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 23, 2013
 
(Exact name of registrant as specified in its charter)
 
 
 
 
 
 
Michigan
 
1-16577
 
38-3150651
(State or other jurisdiction of
incorporation)
 
(Commission File
Number)
 
(I.R.S. 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:
 
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
 




Item 2.02
Results of Operations and Financial Condition
On April 23, 2013, Flagstar Bancorp, Inc. (the "Company") issued a press release regarding its results of operations and financial condition for the three months ended March 31, 2013. The text of the press release is included as Exhibit 99.1 to this report. The Company will include final financial statements and additional analysis for the three months ended March 31, 2013 as part of its Quarterly Report on Form 10-Q.
The information in this Item 2.02, including the exhibit attached hereto, is furnished pursuant to Item 2.02 and shall not be deemed "filed" for any other purpose, including for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that Section. The information in this Item 2.02 of this Current Report on Form 8-K shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act regardless of any general incorporation language in such filing.

Item 7.01
Regulation FD Disclosure
On April 24, 2013, the Company held a quarterly conference call to review first quarter 2013 earnings and furnished a slide presentation to accompany the call. A copy of the slide presentation used by the Company on the conference call is furnished as Exhibit 99.2 to this Current Report on Form 8-K and incorporated by reference herein.

The information in this Item 7.01, including the exhibit attached hereto, is furnished pursuant to Item 7.01 and shall not be deemed "filed" for any other purpose, including for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that Section. The information in this Item 7.01 of this Current Report on Form 8-K shall not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act regardless of any general incorporation language in such filing.




Item 9.01
Financial Statements and Exhibits
 
 
  
Exhibits.
 
 
99.1
  
Press release of Flagstar Bancorp, Inc. dated April 23, 2013
 
 
99.2
  
Flagstar Bancorp, Inc. Conference Call Presentation Slides - First Quarter 2013 Financial Results

This Current Report on Form 8-K contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Forward-looking statements, by their nature, involve estimates, projections, goals, forecasts, assumptions, risks and uncertainties that are difficult to predict and could cause actual results or outcomes to differ materially from those expressed in a forward-looking statement. Forward-looking statements contained in this press release and any information related to expectations about future events or results are based upon information available to the Company as of the date hereof. Forward-looking statements can be identified by such words as "anticipates," "intends," "plans," "seeks," "believes," "expects", "estimates," and similar references to future periods. Examples of forward-looking statements include, but are not limited to, statements made regarding the Company's current expectations, plans or forecasts of its core business drivers, credit related costs, asset quality, capital adequacy and liquidity, the implementation of the Company's business plan and growth strategies, the suspension of dividend payments on preferred stock, the deferral of interest payment on trust preferred securities, the result of improvements to the Company's servicing processes, and other similar matters. Although we believe that these forward-looking statements are based on reasonable estimates and assumptions, they are not guarantees of future performance and are subject to known and unknown risks, uncertainties, contingencies, and other factors. Accordingly, we cannot give you any assurance that our expectations will in fact occur or that actual results will not differ materially from those expressed or implied by such forward-looking statements. We caution you not to place undue reliance on any forward-looking statement and to consider all of the following uncertainties and risks, as well as those more fully discussed in the Company's filings with the Securities and Exchange Commission ("SEC"), including, but not limited to, our Form 10-K and Forms 10-Q: volatile interest rates that impact, among other things, the mortgage banking business, our ability to originate loans and sell assets at a profit, prepayment speeds and our cost of funds; changes in regulatory capital requirements or an inability to achieve or maintain desired capital ratios; actions of mortgage loan purchasers, guarantors and insurers regarding repurchases and indemnity demands and uncertainty related to foreclosure procedures; uncertainty regarding pending and threatened litigation; our ability to control credit related costs and forecast the adequacy of reserves; the imposition of regulatory enforcement actions against us; our compliance with the Supervisory Agreement with the Board of Governors of the Federal Reserve System and the Consent Order with the Office of the Comptroller of the Currency. Except to the extent required under the federal securities laws and the rules and regulations promulgated by the SEC, the Company undertakes no obligation to update any such statement to reflect events or circumstances after the date on which it is made.




