Attached files
| file | filename |
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| EX-99.1 - EXHIBIT 99.1 - FLAGSTAR BANCORP INC | pressrelease3q2017.htm |
| 8-K - 8-K - FLAGSTAR BANCORP INC | a8-kearningsrelease3q2017.htm |
3rd Quarter 2017
Flagstar Bancorp, Inc. (NYSE: FBC)
Earnings Presentation
3rd Quarter 2017
October 24, 2017
3rd 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
3rd Quarter 2017 Executive Overview
Sandro DiNello, CEO
3rd Quarter 2017 Strategic highlights
4
Unique
relationship-based
business model
• Formidable banking business – earning assets grew 5 percent vs. 2Q17 and 20 percent vs. 3Q16
• Industry-leading origination platform – Opes acquisition helped boost retail mortgage production
• Growing subservicing business – servicing platform reached 415,000 total accounts
Strengthen
mortgage revenues
Grow community
banking
Highly
profitable
operations
• Solid, consistent financial results with net income of $40 million or $0.70 per diluted share
• Net interest income rose 6 percent vs. 2Q17, driven by solid earning asset growth
• Mortgage revenues increased 13 percent vs. prior quarter, led by increase in retail originations despite hurricane impact
of $0.02 - $ 0.03 / share
Positioned to thrive
in any market
• Strong credit metrics and low delinquency levels supported by 2.0 percent allowance coverage ratio
• Relatively neutral interest rate risk position; strong liquidity
• Tier 1 leverage ratio of 8.8 percent, down only 0.3 percent on higher MSR balances; Capital Simplification proposal
would improve Tier 1 leverage ratio to 9.5 percent
• Continued transformation into strong commercial bank; average commercial loans up 13 percent vs. prior quarter
• Achieved solid growth in deposit balances while maintaining pricing discipline
• Continued expansion of retail mortgage business, led by full integration of Opes
- Retail fallout-adjusted locks up $226 million, or 23 percent, vs. last quarter
- Gain on sale margin increased 11 bps to 0.84%
3rd Quarter 2017 Financial Overview
Jim Ciroli, CFO
3rd Quarter 2017 Financial highlights
6
Solid
results
Strong
banking
contribution
• Net interest income rose $6 million, or 6 percent, led by growth of high-quality, relationship-based commercial loans
- CRE loans up $169 million, or 11 percent, driven by home builder finance and in-footprint lending
- C&I loans up $137million, or 15 percent, representing diversified growth across several lending initiatives
- Warehouse loans up $128 million, or 15 percent
Good
mortgage
performance
Strong
asset quality
• Net charge-offs of $2 million, or 0.08 percent, versus 0.04 percent, in 2Q17
• Nonperforming loan ratio stable at 0.44 percent
• Allowance for loan losses covered 2.0 percent of loans HFI
Robust
capital
position
• Regulatory capital ratios are well above current “well capitalized” guidelines
- Tier 1 leverage remained strong at 8.8 percent with planned MSR growth on positive signals on capital regulations
- Tier 1 leverage has 380 basis point buffer to “well-capitalized” minimums that would grow to approximately 450 basis
points under the proposed Capital Simplification
• Net income of $40 million, or $0.70 per diluted share, in 3Q17
- Higher noninterest income on increased mortgage revenues(1) and loan fees and charges
- Noninterest expense in-line with expectations reflecting full quarter of Opes and low incremental expense from
growing community banking
1) Mortgage revenue is defined as net gain on loan sales HFS plus the net (loss) return on the MSR.
• Noninterest income increased $14 million, or 12 percent
- Net gain on loan sales increased $9 million, reflecting an 11 basis point increase in margin on higher distributed retail
mix
- Net return on MSR of 11 percent on stable prepayments and hedge performance
3rd Quarter 2017
3Q17 2Q17 $ Variance % Variance
Net interest income $103 $97 $6 6%
Provision for loan losses ("PLL") 2 (1) 3 N/M
Net interest income after PLL 101 98 3 3%
Net gain on loan sales 75 66 9 14%
Loan fees and charges 23 20 3 15%
Loan administration income 5 6 (1) (17%)
Net return on mortgage servicing rights 6 6 - 0%
Representation and warranty benefit 4 3 1 33%
Other noninterest income 17 15 2 13%
Total noninterest income 130 116 14 12%
Net gain on loan sales / total revenue 32% 31% 1%
Compensation and benefits 76 71 5 7%
Commissions and loan processing expense 38 30 8 27%
Other noninterest expenses 57 53 4 8%
Total noninterest expense 171 154 17 11%
Income before income taxes 60 60 - 0%
Provision for income taxes 20 19 1 5%
Net income $40 $41 ($1) (2%)
Diluted income per share $0.70 $0.71 ($0.01) (1%)
Profitability
Net interest margin 2.78% 2.77% 1 bp
Total revenues $233 $213 $20 9%
Mortgage rate lock commitments, fallout adjusted $8,898 $9,002 ($104) (1%)
Mortgage closings $9,572 $9,184 $388 4%
Net gain on loan sale margin, HFS 0.84% 0.73% 11 bps
Efficiency ratio 73.5% 72.0% 150 bps
Quarterly income comparison
$mm Observations
Noninterest income
• Noninterest income increased $14mm or 12%
- Net gain on loan sales rose $9mm, reflecting
stronger retail volume from full quarter of Opes
- Loan fees and charges increased $3mm due to
higher mortgage closings
- Increased representation and warranty benefit on
continued low repurchase activity and pipeline
B
Net interest income
• Net interest income increased $6mm or 6%
- Average earning assets increased 5%, led by
commercial loans (up 13%)
- Net interest margin increased 1bp to 2.78%
A
Noninterest expense
• Noninterest expense increased $17mm or 11% was
in-line with expectations
- Full quarter of operating expenses from Opes
- Low incremental expense from growing
community banking
C
A
B2
C
B1
B3
7
3rd Quarter 2017
Equity(4)
• Common equity to asset ratio of 8.6%
• Our closing share price of $36.56 on October 23, 2017 is
146% of our tangible book value
Average balance sheet highlights
8
Interest-bearing liabilities
• Disciplined deposit growth strategy
- Higher company-controlled and retail deposits led
growth in deposit funding
- Controlled cost of interest-bearing deposits
Observations
Interest-earning assets
• Commercial loan growth driven by 2016 growth
initiatives in home builder, MSR and equipment finance
- CRE lending increased $169mm or 11%
- C&I lending increased $137mm or 15%
- Warehouse lending increased $128mm or 15%
• Higher short-term rates boosted 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 per common share references a non-GAAP number. Please see reconciliation on page 48.
