1bn of earning assets increases
pre-tax profits ~$20mm – $25mm
- Rotate lower spread assets to higher spread assets
while minimizing capital costs
• Nationally recognized leader the quick brown fox d
• Long-term target of 50% of revenue
• Growth trajectory 5 - 10%
- Expand retail originations (distributed, DTC)
- Every 100k in new loans sub-serviced generates $5-
7mm of incremental pre-tax profits
Revenues
Mortgage Banking
FINANCIAL PERFORMANCE
1) Non-GAAP number. Number shown excludes DOJ benefit during 3Q16. Please see reconciliation on slide 41.
2) Data for top ROA and ROE is as of September 30, 2016 (June 30, 2016 if not available) for all major exchange U.S. Banks with assets between
$10bn and $50bn, excluding Puerto Rican banks.
26
3rd Quarter 2016
Deposit Median Proj HHI Proj pop
Market $mm % of total mkt share HHI(2) growth(2)(3) growth(2)(3)
Oakland County 3,456 47.5% 7.0% 72,183 10.7% 2.7%
Grand Rapids MSA 402 5.5% 2.0% 58,024 10.3% 4.3%
Ann Arbor MSA 296 4.1% 3.6% 65,958 9.2% 3.3%
Key Flagstar markets 4,154 57.1% 5.3% 70,369 10.6% 2.9%
National aggregate 57,462 8.7% 3.8%
Flagstar Deposits
154 7 35
Strong market position as leading
Michigan-based community bank
COMMUNITY BANKING
Source: SNL Financial; Note: Deposit data as of June 30, 2016; MI-based banks highlighted; Pro forma for pending mergers and acquisitions.
1) Oakland County data excludes $1.5bn of company-controlled deposits held at company headquarters.
2) Flagstar Median HHI, projected HHI growth and projected population growth are deposit weighted.
3) 2017–2022 CAGR.
Flagstar’s branch network Market share
Attractive markets
Leading position among independent banks
Overall MI-based Institution (pro forma) Branches Total Share
1 Chase 246 $42,006 21%
2 Comerica 214 26,963 13%
3 PNC 206 17,326 9%
4 Bank of America 127 16,564 8%
5 Fifth Third 215 16,073 8%
6 Huntington (pro forma) 362 15,212 8%
7 1 Chemical (pro forma) 224 11,281 6%
8 2 Flagstar 99 8,773 4%
9 Citizens 98 5,138 3%
10 TCF 54 2,908 1%
Top 10 1,845 $162,244 81%
Rank Deposits ($mm)
27
3rd Quarter 2016
Deposits
Portfolio and strategy overview
5.7 5.8 5.8 6.1 6.2
2.6 2.3 2.3 2.6
2.9
$8.3 $8.1 $8.1
$8.6
$9.1
3Q15 4Q15 1Q16 2Q16 3Q16
Retail deposits Other deposits
Total average deposits ($bn)
+10.5%
YOY
• Flagstar gathers deposits from consumers, small
businesses and select governmental entities
– Traditionally, CDs and savings accounts
represented the bulk of our branch-based retail
depository relationships
– Today, we are focused on growing DDA
relationships with small business and
consumers
– We additionally maintain depository
relationships in connection with our mortgage
origination and servicing businesses, and with
Michigan governmental entities
– Cost of total deposits equal to 0.52%(1)
DDA
12%
Savings
41%
MMDA
3%
CD
12%
Company-
controlled
20%
Government &
other
12%
68%
retail
Total : $9.1bn
0.52% cost of total deposits(1)
3Q16 total average deposits
COMMUNITY BANKING
1. Total deposits include noninterest bearing deposits.
28
3rd Quarter 2016 Deposit growth opportunities
• Average balance of $1.1bn during 3Q16
• Cost of total government deposits: 0.49%(2) during
3Q16
• Michigan deposits are not collateralized
• Strong relationships across the state
• Average balance of $0.4 during 3Q16
• Flagstar has realized year-over-year growth in
treasury management services of:
- Deposits 52%
• Average balance of $1.9bn during 3Q16 on 366k
loans serviced and sub-serviced
• Low cost of deposits
• Deposit balances increase along with the number of
loans serviced & sub-serviced
• Average balance of $5.8bn during 3Q16 of which 79%
are customer demand & savings accounts
• Cost of total core deposits(1): 0.68%(2) during 3Q16
• Average core deposits equal $63mm per branch
• Flagstar’s brand campaign and targeted acquisition
offers are helping grow its core deposit base
Core Deposits
Retail
Commercial
Other Deposits
Government
Company controlled
COMMUNITY BANKING
1) Core deposits equal total deposits less government deposits and company-controlled deposits.