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 24, 2013
 
 
 
By:
 
/s/    Paul D. Borja    
 
 
 
 
 
 
Paul D. Borja
 
 
 
 
 
 
Executive Vice-President and Chief Financial Officer



Exhibit Index
 
Exhibit No.
  
Description
 
 
99.1
  
Press release of Flagstar Bancorp, Inc. dated April 23, 2013
 
 
99.2
  
Flagstar Bancorp, Inc. Conference Call Presentation Slides - First Quarter 2013 Financial Results


Press Release First Quarter 2013


EXHIBIT 99.1

NEWS RELEASE
For more information, contact:        
Paul D. Borja
Chief Financial Officer
Bradley T. Howes
Investor Relations Officer
(248) 312-2000
                                
                                        
Flagstar Reports First Quarter 2013 Results

Delivers net income of $22.2 million, or $0.33 per common share
Continues emphasis on overall asset quality, with decreases in credit-related costs, non-performing loans and net charge-offs
Strengthens regulatory capital ratios and liquidity position

TROY, Mich. (April 23, 2013) - Flagstar Bancorp, Inc. (NYSE:FBC) ("the Company"), the holding company for Flagstar Bank, FSB (the "Bank"), today reported first quarter 2013 net income applicable to common stockholders of $22.2 million, or $0.33 per share (diluted), as compared to a net loss of $(94.2) million, or $(1.75) per share, in the fourth quarter 2012, and a net loss of $(8.7) million, or $(0.22) per share, in the first quarter 2012.

“In the past year, we have been focused on improving our risk management operations, strengthening compliance and quality control, and de-risking the balance sheet, while at the same time returning Flagstar to profitability,” said Michael Tierney, the Company's President and Chief Executive Officer. "Our results for the past quarter reflect the positive impact from this commitment as we saw a significant improvement in overall credit quality, with a decline in credit costs to the lowest level since 2008. In addition, non-performing loans decreased by eight percent, net charge-offs declined by 30 percent, and the total repurchase pipeline decreased by 17 percent. We also significantly strengthened our capital and liquidity ratios, and continued our efforts to reduce MSR concentrations, as we prepare to meet the requirements of Basel III and the regulatory-prescribed stress tests.

“In addition, we enhanced our leadership team during the quarter with the appointment of Hugh Boyle as our new Chief Risk Officer and Michael Flynn as General Counsel. We are dedicated to strategically growing our business and creating long-term shareholder value, and Hugh and Michael's leadership will help us to advance those objectives while strengthening our risk management capabilities and our culture of compliance.”

Mr. Tierney concluded, “Flagstar's revenues are heavily dependent on the mortgage banking business, with gain on loan sales, net interest income, and loan fees all driven by mortgage volume. Along with the industry, we experienced a slowdown in mortgage banking activity during the quarter, with reduced demand and tighter margins due to increased competition and excess capacity. In response to recent headwinds, we have taken steps to gain market share and improve margins, and are confident that Flagstar remains well positioned to capitalize on future

1


opportunities in the mortgage business. Additionally, we will continue to carefully and aggressively manage expenses to be in line with revenue trends, and improve company-wide efficiency."

First Quarter 2013 Highlights (as Compared to Fourth Quarter 2012)

Earned net income applicable to common stockholders of $22.2 million, as compared to a loss of $(94.2) million:
Decrease in legal and professional expense of $184.6 million, primarily related to increasing reserves for pending and threatened litigation in the fourth quarter 2012.
Decrease in total credit-related costs of $43.2 million.
Decrease in gain on loan sales of $101.4 million.
Gross mortgage rate lock commitments decreased to $12.1 billion, as compared to $16.2 billion.
Gain on loan sale margin (based on fallout-adjusted locks) decreased to 1.40 percent, as compared to 1.90 percent.
Decrease in net interest income of $18.3 million.

Strengthened capital and liquidity, improved mix of deposits:
Tier 1 leverage ratio increased by 88 basis points to 10.14 percent.
Cash on hand and interest-earning deposits increased by $1.3 billion to $2.2 billion.
Completed bulk sales of mortgage servicing rights related to $10.7 billion in underlying mortgage loans.
Consistent with emphasis on growing retail core deposits in Michigan, increased the average balance of demand deposits by 2.3 percent (12.1 percent increase as compared to first quarter 2012) and the average balance of savings deposits by 22.5 percent (43.9 percent increase as compared to first quarter 2012).