$ $ %
Loans held-for-sale $4,476 $207 5%
Consumer loans(2) 3,106 145 5%
Commercial loans(2) 3,697 434 13%
Total loans held-for-investment 6,803 579 9%
Other earning assets(3) 3,458 (69) (2%)
Interest-earning assets 14,737 $717 5%
Other assets 1,702 12 1%
Total assets 16,439 $729 5%
Deposits $9,005 $266 3%
Short-term FHLB advances & other 3,809 380 11%
Long-term FHLB advances 1,234 34 3%
Other long-term debt 493 - 0%
Other liabilities 427 (4) (1%)
Total liabilities 14,968 $676 5%
Stockholders' equity 1,471 53 4%
Total liabilities and stockholders' equity 16,439 $729 5%
Tangible book val e per common share (9/30/17) (4) $25.01 $0.72 3%
Incr (Decr)(1)
3Q17 ($mm)
3rd Quarter 2017 Asset quality
9
Performing TDRs and NPLs ($mm)
71 67
48 46 46
40 40
28 30 31
$111 $107
$76 $76 $77
9/30/2016 12/31/2016 3/31/2017 6/30/2017 9/30/2017
Peforming TDRs NPLs
1) Excludes loans carried under the fair value option and loans with government guarantees.
Allowance coverage(1) (% of loans HFI)
2.3% 2.4% 2.4%
2.1%
2.0%
3.8%
3.3%
2.9%
2.5%
2.3%
1.3%
1.6%
1.9%
1.7% 1.7%
9/30/2016 12/31/2016 3/31/2017 6/30/2017 9/30/2017
Total Consumer Commercial
Net charge-offs ($mm)
Representation & warranty reserve(2) ($mm)
$32
$27
$23
$20
$16
$11
$6 $6
$4
$5
9/30/2016 12/31/2016 3/31/2017 6/30/2017 9/30/2017
Reserve Repurchase pipeline
2
1 1 1
5
1
2
1
1
$7
$2
$4
$0
$2
3Q16 4Q16 1Q17 2Q17 3Q17
Adj. charge-offs Govt. guaranteed loans Loan sales
2) Please see slide 47 in the appendix for further details on the representation and warranty reserve.
3rd Quarter 2017
-23bps +23bps
-33bps +54bps
+22bps
-130pbs +44bps
+65bps
-38bps
-24bps +32bps
8.9% 8.9%
9.3%
9.1%
8.8%
9/30/2016 12/31/2016 3/31/2017 6/30/2017 9/30/2017
Robust capital
Observations 3Q17
Tier 1 CET-1 Tier 1 Total RBC
Leverage to RWA to RWA to RWA
3Q17 Actual 8.8% 11.7% 13.7% 15.0%
2 17 ctual 9.1 12.5 14.7 15.9
Higher rate capital generation (near-term)
10
Flagstar Bancorp Tier 1 Leverage
Well
Capitalized
5.0%
Balance sheet impact Net earnings contribution
2017 phase-in under Basel III Capital impact of MSR
• As Flagstar utilizes its NOLs, it generates capital at a pre-tax
rate
• The balance sheet has trapped capital of:
- $129mm of NOL-related DTAs (80bps of Tier 1 leverage)
- $128mm of MSRs (79bps of Tier 1 leverage)
• Capital Simplification proposal would unleash trapped capital
and increase Tier 1 leverage ~70 bps(1) and risk-based
capital ratios ~30-45 bps(1) to support balance sheet growth
• Tier 1 leverage remained strong at 8.8% as quarterly
earnings funded balance sheet growth
- $900mm of balance sheet growth with only 6bps decrease in
Tier 1 leverage excluding MSR impact
- Planned MSR growth impacted Tier 1 leverage 24bps given
positive signals of Capital Simplification
1) Pro-forma at September 30, 2017.
