DEFA14A 1 d175334ddefa14a.htm DEFA14A DEFA14A

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): April 26, 2021

 

 

 

Flagstar Bancorp, Inc.

(Exact Name of Registrant as Specified in Charter)

 

 

 

Michigan   1-16577   38-3150651

(State or Other Jurisdiction

of Incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

 

5151 Corporate Drive, Troy, Michigan   48098
(Address of principal executive offices)   (Zip code)

(248) 312-2000

(Registrant’s telephone number, including area code)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

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Securities registered pursuant to Section 12(b) of the Exchange Act:

 

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Trading

symbol

 

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on which registered

Common stock   FBC   New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act (17 CFR 230.405) or Rule 12b-2 of the Exchange Act (17 CFR 240.12b-2).

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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

 

 


Item 2.02

Results of Operations and Financial Condition

On April 26, 2021, Flagstar Bancorp, Inc. (the “Company”) issued a press release regarding its preliminary results of operations and financial condition for the three months ended March 31, 2021. The text of the press release is furnished as Exhibit 99.1 to this report. The Company will include final financial statements and additional analyses for the three months ended March 31, 2021 as part of its Quarterly Report on Form 10-Q.

On April 26, 2021, the Company will hold a conference call to review first quarter 2021 earnings. A copy of the slide presentation to be used by the Company on the conference call is furnished as Exhibit 99.2 to this Current Report on Form 8-K.

 

Item 9.01

Financial Statements and Exhibits

 

Exhibits

99.1    Press release of Flagstar Bancorp, Inc. dated April 26, 2021
99.2    Flagstar Bancorp, Inc. Conference Call Presentation Slides - Earnings Presentation First Quarter
104    Cover Page Interactive Data File (embedded within the Inline XBRL document).


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

 

  FLAGSTAR BANCORP, INC.
Dated: April 26, 2021     By:  

/s/ James K. Ciroli

      James K. Ciroli
     

Executive Vice President and Chief Financial

Officer


EXHIBIT 99.1

 

 
 

NEWS RELEASE

For more information, contact:

Kenneth Schellenberg

FBCInvestorRelations@flagstar.com

(248) 312-5741

Flagstar Bancorp Reports First Quarter 2021 Net Income of $149 million, or $2.80 Per Diluted Share

Key Highlights - First Quarter 2021

 

 

Posted adjusted net income of $176 million, or $3.31 per diluted share, excluding the $35 million expense for the final settlement of Department of Justice legacy liability.

 

 

Generated net interest income of $189 million, with net interest margin up 4 basis points.

 

 

Produced mortgage revenue of $227 million as fallout adjusted locks stayed strong.

 

 

Maintained solid asset quality with low levels of nonperforming loans and net charge-offs coupled with a $16 million recovery of a previously charged-off loan.

 

 

Achieved $41.77 in tangible book value per share – an 8 percent increase from prior quarter.

TROY, Mich., April 26, 2021 - Flagstar Bancorp, Inc. (NYSE: FBC), the holding company for Flagstar Bank, today reported first quarter 2021 net income of $149 million, or $2.80 per diluted share, compared to fourth quarter 2020 net income of $154 million, or $2.83 per diluted share and first quarter 2020 net income of $46 million, or $0.80 per diluted share. On an adjusted basis, Flagstar reported net income of $176 million, or $3.31 per diluted share, for the first quarter 2021.

“Today, I am pleased to announce that we have entered into an agreement for a strategic partnership with New York Community Bank,” said Alessandro DiNello, president and chief executive officer of Flagstar Bancorp. “This is a unique opportunity, and the partnership positions us well for continued expansion and accelerated growth as we leverage complementary business models to achieve the scale necessary to aggressively invest in our key businesses. The combination allows us to build from a safe and profitable base, by tapping into the deep industry knowledge and diverse skillsets of each organization to deliver even stronger financial results and drive increased long-term shareholder value.”

“As for our financial performance for the quarter, we posted impressive results, continuing our string of strong quarterly performances from last year. All our business segments combined to produce robust growth in tangible book value, resulting in a bank that is stronger and well positioned to continue generating shareholder value.”

“Banking delivered solid numbers for the quarter as net interest margin improved 4 basis points to 2.82 percent, with net interest income totaling $189 million and adjusted net interest margin at 3.02 percent, up slightly from the prior quarter. We continue to focus on lending into lower-risk asset classes while maintaining balance sheet flexibility. This strategy has produced consistent results from our banking business while protecting our exposure to credit risk.”

“Credit remained strong with low levels of nonperforming loans and net charge-offs, even after excluding the large recovery. Given our strong asset quality and an improved forecast for our macroeconomic environment, we were able to release $15 million of our allowance for credit losses while maintaining a strong coverage ratio of 3.1 percent, similar to the fourth quarter 2020.”

“We closed the quarter servicing and subservicing over 1.1 million loans, up 6 percent from the prior quarter as we boarded over 100,000 non-Flagstar originated loans to the portfolio in the quarter. This is a testament to our business model, the quality of the service delivered, and the strength of the relationships we have developed with our subservicing partners.”

“Our mortgage team delivered another strong quarter, posting mortgage revenues of $227 million. The team leveraged our multi-channel mortgage platform to grow fallout adjusted locks by 3 percent. We were pleased with how well our margins held up, averaging 1.84 percent for the quarter. Our results demonstrate the team’s ability to remain opportunistic and execute skillfully in an operating environment that is ever changing.”

 

1


“It was a strong start to the year as we continued to generate value for our shareholders, despite the uncertainties we face in everything from regulation to the interest rate environment. With our ability to originate mortgages in multiple channels, our asset-sensitive balance sheet, our strong ACL coverage, and our demonstrated power to generate capital, we are well positioned to flex our business to take advantage of whatever may come our way… and to find success whatever the environment may be.”

 

Income Statement Highlights

 

     Three Months Ended  
  

 

 

 
    

March 31,

2021

 

 

   

December 31,

2020

 

 

    

September 30,

2020

 

 

    

June 30,

2020

 

 

    

March 31,

2020

 

 

  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 
     (Dollars in millions, except per share data)  

Net interest income

   $ 189   $ 189    $ 180    $ 168    $ 148

(Benefit) provision for credit losses

     (28     2      32      102      14

Noninterest income

     324     332      448      375      154

Noninterest expense

     347     314      301      293      232
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Income before income taxes

     194     205      295      148      56

Provision for income taxes

     45     51      73      32      10
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Net income

   $ 149   $ 154    $ 222    $ 116    $ 46
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Income per share:

             

Basic

   $ 2.83   $ 2.86    $ 3.90    $ 2.04    $ 0.80

Diluted

   $ 2.80   $ 2.83    $ 3.88    $ 2.03    $ 0.80

 

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

 

     Three Months Ended  
  

 

 

 
    

March 31,

2021

 

 

   

December 31,

2020

 

 

    

September 30,

2020

 

 

    

June 30,

2020

 

 

    

March 31,

2020

 

 

  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 
     (Dollars in millions, except per share data)  

Net interest income

   $ 189   $ 189    $ 180    $ 168    $ 148

(Benefit) provision for credit losses

     (28     2      32      102      14

Noninterest income

     324     332      448      375      154

Noninterest expense

     312     314      301      293      232
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Income before income taxes

     229     205      295      148      56

Provision for income taxes

     53     51      73      32      10
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Net income

   $ 176   $ 154    $ 222    $ 116    $ 46
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Income per share:

             

Basic

   $ 3.34   $ 2.86    $ 3.90    $ 2.04    $ 0.80

Diluted

   $ 3.31   $ 2.83    $ 3.88    $ 2.03    $ 0.80

 

(1)

See Non-GAAP Reconciliation for further information.

 

Key Ratios

 

       
     Three Months Ended  
  

 

 

 
    

March 31,

2021

   

December 31,

2020

   

September 30,

2020

   

June 30,

2020

   

March 31,

2020

 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest margin

     2.82     2.78     2.78     2.86     2.81

Adjusted net interest margin (1)

     3.02     2.98     2.94     2.88     2.81

Return on average assets

     2.0     2.1     3.1     1.8     0.8

Return on average common equity

     25.7     27.6     41.5     23.5     9.8

Efficiency ratio

     67.7     60.4     47.9     54.1     76.9

HFI loan-to-deposit ratio

     74.4     74.5     75.9     76.7     74.9

Adjusted HFI loan-to-deposit ratio (2)

     66.3     69.8     74.8     85.4     86.3

 

(1)

Excludes loans with government guarantees available for repurchase. See Non-GAAP Reconciliation for further information.

(2)

Excludes warehouse loans and custodial deposits. See Non-GAAP Reconciliation for further information.

 

2


Average Balance Sheet Highlights

 

    
     Three Months Ended        % Change  
  

 

 

    

 

 

 
    

March 31,

2021

 

 

    

December 31,

2020

 

 

    

September 30,

2020

 

 

    

June 30,

2020

 

 

    

March 31,

2020

 

 

     Seq       Yr/Yr  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
     (Dollars in millions)       

Average interest-earning assets

   $ 27,178    $ 27,100    $ 25,738    $ 23,692    $ 21,150          29

Average loans held-for-sale (LHFS)

     7,464      5,672      5,602      5,645      5,248      32     42

Average loans held-for-investment (LHFI)

     14,915      15,703      14,839      13,596      11,823      (5 )%      26

Average total deposits

     20,043      21,068      19,561      17,715      15,795      (5 )%      27

Net Interest Income

Net interest income in the first quarter was $189 million, flat as compared to the fourth quarter 2020. The results primarily reflect higher loans held-for-sale average balances, full quarter of impact from extinguishment of senior notes and the impact of lower rates on deposits, offsetting the impact of lower average balances and yields on loans-held-for-investment.

The net interest margin in the first quarter was 2.82 percent, a 4 basis point increase from the prior quarter. Excluding the impact from the loans with government guarantees that have not been repurchased and do not accrue interest, adjusted net interest margin expanded 4 basis points to 3.02 percent in the first quarter, compared to adjusted net interest margin of 2.98 percent in the prior quarter. The increase in the net interest margin was primarily driven by lower rates on deposits and impact from the early redemption of the senior notes due July 15, 2021. Retail banking deposit rates decreased 5 basis points driven by the expiration of promotional rates on some of our savings deposits and the maturity of higher cost time deposits.

Loans held-for-investment averaged $14.9 billion for the first quarter, decreasing $0.8 billion (5 percent) from the prior quarter. The decrease was primarily driven by $0.6 billion (8 percent) lower average warehouse loan balances consistent with the volume decrease in the overall mortgage market and $0.3 billion (6 percent) lower average consumer loans, primarily attributable to a decrease in our residential first mortgage portfolio as loans pay off.

Average total deposits were $20.0 billion in the first quarter, decreasing $1.0 billion (5 percent) from the fourth quarter 2020. Average custodial deposits decreased $1.3 billion (16 percent) primarily driven by a decrease in refinance activity, more than offsetting $0.3 billion higher average retail banking and government deposits.

Provision for Credit Losses

The benefit for credit losses was $28 million for the first quarter, as compared to a $2 million provision for the fourth quarter 2020, reflecting the impact from improved economic forecasts and $13 million of net recoveries during the quarter. The net recoveries for the quarter were driven by a $16 million recovery on a previously charged-off commercial loan. Excluding the $16 million recovery, the net charge-off ratio remained low for the quarter at only 8 basis points of LHFI. Despite the reserve release, our coverage ratio remained relatively flat as compared to the prior quarter. Although our economic forecasts are improved, we continue to believe that uncertainty persists regarding the economic recovery, especially as it affects consumer loan forbearance and the commercial real estate sector.

Noninterest Income

Noninterest income decreased $8 million to $324 million in the first quarter, as compared to $332 million for the fourth quarter 2020, primarily due to lower mortgage revenues and loan fees and charges.

First quarter net gain on loan sales decreased $5 million, to $227 million, as compared to $232 million in the fourth quarter 2020. Fallout-adjusted locks increased $0.3 billion, or 3 percent, to $12.3 billion and we maintained strong gain on sale margins that decreased only 9 basis points, to 1.84 percent for the first quarter 2021, as compared to 1.93 percent for the fourth quarter 2020.

Net return on mortgage servicing rights was $0.4 million in the first quarter 2021, consistent with the net return for the fourth quarter 2020. Refinance activity remained elevated compared to historical norms as favorable mortgage rates persisted during the quarter impacting prepayment speeds and overall net return on mortgage servicing rights.

Loan fees and charges decreased $6 million, to $42 million for the first quarter, compared to $48 million for the fourth quarter 2020, primarily due to a decrease in the number of loans being boarded in the first quarter and lower revenue associated with loans in forbearance.

 

3


Mortgage Metrics

 

   
     As of/Three Months Ended     Change (% / bps)  
     March 31,
2021
    December 31,
2020
    September 30,
2020
    June 30,
2020
    March 31,
2020
    Seq     Yr/Yr  
     (Dollars in millions)      

Mortgage rate lock commitments (fallout-adjusted) (1) (2)

   $ 12,300   $ 12,000   $ 15,000   $ 13,800   $ 11,200     3     11

Mortgage loans closed (1)

   $ 13,800   $ 13,100   $ 14,400   $ 12,200   $ 8,600     5     61

Net margin on mortgage rate lock commitments (fallout-adjusted) (2)

     1.84     1.93     2.31     2.19     0.80     (9     104  

Net gain on loan sales

   $ 227   $ 232   $ 346   $ 303   $ 90     (2 )%      N/M  

Net return (loss) on mortgage servicing rights (MSR)

   $ —     $ —     $ 12   $ (8   $ 6     N/M       N/M  

Gain on loan sales + net return on the MSR

   $ 227   $ 232   $ 358   $ 295   $ 96     (2 )%      N/M  

Loans serviced (number of accounts - 000’s) (3)

     1,148     1,085     1,105     1,042     1,082     6     6

Capitalized value of MSRs

     1.06     0.86     0.85     0.87     0.95     20       11  

N/M - Not meaningful

              

(1)   Rounded to the nearest hundred million

    

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

    

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

    

Noninterest Expense

Noninterest expense increased to $347 million for the first quarter, compared to $314 million for the fourth quarter 2020.