Improved credit quality:
Total non-performing loans decreased by 7.6 percent to $369.3 million.
Net charge-offs of loans held-for-investment decreased by 29.7 percent to $35.4 million.
Ratio of allowance for loan losses to non-performing loans increased to 78.5 percent.
Net charge-offs of loan repurchases decreased by 24.8 percent to $31.2 million.
Total pipeline of active loan repurchase demands (the "repurchase pipeline") decreased by 16.6 percent to $187.0 million.

Net Interest Income

First quarter 2013 net interest income decreased to $55.7 million, as compared to $73.9 million for the fourth quarter 2012 and $74.7 million for the first quarter 2012. The decrease from the prior quarter was primarily due to a decrease in interest-earnings assets. Net interest margin for the Bank decreased to 1.89 percent, as compared to 2.26 percent for the fourth quarter 2012 and 2.41 percent for the first quarter 2012.
    
As compared to the prior quarter, interest income decreased by $20.4 million, driven primarily by lower average balances of residential first mortgage loans held-for-sale and warehouse loans, both attributable to a decrease in residential first mortgage loan originations during the quarter. It also reflects a decline in commercial and commercial real estate loans related to the previously announced agreements to sell a substantial portion of the Company's commercial loan portfolio, most of which was located in the Northeast (the "Commercial Loan Sales").

Interest expense decreased by $2.2 million from the prior quarter, driven primarily by an improvement in the mix of deposits. The Company's average cost of funds for the first quarter 2013 was 1.54 percent, a decrease from 1.60 percent for the fourth quarter 2012 and from 1.76 percent for the first quarter 2012. The decrease from the prior quarter was primarily driven by a decrease in the average balance of wholesale deposits and a lower average cost of total deposits, which decreased to 0.78 percent for the first quarter 2013, as compared to 0.86 percent for the fourth quarter 2012 and 1.15 percent for the first quarter 2012.

2



Non-interest Income

First quarter 2013 non-interest income decreased to $184.9 million, as compared to $285.8 million for the fourth quarter 2012 and $221.4 million for the first quarter 2012. The decrease from the prior quarter was primarily due to lower net gain on loan sales. First quarter 2013 net gain on loan sales decreased to $137.5 million, as compared to $239.0 million for the fourth quarter 2012 and $204.9 million for the first quarter 2012. The decrease from the prior quarter was equally attributable to a decrease in the volume of mortgage rate lock commitments and a lower gain on sale margin.

The volume of gross mortgage rate lock commitments decreased to $12.1 billion for the first quarter 2013, as compared to $16.2 billion for the fourth quarter 2012 and $14.9 billion for the first quarter 2012. The decrease from the prior quarter was driven primarily by an overall industry decline in volume due to seasonality and an increase in mortgage rates during the quarter, as well as increased competition in the mortgage market. Purchase mortgage originations decreased by 19.8 percent and refinance mortgage originations decreased by 18.9 percent from the prior quarter. As part of its focus on increasing purchase mortgage originations, the Company added 10 new retail home lending centers during the quarter, bringing its total to 41 at March 31, 2013, from 31 at December 31, 2012.

Gain on loan sale margin (based on the amount of rate lock commitments net of estimated cancellations, or "fallout-adjusted locks") decreased to 1.40 percent for the first quarter 2013, as compared to 1.90 percent for the fourth quarter 2012 and 1.91 percent for the first quarter 2012. Gain on loan sale margin (based on loan sales) decreased to 1.07 percent for the first quarter 2013, as compared to 1.53 percent for the fourth quarter 2012 and 1.89 percent for the first quarter 2012. As compared to the prior quarter, the decrease in gain on sale margin was driven largely by a decrease in base margin.

Loan fees and charges decreased to $33.4 million for the first quarter 2013, as compared to $40.8 million for the fourth quarter 2012, but increased as compared to $30.0 million for the first quarter 2012. Loan fees and charges are driven by mortgage loan originations, which decreased to $12.4 billion for the first quarter 2013, as compared to $15.4 billion for the fourth quarter 2012, but increased as compared to $11.2 billion for the first quarter 2012.