3rd Quarter 2017 Business Segment Overview
Lee Smith, COO
3rd Quarter 2017 Community banking
12
Quarter-end commercial loan commitments ($bn)
Average deposit funding(1) ($bn)
6.2 6.3 6.4 6.5 6.6
1.1 1.0 1.0 0.9 0.9
1.9 1.9 1.4 1.4 1.5
$9.1 $9.2 $8.8 $8.7 $9.0
3Q16 4Q16 1Q17 2Q17 3Q17
Retail Government Company-controlled deposits
1) Includes company-controlled deposits which are included as part of mortgage servicing.
1.1 1.2 1.4
1.7 1.8
1.8 1.9
2.2
2.3
2.7
2.9 2.9
2.4
2.6
2.7
$5.8 $6.0 $6.0
$6.6
$7.2
9/30/2016 12/31/2016 3/31/2017 6/30/2017 9/30/2017
Commercial and Industrial Commercial Real Estate Warehouse
Average commercial loans ($bn)
Average consumer loans ($bn)
0.6 0.7 0.8
0.9 1.1
1.1
1.2 1.3
1.5
1.6
1.6
1.5
0.7
0.9
1.0
$3.3
$3.5
$2.8
$3.3
$3.7
3Q16 4Q16 1Q17 2Q17 3Q17
Commercial and Industrial Commercial Real Estate Warehouse
2.1 2.2
2.4 2.5 2.6
0.5 0.5
0.5 0.5
0.5 $2.6
$2.7
$2.9 $3.0
$3.1
3Q16 4Q16 1Q17 2Q17 3Q17
Residential First Mortgages Other Consumer Loans
3rd Quarter 2017
$8.3
$6.1 $6.0
$9.0 $8.9
3Q16 4Q16 1Q17 2Q17 3Q17
Purchase
Mix %
Mortgage originations
13
38% 43% 54% 58% 55%
Net gain on loan sales – revenue and margin ($mm)
Fallout-adjusted locks ($bn)
$94
$57
$48
$66
$75
1.13%
0.93%
0.80%
0.73%
0.84%
3Q16 4Q16 1Q17 2Q17 3Q17
Gain on loan sale Gain on sale margin
3.9 3.2 3.1
5.5 5.5
5.3
5.3
2.8
3.7 4.1
$9.2
$8.6
$5.9
$9.2
$9.6
3Q16 4Q16 1Q17 2Q17 3Q17
Purchase originations Refinance originations
5.1 4.5
3.0
4.6 4.5
2.3
1.9
1.7
2.4 2.2
1.8
2.1
1.2
2.2 2.9
$9.2
$8.6
$5.9
$9.2
$9.6
3Q16 4Q16 1Q17 2Q17 3Q17
Conventional Government Jumbo
Closings by purpose ($bn)
Closings by mortgage type ($bn)
3rd 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
1.6
$5.3
$6.7
$8.0
$19.0
$2.0
3Q16 4Q16 1Q17 2Q17 3Q17
Bulk Sales Flow Transactions
139 133 117
66 87
207 221 242
305 297
29 29 34
31 31
375 383
393 402
415
9/30/2016 12/31/2016 3/31/2017 6/30/2017 9/30/2017
Serviced for Others Subserviced for Others Flagstar Loans HFI
29%
31%
28%
15%
20%
25%
27%
23%
13%
17%
9/30/2016 12/31/2016 3/31/2017 6/30/17 9/30/17
MSR to Tier 1 Common MSR to Tier 1 Capital
Average company-controlled deposits ($bn)
$1.9 $1.9
$1.4 $1.4
$1.5
3Q16 4Q16 1Q17 2Q17 3Q17
3rd Quarter 2017 Noninterest expense and efficiency ratio
15
1) References non-GAAP number for 3Q16 and GAAP number for all other quarters. 3Q16 number shown excludes DOJ benefit during that period. Please see reconciliation on slide 48.
Quarterly noninterest expense ($mm) and efficiency ratio
$142 $142 $140
$154
$171
67%
77% 77%
72%
74%
3Q16 4Q16 1Q17 2Q17 3Q17
Noninterest expense Adusted efficiency ratio
(1)
3rd Quarter 2017 Closing Remarks / Q&A
Sandro DiNello, CEO
3rd Quarter 2017 Earnings guidance(1)
17
1) See cautionary statements on slide 2.