2) Total deposits include noninterest bearing deposits.
29
3rd Quarter 2016
2.2 2.5 2.9 2.9
3.4
5.4 5.6
5.7 5.6
5.8
0.5
0.5
0.5 0.4
0.4
$8.2
$8.6
$9.1 $8.9
$9.7
3Q15 4Q15 1Q16 2Q16 3Q16
Loans HFS Loans HFI Loans with government guarantees
1st Mortgage
HFI; 22%
2nds, HELOC
& other; 5%
Warehouse;
16%
CRE and C&I;
18%
Loans with
government
guarantees;
4%
1st Mortgage
HFS; 35%
3Q16 average loans
Lending
Portfolio and strategy overview
Total average loans ($bn)
• Flagstar’s largest category of earning assets consists
of loans held-for-investment which averaged $5.8bn
during 3Q16
– Loans to consumers consist of residential first and
second mortgage loans, HELOC and other
– C&I / CRE lending is an important growth strategy,
offering risk diversification and asset sensitivity
– Warehouse lending to both originators that sell to
Flagstar and those who sell to other investors
• Flagstar maintains a balance of mortgage loans held-
for-sale which averaged $3.4bn during 3Q16
– Essentially all of our mortgage loans originated are
sold into the secondary market
– Flagstar has the option to direct a portion of the
mortgage loans it originates to its own balance sheet
COMMUNITY BANKING
30
3rd Quarter 2016
Commercial lending
Diversified relationship-based commercial lending capabilities
COMMUNITY BANKING
Commercial Real Estate - $1.2bn (9/30/16)
78% Michigan
Owner-
occupied
22%
Multi-
family
19%
Retail
19%
Office
16%
Home builder
finance
14%
Special
purpose
6%
Industrial
4%
Commercial & Industrial - $0.7bn (9/30/16)
Services
39%
Financial,
Insurance &
Real Estate
(FIRE)
31%
Manufacturing
20%
Servicing
Advances
5%
Distribution
4%
Govt & Educ.
1%
Warehouse - $1.7bn (9/30/16) Overview
• Warehouse lines with approximately 260 relationships
nationwide, of which more than 90% sell a portion of
their loans to Flagstar
• Collateralized by mortgage loans being funded which
are paid off once the loan is sold
• Diversified property types which are primarily income-
producing in the normal course of business
• Focused on experienced top-tier developers with
significant deposit and non-credit product opportunities
• Lines of credit and term loans for working capital
needs, equipment purchases, and expansion projects
• Primarily Michigan based relationships or relationships
with national finance companies
Warehouse
Commercial
Real Estate
Commercial
& Industrial
[CATEGORY
NAME]; ~140
borrowers
[CATEGORY
NAME];
~60 Borrowers
[CATEGORY
NAME];
~60
borrowers
Average 40% advances sold to Flagstar
51% Michigan; 19% national finance
Industry
% Advances sold to Flagstar
Property type
31
3rd Quarter 2016
Sandro DiNello
President & CEO
Drew Ottaway
Managing Director of Lending
Warehouse
Lending
Commercial
Real Estate
Comprised of lending
officers who average
experience of 21 years
in banking
(3+ with Flagstar).
Prior banking experience
includes Fifth Third,
Wells Fargo and Bank of
America.
Homebuilder
Finance
Commercial
& Industrial
Newly recruited team of
lending officers who
have extensive
experience of more than
20 years in banking.
Prior banking experience
includes Texas Capital
and Royal Bank of
Canada.
Comprised of lending
officers who average
experience of 26 years
in banking
(13 with Flagstar).
Prior banking experience
includes Citizens Bank,
Bank of America and
Texas Capital.
Comprised of lending
officers who average
experience of 25 years
in banking
(2+ with Flagstar).
Prior banking experience
includes Fifth Third,
PNC, Bank of America
and JPM Chase.
Flagstar has deep commercial
lending experience
Supported by a team of
credit officers with more
than 15 years average
banking experience.
Supported by a team of
credit officers with more
than 20 years average
banking experience.
Supported by a team of
credit officers with nearly
15 years average banking
experience.
Supported by a team of
credit officers with more
than 15 years average
banking experience.