Net servicing revenue, which is the combination of loan administration income (including the off-balance sheet hedges of mortgage servicing rights) and the gain (loss) on trading securities (i.e., the on-balance sheet hedges of mortgage servicing rights), decreased to $20.4 million for the first quarter 2013, as compared to $25.0 million for the fourth quarter 2012 and $32.9 million for the first quarter 2012. The decrease from the prior quarter was primarily attributable to hedging challenges associated with significant interest rate volatility during the quarter.
  
The Company completed bulk sales of mortgage servicing rights related to $10.7 billion in underlying mortgage loans during the first quarter 2013, as part of its strategy to seek opportunistic ways to reduce its concentration of mortgage servicing rights.
Non-interest Expense

Non-interest expense was $196.6 million for the first quarter 2013, as compared to $398.0 million for the fourth quarter 2012 and $188.7 million for the first quarter 2012. Excluding asset resolution expense (discussed in Credit-Related Costs and Asset Quality, below), non-interest expense would have totaled $180.1 million for the first quarter 2013, as compared to $376.7 million for the fourth quarter 2012 and $152.0 million for the first quarter 2012. The decrease from the prior quarter reflects an $184.6 million decline in legal and professional expense incurred during the fourth quarter 2012, primarily related to the increase in reserves for pending and threatened litigation.

Compensation and benefits increased to $77.2 million for the first quarter 2013, as compared to $72.1 million for the fourth quarter 2012 and $66.0 million for the first quarter 2012. The increase from the prior quarter was primarily due to the timing of payroll taxes. Commission expense decreased to $17.5 million for the first quarter

3


2013, as compared to $22.2 million for the fourth quarter 2012 and increased as compared to $15.5 million for the first quarter 2012. The decrease from the prior quarter was consistent with the decrease in mortgage loan originations during the first quarter 2013.

Warrant income was $3.5 million for the first quarter 2013, as compared to an expense of $5.4 million in the fourth quarter 2012 and an expense of $2.5 million for the first quarter 2012. As compared to the prior quarter, the decrease reflects the quarterly valuation of the outstanding warrant liability arising from the decrease in the market price of the Company's common stock at March 31, 2013, as compared to December 31, 2012.

Credit-Related Costs and Asset Quality

For the first quarter 2013, total credit-related costs (see non-GAAP reconciliation) decreased to $54.4 million, as compared to $97.6 million for the fourth quarter 2012 and $213.6 million for the first quarter 2012. The decrease from the prior quarter was primarily due to a decrease in the representation and warranty reserve - change in estimate expense, as well as a decrease in provision for loan losses.
   
The Company maintains a representation and warranty reserve on the balance sheet, which reflects an estimate of losses that may occur on both loans that have been sold or securitized into the secondary market and those currently in the repurchase pipeline, primarily to the GSEs. At March 31, 2013, the representation and warranty reserve was $185.0 million, a decrease as compared to $193.0 million at December 31, 2012. The decrease from the prior quarter was driven primarily by a decrease in the total repurchase pipeline, as well as lower loss rates resulting from two consecutive quarters of declining levels of net charge-offs of loan repurchases. There was a $10.3 million decrease in net charge-offs of loan repurchases from the prior quarter, and as a result, provisions related to the representation and warranty reserve - change in estimate decreased to $17.4 million for the first quarter 2013 as compared to $25.2 million for the fourth quarter 2012.

At March 31, 2013, the total repurchase pipeline decreased to $187.0 million, as compared to $224.2 million at December 31, 2012, as the Company continued to aggressively work through its existing population of repurchase requests. New audit file review requests increased by 3.7 percent from the prior quarter, and new repurchase demands increased by 20.9 percent from the prior quarter, which management believes is appropriately reflected in its existing loss estimation model and arises from heightened scrutiny by the GSEs as they transition to their new review process.

At March 31, 2013, the allowance for loan losses decreased to $290.0 million, as compared to $305.0 million at December 31, 2012. The decrease from the prior quarter was driven by a release of reserves associated with loans sold as part of the Commercial Loan Sales and a decrease in the consumer allowance for loan losses driven by portfolio run-off and lower loss rates. At March 31, 2013, the ratio of the allowance for loan losses to non-performing loans held-for-investment improved to 78.5 percent, as compared to 76.3 percent at December 31, 2012. There was a $14.9 million decrease in net charge-offs from the prior quarter, and as a result, provision for loan losses in the first quarter 2013 decreased to $20.4 million, as compared to $50.4 million for the fourth quarter 2012.