Net interest income
• Net interest income up slightly
- Average earning assets consistent with period-end Q3 level, led by CRE and jumbo mortgage loan growth,
partially offset by seasonal decline in warehouse loans
- Net interest margin relatively stable
Net gain on loan sales
• Net gain on loan sales down seasonally
- Fallout-adjusted locks (FOAL) down 5-10%
- Gain on loan sale margin steady
Mortgage servicing
rights
• Net return on mortgage servicing rights approximates 5-7% before transaction costs from closing 4Q17 MSR sales ($7
billion UPB)
Other noninterest
income
• Loan fees and charges down moderately on lower mortgage loan closings
• All other noninterest income fairly steady with Q3 levels
Noninterest expense • Noninterest expense to remain fairly stable between $167-$172 million
4th Quarter 2017 Outlook
3rd Quarter 2017 Appendix
Company overview 19
Financial performance 26
Community banking 31
Mortgage origination 40
Mortgage servicing 43
Capital and liquidity 44
Asset quality 47
Non-GAAP reconciliation 48
3rd Quarter 2017
47
Opes
retail home
lending
offices(2)
48
Flagstar
retail home
lending
offices(1)
99
Flagstar
Bank
branches
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
• $16.9bn of assets and $9.2bn of deposits
• 99 branches
• 108k household & 15k business relationships
Mortgage origination
• Leading national originator of residential
mortgages ($33.2bn 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 415k 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 $2.1bn
• Member of the Russell 2000 Index
19
1) Includes seven home lending offices located in banking branches.
2) Opes has one retail lending office in Honolulu, HI that is not pictured on this map.
39
Opes retail home
lending offices
3rd 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
3rd Quarter 2017
21
Flagstar’s integrated business model
Residential MBS Investor
Initial relationship
• Bulk sale of MSRs with subservicing
retained (2013 - 2014)
Expanded relationship
• Provided MSR lending facility (2016)
- Commitments of $50mm
collateralized by FNMA MSRs
- Subservice non-Flagstar mortgage
accounts providing fee income
• Portfolio recapture services provided
with direct-to-consumer refinancings
of more than $150mm since
inception (2016)
• Additional bulk and flow sales of
MSRs with subservicing retained
(2017)
Home Builder
Initial relationship
• Provided home builder line of credit
(2016)
- Unsecured non-real estate
commitments of $30mm
- Commercial deposits of $15mm
Expanded relationship
• Participated in syndicated
warehouse facility to captive
mortgage operation (2016)
- Commitments of $36mm
- 1 of 3 participants in the
syndication
Wholesale Originator
Initial relationship
• Established correspondent lending
relationship (2017)
- Purchased more than $175mm of
mortgages year-to-date
Expanded relationship
• Warehouse line of credit (2017)
- Commitments of $50mm
• Initiated subservicing agreement
(2017)
- Entire portfolio of newly originated
mortgage loans are on-boarded
with Flagstar
COMPANY OVERVIEW
3rd Quarter 2017 Pistons sponsorship improves brand awareness
Local and national exposure
Key elements support community banking, mortgage origination
and mortgage servicing:
• First-ever jersey patch sponsor for the Pistons
• Exclusive title as official banking and mortgage sponsor
• Three 30 second TV and radio spots per game
• In-arena signage including courtside, baskets, LED rings
• Affinity debit and credit cards
• Digital banner ads on Pistons.com and Pistons mobile app
Value proposition
22
Exclusive banking and mortgage sponsorship
• Sponsorship agreement benefits:
- Creates national brand exposure that supports all
business lines
- Our target customers are NBA viewers
- Increased exposure in Michigan banking market
• Strong value proposition relative to other announced NBA
sponsorship deals
- Multi-year agreement with an option to extend
Meaningful geographic overlap
COMPANY OVERVIEW
3rd Quarter 2017 Flagstar has a strong executive team
COMPANY OVERVIEW
23
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
• Appointed
President of
Mortgage effective
9/17
• Has 15 years
experience with
Fannie Mae in
various executive
and leadership
roles focused on
building banking
relationships and
growth initiatives
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 Kristy Fercho Jim Ciroli Lee Smith
• Executive Vice
President, Michigan
Market President
and Managing
Director, Lending
• With Flagstar since
12/15 and 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
3rd Quarter 2017
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
24
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 62 50 12 8 5 30 FTEs
Regulatory
Affairs
Modeling &
Analytics
ERM
Chief
Credit
Officer
QC /
Appraisal
Review
MFIU Fraud
Investigations
Loan
Review
Operational
Risk
AML /
BSA
Compliance
21
3rd Quarter 2017 Strong growth opportunities
COMPANY OVERVIEW
25
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
25
B
u
il
d
B
u
y
• Pairing a deposit franchise where we currently
have mortgage origination offices could enhance
synergies between them
• Acquiring deposit oriented franchises that lag in
profitability because of lack of asset generation
• Opportunistically; no strategic bank buyers of size
• Highly fragmented industry with aging individual
ownership
• Regulatory and interest rate environment is
accelerating exits
• Can produce compelling returns with reliance only
on funding synergies
• Opportunistic team lift outs
• Grow national lending platforms(1)
- Expand warehouse lending (375bp spread)
- Grow home builder finance (475bp spread)
- Build MSR lending (425bp spread; LTVs<60%)
• Cultivate other middle-market commercial
relationships
• Add specialty lending disciplines and teams
1) Indicated spreads are targets and may not be reflective of actual spreads.