COMMUNITY BANKING
32
3rd Quarter 2016
Residential mortgage originations by channel ($bn)
Broker Correspondent Retail
Originates mortgages in multiple channels
on a national scale
$5.6
$4.1
$4.8
$6.2
$7.0
3Q15 4Q15 1Q16 2Q16 3Q16
$1.9
$1.4 $1.3
$1.6 $1.6
3Q15 4Q15 1Q16 2Q16 3Q16
$0.4 $0.3 $0.3 $0.5
$0.6
3Q15 4Q15 1Q16 2Q16 3Q16
MORTGAGE ORIGINATIONS
• 3.3% market share with #7 national ranking(1)
• Nearly 600 brokerage relationships in 50 states
in 3Q16
• Targeted gain on sale margin of ~90bps
• Top 10 relationships account for 24% of overall
brokerage volume
1) Data source: As reported by Inside Mortgage Finance for 2Q16 published August 26, 2016.
• 3.9% market share with #6 national ranking(1)
• More than 700 correspondent partners in 50
states in 3Q16
• Targeted gain on sale margin of ~60bps
• Top 10 relationships account for 18% of overall
correspondent volume
• Warehouse lines with approximately 260
correspondent relationships
• Loan officer additions have expanded our retail
footprint to 31 locations in 21 states
• Targeted gain on sale margin of ~340bps
• Direct-to-consumer is 36% of retail volume
33
3rd Quarter 2016
U.S. residential mortgage origination market (historical and projected volumes)
Source: Inside Mortgage Finance for actual periods and a blended average of forecast by Fannie Mae, Freddie Mac and Mortgage Bankers Association.
1. Adjusted for historical inflation as reported by Bloomberg (2015 = 100).
2. Adjusted for population growth as reported by the US Census Bureau (2015 = 100).
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Nominal $ $0.6 $0.9 $1.0 $0.8 $0.6 $0.8 $0.9 $1.5 $1.3 $1.0 $2.2 $2.9 $3.9 $2.9 $3.1 $3.0 $2.4 $1.5 $1.8 $1.6 $1.5 $2.1 $1.9 $1.2 $1.7 $1.9 $1.6
Real(1) $ 1.0 1.5 .7 1.2 1.0 1.2 1.3 2.1 .9 .4 3.0 3.8 5.1 3.7 .8 .5 .8 .7 2.0 .8 .6 .2 . . . . .
Adjusted(2) $ $ .2 $ .9 $2.1 $ .5 $ .2 $ .4 $ .5 $ .5 $2.2 $1.6 $ .3 $4.3 $ .6 $4.0 $4.1 $3.8 $3.0 $1. $ .1 $1. $1. $2. $2.0 $1.3 $1.7 $1.9 $1.6
$
1
.2
$
1
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$
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$
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$
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.6
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1
.2
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1
.2
1
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1
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1
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1
.2
1
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1
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1
.2
1
9
9
1
A
1
9
9
2
A
1
9
9
3
A
1
9
9
4
A
1
9
9
5
A
1
9
9
6
A
1
9
9
7
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1
9
9
8
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1
9
9
9
A
2
0
0
0
A
2
0
0
1
A
2
0
0
2
A
2
0
0
3
A
2
0
0
4
A
2
0
0
5
A
2
0
0
6
A
2
0
0
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A
2
0
0
8
A
2
0
0
9
A
2
0
1
0
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2
0
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2
0
1
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2
0
1
3
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2
0
1
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2
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A
2
0
1
6
F
2
0
1
7
F
$
in
t
rill
io
n
s
$
1
.2
$
1
.9
$
2
.1
$
1
.5
$
1
.2
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$
1
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.5
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.2
$
1
.6
$
3
.3
$
4
.3
$
5
.6
$
4
.0
$
4
.1
$
3
.8
$
3
.0
$
1
.7
$
2
.1
$
1
.8
$
1
.6
$
2
.2
$
2
.0
$
1
.3
$
1
.7
$
1
.9
$
1
.6
1
9
9
1
A
1
9
9
2
A
1
9
9
3
A
1
9
9
4
A
1
9
9
5
A
1
9
9
6
A
1
9
9
7
A
1
9
9
8
A
1
9
9
9
A
2
0
0
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A
2
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A
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F
2
0
1
7
F
$
in
t
rill
io
n
s
Flagstar has restructured its operations to be profitable
even at historical lows for the mortgage origination market
34
MORTGAGE ORIGINATIONS
3rd Quarter 2016
154 7 35
MSR portfolio
as of 9/30/16
MSR portfolio characteristics (% UPB) MSR portfolio statistics
Measure ($mm) 9/30/2016 6/30/2016 Difference
Unpaid principal balance $31,371 $30,443 $928
Fair value of MSR $302 $301 $1
Capitalized rate (% of UPB) 0.96% 0.99% -0.03%
Multiple 3.443 3.534 (0.091)
N te rate 3.926% 4.034% -0.108%
Service fee 0.279% 0.282% -0.003%
Average Measure ($000)
UPB per loan $226 $227 ($1)
FICO 738 735 3
Loan to value 73.00% 74.05% -1.05%
$ return – MSR asset
$ Return 3Q15 4Q15 1Q16 2Q16 3Q16
Net hedged profit (loss) $1 $1 $1 $1 $4
Carry on asset 19 16 6 9 13
Run-off (8) (8) (11) (15) (19)
Gr ss r turn on the
mortgage servicing asset
$12 $9 ($4) ($5) ($2)
Sale transaction & P/L 3 - (2) 1 (9)
Model Changes (3) - - - -
Net return on the
mortgage servicing asset
$12 $9 ($6) ($4) ($11)
Average mortgage
servicing rights
$317 $304 $285 $307 $316
2016;
41%
2015;
41%
2014;
13%
2013 &
prior; 5%
by Vintage
Fannie
63%
Freddie
20%
[CATEGOR
Y NAME](1)
[PERCENT
AGE]
Private
2%
by Investor
MORTGAGE SERVICING
35
1) Pending MSR sales expected to close in 4Q16 represent nearly all of the
Company’s remaining GNMA MSRs.