Excluding the $35 million expense related to the DOJ settlement liability, noninterest expenses were $312 million for the first quarter, or a $2 million decrease compared to the fourth quarter 2020. The decrease in noninterest expense primarily reflects lower commissions, primarily in the third party originations (TPO) channel, and expenses in the prior quarter associated with the early redemption of the senior notes and a secondary offering which did not reoccur in the first quarter. This more than offset the impact from an increase in performance driven incentives.

Mortgage expenses were $148 million for the first quarter, a decrease of $1 million compared to the prior quarter. The ratio of mortgage noninterest expense to closings – our mortgage expense ratio – was 1.07 percent, a decrease of 7 basis points quarter over quarter, primarily driven by lower revenue-based TPO-related commissions that were impacted by a decrease in TPO channel revenue and the fact that the prior quarter included higher annual payout factor which did not reoccur.

The efficiency ratio was 68 percent for the first quarter, as compared to 60 percent for the fourth quarter 2020. Excluding the $35 million expense related to the DOJ settlement liability, the adjusted efficiency ratio was 61 percent for the first quarter.

Income Taxes

The first quarter provision for income taxes totaled $45 million, with an effective tax rate of 23.0 percent, compared to $51 million and an effective tax rate of 24.8 percent for the fourth quarter 2020. Our effective tax rate decreased slightly primarily due to the prior quarter including a non-recurring tax impact of $2 million from the sale of stock by a shareholder that formerly held more than 50 percent of our outstanding shares.

 

4


Asset Quality

 

Credit Quality Ratios

 

   
     As of/Three Months Ended     Change (% / bps)  
     March 31,
2021
    December 31,
2020
    September 30,
2020
    June 30,
2020
    March 31,
2020
    Seq     Yr/Yr  
     (Dollars in millions)      

Allowance for credit losses (1)

   $ 265     $ 280   $ 280     $ 250   $ 152       (5 )%      74

Credit reserves to LHFI

     1.78     1.73     1.70     1.69     1.10     5       68  

Credit reserves to LHFI excluding warehouse

     3.11     3.20     3.07     2.60     1.54     (9     157  

Net (recoveries) charge-offs

   $ (13   $ 2   $ 2     $ 3   $ 2       N/M       N/M  

Total nonperforming LHFI and TDRs

   $ 60     $ 56   $ 45     $ 33   $ 29       7     N/M  

Net (recoveries) charge-offs to LHFI ratio (annualized)

     (0.35 )%      0.04     0.05     0.11     0.08     (39     (43

Ratio of nonperforming LHFI and TDRs to LHFI

     0.40     0.34     0.28     0.22     0.21     6       19  

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

 

   

Residential first mortgage

     0.31     0.11     0.07     0.26     0.08     20       23  

Home equity and other consumer

     0.16     0.06     0.23     0.28     0.28     10       (12

Commercial real estate

     (0.01 )%          (0.01 )%      0.01     (0.01 )%      (1     —    

Commercial and industrial

     (4.12 )%      0.21     0.06     0.08     0.09     (433     (421

N/M - Not meaningful

              

 

(1)

Includes the allowance for loan losses and the reserve on unfunded commitments.

(2)

Excludes loans carried under the fair value option.

The allowance for credit losses was $265 million and covered 1.78 percent of loans held-for-investment at March 31, 2021, a 5 basis point increase from December 31, 2020. Excluding warehouse loans, the allowance coverage ratio was 3.11 percent, a 9 basis point decrease from December 31, 2020.

Net recoveries in the first quarter 2021 were $13 million, compared to $2 million of net charge-offs in the prior quarter. Excluding the $16 million commercial loan recovery, net charge-offs for the first quarter were a nominal 8 basis points of LHFI, compared to 4 basis points in the prior quarter.

Nonperforming loans and troubled debt restructurings (TDRs) were $60 million and our ratio of nonperforming loans and TDRs to loans held-for-investment was 40 basis points at March 31, 2021, a 6 basis point increase compared to December 31, 2020 with 3 basis points of that increase due to a $1.3 billion decrease in LHFI balances. At March 31, 2021, early stage loan delinquencies totaled $15 million, or 10 basis points, of total loans, compared to $36 million, or 22 basis points, at December 31, 2020.

Capital

Capital Ratios (Bancorp)

 

    

 

    Change (% / bps)  
     March 31,
2021
    December 31,
2020
    September 30,
2020
    June 30,
2020
    March 31,
2020
    Seq     Yr/Yr  

Tier 1 leverage (to adj. avg. total assets)

     8.11     7.71     8.04     7.76     8.09     40       2  

Tier 1 common equity (to RWA)

     10.31     9.15     9.21     9.11     9.17     116       114  

Tier 1 capital (to RWA)

     11.45     10.23     10.31     10.33     10.52     122       93  

Total capital (to RWA)

     13.18     11.89     11.29     11.32     11.18     129       200  

Tangible common equity to asset ratio (1)

     7.48     6.58     6.90     6.58     6.25     90       123  

Tangible book value per share (1)

   $ 41.77   $ 38.80   $ 35.60   $ 31.74   $ 29.52     8     41

 

(1)

See Non-GAAP Reconciliation for further information.

The Company maintained a solid capital position with regulatory ratios above current regulatory quantitative guidelines for “well capitalized” institutions. The capital ratios are impacted by a 100 percent risk-weighting of the warehouse loan portfolio – the largest component of the Company’s held-for-investment portfolio. Adjusting the risk-weighting of warehouse loans to 50 percent, because of the historically low level of losses from this loan portfolio and the fact that the portfolio is fully collateralized with assets that would receive a 50 percent risk weighting, the Company would have had a Tier 1 common equity ratio of 11.89 percent and a total risk-based capital ratio of 15.20 percent at March 31, 2021.

Importantly, tangible book value per share grew to $41.77, up $2.97, or 8 percent from last quarter.

 

5


Earnings Conference Call

As a result of the entry into a merger agreement with New York Community Bank, there will be a joint investor conference call to discuss the transaction and first quarter earnings at 8:30 A.M. Eastern Time today. To listen to the call live, please dial (877) 407-8293 (for domestic calls) or (201) 689-8349 (for international calls). A replay will be available through 11:59 p.m. on April 30, 2021 and may be accessed by calling (877) 660-6853 (domestic) or (201) 612-7415 (international) and providing the following conference ID: 13719339. The live call will be simultaneously webcast at ir.mynycb.com and flagstar.com. The Company has cancelled its originally scheduled earnings conference call on Thursday, April 29, 2021.

About Flagstar

Flagstar Bancorp, Inc. (NYSE: FBC) is a $29.4 billion savings and loan holding company headquartered in Troy, Mich. Flagstar Bank, FSB, provides commercial, small business, and consumer banking services through 158 branches in Michigan, Indiana, California, Wisconsin and Ohio. It also provides home loans through a wholesale network of brokers and correspondents in all 50 states, as well as 87 retail locations in 27 states. Flagstar is a leading national originator and servicer of mortgage and other consumer loans, handling payments and record keeping for $247.4 billion of loans representing over 1.1 million borrowers. For more information, please visit flagstar.com.

Use of Non-GAAP Financial Measures

In addition to results presented in accordance with GAAP, this news release includes certain non-GAAP financial measures. The Company believes these non-GAAP financial measures provide additional information that is useful to investors in helping to understand the capital requirements Flagstar will face in the future and underlying performance and trends of Flagstar.

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

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

Cautionary Statements Regarding Forward-Looking Information

Certain statements in this press release may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, with respect to NYCB’s and Flagstar’s beliefs, goals, intentions, and expectations regarding revenues, earnings, loan production, asset quality, capital levels, and acquisitions, among other matters; NYCB’s and Flagstar’s estimates of future costs and benefits of the actions each company may take; NYCB’s and Flagstar’s assessments of probable losses on loans; NYCB’s and Flagstar’s assessments of interest rate and other market risks; and NYCB’s and Flagstar’s ability to achieve their respective financial and other strategic goals.

Forward-looking statements are typically identified by such words as “believe,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,” “forecast,” “project,” “should,” and other similar words and expressions, and are subject to numerous assumptions, risks, and uncertainties, which change over time. These forward-looking statements include, without limitation, those relating to the terms, timing and closing of the proposed transaction.

 

6


Additionally, forward-looking statements speak only as of the date they are made; NYCB and Flagstar do not assume any duty, and do not undertake, to update such forward-looking statements. Furthermore, because forward-looking statements are subject to assumptions and uncertainties, actual results or future events could differ, possibly materially, from those indicated in such forward-looking statements as a result of a variety of factors, many of which are beyond the control of NYCB and Flagstar. The factors that could cause actual results to differ materially include the following: the occurrence of any event, change or other circumstances that could give rise to the right of one or both of the parties to terminate the definitive merger agreement among NYCB, 615 Corp. and Flagstar; the outcome of any legal proceedings that may be instituted against NYCB or Flagstar; the possibility that the proposed transaction will not close when expected or at all because required regulatory, shareholder or other approvals are not received or other conditions to the closing are not satisfied on a timely basis or at all, or are obtained subject to conditions that are not anticipated; the ability of NYCB and Flagstar to meet expectations regarding the timing, completion and accounting and tax treatments of the proposed transaction; the risk that any announcements relating to the proposed transaction could have adverse effects on the market price of the common stock of NYCB or Flagstar; the possibility that the anticipated benefits of the proposed transaction will not be realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of the two companies or as a result of the strength of the economy and competitive factors in the areas where NYCB and Flagstar do business; certain restrictions during the pendency of the proposed transaction that may impact the parties’ ability to pursue certain business opportunities or strategic transactions; the possibility that the proposed transaction may be more expensive to complete than anticipated, including as a result of unexpected factors or events; diversion of management’s attention from ongoing business operations and opportunities; the possibility that the parties may be unable to achieve expected synergies and operating efficiencies in the proposed transaction within the expected timeframes or at all and to successfully integrate Flagstar’s operations and those of NYCB; such integration may be more difficult, time consuming or costly than expected; revenues following the proposed transaction may be lower than expected; potential adverse reactions or changes to business or employee relationships, including those resulting from the announcement or completion of the proposed transaction; NYCB’s and Flagstar’s success in executing their respective business plans and strategies and managing the risks involved in the foregoing; the dilution caused by NYCB’s issuance of additional shares of its capital stock in connection with the proposed transaction; and other factors that may affect future results of NYCB and Flagstar; and the other factors discussed in the “Risk Factors” section NYCB’s Annual Report on Form 10-K for the year ended December 31, 2020 and in other reports NYCB files with the U.S. Securities and Exchange Commission (the “SEC”), which are available at http://www.sec.gov and in the “SEC Filings” section of NYCB’s website, https://ir.mynycb.com, under the heading “Financial Information,” and in Flagstar’s Annual Report on Form 10-K for the year ended December 31, 2020 and in Flagstar’s other filings with SEC, which are available at http://www.sec.gov and in the “Documents” section of Flagstar’s website, https://investors.flagstar.com.

Important Information and Where You Can Find It

This press release may be deemed to be solicitation material in respect of the proposed transaction by NYCB and Flagstar. In connection with the proposed transaction, NYCB will file with the SEC a registration statement on Form S-4 to register the shares of NYCB’s capital stock to be issued in connection with the proposed transaction. The registration statement will include a prospectus of NYCB and a joint proxy statement of NYCB and Flagstar, which will be sent to the stockholders of NYCB and shareholders of Flagstar seeking certain approvals related to the proposed transaction. INVESTORS AND SECURITY HOLDERS OF NYCB AND FLAGSTAR AND THEIR RESPECTIVE AFFILIATES ARE URGED TO READ, WHEN AVAILABLE, THE REGISTRATION STATEMENT ON FORM S-4, THE JOINT PROXY STATEMENT/PROSPECTUS TO BE INCLUDED WITHIN THE REGISTRATION STATEMENT ON FORM S-4 AND ANY OTHER RELEVANT DOCUMENTS FILED OR TO BE FILED WITH THE SEC IN CONNECTION WITH THE PROPOSED TRANSACTION, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT NYCB, FLAGSTAR AND THE PROPOSED TRANSACTION. Investors and security holders will be able to obtain a free copy of the registration statement, including the joint proxy statement/prospectus, as well as other relevant documents filed with the SEC containing information about NYCB and Flagstar, without charge, at the SEC’s website (http://www.sec.gov). Copies of documents filed with the SEC by NYCB can also be obtained, without charge, by directing a request to Investor Relations, New York Community Bancorp, Inc., 615 Merrick Avenue, Westbury, New York 11590 or by telephone (516-683-4420). Copies of documents filed with the SEC by Flagstar can also be obtained, without charge, by directing requests to Investor Relations, Flagstar Bancorp, Inc., 5151 Corporate Drive, Troy, Michigan 48098 or by telephone (248-312-5741).

Participants in the Solicitation of Proxies in Connection with Proposed Transaction

NYCB, Flagstar, and certain of their respective directors, executive officers and employees may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction under the rules of the SEC. Information regarding NYCB’s directors and executive officers is available in its definitive proxy statement for its 2021 annual stockholders meeting, which was filed with the SEC on April 16, 2021, and certain of its Current Reports on Form 8-K. Information regarding Flagstar’s directors and executive officers is available in its definitive proxy statement for its 2021 annual shareholders meeting, which was filed with the SEC on April 15, 2021, and certain of its Current Reports on Form 8-K. Other information regarding the participants in the solicitation of proxies in respect of the proposed transaction and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the joint proxy statement/prospectus and other relevant materials to be filed with the SEC. Free copies of these documents, when available, may be obtained as described in the preceding paragraph.

 

7


Flagstar Bancorp, Inc.