3rd Quarter 2017 Long-term targets
• Long-term target of 1.0 - 1.5%
- Add incremental revenue with low incremental cost
- Improved risk management will deliver long-run
savings
- Return on average assets (last twelve months) of
0.90%
• Long-term target of 11 - 15%
- Add / increase high ROE businesses
- Return on average common equity (last twelve
months) of 10%
Financial Performance
Return on assets Return on equity
• Lender of choice in key markets (Michigan,
national lending platforms)
• 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
• Every 100k in new loans sub-serviced generates
$4mm - $6mm of incremental pre-tax profits
Revenues
Mortgage Banking
FINANCIAL PERFORMANCE
26
3rd Quarter 2017
$61
$65
$73 $73
$76
$79 $77
$80
$87
$83
$97
$103
$8,725
$9,422
$10,367 $10,693
$11,240
$11,871 $11,639
$12,318
$12,817
$12,343
$14,020
$14,737
4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17
Net interest income Average earning assets
● Sold lower performing assets and re-deployed capital into higher spread commercial loans
● Transition to more stable net interest income
Average earning assets and net interest income ($mm)
CAGR 21%
CAGR 21%
27
Higher net interest income is stabilizing earnings
FINANCIAL PERFORMANCE
3rd Quarter 2017
Date
Federal
NOL
(2)
Other
(3)
Total
9/30/17 (actual) $112 $136 $248
4Q17 tax expense(1) (14) - (14)
12/31/17 (pro-forma) $97 $136 $233
FY2018 Pro forma Tier 1
corporate tax rate NOL Other Total Capital
(5)
35% $0 $0 $0 0 bps
30% ($14) ($19) ($33) 0 bps
25% ($28) ($39) ($67) 0 bps
20% ($42) ($58) ($100) 0 bps
Notes:
(1) Represents consensus estimate from analysts covering FBC.
(2) Includes $36 mill ion of NOL's subject to §382 limitations.
(3) Other includes DTAs related to state NOLs and reserves for ALLL, R&W and DOJ.
(4) Represents write-down in value of DTA to the new tax rate.
(5) Represents Tier 1 Capital reduction at new tax rate under fully phased-in Basel III regulations.
Deferred tax asset, net
Income Statement(4)
Potential corporate tax reform
28
FINANCIAL PERFORMANCE
FBC considerations regarding potential tax reform
• A reduction of the U.S. corporate tax rate would impact FBC’s
earnings by:
- Reducing deferred tax asset upon the enactment date of
the law (i.e. when signed into law)
• Reduction in tangible book value
• Limited reduction to regulatory capital
- Decreasing effective tax rate, which will increase net
income and EPS upon effective date of the law
Pro-forma impact of potential tax reform ($mm)
3rd Quarter 2017
0%
25%
50%
75%
100%
$20
$23
$26
$29
$32
$35
$38
8/16 9/16 10/16 11/16 12/16 1/17 2/17 3/17 4/17 5/17 6/17 7/17 8/17 9/17
Buy Hold Actual Price Target Price
Actual Price +26%
Target Price +22%
Price target has increased on improved prospects
29
Analyst rating history
FINANCIAL PERFORMANCE
Source: Analyst ratings and target price (consensus estimate) as reported by First Call.
3rd Quarter 2017
1
/3
1
/2
0
1
6
2
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9
/2
0
1
6
3
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1
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0
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4
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0
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0
1
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5
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1
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0
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6
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0
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7
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1
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1
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0
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0
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0
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1
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2
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1
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1
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2
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8
/2
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3
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1
/2
0
1
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4
/3
0
/2
0
1
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5
/3
1
/2
0
1
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6
/3
0
/2
0
1
7
7
/3
1
/2
0
1
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8
/3
1
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0
1
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9
/3
0
/2
0
1
7
1
/3
1
/2
0
1
6
2
/2
9
/2
0
1
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3
/3
1
/2
0
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6
4
/3
0
/2
0
1
6
5
/3
1
/2
0
1
6
6
/3
0
/2
0
1
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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
7
/3
1
/2
0
1
7
8
/3
1
/2
0
1
7
9
/3
0
/2
0
1
7
Valuation metrics
Observation: Flagstar continues to narrow its valuation discount to its banking peers.
FINANCIAL PERFORMANCE
30
77%
U
.S
.
p
re
s
iden
ti
a
l
e
le
c
ti
o
n
57%
Market value gap: ~$0.6B
Market / tangible book Price / LTM earnings
. FBC valuation vs. SNL U.S. Bank and Thrift Index
Market value gap: ~$0.2B
. FBC valuation vs. SNL U.S. Bank and Thrift Index
77%
93%
67%
85%
U
.S
.
p
re
s
iden
ti
a
l
e
le
c
ti
o
n
3rd Quarter 2017
% YoY
Overall MI-based Institution Branches Total Share Change
1 Chase 234 $43,668 21% 5%
2 Comerica 197 29,481 14% 14%
3 PNC 117 17,796 8% 11%
4 Bank of America 190 17,425 8% 5%
5 Fifth Third 211 16,954 8% 7%
6 Huntington 316 14,756 7% 8%
7 1 Chemical 206 11,565 6% 6%
8 2 Flagstar 99 9,024 4% 3%
9 Citizens 95 5,538 3% 9%
10 TCF 52 3,010 1% 13%
Top 10 1,717 $169,218 81% 8%
2017 Rank Deposits ($mm)
154 7 35
Strong market position as leading MI-based bank
COMMUNITY BANKING
31
Deposit Median Proj HHI Proj pop
Market $mm % of total mkt share HHI(2) growth(2)(3) growth(2)(3)
Oakland County(1) 3,497 46.4% 6.7% 76,705 11.7% 4.1%
Grand Rapids MSA 415 5.5% 2.0% 61,391 10.9% 3.3%
Ann Arbor MSA 351 4.7% 4.0% 69,221 8.9% 3.3%
Key Flagstar markets 4,262 56.6% 5.3% 74,599 11.4% 3.9%
National aggregate 61,045 8.9% 3.5%
Flagstar Deposits
Source: SNL Financial; Note: Deposit data as of June 30, 2017; MI-based banks highlighted.
