Attached files
| file | filename |
|---|---|
| EX-99.1 - EXHIBIT 99.1 - FLAGSTAR BANCORP INC | pressrelease2q2017.htm |
| 8-K - 8-K - FLAGSTAR BANCORP INC | a8-kearningsrelease2q2017.htm |
2nd Quarter 2017
Flagstar Bancorp, Inc. (NYSE: FBC)
Earnings Presentation
2nd Quarter 2017
July 25, 2017
2nd Quarter 2017 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
2nd Quarter 2017 Executive Overview
Sandro DiNello, CEO
2nd Quarter 2017 Strategic highlights
4
Unique
relationship-based
business model
• Formidable banking business – earning assets grew 14 percent vs. 1Q17 and 20 percent vs. 2Q16
• Industry-leading origination platform – acquisitions helped maintain revenue in a softer mortgage origination market
• Growing subservicing business – high subservicing retention rate on MSR sales helped exceed 400,000 total accounts
Strengthen
mortgage revenues
Grow community
banking
Highly
profitable
operations
• Solid, consistent financial results with net income of $41 million and diluted EPS of $0.71
• Net interest margin rose 10 bps, maintaining stable deposit cost despite recent Fed rate hikes
Positioned to thrive
in any market
• Strong credit metrics and low delinquency levels supported by 2.1 percent allowance coverage ratio
• Relatively neutral interest rate risk position; strong liquidity
• Strong Tier 1 leverage ratio of 9.1 percent available to support earning asset growth
• Strong earning asset growth led by high quality, relationship-based commercial loans, up 17 percent vs. 1Q17
- Relationship lending led by broad-based initiatives
- Scalable platforms with balance sheet growth at low incremental cost
• Smooth integration of Opes Advisors
- Adds 39 retail home lending offices in high growth western markets (CA, OR, WA)
- More than doubles distributed retail origination volume and positions Company for move to purchase market
2nd Quarter 2017 Financial Overview
Jim Ciroli, CFO
2nd Quarter 2017 Financial highlights
6
Solid
results
Strong
banking
contribution
• Net interest income rose $14 million, or 17 percent, led by growth of high quality, relationship based commercial loans
- C&I loans up $162mm, or 21 percent, led by diversified growth in lending initiatives
- Warehouse loans up $160mm, or 23 percent, on seasonal increase
- CRE loans up $159mm, or 12 percent, driven by home builder finance and in-footprint lending
Good
mortgage
performance
Strong
asset quality
• Net charge-offs less than $1 million, or 0.04 percent, versus $4 million, or 0.27 percent, in 1Q17
• Nonperforming loan ratio fell to 0.44 percent
• Allowance for loan losses covered 2.1 percent of loans HFI
Robust
capital
position
• Regulatory capital ratios are well above current guidelines for “well capitalized” institutions
- Tier 1 leverage remained strong at 9.1 percent as MSR sales released 65 bps of Tier 1 capital during 2Q17 and is 4.1
percentage points above “well-capitalized” minimum level
- Other regulatory capital ratios are between 5.9 – 6.6 percentage points above “well capitalized” minimum levels
• Net income per diluted share increased $0.25 to $0.71 in 2Q17 (up 54 percent)
- Strong growth in net interest income
- Higher noninterest income on increased mortgage revenues(1) and loan fees and charges
- Disciplined expense management delivered positive operating leverage
1) Mortgage revenue is defined as net gain on loan sales HFS plus the net (loss) return on the MSR.
• Noninterest income increased $16 million, or 16 percent, led by significant rise in net gain on loan sales
- Fall-out adjusted lock volume increased $3 billion, or 50 percent, with acquisitions nearly two-thirds of growth
- Net gain on loan sale margin declined slightly due to shift in mix and shorter-term market forces
• 11 percent net return on MSR, despite $2 million of selling costs, on improved hedging and stable prepayments
2nd Quarter 2017
2Q17 1Q17 $ Variance % Variance
Net interest income $97 $83 $14 17%
Provision for loan losses ("PLL") (1) 3 (4) N/M
Net interest income after PLL 98 80 18 23%
Net gain on loan sales 66 48 18 38%
Loan fees and charges 20 15 5 33%
Loan administration income 6 5 1 20%
Net return on mortgage servicing rights 6 14 (8) (57%)
Representation and warranty benefit 3 4 (1) (25%)
Other noninterest income 15 14 1 7%