Consolidated Statements of Financial Condition

(Dollars in millions)

(Unaudited)

 

     March 31,
2021
    December 31,
2020
    March 31,
2020
 

Assets

      

Cash

   $ 106   $ 251   $ 216

Interest-earning deposits

     343     372     126
  

 

 

   

 

 

   

 

 

 

Total cash and cash equivalents

     449     623     342

Securitized HFS loans not sold

                 2,058

Investment securities available-for-sale

     1,764     1,944     2,446

Investment securities held-to-maturity

     319     377     554

Loans held-for-sale

     7,087     7,098     4,389

Loans held-for-investment

     14,887     16,227     13,795

Loans with government guarantees

     2,457     2,516     814

Less: allowance for loan losses

     (241     (252     (132
  

 

 

   

 

 

   

 

 

 

Total loans held-for-investment and loans with government guarantees, net

     17,103     18,491     14,477

Mortgage servicing rights

     428     329     223

Federal Home Loan Bank stock

     377     377     306

Premises and equipment, net

     393     392     413

Goodwill and intangible assets

     155     157     167

Other assets

     1,374     1,250     1,430
  

 

 

   

 

 

   

 

 

 

Total assets

   $ 29,449   $ 31,038   $ 26,805
  

 

 

   

 

 

   

 

 

 

Liabilities and Stockholders’ Equity

      

Noninterest-bearing deposits

   $ 10,798   $ 9,458   $ 6,551

Interest-bearing deposits

     8,622     10,515     9,501
  

 

 

   

 

 

   

 

 

 

Total deposits

     19,420     19,973     16,052

Short-term Federal Home Loan Bank advances and other

     2,745     3,900     5,841

Long-term Federal Home Loan Bank advances

     1,200     1,200     1,000

Other long-term debt

     396     641     493

Loans with government guarantee repurchase options

     1,780     1,851     52

Other liabilities

     1,550     1,272     1,525
  

 

 

   

 

 

   

 

 

 

Total liabilities

     27,091     28,837     24,963

Stockholders’ Equity

      

Common stock

     1     1     1

Additional paid in capital

     1,350     1,346     1,487

Accumulated other comprehensive income

     54     47     31

Retained earnings

     953     807     323
  

 

 

   

 

 

   

 

 

 

Total stockholders’ equity

     2,358     2,201     1,842
  

 

 

   

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 29,449   $ 31,038   $ 26,805
  

 

 

   

 

 

   

 

 

 

 

8


Flagstar Bancorp, Inc.

Condensed Consolidated Statements of Operations

(Dollars in millions, except per share data)

(Unaudited)

 

                                      Change compared to:  
     Three Months Ended      4Q20     1Q20  
     March 31,
2021
    December 31,
2020
     September 30,
2020
     June 30,
2020
    March 31,
2020
     Amount     Percent     Amount     Percent  

Interest Income

                     

Total interest income

   $ 208   $ 212    $ 206    $ 201   $ 201    $ (4     (2 )%    $ 7     3

Total interest expense

     19     23      26      33     53      (4     (17 )%      (34     (64 )% 
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

     189     189      180      168     148                41     28

(Benefit) provision for credit losses

     (28     2      32      102     14      (30     N/M       (42     N/M  
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income after (benefit) provision for credit losses

     217     187      148      66     134      30     16     83     62
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Noninterest Income

                   

Net gain on loan sales

     227     232      346      303     90      (5     (2 )%      137     N/M  

Loan fees and charges

     42     48      41      38     23      (6     (13 )%      19     83

Net return (loss) on the mortgage servicing rights

                  12      (8     6            N/M       (6     N/M  

Loan administration income

     27     25      26      21     12      2     8     15     N/M  

Deposit fees and charges

     8     8      8      7     9                (1     (11 )% 

Other noninterest income

     20     19      15      14     14      1     5     6     43
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total noninterest income

     324     332      448      375     154      (8     (2 )%      170     110
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Noninterest Expense

                   

Compensation and benefits

     144     125      123      116     102      19     15     42     41

Occupancy and equipment

     46     44      47      44     41      2     5     5     12

Commissions

     62     70      72      61     29      (8     (11 )%      33     N/M  

Loan processing expense

     21     24      20      22     17      (3     (13 )%      4     24

Legal and professional expense

     8     11      9      5     6      (3     (27 )%      2     33

Federal insurance premiums

     6     5      6      7     6      1     20          

Intangible asset amortization

     3     3      3      4     3                     

Other noninterest expense

     57     32      21      34     28      25     78     29     N/M  
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total noninterest expense

     347     314      301      293     232      33     11     115     50
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     194     205      295      148     56      (11     (5 )%      138     246

Provision for income taxes

     45     51      73      32     10      (6     (12 )%      35     N/M  
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 149   $ 154    $ 222    $ 116   $ 46    $ (5     (3 )%    $ 103     224
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Income per share

                   

Basic

   $ 2.83   $ 2.86    $ 3.90    $ 2.04   $ 0.80    $ (0.03     (1 )%    $ 2.03     N/M  

Diluted

   $ 2.80   $ 2.83    $ 3.88    $ 2.03   $ 0.80    $ (0.03     (1 )%    $ 2.00     N/M  
                     

Cash dividends declared

   $ 0.06   $ 0.05    $ 0.05    $ 0.05   $ 0.05    $ 0.01     20   $ 0.01     20

N/M - Not meaningful

                   

 

9


Flagstar Bancorp, Inc.

Summary of Selected Consolidated Financial and Statistical Data

(Dollars in millions, except share data)

(Unaudited)

 

     Three Months Ended  
     March 31,
2021
    December 31,
2020
    March 31,
2020
 

Selected Mortgage Statistics (1):

      

Mortgage rate lock commitments (fallout-adjusted) (2)

   $ 12,300   $ 12,000   $ 11,200

Mortgage loans closed

   $ 13,800   $ 13,100   $ 8,600

Mortgage loans sold and securitized

   $ 13,700   $ 12,000   $ 7,500

Selected Ratios:

      

Interest rate spread (3)

     2.55     2.44     2.31

Net interest margin

     2.82     2.78     2.81

Net margin on loans sold and securitized

     1.65     1.92     1.19

Return on average assets

     1.98     2.08     0.78

Adjusted return on average assets (4) (5)

     2.34     2.08     0.78

Return on average common equity

     25.73     27.58     9.82

Return on average tangible common equity (5)

     27.99     30.13     11.46

Adjusted return on average tangible common equity (4) (5)

     32.98     30.13     11.46

Efficiency ratio

     67.7     60.4     76.9

Adjusted efficiency ratio (4)

     60.8     59.1     76.9

Common equity-to-assets ratio (average for the period)

     7.71     7.54     7.92

Average Balances:

      

Average interest-earning assets

   $ 27,178   $ 27,100   $ 21,150

Average interest-bearing liabilities

   $ 15,011   $ 13,782   $ 14,480

Average stockholders’ equity

   $ 2,319   $ 2,235   $ 1,854

 

(1)

Rounded to nearest hundred million.

(2)

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

(3)

Interest rate spread is the difference between rate of interest earned on interest-earning assets and rate of interest paid on interest-bearing liabilities.

(4)

See Non-GAAP Reconciliation for further information.

(5)

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

 

     March 31,
2021
    December 31,
2020
    March 31,
2020
 
Selected Statistics:       

Book value per common share

   $ 44.71   $ 41.79   $ 32.46

Tangible book value per share (1)

   $ 41.77   $ 38.80   $ 29.52

Number of common shares outstanding

     52,752,600     52,656,067     56,729,789

Number of FTE employees

     5,418     5,214     4,415

Number of bank branches

     158     158     160

Ratio of nonperforming assets to total assets (2)

     0.23     0.21     0.14

Common equity-to-assets ratio

     8.01     7.09     6.87
MSR Key Statistics and Ratios:       

Weighted average service fee (basis points)

     33.2     34.3     38.8

Capitalized value of mortgage servicing rights

     1.06     0.86     0.95

 

(1)

Excludes goodwill and intangibles. See Non-GAAP Reconciliation for further information.

(2)

Ratio excludes LHFS.

 

10


Average Balances, Yields and Rates

(Dollars in millions)

(Unaudited)

 

     Three Months Ended  
     March 31, 2021     December 31, 2020     March 31, 2020  
     Average
Balance
     Interest      Annualized
Yield/Rate
    Average
Balance
     Interest      Annualized
Yield/Rate
    Average
Balance
     Interest      Annualized
Yield/Rate
 

Interest-Earning Assets

                        

Loans held-for-sale

   $ 7,464    $ 53      2.83   $ 5,672    $ 42      2.99   $ 5,248    $ 49      3.72

Loans held-for-investment

                        

Residential first mortgage

     2,132      17      3.20     2,353      19      3.23     3,062      27      3.51

Home equity

     820      7      3.50     890      8      3.69     1,019      12      4.73

Other

     1,040      12      4.79     1,001      13      5.15     816      12      5.77
  

 

 

    

 

 

      

 

 

    

 

 

      

 

 

    

 

 

    

Total consumer loans

     3,992      36      3.68     4,244      40      3.78     4,897      51      4.14

Commercial real estate

     3,042      26      3.36     3,064      27      3.40     2,949      34      4.61

Commercial and industrial

     1,486      13      3.53     1,447      13      3.55     1,667      19      4.52

Warehouse lending

     6,395      64      4.00     6,948      71      3.99     2,310      25      4.30
  

 

 

    

 

 

      

 

 

    

 

 

      

 

 

    

 

 

    

Total commercial loans

     10,923      103      3.76     11,459      111      3.78     6,926      78      4.48
  

 

 

    

 

 

      

 

 

    

 

 

      

 

 

    

 

 

    

Total loans held-for-investment

     14,915      139      3.73     15,703      151      3.78     11,823      129      4.34

Loans with government guarantees

     2,502      4      0.56     2,478      5      0.73     811      3      1.38

Investment securities

     2,210      12      2.21     2,493      14      2.27     3,060      19      2.47

Interest-earning deposits

     87      —          0.14     754      —          0.11     208      1      1.75
  

 

 

    

 

 

      

 

 

    

 

 

      

 

 

    

 

 

    

Total interest-earning assets

     27,178    $ 208      3.06     27,100    $ 212      3.09     21,150    $ 201      3.78

Other assets

     2,887           2,537           2,263      
  

 

 

         

 

 

         

 

 

       

Total assets

   $ 30,065         $ 29,637         $ 23,413      
  

 

 

         

 

 

         

 

 

       

Interest-Bearing Liabilities

                        

Retail deposits

                        

Demand deposits

   $ 1,852    $      0.07   $ 1,842    $      0.07   $ 1,587    $ 3      0.75

Savings deposits

     3,945      1      0.14     3,847      2      0.20     3,384      9      1.07

Money market deposits

     685             0.06     693             0.07     687      1      0.32

Certificates of deposit

     1,293      4      0.96     1,415      5      1.18     2,254      12      2.24
  

 

 

    

 

 

      

 

 

    

 

 

      

 

 

    

 

 

    

Total retail deposits

     7,775      5      0.25     7,797      7      0.33     7,912      25      1.28

Government deposits

     1,773      1      0.22     1,579      1      0.26     1,131      3      1.15

Wholesale deposits and other

     1,031      4      1.59     1,010      4      1.69     581      4      2.39
  

 

 

    

 

 

      

 

 

    

 

 

      

 

 

    

 

 

    

Total interest-bearing deposits

     10,579      10      0.38     10,386      12      0.46     9,624      32      1.33

Short-term FHLB advances and other

     2,779      1      0.17     1,598      1      0.20     3,566      12      1.35

Long-term FHLB advances

     1,200      3      1.03     1,200      3      1.03     794      3      1.29

Other long-term debt

     453      5      4.11     598      7      4.47     496      6      5.33
  

 

 

    

 

 

      

 

 

    

 

 

      

 

 

    

 

 

    

Total interest-bearing liabilities

     15,011      19      0.51     13,782      23      0.65     14,480      53      1.46

Noninterest-bearing deposits

                        

Retail deposits and other

     2,270           2,155           1,395      

Custodial deposits (1)

     7,194           8,527           4,776      
  

 

 

         

 

 

         

 

 

       

Total noninterest-bearing deposits

     9,464           10,682           6,171      

Other liabilities

     3,271           2,938           908      

Stockholders’ equity

     2,319           2,235           1,854      
  

 

 

         

 

 

         

 

 

       

Total liabilities and stockholders’ equity

   $ 30,065         $ 29,637         $ 23,413      
  

 

 

         

 

 

         

 

 

       

Net interest-earning assets

   $ 12,167         $ 13,318         $ 6,670      
  

 

 

         

 

 

         

 

 

       

Net interest income

      $ 189         $ 189         $ 148   
     

 

 

         

 

 

         

 

 

    

Interest rate spread (2)

           2.55           2.44           2.31
        

 

 

         

 

 

         

 

 

 

Net interest margin (3)

           2.82           2.78           2.81
        

 

 

         

 

 

         

 

 

 

Ratio of average interest-earning assets to interest-bearing liabilities

           181.1           196.6           146.1
        

 

 

         

 

 

         

 

 

 

Total average deposits

   $ 20,043         $ 21,068         $ 15,795      
  

 

 

         

 

 

         

 

 

       

 

(1)

Approximately 80 percent of custodial deposits from loans subserviced which pay interest is recognized as an offset in net loan administration income.

(2)

Interest rate spread is the difference between rate of interest earned on interest-earning assets and rate of interest paid on interest-bearing liabilities.

(3)

Net interest margin is net interest income divided by average interest-earning assets.