3rd Quarter 2016
11.6%
8.9%
6/30/16 9/30/16
Tier 1 leverage ratio
Select capital ratios
13.6%
12.0%
6/30/16 9/30/16
CET-1 ratio
Capitalization ($mm) Illustrative transaction ($mm)
Raised
$250mm of
6.125% Senior
Notes
Due 2021
Flagstar
Bancorp, Inc.
Flagstar Bank,
FSB
$245mm
proceeds
$250mm
notes
$200mm
dividend
TARP securities
$267mm redemption
$104mm dividend
Trust preferred
securities
$34mm interest
6/30/16 9/30/16
Short-term FHLB advances $1,069 $905
Long-term FHLB advances 1,577 1,577
6.125% Senior Notes due 2021 - 246
Trust preferred securities 247 247
Total debt 2,893 2,975
Preferred stock 267 -
Common Equity 1,329 1,286
Total stockholders' equity 1,596 1,286
Total capitalization $4,489 $4,261
Total assets 13,739 14,273
Common equity-to-assets ratio 9.7% 9.0%
Quarter ended
TARP redemption is expected to be EPS
accretive $0.09/share each quarter
36
CAPITAL AND LIQUIDITY
3rd Quarter 2016
4%
Other
liabilitie
s
3%
Other
long-
term
debt
Liabilities & Equity
154 7 35
Balance sheet composition
3Q16 average balance sheet (%)
Assets
Attractive relationship
lending with no loans >30
days delinquent
Primarily low risk, stable
assets (FHLB stock, BOLI,
premises & equipment,
deferred tax asset, etc.)
~75% of assets are in
lower risk-content
assets: cash, marketable
securities, warehouse
loans, loans held-for-sale
and freshly-originated,
high-FICO conforming
mortgages underwritten
by Flagstar
10%
Other assets
2% MSR
11%
Warehouse loans
Loans held-for-sale
24%
Mortgage loans
held-for-investment
21%
Agency
MBS
18%
1% Cash
12%
Commercial loans
CAPITAL AND LIQUIDITY
Efficiently funds loans
held-for-sale and
warehouse loans
37
51%
Deposits excluding
company-
controlled deposits
(“CCD”)
19%
FHLB borrowings
9% Common equity
13%
Company-controlled
deposits (“CCD”)
3rd Quarter 2016 Liquidity and funding
89%
94%
81%
76%
78%
9/30/2015 12/31/2015 3/31/2016 6/30/2016 9/30/2016
1) Total loans (excluding loans held-for-sale & warehouse loans); Core deposits equal total deposits less government deposits and company-controlled deposits
Loans / core deposits(1)
154 7 35
Core deposits¹ /
deposits (%)
70% 74% 70% 71% 67%
Commentary
■ Flagstar has invested
significantly in building its
Community Bank, which provides
attractive core deposit funding for
its balance sheet
■ These retail deposits are
supplemented by Company-
controlled deposits from the
servicing business
■ Much of the remainder of
Flagstar’s balance sheet is self-
funding given it is eligible
collateral for FHLB advances
(which provides significant
liquidity capacity)
CAPITAL AND LIQUIDITY
38
3rd Quarter 2016
0bps
50bps
100bps
150bps
200bps
250bps
300bps
350bps
1
month
3
months
6
months
1
year
2
years
3
years
5
years
7
years
10
years
20
years
30
years
up 100 bps Bear Flattener 9/30/16
Interest rate risk management
• The shorter term measure of the
“Earnings at Risk” interest rate risk
position is asset sensitive due to the
immediate repricing of the variable
rate assets including the mortgage
banking pipeline, warehouse loans
and commercial loans while
liabilities reprice more slowly.