Total noninterest income 116 100 16 16%
Net gain on loan sales / total revenue 31% 26% 5%
Compensation and benefits 71 72 (1) (1%)
Commissions and loan processing expense 30 22 8 36%
Other noninterest expenses 53 46 7 15%
Total noninterest expense 154 140 14 10%
Income before income taxes 60 40 20 50%
Provision for income taxes 19 13 6 46%
Net income $41 $27 $14 52%
Diluted income per share $0.71 $0.46 $0.25 54%
Profitability
Net interest margin 2.77% 2.67% 10 bps
Total revenues $213 $183 $30 16%
Mortgage rate lock commitments, fallout adjusted $9,002 $5,996 $3,006 50%
Mortgage closings $9,186 $5,912 $3,274 55%
Net gain on loan sale margin, HFS 0.73% 0.80% -7 bps
Efficiency ratio 72.0% 76.8% -480 bps
Quarterly income comparison
$mm Observations
Noninterest income
• Noninterest income increased $16mm or 16%
- Net gain on loan sales rose $18mm due to
acquisitions and seasonality that was partially
offset by lower gain on sale margin due to mix shift
and shorter-term market forces
- Loan fees and charges increased $5mm due to
higher mortgage closings
- Annualized net return on MSR of 11% despite
$2mm of selling costs
B
Net interest income
• Net interest income rose $14mm or 17%
- Average earning assets increased 14%, led by
commercial loans (up 17%) and loans HFS (up
30%)
- Net interest margin increased 10 bps to 2.77%
- Stable cost of interest-bearing deposits
A
Noninterest expense
• Noninterest expense rose $14 m or 10%
- Primarily due to incremental operating costs from
acquisitions and higher commissions and loan
processing expense on higher mortgage closings
- Excluding $11mm of operating expenses and $1
million of transaction costs from acquisitions,
noninterest expense was $142 million
C
A
B2
C
B1
B3
7
2nd Quarter 2017 Average balance sheet highlights
8
Equity(4)
• Common equity to asset ratio of 8.8%
• Price to book ratio of 124% based on closing price as of
July 24, 2017
Interest-bearing liabilities
• Average deposits relatively flat
- Higher company-controlled and retail deposits largely
offset lower government deposits
• Short-term FHLB funding supported increased HFS and
warehouse loans
• Stable cost of interest-bearing deposits
Observations
Interest-earning assets
• Loans held-for-sale increase led by higher originations
and jumbos retained for RMBS securitization
• Commercial loan growth stemmed from 2016 growth
initiatives in home builder, MSR and equipment finance
• Net interest margin increased 10bps to 2.77%
- Diversification and growth into higher spread assets
- Federal Reserve rate increases boosting yields
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) Tangible book value and common shares are calculated on ending period balances.
$ $ %
Loans held-for-sale $4,269 $983 30%
Consumer loans(2) 2,961 104 4%
Commercial loans(2) 3,263 481 17%
Total loans held-for-investment 6,224 585 10%
Other earning assets(3) 3,527 109 3%
Interest-earning assets 14,020 $1,677 14%
Other assets 1,690 (10) (1%)
Total assets 15,710 $1,667 12%
Deposits $8,739 ($56) (1%)
Short-term FHLB advances & other 3,429 1,607 88%
Long-term FHLB advances 1,200 - 0%
Other long-term debt 493 - 0%
Other liabilities 431 44 11%
Total liabilities 14,292 $1,595 13%
Stockholders' equity 1,418 72 5%
Total liabilities and stockholders' equity 15,710 $1,667 12%
Tangible book valu per common share (6/30/17) (4) $24.29 $0.33 1%
Incr (Decr)(1)
2Q17 ($mm)
2nd Quarter 2017 Asset quality
9
Performing TDRs and NPLs ($mm)
73 71 67
48 46
44 40 40
28 30
$117
$111 $107
$76 $76
6/30/2016 9/30/2016 12/31/2016 3/31/2017 6/30/2017
Peforming TDRs NPLs
1) Excludes loans carried under the fair value option and loans with government guarantees.
Allowance coverage(1) (% of loans HFI)
2.6%
2.3% 2.4% 2.4%
2.1%
4.5%
3.8%
3.3%
2.9%
2.5%
1.2% 1.3%
1.6%
1.9%
1.7%
6/30/2016 9/30/2016 12/31/2016 3/31/2017 6/30/2017
Total Consumer Commercial
Net charge-offs ($mm)
Representation & warranty reserve(2) ($mm)
$36
$32
$27
$23
$20
$11 $11
$6 $6
$4
6/30/2016 9/30/2016 12/31/2016 3/31/2017 6/30/2017
Reserve Repurchase pipeline
3 2 1 1
2
1
4
5
1
2
$9
$7
$2
$4
$0
2Q16 3Q16 4Q16 1Q17 2Q17
Adj. charge-offs Loan sales Govt. guaranteed loans
2) Please see slide 44 in the appendix for further details on the representation and warranty reserve.