 

11


Earnings Per Share

(Dollars in millions, except share data)

(Unaudited)

 

     Three Months Ended  
     March 31,
2021
    December 31
2020
    March 31,
2020
 

Net income

   $ 149   $ 154   $ 46

Weighted average common shares outstanding

     52,675,562     53,912,584     56,655,865

Stock-based awards

     622,241       431,382       534,058
  

 

 

   

 

 

   

 

 

 

Weighted average diluted common shares

     53,297,803     54,343,966     57,189,923
  

 

 

   

 

 

   

 

 

 

Basic earnings per common share

   $ 2.83   $ 2.86   $ 0.80

Stock-based awards

     (0.03     (0.03     —    
  

 

 

   

 

 

   

 

 

 

Diluted earnings per common share

   $ 2.80   $ 2.83   $ 0.80
  

 

 

   

 

 

   

 

 

 

Regulatory Capital - Bancorp

(Dollars in millions)

(Unaudited)

 

     March 31, 2021     December 31, 2020     March 31, 2020  
     Amount      Ratio     Amount      Ratio     Amount      Ratio  

Tier 1 leverage (to adjusted avg. total assets)

   $ 2,423      8.11   $ 2,270      7.71   $ 1,879      8.09
  

 

 

      

 

 

      

 

 

    

Total adjusted avg. total asset base

   $ 29,881      $ 29,444      $ 23,212   
  

 

 

      

 

 

      

 

 

    

Tier 1 common equity (to risk weighted assets)

   $ 2,183      10.31   $ 2,030      9.15   $ 1,639      9.17

Tier 1 capital (to risk weighted assets)

   $ 2,423      11.45   $ 2,270      10.23   $ 1,879      10.52

Total capital (to risk weighted assets)

   $ 2,790      13.18   $ 2,638      11.89   $ 1,997      11.18
  

 

 

      

 

 

      

 

 

    

Risk-weighted asset base

   $ 21,164      $ 22,190      $ 17,863   
  

 

 

      

 

 

      

 

 

    

Regulatory Capital - Bank

(Dollars in millions)

(Unaudited)

 

     March 31, 2021     December 31, 2020     March 31, 2020  
     Amount      Ratio     Amount      Ratio     Amount      Ratio  

Tier 1 leverage (to adjusted avg. total assets)

   $ 2,523      8.45   $ 2,390      8.12   $ 1,900      8.19
  

 

 

      

 

 

      

 

 

    

Total adjusted avg. total asset base

   $ 29,866      $ 29,437      $ 23,194   
  

 

 

      

 

 

      

 

 

    

Tier 1 common equity (to risk weighted assets)

   $ 2,523      11.93   $ 2,390      10.77   $ 1,900      10.64

Tier 1 capital (to risk weighted assets)

   $ 2,523      11.93   $ 2,390      10.77   $ 1,900      10.64

Total capital (to risk weighted assets)

   $ 2,740      12.96   $ 2,608      11.75   $ 2,019      11.30
  

 

 

      

 

 

      

 

 

    

Risk-weighted asset base

   $ 21,141      $ 22,194      $ 17,857   
  

 

 

      

 

 

      

 

 

    

 

12


Loans Serviced

(Dollars in millions)

(Unaudited)

 

     March 31, 2021      December 31, 2020      March 31, 2020  
     Unpaid
Principal
Balance (1)
     Number of
accounts
     Unpaid
Principal
Balance (1)
     Number of
accounts
     Unpaid
Principal
Balance (1)
     Number of
accounts
 

Subserviced for others (2)

   $ 197,053      921,126    $ 178,606      867,799    $ 193,037      916,989

Serviced for others (3)

     40,402      160,511      38,026      151,081      23,439      102,338

Serviced for own loan portfolio (4)

     9,965      66,363      10,079      66,519      8,539      63,085
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans serviced

   $ 247,420      1,148,000    $ 226,711      1,085,399    $ 225,015      1,082,412
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)

UPB, net of write downs, does not include premiums or discounts.

(2)

Loans subserviced for a fee for non-Flagstar owned loans or MSRs. Includes temporary short-term subservicing performed as a result of sales of servicing-released MSRs.

(3)

Loans for which Flagstar owns the MSR.

(4)

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

Loans Held-for-Investment

(Dollars in millions)

(Unaudited)

 

     March 31, 2021     December 31, 2020     March 31, 2020  

Consumer loans

               

Residential first mortgage

   $ 1,998      13.4   $ 2,266      14.0   $ 2,964      21.5

Home equity

     781      5.2     856      5.3     1,028      7.5

Other

     1,049      7.0     1,004      6.1     858      6.2
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total consumer loans

     3,828      25.6     4,126      25.4     4,850      35.2
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Commercial loans

               

Commercial real estate

     3,084      20.7     3,061      18.9     3,092      22.4

Commercial and industrial

     1,424      9.6     1,382      8.5     1,880      13.6

Warehouse lending

     6,551      44.1     7,658      47.2     3,973      28.8
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total commercial loans

     11,059      74.4     12,101      74.6     8,945      64.8
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total loans held-for-investment

   $ 14,887      100.0   $ 16,227      100.0   $ 13,795      100.0
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Other Consumer Loans Held-for-Investment

(Dollars in millions)

(Unaudited)

 

     March 31, 2021     December 31, 2020     March 31, 2020  

Indirect lending

   $ 791      75.4   $ 713      71.0   $ 620      72.3

Point of sale

     214      20.4     211      21.0     159      18.5

Other

     44      4.2     80      8.0     79      9.2
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total other consumer loans

   $ 1,049      100.0   $ 1,004      100.0   $ 858      100.0
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

 

13


Allowance for Credit Losses

(Dollars in millions)

(Unaudited)

 

     March 31, 2021      December 31, 2020      March 31, 2020  

Residential first mortgage

   $ 45    $ 49    $ 46

Home equity

     20      25      23

Other

     33      39      16
  

 

 

    

 

 

    

 

 

 

Total consumer loans

     98      113      85
  

 

 

    

 

 

    

 

 

 

Commercial real estate

     84      84      28

Commercial and industrial

     55      51      18

Warehouse lending

     4      4      1
  

 

 

    

 

 

    

 

 

 

Total commercial loans

     143      139      47
  

 

 

    

 

 

    

 

 

 

Allowance for loan losses

     241      252      132

Reserve for unfunded commitments

     24      28      20
  

 

 

    

 

 

    

 

 

 

Allowance for credit losses

   $ 265    $ 280    $ 152
  

 

 

    

 

 

    

 

 

 

Allowance for Credit Losses

(Dollars in millions)

(Unaudited)

 

     Three Months Ended March 31, 2021  
     Residential
First
Mortgage
    Home
Equity
    Other
Consumer
    Commercial
Real Estate
    Commercial
and
Industrial
    Warehouse
Lending
     Total LHFI
Portfolio (1)
    Unfunded
Commitments
 

Adjusted beginning balance

   $ 49   $ 25   $ 39   $ 84   $ 51   $ 4    $ 252   $ 28

Provision (benefit) for credit losses:

                 

Loan volume

     (3     (1     1     1     1     —          (1     (4

Economic forecast (2)

     (3     (2     (3     11     (5     —          (2     —    

Credit (3)

     3     1     —         (8     (1     —          (5     —    

Qualitative factor adjustments (4)

     (1     (3     (4     (4     9     —          (3     —    

Charge-offs

     (2     —         (1     —         (1     —          (4     —    

Recoveries

     —         —         1     —         16     —          17     —    

Provision for net charge-offs

     2     —         —         —         (15     —          (13     —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Ending allowance balance

   $ 45   $ 20   $ 33   $ 84   $ 55   $ 4    $ 241   $ 24
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

 

(1)

Excludes loans carried under the fair value option.

 

(2)

Includes changes in the lifetime loss rate based on current economic forecasts as compared to forecasts used in the prior quarter.

 

(3)

Includes changes in the probability of default and severity of default based on current borrower and guarantor characteristics, as well as individually evaluated reserves.

 

(4)

Includes $4 million of unallocated reserves attributed to various portfolios for presentation purposes.

 

14


Nonperforming Loans and Assets

(Dollars in millions)

(Unaudited)

 

     March 31,
2021
    December 31,
2020
    March 31, 2020  

Nonperforming LHFI

   $ 49   $ 46   $ 19

Nonperforming TDRs

     5     4     4

Nonperforming TDRs at inception but performing for less than six months

     6     6     6
  

 

 

   

 

 

   

 

 

 

Total nonperforming LHFI and TDRs (1)

     60     56     29

Other nonperforming assets, net

     7     8     10

LHFS

     9     9     5
  

 

 

   

 

 

   

 

 

 

Total nonperforming assets

   $ 76   $ 73   $ 44
  

 

 

   

 

 

   

 

 

 

Ratio of nonperforming assets to total assets (2)

     0.23     0.21     0.14

Ratio of nonperforming LHFI and TDRs to LHFI

     0.40     0.34     0.21

Ratio of nonperforming assets to LHFI and repossessed assets (2)

     0.45     0.40     0.28

 

(1)

Includes less than 90 day past due performing loans placed on nonaccrual. Interest is not being accrued on these loans.

(2)

Ratio excludes LHFS.

Asset Quality - Loans Held-for-Investment

(Dollars in millions)

(Unaudited)

 

     30-59 Days
Past Due
     60-89 Days
Past Due
     Greater than
90 days (1)
     Total Past
Due
     Total LHFI  

March 31, 2021

              

Consumer loans

   $ 10    $ 5    $ 42    $ 57    $ 3,828

Commercial loans

     —          —          18      18      11,059
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 10    $ 5    $ 60    $ 75    $ 14,887
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

December 31, 2020

              

Consumer loans

   $ 9    $ 6    $ 38    $ 53    $ 4,126

Commercial loans

     21      —          18      39      12,101
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 30    $ 6    $ 56    $ 92    $ 16,227
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

March 31, 2020

              

Consumer loans

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

Commercial loans

     7      —          —          7      8,945
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)

Includes performing nonaccrual loans that are less than 90 days delinquent and for which interest cannot be accrued.

 

15


Troubled Debt Restructurings

(Dollars in millions)

(Unaudited)

 

     TDRs  
         Performing          Nonperforming              Total          

March 31, 2021

        

Consumer loans

   $ 31    $ 11    $ 42

Commercial loans

     5      —          5
  

 

 

    

 

 

    

 

 

 

Total TDR loans

   $ 36    $ 11    $ 47
  

 

 

    

 

 

    

 

 

 

December 31, 2020

        

Consumer loans

   $ 31    $ 10    $ 41

Commercial loans

     5             5
  

 

 

    

 

 

    

 

 

 

Total TDR loans

   $ 36    $ 10    $ 46
  

 

 

    

 

 

    

 

 

 

March 31, 2020

        

Consumer loans

   $ 37    $ 10    $ 47
  

 

 

    

 

 

    

 

 

 

Total TDR loans

   $   37    $ 10    $   47
  

 

 

    

 

 

    

 

 

 

Non-GAAP Reconciliation

(Unaudited)

In addition to analyzing the Company’s results on a reported basis, management reviews the Company’s results and the results on an adjusted basis. The non-GAAP measures presented in the tables below reflect the adjustments of the reported U.S.GAAP results for significant items that management does not believe are reflective of the Company’s current and ongoing operations. The DOJ benefit and loans with government guarantees that have not been repurchased and don’t accrue interest are not reflective of our ongoing operations and, therefore, have been excluded from our U.S. GAAP results. The Company believes that tangible book value per share, tangible common equity to assets ratio, adjusted return on average tangible common equity, adjusted return on average tangible common equity, adjusted return on average assets, adjusted HFI loan-to-deposit ratio, adjusted noninterest expense, adjusted income before income taxes, adjusted provision for income taxes, adjusted net income, adjusted basic earnings per share, adjusted diluted earnings per share, adjusted net interest margin and adjusted efficiency ratio provide a meaningful representation of its operating performance on an ongoing basis.

The following tables provide a reconciliation of non-GAAP financial measures.

Tangible book value per share and tangible common equity to assets ratio.

 

    

March 31,

2021

 

 

   

December 31,

2020

 

 

   

September 30,

2020

 

 

   

June 30,

2020

 

 

   

March 31,

2020

 

 

  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     (Dollars in millions, except share data)  

Total stockholders’ equity

   $ 2,358   $ 2,201   $ 2,195   $ 1,971   $ 1,842

Less: Goodwill and intangible assets

     155     157     160     164     167
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Tangible book value

   $ 2,203   $ 2,044   $ 2,035   $ 1,807   $ 1,675

Number of common shares outstanding

     52,752,600     52,656,067     57,150,470     56,943,979     56,729,789

Tangible book value per share

   $ 41.77   $ 38.80   $ 35.60   $ 31.74   $ 29.52

Total assets

   $ 29,449   $ 31,038   $ 29,476   $ 27,468   $ 26,805

Tangible common equity to assets ratio

     7.48     6.58     6.90     6.58     6.25

 

16


Adjusted return on average common equity, adjusted return on average tangible common equity and adjusted return on average assets.

 

     Three Months Ended  
  

 

 

 
    

March 31,

2021

 

 

   
December 31,
2020
 
 
   

March 31,

2020

 

 

  

 

 

   

 

 

   

 

 

 
     (Dollars in millions)  

Net income

   $ 149   $ 154   $ 46

Add: Intangible asset amortization, net of tax

     2     2     2
  

 

 

   

 

 

   

 

 

 

Tangible net income

   $ 151   $ 156   $ 48

Total average equity

   $ 2,319   $ 2,235   $ 1,854

Less: Average goodwill and intangible assets

     156     159     169
  

 

 

   

 

 

   

 

 

 

Total tangible average equity

   $ 2,163   $ 2,076   $ 1,685

Return on average tangible common equity

     27.99     30.13     11.46

Adjustment to remove DOJ settlement expense

     4.98        
  

 

 

   

 

 

   

 

 

 
Adjusted return on average tangible common equity      32.97     30.13     11.46

Return on average assets

     1.98     2.08     0.78

Adjustment to remove DOJ settlement expense

     0.36        
  

 

 

   

 

 

   

 

 

 

Adjusted return on average assets

     2.34     2.08     0.78

Adjusted HFI loan-to-deposit ratio.