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) 2018–2023 CAGR.
Flagstar’s branch network Market share
Attractive markets
Leading position among independent banks
3rd Quarter 2017
Deposits
Portfolio and strategy overview
COMMUNITY BANKING
32
6.2 6.3 6.4 6.5 6.5
2.9 2.9 2.4 2.2 2.5
$9.1 $9.2 $8.8 $8.7 $9.0
3Q16 4Q16 1Q17 2Q17 3Q17
Retail deposits Other deposits
Total average deposits ($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 0.58%(1)
DDA
14%
[CATEGORY
NAME]
43%
MMDA
3%
CD
13%
[CATEGORY
NAME]
16%
Government &
other
11%
73%
retail
Total : $9.0bn
0.58% cost of total deposits(1)
3Q17 total average deposits
1. Total deposits include noninterest bearing deposits.
3rd Quarter 2017 Deposit growth opportunities
• Average balance of $0.9bn during 3Q17
• Cost of total government deposits: 0.69%(2) during
3Q17
• Michigan deposits are not required to be collateralized
• Strong, long-term relationships across the state
• Average balance of $0.6bn during 3Q17
• Flagstar realized 16% quarter-over-quarter increase
in commercial deposits
- Increasing balances with growing lines of
business, including home builder finance
• Offer complete line of treasury management services
• Average balance of $1.5bn during 3Q17 on 415k
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 3Q17 of which 78%
are demand & savings accounts
• Cost of total core deposits(1): 0.70%(2) during 3Q17
• Average core deposits of $66mm 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.
33
3rd Quarter 2017
Lending
Portfolio and strategy overview
COMMUNITY BANKING
34
3.4 3.3 3.3
4.3 4.5
5.8 6.2 5.6
6.2
6.8
$9.7 $9.9
$9.2
$10.8
$11.6
3Q16 4Q16 1Q17 2Q17 3Q17
Loans HFS Loans HFI Loans with government guarantees
1st Mortgage
HFI
22%
2nds, HELOC
& other
4%
Warehouse
9%
CRE and C&I
24%
Loans with
government
guarantees
2%
1st Mortgage
HFS
39%
3Q17 average loans
Total average loans ($bn)
• Flagstar’s largest category of earning assets consists
of loans held-for-investment which averaged $6.8bn
during 3Q17
– 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 $4.5bn during 3Q17
– 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
3rd Quarter 2017
Flagstar has deep lending experience
COMMUNITY BANKING
35
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
Recent additions from
Comerica support
growth in line of
business
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 consumer
lending products,
including processing
and underwriting of
loan applications
received from the
Retail Branch, Direct
to Consumer lending
channels and Indirect
originations platform.
Supported by a
management team
with an average of
25+ years of
consumer lending
experience
3rd Quarter 2017 Community banking growth model
• Primary focus is to build relationships
- Recruit experienced bankers from larger regional
banks
- Retain seasoned bankers within our organization
• Leverage deep industry experience and client
relationships
- Focus on moving relationships and credit facilities
to Flagstar
• Low incremental efficiency ratio
- Marginal cost of 15-30% that varies with type of
loans underwritten
• Estimated pre-tax contribution of $5bn loan growth
could contribute ~$1.00 earnings per share
New banker additions (past 2 years)
36
Relationship based growth platform
(1) We focus on recruitment of bankers with larger, regional bank
lending experience.
# of Avg Years
Line of Service Additions Experience(1)
Business Banking 9 28
Commercial Lending 6 23
Consumer Finance 6 27
CRE Lending 2 32
Equip Financing 6 27
Home Builder Finance 13 21
Indirect Lending 1 35
Warehouse Lending 1 17
Grand Total 44 25
COMMUNITY BANKING
3rd Quarter 2017
Commercial lending
Diversified relationship-based commercial lending capabilities
COMMUNITY BANKING
Commercial Real Estate - $1.8bn (9/30/17)
Home builder
finance
29%
Multi-
family
18%
Retail
15%
Office
10% Industrial
11%
Hospitality
7%
Other
10%
Commercial & Industrial - $1.1bn (9/30/17)
Services
37%
Financial,
Insurance &
Real Estate
33%
Manufacturing
16%
Distribution
5%
Servicing
Advances
4%
Government &
Education
4%
Other
1%
Warehouse - $1.2bn (9/30/17) Overview
• Warehouse lines with approximately 270 active
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
~150
borrowers
sell >75%
~50
borrowers
sell 25% - 75%
~80
borrowers
sell <25%
Average 37% advances sold to Flagstar
Industry
% Advances sold to Flagstar
Property type
37
15% owner occupied 43% Michigan relationships; 19% national finance
3rd Quarter 2017
1.8
1.2 1.2 1.2 1.2
1.1
1.7
1.2 1.4
1.5
$2.9 $2.9
$2.4
$2.6
$2.7
9/30/16 12/31/16 3/31/17 6/30/17 9/30/17
Outstandings Unfunded Commitments
Warehouse lenders ranked by commitments ($mm)
Source: Inside Mortgage Finance as of September 8, 2017.