• The longer term measure of the
“Economic Value of Equity” interest
rate position is expected to
decrease largely due to the
convexity of mortgage related
assets.
• Flagstar also performs a Net Income
Simulation that includes the effect of
changes in interest rates on the
mortgage business. Net income is
projected to increase significantly in
a decreasing rate environment due
to increased mortgage originations.
Net interest margin – 12 month horizon instantaneous shocks ($mm)
($ in mm) Parallel Shift Bear Flattener
Net interest income $21 ($14)
Noninterest Income ($21) to $0 $0 to $14
Up 100bps
Low interest rate risk
Economic value of equity
Change in Economic Value Policy Limit
Rates (bps) of Equity ($bn) ($bn) (%) (%)
+300 $2.00 ($0.00) (0.2%) (22.5%)
+200 $2.03 $0.03 1.4 (15.0 )
+100 $2.04 $0.04 2.0% (7.5%)
Market Implied $2.00 $0.00 0.0 0.0
-100 $1.88 ($0.12) (6.2%) (7.5%)
Change
CAPITAL AND LIQUIDITY
39
3rd Quarter 2016
788 778
540 457 508
402 337
350
238 238
1,190
56
1,115
60
890
49
695
28
746
24
3Q 2015 4Q 2015 1Q 2016 2Q 2016 3Q 2016
Fannie Mae Freddie Mac Fannie Mae Freddie Mac
Audit file pulls Repurchase demands
Representation & Warranty reserve details
(in millions) 9/30/15 12/31/15 3/31/16 6/30/16 9/30/16
Beginning balance $48) $45) $40) $40) $36
Additions (release) (4) (5) 0) (3) (5)
Net (charge-offs) /
recoveries 1) (0) 0) (1) (1)
Ending Balance $45) $40) $40) $36) $32
Repurchase pipeline ($mm) Repurchase reserve ($mm)
Repurchase activity with Fannie and Freddie
Repurchase demands /
file pulls
5% 6% 4% 5% 3%
ASSET QUALITY
$30
$20
$16
$11 $11
9/30/2015 12/31/2015 3/31/16 6/30/16 9/30/16
40
3rd Quarter 2016 Non-GAAP reconciliation
NON-GAAP RECONCILIATION
$mm
1) Reflects the exclusion of the 3Q16 Department of Justice (“DOJ”) benefit.
2) Effective tax rate of 34% applied to the Department of Justice (“DOJ”) benefit.
41
3 Months Ended 9 Months Ended
9/30/16 9/30/16
Net interest income (a) $80 $236
Noninterest income (b) $156 $389
Adjustment to remove DOJ benefit(1) (24) (24)
Adjusted noninterest income (c) $132 $365
Noninterest expense (d) $142 $418
Efficiency ratio (d/(a+b)) 59.9% 66.9%
Adjustment to remove DOJ benefit(1) 7.1% 2.7%
Adjusted efficiency ratio (d/(a+c)) 67.0% 69.6%
Net income applicable to common stockholders (e) $57 $143
Adjustment to remove DOJ benefit(1) (24) (24)
Tax impact of DOJ benefit(2) 8 8
Adjusted net income applicable to common stockholders (f) $41 $127
Weighted average diluted shares outstanding (g) 57,933,806 57,727,262
Diluted income per share (e/g) $0.96 $2.16
Adjustment to remove DOJ benefit(1) (0.41) (0.42)
Tax impact of DOJ benefit(2) 0.14 0.14
Adjusted diluted income per share (f/g) $0.69 $1.88
Average total assets (h) $14,148 $13,711
Return on average assets ((e/h) x annualization factor) 1.6% 1.4%
Adjustment to remove DOJ benefit(1) (0.4%) (0.2%)
Adjusted return on average assets ((f/h) x 4) 1.2% 1.2%
Average equity (i) $1,379 $1,515
Return on average common equity ((e/i) x annualization factor) 16.5% 12.6%
Adjustment to remove DOJ benefit(1) (4.6%) (1.4%)
Adjusted return on average equity ((f/i) x 4) 11.9% 11.2%
Average common equity (j) $1,307 $1,313
Return on average common equity ((e/j) x annualization factor) 17.5% 14.5%
Adjustment to remove DOJ benefit(1) (4.9%) (1.6%)
Adjusted return on average common equity ((f/j) x 4) 12.6% 12.9%