 

    

March 31,

2021

 

 

   

December 31,

2020

 

 

   

September 30,

2020

 

 

   

June 30,

2020

 

 

   

March 31,

2020

 

 

  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     (Dollars in millions)  

Average LHFI

   $ 14,915   $ 15,703   $ 14,839   $ 13,596   $ 11,823

Less: Average warehouse loans

     6,395     6,948     5,697     3,785     2,310
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted average LHFI

   $ 8,520   $ 8,755   $ 9,142   $ 9,811   $ 9,513

Average deposits

   $ 20,043   $ 21,068   $ 19,561   $ 17,715   $ 15,795

Less: Average custodial deposits

     7,194     8,527     7,347     6,223     4,776
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted average deposits

   $ 12,849   $ 12,541   $ 12,214   $ 11,492   $ 11,019

HFI loan-to-deposit ratio

     74.4     74.5     75.9     76.7     74.9

Adjusted HFI loan-to-deposit ratio

     66.3     69.8     74.8     85.4     86.3

 

17


Adjusted noninterest expense, income before income taxes, provision for income taxes, net income, basic earnings per share, diluted earnings per share, net interest margin and efficiency ratio.

 

     Three Months Ended  
  

 

 

 
    

March 31,

2021

 

 

   

December 31,

2020

 

 

   

September 30,

2020

 

 

   

June 30,

2020

 

 

   

March 31,

2020

 

 

  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     (Dollar in millions)  

Noninterest expense

   $ 347     $ 314   $ 301   $ 293   $ 232

Adjustment to remove DOJ settlement expense

     35       —         —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
Adjusted noninterest expense    $ 312     $ 314   $ 301   $ 293   $ 232

Income before income taxes

   $ 194     $ 205   $ 295   $ 148   $ 56

Adjustment to remove DOJ settlement expense

     35       —         —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
Adjusted income before income taxes    $ 229     $ 205   $ 295   $ 148   $ 56

Provision for income taxes

   $ 45     $ 51   $ 73   $ 32   $ 10

Tax impact on adjustment to remove DOJ settlement expense

     (8     —         —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
Adjusted provision for income taxes    $ 53     $ 51   $ 73   $ 32   $ 10

Net income

   $ 149     $ 154   $ 222   $ 116   $ 46
Adjusted net income    $ 176     $ 154   $ 222   $ 116   $ 46

Weighted average common shares outstanding

     52,675,562       53,912,584     57,032,746     56,790,642     56,655,865

Weighted average diluted common shares

     53,297,803       54,343,966     57,379,809     57,123,706     57,189,923
Adjusted basic earnings per share    $ 3.34     $ 2.86   $ 3.90   $ 2.04   $ 0.80
Adjusted diluted earnings per share    $ 3.31     $ 2.83   $ 3.88   $ 2.03   $ 0.80

Average interest earning assets

   $ 27,178     $ 27,100   $ 25,738   $ 23,692   $ 21,150

Net interest margin

     2.82     2.78     2.78     2.86     2.81

Adjustment to LGG loans available for repurchase

     0.20     0.20     0.16     0.02    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
Adjusted net interest margin      3.02     2.98     2.94     2.88     2.81
Efficiency ratio      68     60     48     54     77

Adjustment to remove DOJ settlement expense

     (7 )%                 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted efficiency ratio

     61     60     48     54     77

 

18


Exhibit 99.2

 

Flagstar Bancorp, Inc. (NYSE: FBC) Earnings Presentation 1st Quarter 2021 April 26, 2021


Cautionary statements 1st Quarter 2021 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.


Strategic highlights 1st Quarter 2021 • Supporting employees, communities and customers during the pandemic, with focus on their health, safety and Unique financial well-being relationship-based business model • Diverse revenue streams and flexible balance sheet produced strong results in volatile interest rate environment by capitalizing on the resulting beneficial mortgage market • Well diversified loan portfolio, with no outsized exposure to any geography or industry reflects our disciplined Grow community approach to growing the Community Bank. banking • Highly asset sensitive bank positioned to capitalize on a rising interest rate environment Award winning • Servicing business produced consistent results for the quarter, while also highlighting our competitive advantage as servicing business the subservicing business is housed within a well capitalized Bank with ample liquidity • Leveraged multi-channel origination platform to generate solid fallout adjusted lock growth, even with most of our staff Strengthen working remotely during the quarter mortgage • Invested in people and technology, expanding retail and generating more business in the most profitable channels Highly profitable • Delivered strong pre-provision net revenue despite the volatility in the market that persists from the COVID-19 operations pandemic • Durable business model well-positioned to weather the storm profitability is strong capital is strong allowance is Positioned to thrive strong and liquidity is strong in any market • Maintaining quarterly dividend demonstrating a commitment to return capital to our shareholders while still being prudent in managing our balance sheet in these uncertain times 3


Financial highlights 1st Quarter 2021 • Adjusted net income of $176mm, or $3.31per diluted share, in 1Q21 Solid earnings • Adjusted pre-tax, pre-provision net revenue of $201mm in 1Q21, a decrease of $6mm vs. 4Q20 • Grew TBV per share $2.97, or 8%, to $41.772 per share at 03/31/21, compared to $38.802 per share at 12/31/20 • Net interest margin, excluding the impact from loans with government guarantees that have not been repurchased, was 3.02% for Growth in the quarter, up 4 basis points, vs. 4Q20 community banking - Performance driven by the impact of lower rates on deposits and servicing • Servicing results solid as total loans serviced were over 1.1 million loans at period end as we boarded over 100,000 non-Flagstar originated loans • Mortgage revenue(1) of $227mm, down $5mm vs. 4Q20 as margin contracted 9 basis points, partially offset by a 3% increase in Mortgage revenue FOALs - Gain on sale margin of 1.84%, down 9 basis points from 4Q20 levels - Net return on MSR was consistent with 4Q20 reflecting continued elevated prepayment speeds and EBO charge • Asset quality strong as net charge-offs, excluding the $16mm commercial loan recovery, were only 8 basis points and nonperforming Strong asset loan ratio remained low quality • Credit reserves of $265mm at 03/31/21, a $15mm decrease from 4Q20 • Credit reserves covered 1.78% of loans HFI, or 3.11% excluding warehouse loans at 03/31/21, consistent with prior quarter • Total risk based capital ratio at 13.2% - Total risk based capital ratio would have been 15.2% if the risk-weighting of warehouse loans were adjusted to 50% to reflect the Robust capital risk weightings of the assets that fully collateralized the loans position • Tier 1 leverage ratio at 8.1% and CET1 ratio at 10.3% reflecting strong capital generation during the quarter and anticipated period end balance sheet contraction • Over $650mm of excess total risk-based capital over the minimum level needed to be considered well-capitalized. 1. Mortgage revenue is defined as net gain on loan sales HFS plus the net return on the MSRs. 2. References non-GAAP number. Please see reconciliations on page 44 - 45. 4


Quarterly income comparison 1st Quarter 2021 $mm Observations 1Q21 4Q20 $ Variance % Variance Net interest income Net interest income $189 $189 $0 -% Net gain on loan sales 227 232 (5) (2%) • Net interest income remained flat at $189mm Loan fees and charges 42 48 (6) (13%) - Average earning assets remained flat. Loan administration income 27 25 2 8% - Net interest margin, excluding LGG that have not Net return on mortgage servicing rights - - - N/M been repurchased, expanded 4 basis points to Other noninterest income 28 27 1 4% 3.02%. Total noninterest income 324 332 (8) (2%) - Average deposits decreased 5%, due to a $1.3bn Pre-provision total revenue 513 521 (8) (2%) billion decrease in custodial deposits. Interest-Compensation and benefits 144 125 19 15% bearing deposit costs declined 16 basis points. Commissions and loan processing expense 83 94 (11) (12%) Other noninterest expenses 85 (3) 95 (10) (11%) Total noninterest expense 312 (3) 314 (2) (1%) Pretax, pre-provision net revenue 201 207 (6) (3%) (Benefit) provision for credit losses (28) 2 (30) (1500%) Noninterest income Income before income taxes 229 205 24 N/M Provision for income taxes 53 (3) 51 2 4% • Noninterest income down $8mm, or 2% Net income $176 (3) $154 $22 14% - Net gain on loan sale margin decreased 9 basis Diluted income per share $3.31 (3) $2.83 $0.48 17% points, to 1.84%. - FOALs increased $0.3bn. Profitability Net interest margin 2.82% 2.78% 4 bps Net interest margin, excl. LGG repurchase obligation(1) 3.02% 2.98% 4 bps Net gain on loan sales / total revenue 44.2% 44.1% 0.1% Mortgage rate lock commitments, fallout adjusted (2) $12,300 $12,000 $300 3% Mortgage closings (2) $13,800 $13,100 $700 5% Noninterest expense Net gain on loan sale margin, HFS 1.84% 1.93% (9) bps • Noninterest expense down $2mm, or 1%, refer to slide 9 for more details 1. References non-GAAP number as it excludes impact of $1.8 billion (4Q20) and $1.8 billion (1Q21) of average balance of loans with government guarantees that have not been repurchased and do not accrue interest. Please see reconciliations on page 44 - 45. 2. Rounded to the nearest hundred million 3. Non-GAAP number for 1Q21. Number shown is adjusted for DOJ effect. Please see reconciliations on page 42 and 43. 5 N/M = not meaningful


Net interest income 1st Quarter 2021 Average interest-earning assets & yields ($bn) Average liabilities and rate ($bn) LHFS Consumer LHFI CRE and C&I Warehouse Other Total Retail Deposits Other Deposits FHLB Borrowings LT Debt $27.1 $27.2 $25.7 $23.6 $24.5 $24.5 $23.7 $23.0 4.8 0.6 0.5 5.8 $20.7 0.5 0.5 2.8 $21.2 5.2 3.5 4.0 4.5 0.5 4.8 4.2 6.9 4.4 3.8 5.7 6.9 9.5 8.2 2.3 8.3 7.0 4.5 5.4 4.6 5.1 4.7 4.5 4.0 4.9 4.7 4.5 4.2 10.4 10.8 11.3 11.5 11.8 5.6 5.6 5.7 7.5 5.2 1Q20 2Q20 3Q20 4Q20 1Q21 1Q20 2Q20 3Q20 4Q20 1Q21 3.78% 3.38% 3.16% 3.09% 3.06% 1.03% 0.57% 0.44% 0.37% 0.31% Warehouse- $6.6bn (EOP-03/31/21) CRE - $3.1bn (EOP-03/31/21) C&I - $1.4bn (EOP-03/31/21) 24% 33% 10% 17% 9% 16% 4% 10% 82% 2% 1% 46% 46% LIBOR w/Floor > 0 Prime w/Floor > 0 No Floor LIBOR w/Floor = 0 LIBOR w/Floor > 0 Prime w/Floor = 0 LIBOR w/Floor = 0 Fixed Rate LIBOR w/Floor > 0 Prime w/Floor > 0 Fixed Rate LIBOR no Floor Prime w/Floor = 0 No Floor Prime w/Floor > 0 6


Noninterest income and expense 1st Quarter 2021 Noninterest income ($mm) Noninterest expense ($mm) Mortgage Revenue Loan Fees Loan Admin Other Comp & Benefits Commissions Loan Processing Other (1) $449 23 26 $314 $312 $374 42 $293 $301 21 21 $332 $324 95 85 37 27 $232 86 28 94 25 27 21 48 42 84 20 24 22 62 72 70 $154 358 17 61 23 295 29 23 232 227 144 116 123 125 102 96 1Q20 2Q20 3Q20 4Q20 1Q21 1Q20 2Q20 3Q20 4Q20 1Q21 Noninterest income Noninterest expense • Noninterest income down $8mm, or 2% • Noninterest expense down $2mm, or 1% - Mortgage revenue decreased $5mm to $227mm, compared to - Mortgage expenses decreased $1mm. The ratio of mortgage prior quarter. Fallout-adjusted locks increased $0.3 billion, or 3 noninterest expense to closings – our mortgage expense ratio –percent, to $12.3 billion and we maintained strong gain on sale was 1.07 percent, a decrease of 7 basis points quarter over margins of 1.84 percent for the first quarter 2021, as compared to quarter, primarily driven by lower commissions. 1.93 percent for the fourth quarter 2020. Net return on MSR was - Non-mortgage expense decreased $1mm. The decrease consistent compared to the prior quarter as prepayments noninterest expense primarily reflects lower expenses in the prior continued to be elevated. quarter associated with the early redemption of the senior notes - Loan fees and charges decreased $6mm primarily due to a and secondary offering which did not reoccur in the first quarter. decrease in the number of loans being boarded this quarter and This decrease more than offset the impact from an increase in lower revenue associated with loans in forbearance. performance driven incentives. 7 1. Non-GAAP number for Q1 2021. Number shown excludes $35 million DOJ benefit. Please see reconciliations on page 44 - 45.