2nd Quarter 2017
8.6% -293bps
-35bps +57bps
-23bps +23bps -33pbs +54bps
+22bps
-130bps +44bps
+65bps
3.0%
11.6%
8.9% 8.9%
9.3%
9.1%
6/30/2016 9/30/2016 12/31/2016 3/31/2017 6/30/2017
Robust capital
• Flagstar uses excess capital generation to support balance
sheet growth
• Flagstar grows regulatory capital at a greater pace as it utilizes
NOL-related DTAs and reduces MSRs
• The balance sheet has trapped capital of:
- $140mm of NOL-related DTAs (91bps of Tier 1 Leverage)
- $89mm of MSRs (58bps of Tier 1 Leverage)
• Robust capital generation will support future growth
Observations 2Q17
• Tier 1 leverage remained strong at 9.1% as capital released
from MSR sales and quarterly earnings funded strong balance
sheet growth
- MSR sales helped reduce trapped capital $80mm or 65bps
- 2Q17 earnings generated 44bps of Tier 1 leverage
- Capital ratios are consistent or higher than peers before
considering low risk content of business
Tier 1 CET-1 Tier 1 Total RBC
Leverage to RWA to RWA to RWA
2Q17 Actual 9.1% 12.5% 14.7% 15.9%
1 17 ctual 9.3 12.3 14.7 16.0
Higher rate capital generation (near-term)
10
Flagstar Bancorp Tier 1 Leverage
Well
Capitalized
5.0%
Balance sheet impact Net earnings contribution
TARP redemption 2017 phase-in under Basel III
Capital released from MSR bulk sales
Tier 1 equity less TARP incl. deferred dividends TARP incl. deferred dividends
2nd Quarter 2017 Business Segment Overview
Lee Smith, COO
2nd Quarter 2017 Community banking
12
Average commercial loans ($bn) Quarter-end commercial loan commitments ($bn)
Average consumer loans ($bn) Average deposit funding(1) ($bn)
0.6 0.6 0.7 0.8
0.9
0.9 1.1
1.2 1.3
1.5
1.3
1.6
1.5
0.7
0.9
$2.8
$3.3
$3.5
$2.8
$3.3
2Q16 3Q16 4Q16 1Q17 2Q17
Commercial and Industrial Commercial Real Estate Warehouse
1.0 1.1 1.2 1.4
1.7
1.5
1.8 1.9
2.2
2.3
2.4
2.9 2.9
2.4
2.6 $4.9
$5.8 $6.0 $6.0
$6.6
6/30/2016 9/30/2016 12/31/2016 3/31/2017 6/30/2017
Commercial and Industrial Commercial Real Estate Warehouse
2.2 2.1 2.2
2.4 2.5
0.5 0.5 0.5
0.5 0.5
$2.7 $2.6 $2.7
$2.9 $3.0
2Q16 3Q16 4Q16 1Q17 2Q17
Residential First Mortgages Other Consumer Loans
6.1 6.2 6.3 6.4 6.5
1.0 1.1 1.0
1.0 0.9
1.6
1.9 1.9 1.4 1.4
$8.6
$9.1 $9.2
$8.8 $8.7
2Q16 3Q16 4Q16 1Q17 2Q17
Retail Government Company-controlled deposits
1) Includes company-controlled deposits which are included as part of mortgage servicing.
2nd Quarter 2017
$8.1 $8.3
$6.1 $6.0
$9.0
2Q16 3Q16 4Q16 1Q17 2Q17
3.8 3.9 3.2 3.1
5.5
4.5
5.3
5.3
2.8
3.7
$8.3
$9.2
$8.6
$5.9
$9.2
2Q16 3Q16 4Q16 1Q17 2Q17
Purchase originations Refinance originations
Mortgage originations
13
47% 38% 43% 54% 58%
4.7 5.1 4.5
3.0
4.6
2.1
2.3
1.9
1.7
2.4
1.5
1.8
2.1
1.2
2.2
$8.3
$9.2
$8.6
$5.9
$9.2
2Q16 3Q16 4Q16 1Q17 2Q17
Conventional Government Jumbo
Closings by purpose ($bn)
Closings by mortgage type ($bn) Net gain on loan sales ($mm and %)
Fallout-adjusted locks ($bn)
$85
$90
$94
$57
$48
$66
1.04% 1.13%
0.93%
0.80% 0.73%
2Q16 3Q16 4Q16 1Q17 2Q17
Net gain on loan sales (HFS) Gain on HFI transfer Gain on sale margin (HFS)
Purchase
Mix %
2nd Quarter 2017 Mortgage servicing
14
MSR / regulatory capital (Bancorp)
Quarter-end loans serviced (000’s) UPB of MSRs sold ($bn)
2.1
4.2
5.8
17.1
3.2
2.5
2.2
1.9
$2.2
$5.3
$6.7
$8.0
$19.0
2Q16 3Q16 4Q16 1Q17 2Q17
Bulk Sales Flow Transactions
134 139 133 117
66
194 207 221 242 305
30
29 29 34
31 358
375 383
393 402
6/30/2016 9/30/2016 12/31/2016 3/31/2017 6/30/2017
Serviced for Others Subserviced for Others Flagstar Loans HFI
28% 29%
31%
28%
15%
20%
25%
27%
23%
13%
6/30/2016 9/30/2016 12/31/2016 3/31/2017 6/30/17
MSR to Tier 1 Common MSR to Tier 1 Capital
Average company-controlled deposits ($bn)
$1.6
$1.9 $1.9
$1.4 $1.4
2Q16 3Q16 4Q16 1Q17 2Q17
2nd Quarter 2017 Noninterest expense and efficiency ratio
• Flagstar‘s long-term objective is to achieve an efficiency ratio in the mid-60’s
15
2) References non-GAAP number for 3Q16, 1Q17 and 2Q17. 3Q16 number excludes DOJ benefit
during that period. 1Q17 and 2Q17 number excludes transaction costs related to the acquisition
of the delegated correspondent business from Stearns Lending and Opes Advisors. Please see
reconciliation on slide 45.
70% 73%
LTM 2Q16 LTM 2Q17
Adjusted efficiency ratio(2)
68% 67%
77% 76%
72%
2Q16 3Q16 4Q16 1Q17 2Q17
Quarterly noninterest expense ($mm)
$138
$142
$12 $140
$154
$139
$142 $142
2Q16 3Q16 4Q16 1Q17 2Q17
Noninterest expense excluding acquisitions Acquisitions expense
(1)
1) Represents operating expense and transactions costs of $2 million during 1Q17 and $12 million
during 2Q17 from the acquisition of the delegated correspondent business from Stearns Lending
and Opes Advisors.
2nd Quarter 2017 Closing Remarks / Q&A
Sandro DiNello, CEO
2nd Quarter 2017 Earnings guidance(1)
17
1) See cautionary statements on slide 2.