FBC warehouse loan commitments ($mm)
62%
Warehouse lending
● National relationship based lending platform
● Attractive asset class with good spreads and low credit risk
● Strong 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
38
YOY
Rank Institution Growth Total Share
1 JPMorgan Chase 36% $10,500 16%
2 Wells Fargo 16% 5,800 9%
3 Texas Capital -1% 5,183 8%
4 EverBank 3% 3,900 6%
5 BB&T 11% 3,770 6%
6 Comerica 3% 3,700 6%
7 Customers Bank 7% 3,500 5%
8 First Tennessee 24% 3,147 5%
9 U.S. Bancorp 5% 2,826 4%
10 Santander Bank 13% 2,700 4%
Top 10 13% $45,026 70%
11 Flagstar Bancorp 5% 2,555 4%
2Q17
3rd Quarter 2017 Home builder finance
COMMUNITY BANKING
39
Home builder loan commitments(2) ($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 have relationships with 6 of the top 10 and 37 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
$234 $264
$365
$494
$619 $229
$297
$403
$484
$559
$463
$561
$768
$978
$1,178
9/30/16 12/31/16 3/31/17 6/30/17 9/30/17
Unpaid principal balance Unused
Tightening housing supply(1)
0
2
4
6
8
10
12
0
1
2
3
4
5
6
7
8
2
0
0
0
2
0
0
1
2
0
0
2
2
0
0
3
2
0
0
4
2
0
0
5
2
0
0
6
2
0
0
7
2
0
0
8
2
0
0
9
2
0
1
0
2
0
1
1
2
0
1
2
2
0
1
3
2
0
1
4
2
0
1
5
2
0
1
6
2
0
1
7
Existing home sales Months supply of existing homes for sale
1) Source: Bloomberg (through 8/31/17)
2) Commitments are for loans classified as commercial real estate and commercial
& industrial.
3rd Quarter 2017
National distribution through multiple channels
MORTGAGE ORIGINATIONS
40
Residential mortgage originations by channel ($bn)
• 2.9% market share with #8 national ranking(1)
• More than 700 brokerage relationships in 50
states during 3Q17
• Targeted gain on sale margin of ~90bps
• Top 10 relationships account for 18% of overall
brokerage volume
1) Data source: As reported by Inside Mortgage Finance published August 25, 2017.
• 4.7% market share with #6 national ranking(1)
• More than 1,000 correspondent partners in 50
states during 3Q17
• Targeted gain on sale margin of ~60bps
• Top 10 relationships account for 12% of overall
correspondent volume
• Warehouse lines with more than 240
correspondent relationships
• Opes acquisition and organic growth has
expanded our retail footprint to 95 locations in
27 states
• Targeted gain on sale margin of ~300bps
• Direct-to-consumer is 13% of retail volume
Broker Correspondent Retail
$7.0
$6.5
$4.5
$7.0 $7.0
3Q16 4Q16 1Q17 2Q17 3Q17
$1.6 $1.4
$1.0
$1.4 $1.3
3Q16 4Q16 1Q17 2Q17 3Q17
$0.6 $0.6 $0.4
$0.8
$1.3
3Q16 4Q16 1Q17 2Q17 3Q17
3rd Quarter 2017 Mortgage origination channel mix with acquisitions
41
MORTGAGE ORIGINATIONS
Channel Sub-channel
FBC,
pre-acquisitions Acquisitions Pricing
Credit
Underwriting Funding GOS Margin
Distributed
retail
N/A ~5%
Opes
(~100%)
N/A FBC FBC Highest
Consumer
direct
N/A ~2% N/A FBC FBC
Broker N/A ~20% Best efforts FBC FBC
Non-delegated ~50% Best efforts FBC Warehouse
Delegated
best efforts
~15%
Stearns
(~20%)
Best efforts 3rd Party Warehouse
Delegated
mandatory
~3% Mandatory 3rd Party Warehouse
Bulk mandatory ~5%
Stearns
(~80%)
Mandatory 3rd Party Warehouse Lowest
Correspondent
Mortgage origination channel attributes
3rd Quarter 2017
Flagstar has restructured its operations to be profitable
even at historical lows for the mortgage origination market
42
MORTGAGE ORIGINATIONS
Source: Inside Mortgage Finance for actual periods and a blended average of forecast by Fannie Mae, Freddie Mac and Mortgage Bankers Association.