Asset quality 1st Quarter 2021 Delinquencies(1) (% of loans HFI) NPLs and performing TDRs ($mm) Performing TDRs Consumer NPLs Commercial NPL 0.56% $96 $92 0.50% $84 18 $73 18 0.40% 10 $66 0.36% 0.32% 33 35 38 42 29 37 40 39 36 36 3/31/2020 6/30/2020 9/30/2020 12/31/2020 3/31/2021 3/31/2020 6/30/2020 9/30/2020 12/31/2020 3/31/2021 Allowance coverage (% of loans HFI) Nonperforming loan and asset ratios Total Total excl. Warehouse NPA/LHFI & OREOs (2) NPL & TDRs/LHFI NPA/Total Assets (2) 3.1% 3.2% 3.1% 0.45% 0.40% 2.6% 0.31% 0.40% 0.28% 0.27% 1.5% 0.34% 1.8% 0.28% 1.7% 1.7% 1.7% 0.22% 0.23% 0.21% 0.21% 1.1% 0.17% 0.14% 0.14% 3/31/2020 6/30/2020 9/30/2020 12/31/2020 3/31/2021 3/31/2020 6/30/2020 9/30/2020 12/31/2020 3/31/2021 1. Includes early stage delinquencies, defined as 30 to 89 days past due and nonaccrual loans 8 2. Excludes loans held-for-sale


Current Expected Credit Loss (“CECL”) 1st Quarter 2021 Allowance for credit losses ($mm) CECL methodology - Forecast • Used 2-year forecasts as of March reflecting the continued economic distress caused by COVID weighted 40% base, 30% adverse and 30% growth. • Composite forecast contemplates unemployment ending 2021 at 6% and will continue to recover in 2022. • GDP recovers throughout 2021 from current levels and does not return to pre-COVID level until 2025. • HPI stays flat throughout 2021. • Qualitative adjustments reflect best estimate of COVID-19 impact on portfolios including estimated impact of government stimulus, forbearance/payment holidays and Fed programs. 1. New loans and aging of existing portfolio 2. COVID impact sectors 3. Changes to macro-economic variables and forecast scenarios 4. Changes to underlying credit conditions 9


COVID-19 impacted industry exposure 1st Quarter 2021 Commercial Exposure - $1.0 billion, 6.6% of LHFI Commercial & Industrial Loans $84 million UPB / 0.6% of loans Automotive Manufacturing, automotive suppliers No loans in deferral or classified as nonperforming $132 million / 0.9% of loans Leisure & Entertainment Includes restaurants, churches, theatres, etc. No loans in deferral $10 million in nonperforming loans $21 million / 0.1% of loans Healthcare Hospitals, HMO Medical Centers No loans in deferral or classified as nonperforming Commercial Real Estate Loans $291 million / 2.0% of loans (44 loans) ~ 82% in footprint; 63% are neighborhood Retail No loans in deferral or classified as centers or single-tenant properties nonperforming $297 million / 2.0% of loans (22 loans) Marriott, Hilton, IHG and Hyatt flagship hotels Hotel $4 million in deferrals comprise 75% of portfolio No loans classified as nonperforming Geographically diverse; facilities in 8 different $157 million / 1.1% of loans (19 loans) Senior Housing metro areas. All have recourse to strong No loans in deferral or classified as borrowers nonperforming 10


Capital 1st Quarter 2021 Flagstar Bancorp Total Risk Based Capital Ratio Observations 1Q21 Tier 1 CET-1 Tier 1 Total RBC Leverage to RWA to RWA to RWA 1Q21 8.1% 10.3% 11.5% 13.2% 4Q20 7.7% 9.1% 10.2% 11.9% Total risk based capital ratio of 13.2% o Total risk based capital ratio would have been 15.2% if the risk-weighting of warehouse loans were adjusted to 50% o Warehouse lending—100% risk weight– has had under $5mm of losses, cumulatively, over the last 12 years o Over 1,000 basis points of total risk based capital attributed to warehouse loans, loans held for sale and loans with government guarantees that have not yet been repurchased Tier 1 leverage ratio ended the quarter at 8.1% o Almost 900 basis points of tier 1 leverage attributed to warehouse loans, loans held for sale and loans with government guarantees that have not yet been repurchased 11


Deposits and Lending Portfolio and strategy overview 1st Quarter 2020 Total average deposits $20.0bn Total average LHFI $14.9bn C&I CRE 10% 1st Mortgage 20% 14% Warehouse 2nds, HELOC 43% & other 13% Total: $20.0 bn Total: $14.9 bn 0.21% cost of total deposits(1) 3.73% LHFI yield Flagstar gathers deposits from consumers, businesses Flagstar’s largest category of earning assets consists of and select governmental entities loans held-for-investment which averaged $14.9 bn during 1Q21 – Traditionally, CDs and savings accounts represented the bulk of our branch-based retail depository relationships – Loans to consumers consist of residential first and second mortgage loans, HELOC and other – Today, we are focused on growing DDA balances with consumer, business banking and commercial – C&I / CRE lending is an important growth strategy, relationships offering risk diversification and asset sensitivity – We additionally maintain depository relationships in – Warehouse lending to both originators that sell to Flagstar connection with our mortgage origination and servicing and those who sell to other investors businesses, and with governmental entities – Cost of total deposits(1) equal to 0.21%, down 2 basis points from 0.23% in 4Q20 1. Total deposits include noninterest bearing deposits.


Commercial lending Diversified relationship-based approach 1st Quarter 2020 Overview Warehouse - $6.6bn (03/31/2021) Warehouse lines with approximately 411 active % Advances sold to Flagstar relationships nationwide, of which approximately 65% Warehouse sell a portion of their loans to Flagstar Collateralized by mortgage loans being funded which ~46 are paid off once the loan is sold borrowers Diversified property types which are primarily income- sell >75% Commercial producing in the normal course of business ~305 ~60 Real Estate Focused on experienced top-tier developers with borrowers borrowers significant deposit and non-credit product opportunities sell <25% sell 25% - Lines of credit and term loans for working capital 75% Commercial needs, equipment purchases, and expansion projects & Industrial Primarily Michigan based relationships or relationships with national finance companies Commercial Real Estate - $3.1bn (03/31/2021) Commercial & Industrial - $1.4bn (03/31/2021) Property type Industry Hotel/Motel, Retail, 10% 10% Services Office, 9% Manufacturing Owner 22% 18% Occupied, 12% Financial, Healthcare Multi Other, insurance & 1% Family, 19% real estate Distribution Home 49% 18% Building, 8% Government & 22% Other education 1% 1%


Flagstar’s one-stop-shop mortgage model 1st Quarter 2021 Bank Synergies Sales – multi Secondary & Cap channel Markets Warehouse Lending TPO Pricing & Hedging MSR and Servicing Advance Distributed Retail Outlets Lending Direct Lending o Sales Mortgage People o Securitizations Custodial Deposits – fund Products o Retain on B/S balance sheet Originations HELOCs CRA MORTGAGE BANKING & SERVICING Teamwork Customer Satisfaction Risk & Compliance Mortgage Mortgage Optimize Results Servicing Operations Performing Default MSR Creation Mortgage Ops Growth & Scale Risk and Sale and retain Service Customer compliance subservicing Multi skilled Feedback Delinquency Mgt Retain MSR operators Risk and Forbearance Mgt o Agency Risk and Compliance Claims process o GNMA Compliance Other Revenue Minimize losses Protect asset Variable cost model Opportunities Support 14


Mortgage originations 1st Quarter 2021 Net gain on loan sales – revenue and margin Fallout-adjusted locks by channel ($bn) Gain on loan sale ($mm) Gain on sale margin (HFS) Correspondent Bulk Broker Distributed Retail Direct Lending 2.31% $15.0 2.19% $13.8 1.93% 1.0 $346 1.84% $11.2 1.2 $12.0 $12.3 3.7 $303 3.0 1.2 1.5 1.0 2.2 2.7 2.7 $232 $227 2.4 2.0 1.4 2.3 1.6 1.4 0.80% 2.4 2.2 1.8 2.7 $90 5.1 5.8 4.2 4.7 4.0 1Q20 2Q20 3Q20 4Q20 1Q21 1Q20 2Q20 3Q20 4Q20 1Q21 Purchase 36% 35% 33% 36% 34% Mix % Closings by mortgage type ($bn) Closings by purpose and expense ratio ($bn) Conventional Jumbo Government Purchase originations Refinance originations Mortgage expense 1.20% $14.4 1.14% $13.8 1.07% 1.07% 0.3 $13.1 0.99% $12.2 1.6 1.1 0.5 0.9 2.4 2.5 $14.4 $13.8 $8.6 1.2 $12.2 $13.1 1.8 $8.6 9.0 1.6 12.5 7.8 8.5 9.8 10.1 10.2 10.2 5.5 5.2 5.4 4.4 4.6 4.0 3.1 1Q20 2Q20 3Q20 4Q20 1Q21 1Q20 2Q20 3Q20 4Q20 1Q21 Retail 23% 30% 31% 33% 34% Mix % 15


Mortgage servicing 1st Quarter 2021 Quarter-end loans serviced (000’s) $ UPB of MSRs sold ($bn) Serviced for Others Subserviced for Others Flagstar Lo ans HFI Bulk Sales Flow Transactions 1,105 1,148 1,082 1,085 $6.6 1,043 $5.2 $4.0 4.4 921 2.6 917 894 868 855 2.2 $1.0 $0.8 2.6 102 123 149 151 161 1Q20 2Q20 3Q20 4Q20 1Q21 1Q20 2Q20 3Q20 4Q20 1Q21 Average custodial deposits ($bn) MSR / CET1 (Bancorp) $8.5 $7.3 $7.2 $6.2 20% $4.8 16% 16% 15% 13% 1Q20 2Q20 3Q20 4Q20 1Q21 1Q20 2Q20 3Q20 4Q20 1Q21 16


Supporting consumer needs 1st Quarter 2021 Consumer Forbearance as of 03/31/2021 (UPB in $mm) Forbearance Requests (accounts thru December 2020) Significant decrease in new forbearance requests since middle of April 28,675 12% of residential first lien borrowers who have requested forbearance have made their January, February, and March payments and not taken advantage of the forbearance option. Proactive customer outreach to evaluate readiness to 5,134 return to payment or need for further assistance 1,526 870 687 849 1,802 1,765 646 Stable early-stage delinquency trends for loans not in 2/29/2020 3/31/2020 4/30/2020 5/31/2020 6/30/2020 7/31/2020 8/30/2020 9/30/2020 10/31/2020 11/30/2020 forbearance 1. Includes temporary short-term subservicing performed as a result of sales of servicing-released mortgage servicing rights. Includes repossessed assets. 2. Includes LHFI (residential first mortgage, home equity and other consumer), LHFS (residential first mortgage), loans with government 17 guarantees (residential first mortgage), and repossessed assets.


Appendix Company overview 19 Community banking 22 Mortgage servicing 32 Mortgage originations 35 Financial performance 37 Capital and liquidity 39 Guidance 42 Non-GAAP reconciliation 43


Company Overview Flagstar at a glance 1st Quarter 2020 Corporate Overview Traded on the NYSE (FBC) 158 87 Headquartered in Troy, MI Flagstar Retail home Bank lending Branches Offices(1) Market capitalization $2.4bn Member of the Russell 2000 Index Community banking Leading Michigan-based bank with a balanced, diversified lending platform $29.4bn of assets and $19.4bn of deposits 208k household & over 28k business relationships Mortgage origination 6th largest bank originator of residential mortgages ($53.5bn during twelve months ended March 31, 2021) Scalable platform originating business in all channels and all 50 states including 87 retail home lending offices More than 1,060 correspondent and more than 1,400 broker relationships Mortgage servicing 6th largest sub-servicer of mortgage loans nationwide Servicing over 1.1 million loans as of March 31, 2021 Efficiently priced deposits from escrow balances 1. Includes eight home lending offices located in banking branches.


COMPANY OVERVIEW Flagstar has a strong executive team 1st Quarter 2021 Board of Directors John Lewis Chairman Chief Human Resources Officer David Hollis Chief Audit Officer Sandro DiNello Meagan Belfinger President & CEO Corporate Responsibility CEO since 5/13 Beth Correa Over 40 years of banking experience with Flagstar and its predecessors with a strong emphasis on Chief Marketing community banking, including the management of Officer retail operations and product strategy Matt Allen Chief Mortgage Banking Community Chief Risk Chief Information Operations Financial Officer and Servicing Banking Officer Officer Jim Ciroli Lee Smith Reggie Davis Steve Figliuolo Karen Buck Jennifer Charters CFO since 8/14 Effective since More than 35 years of CRO since 6/14 Joined Flagstar in CIO since 6/18 More than 30 years of September 2020 banking experience Over 35 years of 1/21 Over 25 years of IT banking and financial Previously COO for 7 with Suntrust, Royal financial services Over 30 years of and financial services services experience years May 2013 – Bank of Canada, and experience with experience in the experience with Ally with First Niagara, Aug 2020 Wachovia Citizens Republic, financial services Financial and Huntington and Formerly a partner of Fleet Boston Financial, industry, most Accenture KeyCorp MatlinPatterson First Union and Chase recently with TD Bank Global Advisors and a Manhattan Senior Director at Zolfo Cooper Extensive experience in financial management and operations 20


Risk management COMPANY OVERVIEW Best-in-class risk management platform with 286 FTEs(1) 1st Quarter 2021 Board of Directors Risk Committee Enterprise Sandro DiNello Risk President & CEO Committee Kristina Janssens Steve Figliuolo Chief Compliance Chief Risk Officer Officer Chief QC / Financial Information MFIU Fraud Regulatory Operational Vendor Credit Appraisal Crimes Compliance Security Investigations Affairs Risk Management Officer Review (BSA/AML) FTEs 69 23 51 13 4 18 59 13 36 1. Does not include 29 FTEs in internal audit as of 03/31/2021. 21


COMMUNITY BANKING Higher net interest income is stabilizing earnings 1st Quarter 2021 • Achieving earning asset growth while continuing to grow net interest income - Strong net interest margin management • Transition to more stable net interest income Average earning assets and net interest income Net interest income ($mm)(1) Average earning assets ($bn)(2) $25.3 $25.4 $24.3 $23.6 CAGR 20% $21.2 $20.7 $189 $189 $19.0 $180 CAGR 23% $17.8 $168 $16.0 $16.8 $16.4 $16.3 $15.4 $15.4 $152 $148 $14.7 $146 $14.0 $138 $12.3 $124 $123 $126 $107 $115 $97 $103 $106 $83 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q201Q21 Adjusted (1) (2) (2) (2) (2) 2.67% 2.77% 2.78% 2.76% 2.76% 2.86% 2.93% 2.99% 3.09% 3.08% 3.05% 2.93% 2.81% 2.88% 2.94% 2.98% 3.02% NIM: 1. References non-GAAP number for 4Q18; excludes $29 million of hedging gains reclassified from AOCI to net interest income in conjunction with the payment of long-term FHLB advances. Please see reconciliations on page 44 - 45. 22 2. References non-GAAP number as it excludes impact of $0.1 billion(2Q20), $1.4 billion (3Q20), $1.8 billion (4Q20), and $1.8 billion (1Q21) of average balance of loans with government guarantees that have not been repurchased and do not accrue interest. Please see reconciliations on page 44 - 45.