Total non-performing loans held-for-investment were $369.3 million at March 31, 2013, a decrease of 7.6 percent as compared to $399.8 million at December 31, 2012, and a decrease of 9.2 percent as compared to $406.6 million at March 31, 2012. The ratio of non-performing loans held-for-investment to loans held-for-investment increased to 7.79 percent at March 31, 2013, from 7.35 percent at December 31, 2012, as the level of loans held for investment decreased more than the level of total non-performing loans during the quarter.

Consumer non-performing loans decreased to $303.2 million at March 31, 2013, as compared to $313.4 million at December 31, 2012 and $314.2 million at March 31, 2012. The decrease from the prior quarter primarily reflects a reduction in greater than 90 days past due residential first mortgage loans. Commercial non-performing loans decreased to $66.1 million at March 31, 2013, as compared to $86.4 million at December 31, 2012 and $92.4 million at March 31, 2012. The decrease from the prior quarter was driven primarily by continued work-outs and individual note sales within the portfolio.

4


Asset resolution expense, which includes expenses associated with foreclosed properties (including the foreclosure claims in process with respect to government insured loans for which the Bank files claims with HUD) decreased to $16.4 million for the first quarter 2013, as compared to $21.2 million for the fourth quarter 2012 and to $36.8 million for the first quarter 2012. The decrease from the prior quarter was primarily attributable to the realization of gains on the sales of repossessed assets due to an improvement in home prices.

Balance Sheet and Funding

Total assets at March 31, 2013 were $13.1 billion, as compared to $14.1 billion at December 31, 2012. The decrease from the prior quarter was driven largely by an $859.0 million reduction in commercial loans held-for-sale, as a result of the settlements of the Commercial Loan Sales. Mortgage loans held-for-sale also decreased by $403.5 million from the prior quarter and warehouse loans decreased by $597.0 reflecting the decrease in mortgage loan originations during the first quarter 2013. Loans repurchased with government guarantees also decreased by $236.4 million. These decreases were partially offset by an increase in cash and interest-earnings deposits resulting from the proceeds from the Commercial Loan Sales and the Company's continued strengthening of its liquidity position.

Total deposits were $7.8 billion at March 31, 2013, a decrease of $447.0 million as compared to $8.3 billion at December 31, 2012. The decrease from the prior quarter was primarily attributable to decreases in company-controlled custodial deposits and certificate of deposits, partially offset by increased savings deposits, as the Company continues to shift its funding mix towards more core branch deposits.
  
At March 31, 2013, the Company had approximately $2.2 billion of cash on hand and interest-earning deposits, as compared to $1.0 billion at December 31, 2012. The Bank maintains a line of credit with the FHLB under which borrowings are collateralized by residential first mortgage loans and other assets of the Bank. At March 31, 2013, the Bank had medium-term outstanding borrowings from the FHLB of $2.9 billion, as compared to medium-term and short-term borrowings of $3.2 billion at December 31, 2012. At March 31, 2013, the Bank had an additional $0.9 billion of collateralized borrowing capacity available at the FHLB.

Capital

The Bank's regulatory capital ratios remain above current regulatory quantitative guidelines for "well-capitalized" institutions. At March 31, 2013, the Bank had a Tier 1 leverage ratio of 10.14 percent, as compared to 9.26 percent at December 31, 2012. At March 31, 2013, the Company had an equity-to-assets ratio of 9.04 percent.

Troubled Asset Relief Program ("TARP")

During the first quarter 2013, the U.S. Treasury sold to private investors all of the shares of the Company's Series C fixed rate cumulative non-convertible perpetual preferred stock ("Series C Preferred Stock") previously acquired by the U.S. Treasury as part of the TARP Capital Purchase Program. Pursuant to that program, the Company had sold the Series C Preferred Stock, as well as a warrant to purchase 645,137 shares of common stock at an exercise price of $62.00 per share (the "Treasury Warrant"), to the U.S. Treasury in January 2009 for $266.7 million. The Series C Preferred Stock qualifies as Tier 1 capital and accrues cumulative dividends quarterly at a rate of 5 percent per annum until January 2014, and 9 percent per annum thereafter. The sale did not include the Treasury Warrant, which is still held by the U.S. Treasury.