Net interest income
• Net interest income up moderately
- Average earning assets consistent with period-end Q2 level, led by continued rotation into higher spread
commercial loans
- Net interest margin steady
Net gain on loan sales
• Net gain on loan sales up significantly, led by full quarter of Opes
- Fallout-adjusted locks (FOAL) up moderately
- Gain on loan sale margin increases on higher distributed retail mix
Mortgage servicing
rights
• Net return on mortgage servicing rights approximates 5-7% on stable prepayments and lower transaction costs on
fewer anticipated MSR bulk sales
Other noninterest
income
• Loan fees and charges up on higher mortgage closings
• All other noninterest income steady with Q2 levels with modest decrease in R&W benefit
Noninterest expense
• Noninterest expense to rise to $168-$173 million, due to full quarter of Opes-related expenses and higher mortgage
volume driven expenses
3rd Quarter 2017 Outlook
2nd Quarter 2017 Appendix
Company overview 19
Financial performance 24
Community banking 28
Mortgage origination 37
Mortgage servicing 40
Capital and liquidity 41
Asset quality 44
Non-GAAP reconciliation 45
2nd Quarter 2017 Flagstar at a glance
COMPANY OVERVIEW
46
Flagstar retail home
lending offices(1)
99
Branches in
Michigan
Bank branches
Flagstar retail home lending
Opes retail home lending
Community banking
• Leading Michigan-based bank with a balanced,
diversified lending platform
• $16.0bn of assets and $8.7bn of deposits
• 99 branches
• 107k household & 15k business relationships
Mortgage origination
• Leading national originator of residential
mortgages ($32.9bn during last twelve months)
• Recent acquisitions originated approximately
$10bn of residential mortgages during 2016
• More than 1,000 correspondent and nearly 700
broker relationships
Mortgage servicing
• 8th largest sub-servicer of mortgage loans
nationwide
• Currently servicing approximately 402k 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 $1.7bn
• Member of the Russell 2000 Index
19
1) Includes seven home lending offices located in banking branches.
39
Opes retail home
lending offices
2nd Quarter 2017 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
2nd Quarter 2017 Flagstar has a strong executive team
COMPANY OVERVIEW
21
Board of Directors
John Lewis
Chairman
Community
Banking
Chief
Financial Officer
• CFO since 8/14
• 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
• Interim
management of
sales and
fulfillment to be
shared between
Sandro DiNello
and Lee Smith,
respectively, until a
search is
completed
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 Drew Ottaway Sandro DiNello Jim Ciroli Lee Smith
• Managing Director
of Lending and
Michigan Market
President
• Has over 25 years
of banking and
commercial lending
experience in
southeast Michigan
with Comerica and
NBD
Chief Audit
Officer
Sandro DiNello
President & CEO
Brian Dunn
2nd Quarter 2017
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
5 6 61 50 12 8 7 30 FTEs
Regulatory
Affairs
Modeling &
Analytics
ERM
Chief
Credit
Officer
QC /
Appraisal
Review
MFIU Fraud
Investigations
Loan
Review
Operational
Risk
AML /
BSA
Compliance
20
¹ Excludes 25 FTEs in internal audit and 4 FTEs in Sarbanes-Oxley compliance.
Risk management
Best-in-class risk management platform with 199 FTEs(1)
COMPANY OVERVIEW
22
2nd Quarter 2017 Strong growth opportunities
Grow community banking 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
• Team lift outs
• Grow housing finance related relationships(1)
- Expand warehouse lending (375bps spreads)
- Grow builder finance lending (475bps spreads)
- Build MSR lending (450bps spreads; LTVs<60%)
• Cultivate middle-market commercial relationships in
foot-print
COMPANY OVERVIEW
1) Indicated spreads are targets and may not be reflective of actual spreads.
23
2nd Quarter 2017 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 (last twelve
months) of 1.0%(1)
• Long-term target of 13 - 18%
- Add / increase high ROE businesses
- Adjusted return on average common equity (last
twelve months) of 10.3%(1)
Financial Performance
Return on assets Return on equity
• Lender of choice in key markets (Michigan,
national housing finance)
• 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
- Scalable platforms with balance sheet growth at low
incremental cost
• Nationally recognized leader the quick brown fox d
• Growth trajectory 5 - 10%
- Expand retail originations (distributed, DTC)
- Every 100k in new loans sub-serviced generates
$4mm - $6mm of incremental pre-tax profits
Revenues
Mortgage Banking
FINANCIAL PERFORMANCE
1) References non-GAAP number for 3Q16, 1Q17 and 2Q17. 3Q16 number excludes DOJ benefit during that period. 1Q17 and 2Q17 number excludes transaction costs related to
the acquisition of the delegated correspondent business from Stearns Lending and Opes Advisors. Please see reconciliation on slide 45.
24
2nd Quarter 2017
$20
$23
$26
$29
$32
$35
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
5
/1
6
6
/1
6
7
/1
6
8
/1
6
9
/1
6
1
0
/1
6
1
1
/1
6
1
2
/1
6
1
/1
7
2
/1
7
3
/1
7
4
/1
7
5
/1
7
6
/1
7
Pr
ic
e
%
o
f
Re
c
o
m
m
e
n
d
a
ti
o
n
s
Buy Hold Actual Price Target Price
Price target has increased on improved prospects
25
Analyst rating history
0%
25%
50%
75%
100%
$20
$23
$26
$29
$32
$35
5/16 6/16 7/16 8/16 9/16 10/16 11/16 12/16 1/17 2/17 3/17 4/17 5/17 6/17
%
o
f Re
c
o
m
m
e
n
d
a
tio
n
s
Pr
ic
e
Buy Hold Act ic Ta get Price
Target Price +25%
Actual Price +27%
FINANCIAL PERFORMANCE
2nd Quarter 2017 Valuation metrics
Observation: Flagstar has a valuation discount to its banking peers. The Company closed the valuation
gap through October 2016, but has underperformed since the U.S. presidential election.