COMMUNITY BANKING Strong market position 1st Quarter 2021 • Leading deposit share in Michigan, Fort Wayne, IN(1), and San Bernardino County, CA (High Desert Region) • Provides access to markets with attractive demographics and low-cost, stable liquidity for continued balance sheet growth Michigan deposit share Key Markets 2020 Rank Deposits as of 06/30/2020 ($mm) % YoY Flagstar Deposits Deposit Median Proj HHI Proj pop Overall MI-based Institution Branches Total Share Change Market $mm % of total mkt share HHI growth (4) growth (4) 1 Chase 208 $63,501 22% 43% Oakland County, MI $ 5,922 50.1% 8.1% $ 86,562 10.7% 1.4% 2 TCF/Huntington 513 39,743 14% 20% Grand Rapids, MI MSA 392 3.3% 1.4% 68,835 10.2% 2.7% 3 Comerica 194 35,492 12% 22% 4 Bank of America 92 29,285 10% 28% Ann Arbor, MI MSA 265 2.2% 2.3% 78,844 12.5% 1.7% Fort Wayne, IN(1) 808 6.8% 6.7% 60,699 9.4% 2.9% 5 Fifth Third 191 21,632 8% 30% (2) Key Midwest Markets 7,387 62.4% 6.0% 82,516 10.6% 1.6% 6 PNC 164 21,220 7% 25% San Bernardino County, CA (3) 658 5.6% 1.0% 71,365 12.8% 3.6% 7 1 Flagstar 114 17,184 6% 32% 8 Citizens 82 6,372 2% 10% National aggregate $ 67,761 9.0% 2.9% 9 Independent 66 3,561 1% 18% 10 Mercantile Bank Corp. 43 3,272 1% 25% Top 10 1,667 $241,262 83% 29% Source: S&P Global Market Intelligence; Note: Deposit data as of June 30, 2020 and projections based on 2020 estimates; MI-based banks highlighted. 1. Fort Wayne, IN deposit data is based on Fort Wayne, IN Fed District. Fort Wayne, IN demographic data is based on counties within Fort Wayne, IN Fed District, deposit weighted based on Flagstar’s portfolio. 2. Key Midwest Markets Median HHI, based on Flagstar’s portfolio. 23 3. Deposit data is based on High Desert Region of San Bernardino County, CA. projected HHI growth and projected population growth are deposit weighted 4. 2021–2026 CAGR.


COMMUNITY BANKING Community banking 1st Quarter 2021 Average commercial loans ($bn) Quarter-end commercial loan commitments ($bn) Commercial and Industrial Commercial Real Estate Warehouse Commercial and Industrial Commercial Real Estate Warehouse $18.1 $11.5 $17.7 $10.4 $10.9 $17.1 $15.5 $8.9 $13.6 6.9 9.8 10.4 10.7 $6.9 3.8 5.7 6.4 7.9 6.2 2.3 3.1 3.0 4.8 4.7 4.6 4.7 4.7 2.9 3.1 3.0 1.7 2.0 1.7 1.5 1.5 2.6 2.9 2.7 2.6 2.7 1Q20 2Q20 3Q20 4Q20 1Q21 1Q20 2Q20 3Q20 4Q20 1Q21 Average consumer loans ($bn) Average deposit funding(1) ($bn) Residential First Mortgages Other Consumer Loans Retail Government Custodial deposits Brokered deposits $4.9 $21.1 $4.7 $19.6 $20.0 $4.5 $4.2 $17.7 $4.0 $15.8 1.8 1.9 8.5 7.2 1.9 7.3 1.9 6.2 1.9 4.8 1.1 1.4 1.6 1.8 1.1 3.1 2.8 2.6 2.3 9.7 9.9 10.0 10.0 2.1 9.3 1Q20 2Q20 3Q20 4Q20 1Q21 1Q20 2Q20 3Q20 4Q20 1Q21 1. Includes custodial deposits which are included as part of mortgage servicing. 24


COMMUNITY BANKING Commercial real estate portfolio detail 1st Quarter 2021 Commercial Real Estate ($bn) Portfolio Characteristics • Average LTV ~53% and DSC ~2.3% NBV Commitment %Utilization Home Builder $ 0.7 $ 1.6 41.5% Multi Family 0.5 0.8 64.0% Owner Occupied 0.4 0.4 97.1% • 62% LIBOR / 34% Prime Rate / 4% Fixed Rate Retail 0.3 0.3 86.5% Office 0.3 0.3 88.8% Hotel/Motel 0.3 0.3 91.3% • 96% of portfolio has Prime and LIBOR rate floors at or Senior Living Facility 0.2 0.3 70.2% greater than 0% Industrial 0.1 0.2 59.8% Parking Garage/Lot 0.1 0.1 99.8% All Other 0.2 0.2 77.5% • Shared National Credits ~6% of portfolio Total CRE $ 3.1 $ 4.5 68.5% State Breakdown (by collateral location) Property Breakdown Multi Family 18% Home Michigan Texas Building 40% 13% 22% Owner Occupied California 12% Other 11% 19% Other Retail 26% Ohio 10% Office 6% 9% Colorado Hotel/Motel 4% 10% 25


COMMUNITY BANKING Commercial and industrial portfolio detail 1st Quarter 2021 Commercial & Industrial ($bn) Portfolio Characteristics • 79% LIBOR / 10% Fixed Rate / 11% Prime Rate • Approximately 88% of portfolio has Prime and LIBOR rate floors at or greater than 0% • Shared national credits ~44% of portfolio State Breakdown Industry Breakdown OH IN 4% 2% CA WI Manufacturing 6% 1% Services 18% FL 22% MI 8% Healthcare 35% 1% MN 7% Financial, Distribution NY insurance & 7% 6% real estate Other Government & 49% 23% TX education 5% 1% SC Other 4% 2% 26


COMMUNITY BANKING Allowance for credit losses 1st Quarter 2021 December 31, 2020 March 31, 2021 Amount(1) % of LHFI Amount(1) % of LHFI ($ in millions) Consumer: Residential First Mortgage $ 49 2.2% $ 45 2.3% Home Equity 25 2.9% 20 2.6% Other Consumer 40 4.0% 34 3.2% Total Consumer 114 2.8% 99 2.6% Commercial: Commercial Real Estate 103 3.4% 100 3.2% Commercial and Industrial 57 4.1% 60 4.2% Warehouse Lending 6 0.1% 6 0.1% Total Commercial 166 1.4% 166 1.5% Total Credit Reserve $ 280 1.7% $ 265 1.8% Total Credit Reserve Excluding Warehouse $ 274 3.2% $ 259 3.1% 1. Includes reserve for unfunded commitment of $28 million and $24 million at 12/31/20 and 03/31/21, respectively. 27


COMMUNITY BANKING Warehouse lending 1st Quarter 2021 • National relationship-based lending platform FBC warehouse loan commitments ($bn) • Attractive asset class with good spreads and low credit risk Outstandings Unfunded Commitments $10.7 $9.8 $10.5 • Flagstar is well positioned to hold market share, 2.8 leveraging relationships in complementary lines of $7.9 2.2 4.2 business, including home builder finance and mortgage $6.2 originations 2.7 • Collateral Breakdown: Agency & Conventional 67.0% 2.2 7.6 7.7 Government 17.3% / Jumbo 15.3% / Non-QM 0.4% 5.2 6.6 4.0 3/31/2020 6/30/2020 9/30/2020 12/31/2020 3/31/2021 Lenders ranked by commitments ($mm) Net charge-offs YOY 4Q20 NCO ($mm) NCO Rate (bps) Rank Institution Growth Total Share 1 JPMorgan Chase 8% $20,600 15% 2 First Horizon 22% 10,600 8% 3 Flagstar Bancorp(1) 123% 10,507 8% 29 6 bps annual loss rate since 2006 4 TIAA FSB 63% 10,200 7% 22 5 Truist Bank 107% 9,084 7% 17 17 6 Texas Capital 11% 9,079 7% 7 Merchants Bank 42% 7,500 5% $1.1 $1.2 $1.1 8 Wells Fargo 9% 7,000 5% $1.0 9 Customers Bank 51% 5,600 4% 1 10 People’s United 100% 5,000 4% Top 10 38% $95,170 70% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Source: Inside Mortgage Finance as of December 31, 2021 28


COMMUNITY BANKING Home builder finance 1st Quarter 2021 Overview Tightening housing supply Existing home sales (mm) Months supply of existing homes for sale • National relationship-based lending platform launched in 1Q16 (left axis) (right axis)—Attractive asset class with good spreads (~375 bps) 8 12—Meaningful cross-sell opportunities including warehouse loans, 7 10 commercial deposits and purchase originations 6 8 • Flagstar is well positioned 5—Focused on markets with strong housing fundamentals and 4 6 higher growth potential 3 4—We have direct relationships with 10 of the top 10 and do 2 business with 59 of the top 100 builders nationwide (80 of the 2 1 top 200) through March. 0 -2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Source: Bloomberg (through 9/30/20) Home builder finance footprint Home builder loan commitments(1) ($mm) Unpaid principal balance Unused $2,101 $2,022 $2,013 $1,992 $2,002 $1,154 $1,065 $1,161 $1,206 $1,231 $947 $957 $852 $786 $771 3/31/2020 6/30/2020 9/30/2020 12/31/2020 3/31/2021 1. Commitments are for loans classified as commercial real estate and commercial & industrial. 29


COMMUNITY BANKING Leverage lending and SNCs 1st Quarter 2021 Leverage lending commentary Shared national credits “SNCs” commentary • Average UPB of ~$10 million per loan • 63 borrowers, average UPB of $25 million and average commitment of $14 million • $15 million of nonperforming loans as of 03/31/21 • Total SNC breakdown: C&I ~70% / CRE ~22% / Warehouse ~8% • Loans totaling $72 million of commitments are rated as special mention or substandard • We are the lead bank in 11% of these deals and this percentage continues to grow • SNCs comprised $155 million of total leveraged loan UPB • No nonperforming loans as of 03/31/21 • Loans totaling $22 million are rated as special mention or substandard Portfolio Composition—$0.3bn UPB (03/31/21) Portfolio Composition—$0.9bn UPB (03/31/21) Financials Services Rental & Services & 25% Leasing 29% Insurance 19% 19% Distribution 4% Manufacturing Warehouse 13% 8% Manufacturing Healthcare 48% 4% Financial & Insurance Distribution Healthcare 27% 2% 2% 30


COMMUNITY BANKING COVID Impacted Sectors – CRE 1st Quarter 2021 as of March 31, 2021 ($mm) Portfolio Characteristics Credit Quality Credit Metrics (Pre-COVID) Median Top 10 Total Footprint $ $ $ UPB % of LHFI SNCs Construction Watch DSC LTV Occ ($mm) Loan Size Borrowers Borrowers Exposure Deferred Past Due NPLs Retail $ 291 2.0% $ 2.0 83% 44 $ 19 88% 2% $—$—$—0% 1.7 48% 95% Hotel 297 2.0% 9.0 75% 22 16 72% 48% 4 — —35% 1.4 60% 61% Senior Housing 157 1.1% 8.0 74% 19 —23% 39% — — —0% 1.7 60% 84% Total $ 745 5.0% $ 6.1 66 $ 35 $ 5 $—$—14% Retail UPB (as of March 31, 2021) ($mm) Hotel UPB(5) (as of March 31, 2021) ($mm) ~75% of balances are from Marriott, Hilton, IHG, and 58% 49% Hyatt flagged franchises $291M Neighborhood Centers(1) $297M Luxury (2) 13% Upper Upscale 10% Single Tenant 18% 17% Shopping Centers (3) Upper Midscale 15% (4) 20% Other Upscale Retail Descriptions 1. Retail centers < 100,000 sq. ft. – generally anchored by grocery 5. Classifications as determined by STR Chain Scales stores 2. Single Tenant – Hardware stores 56% / Pharmacies 40% 3. Power centers 4. Other – includes one regional mall with $16mm in UPB 31


MORTGAGE SERVICING MSR portfolio 1st Quarter 2021 MSR portfolio statistics MSR portfolio characteristics (% UPB) Measure ($mm) 12/31/2020 3/31/2021 Difference By Vintage Unpaid principal balance $38,026 $40,401 $2,375 Fair value of MSR $329 $428 $99 2019 Capitalized rate (% of UPB) 0.86% 1.06% 20 bps 11% 2018 & Multiple 2.575 3.272 0.697 Note rate 3.66% 3.51% (15) bps prior 20% Service fee 0.34% 0.32% (2) bps Average Measure ($000) 2021 UPB per loan $252 $252 $0 9% FICO 726 731 5 2020 Loan to value 76.77% 74.84% NM 60% Net return (loss) on mortgage servicing rights ($mm) $ Return 1Q20 2Q20 3Q20 4Q20 1Q21 By Investor Net hedged profit (loss) $10 $1 $2 $3 $2 Carry on asset 17 18 30 30 34 Run-off (20) (20) (23) (34) (41) GNMA Gross return on the 26% $7 ($0) $9 ($1) ($5) Fannie mortgage servicing rights 33% Sale transaction & P/L (1) (3) 3 1 5 Private Model changes —(5) ———1% Net return on the $6 ($8) $12 ($0) $0 Freddie mortgage servicing rights ($) 40% Average mortgage $252 $242 $292 $347 $369 servicing rights ($) Net return on the -4.1% 9.6% 16.5% -0.2% 0.0% mortgage servicing rights (%) 32