Earnings Conference Call

As previously announced, the Company's quarterly earnings conference call will be held on Wednesday, April 24, 2013 from 11 a.m. until Noon (Eastern).

It is preferred that questions are emailed in advance to investors@flagstar.com, or they may be asked during the conference call.


5


To join the call, please dial (888) 663-2254 toll free or (913) 312-1503, and use passcode: 2962176. Please call at least 10 minutes before the call is scheduled to begin. A replay will be available for five business days by calling (888) 203-1112 toll free or (719) 457-0820, using passcode: 2962176.

The conference call will also be available as a live audio cast on the Investor Relations section of flagstar.com. It will be archived on that site and will be available for replay and download. A slide presentation to accompany the conference call will also be posted on the site.

About Flagstar

Flagstar Bancorp, Inc. is the holding company for Flagstar Bank, FSB, a full-service financial institution offering a range of products and services to consumers, businesses, and homeowners. With $13.1 billion in total assets at March 31, 2013, Flagstar is the largest publicly held savings bank headquartered in the Midwest. Flagstar operates 111 banking centers, all of which are located in Michigan and 41 home lending centers located in 19 states, which primarily originate one-to-four family residential first mortgage loans. Originating loans nationwide, Flagstar is one of the leading originators of residential first mortgage loans. For more information, please visit flagstar.com.

Non-GAAP

This press release contains both financial measures based on accounting principles generally accepted in the United States (GAAP) and non-GAAP based financial measures, which are used where management believes it to be helpful in understanding the Company's results of operations or financial position. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found in this press release. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.


6


Forward Looking Statements

This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Forward-looking statements, by their nature, involve estimates, projections, goals, forecasts, assumptions, risks and uncertainties that are difficult to predict and could cause actual results or outcomes to differ materially from those expressed in a forward-looking statement. Forward-looking statements contained in this press release and any information related to expectations about future events or results are based upon information available to the Company as of the date hereof. Forward-looking statements can be identified by such words as "anticipates," "intends," "plans," "seeks," "believes," "expects", "estimates," and similar references to future periods. Examples of forward-looking statements include, but are not limited to, statements made regarding the Company's current expectations, plans or forecasts of its core business drivers, credit related costs, asset quality, capital adequacy and liquidity, the implementation of the Company's business plan and growth strategies, the suspension of dividend payments on preferred stock, the deferral of interest payment on trust preferred securities, the result of improvements to the Company's servicing processes, and other similar matters. Although we believe that these forward-looking statements are based on reasonable estimates and assumptions, they are not guarantees of future performance and are subject to known and unknown risks, uncertainties, contingencies, and other factors. Accordingly, we cannot give you any assurance that our expectations will in fact occur or that actual results will not differ materially from those expressed or implied by such forward-looking statements. We caution you not to place undue reliance on any forward-looking statement and to consider all of the following uncertainties and risks, as well as those more fully discussed in the Company's filings with the Securities and Exchange Commission ("SEC"), including, but not limited to, our Form 10-K and Forms 10-Q: volatile interest rates that impact, among other things, the mortgage banking business, our ability to originate loans and sell assets at a profit, prepayment speeds and our cost of funds; changes in regulatory capital requirements or an inability to achieve or maintain desired capital ratios; actions of mortgage loan purchasers, guarantors and insurers regarding repurchases and indemnity demands and uncertainty related to foreclosure procedures; uncertainty regarding pending and threatened litigation; our ability to control credit related costs and forecast the adequacy of reserves; the imposition of regulatory enforcement actions against us; our compliance with the Supervisory Agreement with the Board of Governors of the Federal Reserve System and the Consent Order with the Office of the Comptroller of the Currency. Except to the extent required under the federal securities laws and the rules and regulations promulgated by the SEC, the Company undertakes no obligation to update any such statement to reflect events or circumstances after the date on which it is made.