FINANCIAL PERFORMANCE
26
1
/3
1
/2
0
1
6
2
/2
9
/2
0
1
6
3
/3
1
/2
0
1
6
4
/3
0
/2
0
1
6
5
/3
1
/2
0
1
6
6
/3
0
/2
0
1
6
7
/3
1
/2
0
1
6
8
/3
1
/2
0
1
6
9
/3
0
/2
0
1
6
1
0
/3
1
/2
0
1
6
1
1
/3
0
/2
0
1
6
1
2
/3
1
/2
0
1
6
1
/3
1
/2
0
1
7
2
/2
8
/2
0
1
7
3
/3
1
/2
0
1
7
4
/3
0
/2
0
1
7
5
/3
1
/2
0
1
7
6
/3
0
/2
0
1
7
1
/3
1
/2
0
1
6
2
/2
9
/2
0
1
6
3
/3
1
/2
0
1
6
4
/3
0
/2
0
1
6
5
/3
1
/2
0
1
6
6
/3
0
/2
0
1
6
7
/3
1
/2
0
1
6
8
/3
1
/2
0
1
6
9
/3
0
/2
0
1
6
1
0
/3
1
/2
0
1
6
1
1
/3
0
/2
0
1
6
1
2
/3
1
/2
0
1
6
1
/3
1
/2
0
1
7
2
/2
8
/2
0
1
7
3
/3
1
/2
0
1
7
4
/3
0
/2
0
1
7
5
/3
1
/2
0
1
7
6
/3
0
/2
0
1
7
77%
U
.S
.
p
re
s
iden
ti
a
l
e
le
c
ti
o
n
57%
Market value gap: ~$0.8B
Market / tangible book Price / LTM earnings
. FBC valuation vs. SNL U.S. Bank and Thrift Index
Market value gap: ~$0.3B
. FBC valuation vs. SNL U.S. Bank and Thrift Index
69%
85%
67%
85%
U
.S
.
p
re
s
iden
ti
a
l
e
le
c
ti
o
n
2nd Quarter 2017
Date
Federal
NOL
(2)
Other
(3)
Total
6/30/17 (actual) $125 $141 $266
FY17 tax expense(1) (34) - (34)
12/31/17 (pro-forma) $91 $141 $232
FY2018 Pro forma Tier 1
corporate tax rate NOL Other Total Capital
(5)
35% $0 $0 $0 0 bps
30% ($13) ($20) ($33) 0 bps
25% ($26) ($40) ($66) 0 bps
20% ($39) ($60) ($99) 0 bps
Notes:
(1) Represents consensus estimate from analysts covering FBC.
(2) Includes $36 of NOL's subject to §382 limitations.
(3) Other includes DTAs related to state NOLs and reserves for ALLL, R&W and DOJ.
(4) Represents write-down in value of DTA at new tax rate.
(5) Represents Tier 1 Capital reduction at new tax rate under fully phased-in Basel III regulations.
Deferred tax asset, net
Income Statement(4)
Potential corporate tax reform
27
FINANCIAL PERFORMANCE
FBC considerations regarding potential tax reform
• A reduction of the U.S. corporate tax rate would impact FBC’s
earnings by:
- Reducing deferred tax asset upon the enactment date of
the law
• Reduction in tangible book value
• Limited reduction to regulatory capital
- Decreasing effective tax rate, which will increase net
income and EPS upon effective date of the law
• Focus on implementing strategies to maximize economic
benefit of DTA
Pro-forma impact of potential tax reform ($mm)
2nd Quarter 2017
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 MI-based 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)
28
2nd Quarter 2017
Deposits
Portfolio and strategy overview
6.1 6.2 6.3 6.4 6.5
2.6 2.9
2.9 2.4 2.2
$8.6
$9.1 $9.2 $8.8 $8.7
2Q16 3Q16 4Q16 1Q17 2Q17
Retail deposits Other deposits
Total average deposits ($bn)
• Flagstar gathers deposits from consumers,
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
balances with consumer, business banking and
commercial relationships
– 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 0.55%(1)
DDA
14%
Savings
45%
MMDA
3%
CD
12%
Company-
controlled
16%
Government &
other
10%
74%
retail
Total : $8.7bn
0.55% cost of total deposits(1)
2Q17 total average deposits
COMMUNITY BANKING
1. Total deposits include noninterest bearing deposits.
29
2nd Quarter 2017 Deposit growth opportunities
• Average balance of $0.9bn during 2Q17
• Cost of total government deposits: 0.56%(2) during
2Q17
• Michigan deposits are not collateralized
• Strong relationships across the state
• Average balance of $0.5bn during 2Q17
• Offer complete line of treasury management services
• Flagstar realized 16% quarter-over-quarter increase
in service charges
• Average balance of $1.4bn during 2Q17 on 402k
loans serviced and sub-serviced
• Low cost of deposits
• Deposit balances increase along with the number of
loans serviced and sub-serviced
• Average balance of $6.0bn during 2Q17 of which 79%
are demand & savings accounts
• Cost of total core deposits(1): 0.67%(2) during 2Q17
• Average core deposits of $65mm per branch
• Flagstar’s brand campaign is helping grow its core
deposit base
Core Deposits
Retail
Commercial
Other Deposits
Government
Company-controlled
COMMUNITY BANKING
1) Core deposits = total deposits excluding government deposits and company-controlled deposits.