MORTGAGE SERVICING Servicing 1st Quarter 2021 Servicing Profitability ($mm) 1Q20 2Q20 3Q20 4Q20 1Q21 Net interest income Interest income (FTP) $ 23 $ 12 $ 7 $ 8 $ 6 Interest expense on custodial deposits (1) (19) (8) (2) (3) (2) Total net interest income 4 4 5 5 4 Noninterest income(2) Service fee income 30 35 39 37 36 Ancillary fee income 9 18 15 23 18 Late fee income 6 2 2 2 4 Total noninterest income 45 55 56 62 57 Noninterest expense(3) (36) (38) (41) (47) (46) Earnings before Tax $ 13 $ 21 $ 20 $ 20 $ 16 Average Custodial Deposits ($bn) $ 4.8 $ 6.2 $ 7.3 $ 8.5 $ 7.2 Average Loans Serviced for Others (000’s) 1,086 1,062 1,074 1,095 1,117 1. Expense on custodial deposits from loans subserviced which is included in net loan administration income for GAAP purposes. Includes intersegment allocation. 2. Service fee income and late fee income are included in net loan administration income for GAAP purposes; ancillary fee income is included in loan fees and charges for GAAP purposes. 3. Includes direct allocations. 33


MORTGAGE SERVICING Loans with government guarantees (LGG) 1st Quarter 2021 LGG end of period balance ($mm) LGG Overview Repurchased Loans Loans Eligible for Repurchase General Overview $2,500 $2,516 $2,457 • GNMA Loans are eligible to be repurchased, at our option, after no payment has been made for 90 days (whether due to delinquency or forbearance) $1,791 • When eligible to be repurchased, accounting rules require us to 1,783 record a loan and a related liability 1,850 1,780 • Loans eligible to be repurchased are limited to GNMA loans for 1,067 which we own the MSR; not eligible to repurchase loans we are $814 subservicing 52 • Prior to repurchasing the loan, no interest is earned, we continue to 762 make advances and no credit risk is present 724 717 666 677 • All LGG loans, including loans eligible to be repurchased, are a 20% risk-weighted asset 3/31/2020 6/30/2020 9/30/2020 12/31/2020 03/31/2021 Impact/Opportunity • $2.3 B GNMA loans (22%) are in forbearance as of 03/31/2021, of GNMA MSR UPB end of period ($mm) which $1.8 B are recognized on the balance sheet • Approximately $240 million of eligible GNMA forbearance loans were repurchased during Q1 • Repurchased loans are able to be pledged as collateral with the $15,243 FHLB $14,971 $13,768 • Drag on capital ratios and NIM due to inflated balances created by $12,162 loans eligible for repurchase; no actual income risk $10,592 • Estimated that $800 million will cure through the partial claim process, which will be bought out and re-securitized with an estimated impact to gain on sale of approximately $32 million, $23 million in second half of 2021 and $9 million in 2022. 3/31/2020 6/30/2020 9/30/2020 12/31/2020 03/31/2021 • Estimated another $250 million will cure through a modification, with an opportunity of approximately $10 million of gain on sale related to these loans, $7 million in 2021 and $3 million in 2022. 34


ORIGINATIONS National distribution through multiple channels 1st Quarter 2021 Residential mortgage originations by channel ($bn) Correspondent Broker Retail Other Bulk Broker Distributed Retail Direct Lending $8.3 $7.4 $6.6 $6.6 $4.6 $5.5 2.4 $4.3 $4.3 2.5 $3.7 1.6 1.1 1.1 1.6 2.7 1.0 2.0 $2.0 $2.2 $1.9 $1.8 $1.7 5.9 0.6 5.0 4.9 $1.1 3.2 3.2 3.0 3.9 2.7 3.5 1.4 1Q20 2Q20 3Q20 4Q20 1Q21 1Q20 2Q20 3Q20 4Q20 1Q21 1Q20 2Q20 3Q20 4Q20 1Q21 3.3% market share with #8 national ranking(1) 1.3% market share with #13 national ranking(1) 87 retail locations in 27 states More than 1,060 correspondent partners 1,400 broker relationships Direct Lending is 26% of retail volume Top 10 relationships account for 16% of overall Top 10 relationships account for 27% of overall correspondent volume brokerage volume Warehouse lines with 306 correspondent relationships 1. Data source: As reported by Inside Mortgage Finance for 12M20 published August 28,2020. 35


Flagstar has a scalable origination platform that drives MORTGAGE ORIGINATIONS profitability in almost any mortgage origination market 1st Quarter 2021 U.S. residential mortgage origination market (historical and projected volumes) trillions . 2 in 6 $            . 7 5 4 3 . . 4 1 9 4 9 . . 3 3 . 4 6 3 3 . . 2 3 . 3 5 . 6 5 . 6 3 . 2 2 . 2 3 3 2 3 1 . 2 0 0 . 2 . . . . . 2 . . 2 8 2 9 2 9 8 2 2 2 7 6 6 2 2 . . . . 4 . 4 . . 1 5 1 1 1 . 1 . 1 1 1 . 1 1 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021F 2022F 2023F Nominal ($) 0.6 0.9 1.0 0.8 0.6 0.8 0.8 1.7 1.4 1.1 2.2 2.9 3.9 2.8 3.0 2.7 2.4 1.5 2.0 1.7 1.4 2.0 1.8 1.3 1.7 2.1 1.8 1.7 2.3 4.1 3.6 2.6 2.3 Real(1)($) 1.1 1.6 1.8 1.3 1.1 1.3 1.3 2.6 2.1 1.7 3.3 4.1 5.4 3.8 4.0 3.5 3.0 1.9 2.4 2.0 1.7 2.3 2.1 1.4 1.8 2.2 1.9 1.7 2.3 4.1 3.6 2.6 2.3 Adjusted(2)($ 1.4 2.1 2.3 1.7 1.4 1.6 1.6 3.2 2.5 2.0 3.9 4.7 6.2 4.3 4.5 3.9 3.3 2.0 2.6 2.2 1.8 2.5 2.2 1.5 1.9 2.3 1.9 1.8 2.3 4.1 3.6 2.6 2.3 Source: Mortgage Bankers Association (MBA) for actual periods and a blended average of forecast by Fannie Mae (3/10/2021), Freddie Mac (3/30/2021) and MBA (3/19/2021). 1. Adjusted for historical inflation as reported by Bureau of Labor Statistics (2020 = 100). 36 2. Adjusted for population growth as reported by the U.S. Census Bureau (2020 = 100).


FINANCIAL PERFORMANCE Financial performance 1st Quarter 2021 • Solid growth in banking and subservicing has created more stable earnings • Focus on efficiency and expense management Revenue Composition and Earnings Metrics Percentage Percentage Revenue (millions) 3/31/2020 3/31/2021 of Revenue Increase Community Banking $ 119 $ 174 34% 46% Mortgage Servicing 49 62 12% 27% Subtotal 168 236 46% 40% Mortgage Origination 146 300 58% NM Other (1) (12) (23) -4% 92% Total $ 302 $ 513 100% 70% Diluted Earnings per Share(1) $ 0.80 $ 2.80 NM Return on Average Assets(1) 0.8% 2.0% Return on Average Tangible Common Equity (1) 11.5% 28.0% 1. Non-GAAP number for Q1 2020. Number shown excludes $25 million DOJ benefit. Please see reconciliations on page 44—45. 37


FINANCIAL PERFORMANCE Quarterly results 1st Quarter 2021 Quarterly revenue ($mm) Quarterly adjusted noninterest expense ($mm) (1) (2) (1) (2) (3) Non-Mortgage Revenue Mortgage Revenue Non-Mortgage NIE Mortgage NIE Mortgage expense 1.20% $629 1.14% 1.07% 1.07% $542 0.99% $521 $513 $314 $312 $293 $301 423 $232 363 294 300 149 148 $302 145 143 92 146 227 148 158 165 164 206 213 140 156 179 1Q20 2Q20 3Q20 4Q20 1Q21 1Q20 2Q20 3Q20 4Q20 1Q21 Quarterly noninterest expense ($mm) and efficiency ratio 77% (4) (5) Noninterest expense Efficiency ratio $314 $312 $293 $301 60% 61% $232 54% 48% 1Q20 2Q20 3Q20 4Q20 1Q21 1. Includes Servicing segment 2. Includes direct allocations. 38 3. As a percentage of that period’s close volume 4. Non-GAAP number for 1Q21. Number shown is adjusted for DOJ effect. Please see reconciliations on page 48 and 49. 5. Adjusted Efficiency Ratio for 1Q21. Number shown is adjusted for DOJ effect. Please see reconciliations on page 48 and 49.


CAPITAL AND LIQUIDITY Balance sheet composition 1st Quarter 2021 1Q21 average balance sheet (%) 1% Cash 7% Agency MBS 14% ~70% of assets are in Mortgage loans held-for-investment 43% lower risk-content Deposits excluding assets: cash, marketable custodial deposits securities, warehouse loans, loans held-for-sale 25% and freshly-originated, Loans held-for-sale high-FICO conforming mortgages underwritten by Flagstar 21% 24% Custodial deposits Efficiently funds loans Warehouse loans held-for-sale and warehouse loans Attractive relationship 13% lending with very low FHLB borrowings 21% 2% Other long-term debt delinquencies Commercial loans and Other LHFI (1) 1% MSR 10% Other liabilities Primarily low risk, stable assets (FHLB stock, BOLI, 10% 8% Equity premises & equipment, Other assets deferred tax asset, etc.) Assets Liabilities & Equity 1) Other LHFI includes home equity and other consumer loans. 39


CAPITAL AND LIQUIDITY Liquidity and funding 1st Quarter 2021 Adjusted HFI loan-to-deposit ratio(1) Commentary 86% 85% • Flagstar has invested significantly in building its Community Bank, which 75% provides attractive core deposit 70% funding for its balance sheet 66% • These retail deposits are supplemented by custodial deposits from the servicing business 1Q20 2Q20 3Q20 4Q20 1Q21 • Much of the remainder of Flagstar’s balance sheet is self- Liquidity ratio(2) funding given it is eligible collateral for FHLB advances Cash & investment securities FHLB borrowing capacity (which provides significant liquidity capacity) • Over $1.4 billion of additional borrowing capacity through the 18% 16% discount window 8% 11% 8% 7% 4Q20 1Q21 1. Adjusted HFI loan-to-deposit ratio is total average loans HFI (excluding warehouse loans) expressed as a percentage of total average deposits (excluding custodial deposits). Please see non-GAAP reconciliations on page 44—45. 2. Cash, investment securities and FHLB borrowing capacity expressed as a percentage of total assets. 40


CAPITAL AND LIQUIDITY Interest rate risk 1st Quarter 2021 • Flagstar’s net interest income remains asset sensitive and stable Earnings at Risk * All shocks are paralle
l and instantaneous 41


Earnings guidance(1) 1st Quarter 2021 2nd Quarter 2021 Outlook • Net interest income flat to down slightly Net interest income • Net interest margin should be relatively flat • Gain on sale revenue between $150 million and $170 million Noninterest income • All other noninterest income flat Noninterest expense • Noninterest expense of $285 million to $295 million for the second quarter of 2021 Provision for Credit • Expected to approximate net charge-offs, which are expected to be negligible 1) See cautionary statements on slide 2. 42


NON-GAAP RECONCILIATION Non-GAAP reconciliation 1st Quarter 2021 $mm Adjusted ROA, ROE and ROTCE 3 Months ended March 31, 2021 Return on Average Assets 2.0% Adjustment to remove DOJ 0.4% Adjusted return on average assets 2.3% Return on average tangible common equity 28.0% Adjustment to remove DOJ 5.0% Adjusted return on tangible commmon equity 33.0% Tangible Book Value Per Share and Tangible Common Equity to Assets Ratio As of As of March 31, 2021 December 31, 2020 Total stockholders’ equity $ 2,358 $ 2,201 Goodwill and intangible assets 155 157 Tangible book value $ 2,203 $ 2,044 Number of common shares outstanding 52,752,600 52,656,067 Tangible book value per share $ 41.77 $ 38.80 Adjusted HFI Loan-to-Deposit Ratio As of As of As of As of As of March 31, 2021 December 31, 2020 September 30, 2020 June 30, 2020 March 31, 2020 Average LHFI $ 14,915 $ 15,703 $ 14,839 $ 13,596 $ 11,823 Less: Average warehouse loans 6,395 6,948 5,697 3,785 2,310 Adjusted average LHFI $ 8,520 $ 8,755 $ 9,142 $ 9,811 $ 9,513 Average deposits $ 20,043 $ 21,068 $ 19,561 $ 17,715 $ 15,795 Less: Average custodial deposits 7,194 8,527 7,347 6,223 4,776 Adjusted average deposits $ 12,849 $ 12,541 $ 12,214 $ 11,492 $ 11,019 HFI loan-to-deposit ratio 74.4% 74.5% 75.9% 76.7% 74.9% Adjusted HFI loan-to-deposit ratio 66.3% 69.8% 74.8% 85.4% 86.3% 43


NON-GAAP RECONCILIATION Non-GAAP reconciliation (continued) 1st Quarter 2021 $mm Adjusted Total Revenues and Noninterest Expense 3 Months ended 3 Months ended March 31, 2021 December 31, 2018 Net interest income $ 152 Adjustment to remove hedging gains (29) Adjusted net interest income $ 123 Noninterest expense $ 347 Adjustment to remove DOJ 35 Adjusted noninterest expense $ 312 Income before income taxes $ 194 Adjustment to remove DOJ 35 Adjusted income before income taxes $ 229 Provision for income taxes $ 45 Adjustment to remove DOJ (8) Adjusted provision for income taxes $ 53 Net Income $ 149 Adjustment to remove DOJ 27 Adjusted net income $ 176 Adjusted Net Interest Margin 3 Months ended 3 Months ended 3 Months ended 3 Months ended March 31, 2021 December 31, 2020 September 30, 2020 June 30, 2020 Net interest margin 2.82% 2.78% 2.78% 2.86% Adjustment to LGG loans available for repurchase 0.20% 0.20% 0.16% 0.02% Adjusted net interest margin 3.02% 2.98% 2.94% 2.88% Adjusted Diluted Earnings Per Share 3 Months ended March 31, 2021 Diluted earnings per share $ 2.80 Adjustment to remove DOJ benefit (net of tax) 0.51 Adjusted diluted earnings per share $ 3.31 44