7


Flagstar Bancorp, Inc.
Consolidated Statements of Financial Condition
(In thousands)
 
March 31, 2013
 
December 31, 2012
 
March 31, 2012
Assets
(Unaudited)
 
 
 
(Unaudited)
    Cash and cash items
$
50,840

 
$
38,070

 
$
46,946

    Interest-earning deposits
2,179,846

 
914,723

 
711,002

         Cash and cash equivalents
2,230,686

 
952,793

 
757,948

    Securities classified as trading
170,139

 
170,086

 
307,355

    Securities classified as available-for-sale
169,827

 
184,445

 
448,147

Loans held-for-sale
2,677,239

 
3,939,720

 
2,492,855

    Loans repurchased with government guarantees
1,604,906

 
1,841,342

 
2,002,999

Loans held-for-investment
4,743,266

 
5,438,101

 
6,659,538

         Less: allowance for loan losses
(290,000
)
 
(305,000
)
 
(281,000
)
         Loans held-for-investment, net
4,453,266

 
5,133,101

 
6,378,538

             Total interest-earning assets
11,255,223

 
12,183,417

 
12,340,896

    Accrued interest receivable
81,056

 
91,992

 
108,143

    Repossessed assets, net
114,356

 
120,732

 
108,686

    Federal Home Loan Bank stock
301,737

 
301,737

 
301,737

    Premises and equipment, net
223,276

 
219,059

 
206,573

    Mortgage servicing rights
727,207

 
710,791

 
596,830

    Other assets
340,455

 
416,214

 
332,538

             Total assets
$
13,094,150

 
$
14,082,012

 
$
14,042,349

Liabilities and Stockholders' Equity
 
 
 
 
 
    Deposits
$
7,847,291

 
$
8,294,295

 
$
8,599,153

    Federal Home Loan Bank advances
2,900,000

 
3,180,000

 
3,591,000

    Long-term debt
247,435

 
247,435

 
248,585

            Total interest-bearing liabilities
10,994,726

 
11,721,730

 
12,438,738

    Accrued interest payable
15,402

 
13,420

 
10,124

    Representation and warranty reserve
185,000

 
193,000

 
142,000

Other liabilities
714,994

 
994,500

 
364,066

            Total liabilities
11,910,122

 
12,922,650

 
12,954,928

    Stockholders' Equity
 
 
 
 
 
Preferred stock
261,828

 
260,390

 
256,139

Common stock (1)
561

 
559

 
557

    Additional paid in capital (1)
1,476,624

 
1,476,569

 
1,472,490

    Accumulated other comprehensive (loss) income
(656
)
 
(1,658
)
 
6,167

    Accumulated deficit
(554,329
)
 
(576,498
)
 
(647,932
)
            Total stockholders' equity
1,184,028

 
1,159,362

 
1,087,421

            Total liabilities and stockholders' equity
$
13,094,150

 
$
14,082,012

 
$
14,042,349


(1)
March 31, 2012 has been restated for a one-for-ten reverse stock split announced September 27, 2012 and began trading on October 11, 2012.


8


Flagstar Bancorp, Inc.
 Consolidated Statements of Operations
 (In thousands, except per share data)
 
 
For the Three Months Ended
 
March 31, 2013
 
December 31, 2012
 
March 31, 2012
 
(Unaudited)
 
(Unaudited)
 
(Unaudited)
 Interest Income
 
 
 
 
 
 Loans
$
91,950

 
$
112,464

 
$
113,908

 Securities classified as available-for-sale or trading
2,094

 
2,277

 
8,571

 Interest-earning deposits and other
946

 
674

 
412

    Total interest income
94,990

 
115,415

 
122,891

 Interest Expense
 
 
 
 
 
 Deposits
13,508

 
15,017

 
18,986

 FHLB advances
24,161

 
24,756

 
27,394

 Other
1,652

 
1,701

 
1,778

    Total interest expense
39,321

 
41,474

 
48,158

 Net interest income
55,669

 
73,941

 
74,733

 Provision for loan losses
20,415

 
50,351

 
114,673

 Net interest income (expense) after provision for loan losses
35,254

 
23,590

 
(39,940
)
 Non-Interest Income
 
 
 
 
 
 Loan fees and charges
33,360

 
40,793

 
29,973

 Deposit fees and charges
5,146

 
5,154

 
4,923

 Loan administration
20,356

 
25,010

 
38,885

 Gain (loss) on trading securities
51

 
12

 
(5,971
)
 Loss on transferors' interest
(174
)
 
(780
)
 
(409
)
 Net gain on loan sales
137,540

 
238,953

 
204,853

 Net loss on sales of mortgage servicing rights
(4,219
)
 
(7,687
)
 