2) Total deposits include noninterest bearing deposits.
30
2nd Quarter 2017
2.9 3.4 3.3 3.3
4.3
5.6
5.8 6.2 5.6
6.2
$8.9
$9.7 $9.9
$9.2
$10.8
2Q16 3Q16 4Q16 1Q17 2Q17
Loans HFS Loans HFI Loans with government guarantees
1st Mortgage
HFI
23%
2nds, HELOC
& other
4%
Warehouse
8%
CRE and C&I
22%
Loans with
government
guarantees
3%
1st Mortgage
HFS
40%
2Q17 average loans
Lending
Portfolio and strategy overview
Total average loans ($bn)
• Flagstar’s largest category of earning assets consists
of loans held-for-investment which averaged $6.2bn
during 2Q17
– 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 $4.3bn during 2Q17
– 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
31
2nd Quarter 2017
$73 $73
$76
$79 $77
$80
$87
$83
$97
$10,367
$10,693
$11,240
$11,871 $11,639
$12,318
$12,817
$12,343
$14,020
2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17
Net interest income Average earning assets
● Sold lower performing assets and re-deployed capital into higher spread commercial loans
● Transition to more stable net interest income
Average earning assets and net interest income ($mm)
CAGR 16%
CAGR 16%
32
Higher net interest income is stabilizing earnings
COMMUNITY BANKING
2nd Quarter 2017
Commercial lending
Diversified relationship-based commercial lending capabilities
COMMUNITY BANKING
Commercial Real Estate - $1.6bn (6/30/17)
Home builder
finance
26%
Multi-family
17%
Retail
17%
Owner-
occupied
16%
Office
11%
Special
purpose
9%
Industrial
4%
Commercial & Industrial - $1.0bn (6/30/17)
Services
33%
Financial,
Insurance &
Real Estate
33%
Manufacturing
19%
Distribution
6%
Servicing
Advances
5%
Government &
Education
4%
Warehouse - $1.2bn (6/30/17) Overview
• Warehouse lines with approximately 270 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
>75%; ~150
borrowers
25% - 75%;
~60 borrowers
< 25%; ~60
borrowers
Average 39% advances sold to Flagstar
Industry
% Advances sold to Flagstar
Property type
33
64% Michigan 47% Michigan; 22% national finance
2nd Quarter 2017
Flagstar has deep lending experience
COMMUNITY BANKING
34
Sandro DiNello
President & CEO
Drew Ottaway
Managing Director of Lending &
Michigan Market President
Commercial
Real Estate
Comprised of
commercial and
homebuilder lending
officers who average
experience of 21
years in banking.
Prior banking
experience includes
Fifth Third, Wells
Fargo, Bank of
America, Texas
Capital, and Royal
Bank of Canada.
Supported by a team of
credit officers with more
than 15 years average
banking experience.
Commercial
& Industrial
Comprised of lending
officers who average
experience of 25
years in banking.
Prior banking
experience includes
Fifth Third, PNC, Bank
of America and JP
Morgan Chase.
Supported by a team of
credit officers with more
than 20 years average
banking experience.
Warehouse
Lending
Comprised of lending
officers who average
experience of 26
years in banking.
Prior banking
experience includes
Citizens Bank, Bank
of America and Texas
Capital.
Supported by a team of
credit officers with nearly
15 years average
banking experience.
Capital
Markets
More than 20 years
experience in various
capital raising
activities across all
asset classes.
Prior banking
experience includes
MUFG Union Bank
Supports all the lending
segments of Commercial
Lending where the
officers average over
17 years of experience
Business
Banking
Comprised of lending
officers with average
experience of over 25
years in banking.
Prior banking
experience includes
Comerica, Huntington,
PNC, and Fifth Third.
Supported by a team of
credit officers with more
than 20 years average
banking experience.
Consumer Finance
Consumer Finance
supports the product
and pricing of
consumer lending
products, including
processing and
underwriting of loan
applications received
from the Retail Branch
and Direct to
Consumer lending
channels.
Supported by a
management team
with an overage of
25+ years of
consumer lending
experience
2nd Quarter 2017
Warehouse lenders ranked by commitments ($mm)
YOY
Rank Institution Growth Total Share
1 JPMorgan Chase 50% $9,000 15%
2 Wells Fargo 19% 5,600 9%
3 Comerica 21% 4,000 6%
4 EverBank 8% 4,000 6%
5 BB&T 30% 3,650 6%
6 Customers Bank 7% 3,517 6%
7 Texas Capital -32% 3,371 5%
8 First Tennessee 44% 3,364 5%
9 Santander Bank 11% 2,600 4%
10 Flagstar Bancorp 4% 2,459 4%
Top 10 16% $41,561 67%
1Q17
Source: Inside Mortgage Finance as of May 25, 2017.