1. Adjusted for historical inflation as reported by Bloomberg (2015 = 100).
2. Adjusted for population growth as reported by the US Census Bureau (2015 = 100).
Nominal ($) 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
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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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2
1
9
9
3
1
9
9
4
1
9
9
5
1
9
9
6
1
9
9
7
1
9
9
8
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
2
0
1
7
F
2
0
1
8
F
$
in
t
rill
io
n
s
U.S. residential mortgage origination market (historical and projected volumes)
3rd Quarter 2017
Fannie
33%
Freddie
47%
GNMA
17%
Private
3%
by Investor
154 7 35
MSR portfolio
as of 9/30/17
MSR portfolio characteristics (% UPB) MSR portfolio statistics
Measure ($mm) 6/30/2017 9/30/2017 Difference
Unpaid principal balance $16,144 $21,342 $5,198
Fair value of MSR $184 $246 $62
Capitalized rate (% of UPB) 1.14% 1.15% 0.01%
Multiple 4.112 4.092 (0.020)
N te rate 4.032% 4.026% -0.006%
Service fee 0.277% 28.100% 27.823%
Average Measure ($000)
UPB per loan $244 $245 $1
FICO 733 728 (5)
Loan to value 76.06% 74.09% -1.97%
Net (loss) return on mortgage servicing rights ($mm)
$ Return 3Q16 4Q16 1Q17 2Q17 3Q17
Net hedged profit (loss) $4 ($5) $2 $0 $0
Carry on asset 13 17 14 9 9
Run-off (19) (17) (6) (4) (4)
Gr ss r turn on the
mortgage servicing rights
($2) ($5) $10 $5 $5
Sale transaction & P/L (9) 1 (1) 1 1
Model Changes - (1) 5 0 0
Net return on the
mortgage servicing rights
($11) ($5) $14 $6 $6
Average mortgage
servicing rights
$316 $327 $344 $205 $212
2016 &
later; 79%
2015;
12%
2014; 4%
2013 &
prior; 5%
by Vintage
MORTGAGE SERVICING
43
2016 &
later
85%
2015
9%
2014
3%
2013 &
prior
3%
By intage
3rd Quarter 2017
154 7 35
Balance sheet composition
CAPITAL AND LIQUIDITY
44
2%
Other
liabilitie
s
3%
Other
long-
term
debt
Liabilities & Equity
3Q17 average balance sheet (%)
Assets
Attractive relationship
lending with no loans >30
days delinquent and still
accruing
Primarily low risk, stable
assets (FHLB stock, BOLI,
premises & equipment,
deferred tax asset, etc.)
~73% 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
6% Warehouse loans
20%
Loans held-for-sale
27%
Mortgage loans
held-for-investment
19%
Agency MBS
1% Cash
17%
Commercial loans
Efficiently funds loans
held-for-sale and
warehouse loans
46%
Deposits excluding
company-
controlled deposits
(“CCD”)
31%
FHLB borrowings
9% Common equity
9%
Company-controlled
deposits (“CCD”)
3rd Quarter 2017 Liquidity and funding
154 7 35
CAPITAL AND LIQUIDITY
45
59%
63%
66%
73%
78%
3Q16 4Q16 1Q17 2Q17 3Q17
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)
3rd Quarter 2017 Low interest rate risk
CAPITAL AND LIQUIDITY
46
-1.4%
-0.6%
-7.5%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
6/30/2016 9/30/2016 12/31/2016 3/31/2017 6/30/2017 9/30/2017
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 9/30/2017
Net interest margin – 12 month horizon instantaneous shocks ($mm)
Economic value of equity, trend (6/30/16 - 3/31/17)
($ in mm) +100bps Bear Flattener
Net interest income $13 ($39)
Noninterest Income ($13) to $0 $0 to $39
Scenario
3rd Quarter 2017
761
503
135
104
FY14 FY15 FY16 LTM 9/17
Repurchase demands
Representation & Warranty reserve details
(in millions) 9/30/16 12/31/16 3/31/17 6/30/17 9/30/17
Beginning balance $36) $32 $27 $23 $20
Additions (release) (5) (6) (4) (2) (3)
Net (charge-offs) /
recoveries 1) 1) 0) (1) (1)
Ending Balance $32) $27 $23 $20 $16
Repurchase pipeline ($mm) Repurchase reserve ($mm)
ASSET QUALITY
$11
$6
$6
$4
$5
9/30/16 12/31/16 3/31/2017 6/30/2017 9/30/2017
47
LTM 1Q17 Repurchase rate(1)(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
3rd Quarter 2017 Non-GAAP reconciliation
NON-GAAP RECONCILIATION
48
$mm
1) Reflects the exclusion of the 3Q16 Department of Justice (“DOJ”) benefit.
3 Months Ended
Adjusted Efficiency Ratio 9/30/2016
Net interest income (a) 80$
Noninterest income (b) 156
Adjustment to remove DOJ benefit(1) (24)
Adjusted noninterest income (c) 132$
Noninterest expense (d) 142$
Efficiency ratio (d/(a+b)) 60%
Adjustment to remove DOJ benefit(1) 7%
Adjusted efficiency ratio (d/(a+c)) 67%
Tangible book value per share as of 9/30/2017
Total stockholders' equity 1,451$
Preferred Stock -
Goodwill and intangibles 21
Tangible book value 1,430$
Number of common shares outstanding 57,181,536
Tangible book value per share 25.01$