FBC average warehouse loans ($mm)
62%
57%
Warehouse lending
● National relationship based lending platform
● Attractive asset class with good spreads and low credit risk
● Strong demonstrated growth potential
● Flagstar is well positioned to gain market share, leveraging relationships in complementary lines of business,
including home builder finance and mortgage originations
COMMUNITY BANKING
35
$1,317
$1,553 $1,542
$690
$850
2Q16 3Q16 4Q16 1Q17 2Q17
2nd Quarter 2017
1,779
356
815
1
9
9
9
2
0
0
0
2
0
0
1
2
0
0
2
2
0
0
3
2
0
0
4
2
0
0
5
2
0
0
6
2
0
0
7
2
0
0
8
2
0
0
9
2
0
1
0
2
0
1
1
2
0
1
2
2
0
1
3
2
0
1
4
2
0
1
5
2
0
1
6
Home builder finance
COMMUNITY BANKING
36
Home builder loan commitments ($mm)
● National relationship based lending platform launched in 1Q16
- Attractive asset class with good spreads (~475bps)
- Meaningful cross-sell opportunities including warehouse loans,
commercial deposits and purchase originations
● Flagstar is well positioned to gain market share given builder and
mortgage relationships
- Focused on markets with strong housing fundamentals and
higher growth potential
- We currently finance 5 of the top 10 and have active
relationships with 29 of the top 100 builders nationwide
- We are well positioned to take advantage of supply demand
imbalance in housing market
Home builder finance footprint
Primary markets
Secondary markets
Overview
$152
$234 $264
$365
$494 $155
$229
$297
$403
$484
$307
$463
$561
$768
$978
6/30/16 9/30/16 12/31/16 3/31/17 6/30/17
Outstanding Unused
U.S. 1-unit housing starts (000’s)
(SAAR thru 5/31/17)
2nd Quarter 2017
National distribution through multiple channels
MORTGAGE ORIGINATIONS
37
Residential mortgage originations by channel ($bn)
Broker Correspondent Retail
$6.2
$7.0
$6.5
$4.5
$7.0
2Q16 3Q16 4Q16 1Q17 2Q17
$1.6 $1.6 $1.4
$1.0
$1.4
2Q16 3Q16 4Q16 1Q17 2Q17
$0.5 $0.6 $0.6 $0.4
$0.8
2Q16 3Q16 4Q16 1Q17 2Q17
• 2.8% market share with #8 national ranking(1)
• Nearly 700 brokerage relationships in 50 states
during 2Q17
• Targeted gain on sale margin of ~90bps
• Top 10 relationships account for 19% of overall
brokerage volume
1) Data source: As reported by Inside Mortgage Finance for 1Q17 published May 26, 2017.
• 3.5% market share with #6 national ranking(1)
• More than 1,000 correspondent partners in 50
states during 2Q17
• Targeted gain on sale margin of ~60bps
• Top 10 relationships account for 11% of overall
correspondent volume
• Warehouse lines with approximately 250
correspondent relationships
• Opes acquisition and organic growth has
expanded our retail footprint to 85 locations in
26 states
• Targeted gain on sale margin of ~300bps
• Direct-to-consumer is 16% of retail volume
2nd Quarter 2017 Mortgage origination channel mix with acquisitions
38
MORTGAGE ORIGINATIONS
Channel Sub-channel
FBC,
pre-acquisitions Acquisitions Pricing
Credit
Underwriting Funding GOS Margin
Distributed
retail
N/A ~5%
Opes
(~100%)
N/A FBC FBC Highest
Consumer
direct
N/A ~2% N/A FBC FBC
Broker N/A ~20% Best efforts FBC FBC
Non-delegated ~50% Best efforts FBC Warehouse
Delegated
best efforts
~15%
Stearns
(~20%)
Best efforts 3rd Party Warehouse
Delegated
mandatory
~3% Mandatory 3rd Party Warehouse
Bulk mandatory ~5%
Stearns
(~80%)
Mandatory 3rd Party Warehouse Lowest
Correspondent
Mortgage origination channel attributes
2nd Quarter 2017
Flagstar has restructured its operations to be profitable
even at historical lows for the mortgage origination market
39
MORTGAGE ORIGINATIONS
Source: Inside Mortgage Finance for actual periods and a blended average of forecast by Fannie Mae, Freddie Mac and Mortgage Bankers Association.
1. Adjusted for historical inflation as reported by Bloomberg (2015 = 100).
2. Adjusted for population growth as reported by the US Census Bureau (2015 = 100).
Nominal ($) 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 2.0 1.7 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 2.0 1.7 1.6
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$
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s
U.S. residential mortgage origination market (historical and projected volumes)
2nd Quarter 2017
Fannie
26%
Freddie
56%
GNMA
14%
Private
4%
by Investor
154 7 35
MSR portfolio
as of 6/30/17
MSR portfolio characteristics (% UPB) MSR portfolio statistics
Measure ($mm) 3/31/2017 6/30/2017 Difference
Unpaid principal balance $26,763 $16,144 ($10,619)
Fair value of MSR $295 $184 ($111)
Capitalized rate (% of UPB) 1.10% 1.14% 0.04%
Multiple 4.141 4.112 (0.029)
N te rate 3.905% 4.032% 0.127%
Service fee 0.266% 0.277% 0.011%
Average Measure ($000)
UPB per loan $229 $244 $15
FICO 744 733 (11)
Loan to value 68.22% 76.06% 7.84%
Mortgage servicing rights – $ return
$ Return 2Q16 3Q16 4Q16 1Q17 2Q17
Net hedged profit (loss) $1 $4 ($5) $2 $0
Carry on asset 9 13 17 14 9
Run-off (15) (19) (17) (6) (4)
Gr ss r turn on the
mortgage servicing rights
($5) ($2) ($5) $10 $5
S l transaction & P/L 1 (9) 1 (1) 1
Model Changes - - (1) 5 0
Net return on the
mortgage servicing rights
($4) ($11) ($5) $14 $6
Average mortgage
servicing rights
$307 $316 $327 $344 $205
2016 &
later; 79%
2015;
12%
2014; 4%
2013 &
prior; 5%
by Vintage
MORTGAGE SERVICING
40
2016 &
later
79%
2015
12%
2014
4%
2013 &
prior
5%
By intage
2nd Quarter 2017
154 7 35
Balance sheet composition
CAPITAL AND LIQUIDITY
41
3%
Other
liabilitie
s
3%
Other
long-
term
debt
Liabilities & Equity
2Q17 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.)
~74% 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
5% Warehouse loans
Loans held-for-sale
27%
Mortgage loans
held-for-investment
21%
Agency
MBS
21%
1% Cash
15%
CRE and C&I loans
Efficiently funds loans
held-for-sale and
warehouse loans
47%
Deposits excluding
company-
controlled deposits
(“CCD”)
29%
FHLB borrowings
9% Common equity
9%
Company-controlled
deposits (“CCD”)
2nd Quarter 2017 Liquidity and funding
154 7 35
CAPITAL AND LIQUIDITY
42
60% 59%
63%
66%
73%
2Q16 3Q16 4Q16 1Q17 2Q17
1) HFI loan-to-deposit ratio is total average loans HFI (excluding warehouse loans) expressed as a percentage of total average deposits (excluding company-controlled deposits).
HFI loan-to-deposit ratio(1) 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)
2nd Quarter 2017 Low interest rate risk
CAPITAL AND LIQUIDITY
43
-1.9%
-0.4%
-7.5%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
3/31/2016 6/30/2016 9/30/2016 12/31/2016 3/31/2017 6/30/2017
down 100bps up 100bps +/-100bps limit
0bps
50bps
100bps
150bps
200bps
250bps
300bps
350bps
400bps
450bps
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 6/30/2017
Net interest margin – 12 month horizon instantaneous shocks ($mm)
Economic value of equity, trend (12/31/15 - 3/31/17)
($ in mm) Parallel Shift Bear Flattener
Net interest income $12 ($37)
Noninterest Income ($12) to $0 $0 to $37
Up 100bps
2nd Quarter 2017
761
503
135 116
FY14 FY15 FY16 LTM 6/17
Repurchase demands
Representation & Warranty reserve details
(in millions) 6/30/16 9/30/16 12/31/16 3/31/17 6/30/17
Beginning balance $40) $36) $32 $27 $23
Additions (release) (3) (5) (6) (4) (2)
Net (charge-offs) /
recoveries (1) (1) 1 0 1
Ending Balance $36) $32) $27 $23 $20
Repurchase pipeline ($mm) Repurchase reserve ($mm)
ASSET QUALITY
$11 $11
$6 $6
$4
6/30/16 9/30/16 12/31/16 3/31/2017 6/30/2017
44
LTM 1Q17 Repurchase rate1,2
1. As reported, where available, by Inside Mortgage Finance, Inside Mortgage Trends and SEC
documents for the top 50 mortgage originators as of July 14, 2017.
2. Repurchase rate is defined as mortgages repurchased / mortgages originated.
2 0.37%
0.09%
0.04%
Average Median Flagstar
2nd Quarter 2017 Non-GAAP reconciliation
NON-GAAP RECONCILIATION
45
$mm
1) Reflects the exclusion of the 3Q16 Department of Justice (“DOJ”) benefit.
2) Reflects the exclusion of 1Q17 and 2Q17 acquisition costs
3) Effective tax rate of 33% applied.
3 Months Ended 3 Months Ended 3 Months Ended 12 Months Ended
9/30/16 3/31/2017 6/30/2017 6/30/2017
Net interest income (a) $80 $83 $97 $347
Noninterest income (b) $156 $100 $116 $470
Adjustment to remove DOJ benefit(1) (24) - - (24)
Adjusted noninterest income (c) $132 $100 $116 $446
Noninterest expense (d) $142 $140 $154 $578
Adjustment to remove acquisition costs (2) - (1) (1) (2)
Adjusted noninterest income (c) $142 $139 $153 $576
Efficiency ratio (d/(a+b)) 60% 77% 72% 71%
Adjustment to remove DOJ benefit(1) 7% 0% 0% 2%
Adjustment to remove acquisition costs (1) 0% (1%) (0%) (0%)
Adjusted efficiency ratio (d/(a+c)) 67% 76% 72% 73%
12 Months Ended
6/30/2017
Net income applicable to common stockholders (e) $153
Adjustment to remove DOJ benefit(1) (24)
Tax impact of DOJ benefit(3) 8
Adjustment to remove acquisition costs (2) 2
Tax impact of acquisition costs (3) -
Adjusted net income applicable to common stockholders (f) $139
Average total assets (g) $14,598
Return on average ssets ((e/g) x annualization factor) 1.0%
Impact of adjustments to net income 0.0%
Adjusted return on average assets ((f/g) x annualization factor) 1.0%
Average common equity (h) $1,346
Return on average common equity ((e/h) x annualization factor) 11.4%
Impact of adjustments to net income (1.1%)
Adjusted return on average common equity ((f/h) x annualization factor) 10.3%