(2,317
)
 Net (loss) gain on securities available-for-sale

 
(310
)
 
310

 Net gain on sale of assets
958

 

 
27

    Total other-than-temporary impairment gain

 

 
3,872

Loss recognized in other comprehensive income before taxes

 

 
(5,047
)
 Net impairment losses recognized in earnings

 

 
(1,175
)
 Representation and warranty reserve - change in estimate
(17,395
)
 
(25,231
)
 
(60,538
)
 Other fees and charges, net
9,320

 
9,881

 
12,816

    Total non-interest income
184,943

 
285,795

 
221,377

 Non-Interest Expense
 
 
 
 
 
 Compensation and benefits
77,208

 
72,081

 
65,989

 Commissions
17,462

 
22,154

 
15,466

 Occupancy and equipment
19,375

 
19,184

 
16,950

 Asset resolution
16,445

 
21,241

 
36,770

 Federal insurance premiums
11,240

 
12,202

 
12,324

 Other taxes
897

 
856

 
946

 Warrant (income) expense
(3,500
)
 
5,422

 
2,549

Loan processing expense
17,111

 
18,590

 
10,686

Legal and professional expense
28,839

 
213,413

 
16,817

General and administrative
11,513

 
12,819

 
10,249

    Total non-interest expense
196,590

 
397,962

 
188,746


9


Flagstar Bancorp, Inc.
 Consolidated Statements of Operations
 (In thousands, except per share data)
 
 
For the Three Months Ended
 
March 31, 2013
 
December 31, 2012
 
March 31, 2012
 Income (loss) before federal income taxes
23,607

 
(88,577
)
 
(7,309
)
 Provision for federal income taxes

 
4,235

 

 Net income (loss)
23,607

 
(92,812
)
 
(7,309
)
 Preferred stock dividend/accretion (1)
(1,438
)
 
(1,417
)
 
(1,407
)
 Net income (loss) applicable to common stockholders
$
22,169

 
$
(94,229
)
 
$
(8,716
)
 Income (loss) per share
 
 
 
 
 
       Basic (2)
$
0.33

 
$
(1.75
)
 
$
(0.22
)
       Diluted (2)
$
0.33

 
$
(1.75
)
 
$
(0.22
)

(1)
The preferred stock dividend/accretion represents only the accretion. On January 27, 2012, the Company elected to defer payment of dividends and interest on the preferred stock.
(2)
The three months ended March 31, 2012 has been restated for a one-for-ten reverse stock split announced September 27, 2012 and began trading on October 11, 2012.

10



Flagstar Bancorp, Inc.
Summary of Selected Consolidated Financial and Statistical Data
(Dollars in thousands, except per share data)
(Unaudited)
 
For the Three Months Ended
 
March 31, 2013
 
December 31, 2012
 
March 31, 2012
Return on average assets
0.65
%
 
(2.51
)%
 
(0.25
)%
Return on average equity
7.55
%
 
(29.26
)%
 
(3.07
)%
Efficiency ratio
81.7
%
 
110.6
 %
 
63.7
 %
Efficiency ratio (credit-adjusted) (1)
69.8
%
 
97.9
 %
 
42.6
 %
Equity-to-assets ratio (average for the period)
8.57
%
 
8.58
 %
 
8.00
 %
Mortgage loans originated (2)
$
12,423,364

 
$
15,356,795

 
$
11,169,409

Other loans originated
$
74,739

 
$
113,458

 
$
271,445

Mortgage loans sold and securitized
$
12,822,879

 
$
15,610,590

 
$
10,829,798

Interest rate spread - bank only (3)
1.64
%
 
1.87
 %
 
2.15
 %
Net interest margin - bank only (4)
1.89
%
 
2.26
 %
 
2.41
 %
Interest rate spread - consolidated (3)
1.61
%
 
1.84
 %
 
2.13
 %
Net interest margin - consolidated (4)
1.83
%
 
2.21
 %
 
2.35
 %
Average common shares outstanding (5)
55,973,888

 
55,842,910

 
55,662,305

Average fully diluted shares outstanding (5)
56,415,057

 
55,842,910

 
55,662,305

Average interest-earning assets
$
12,075,212

 
$
13,349,991

 
$
12,640,668

Average interest paying liabilities
$
10,338,644

 
$
10,318,385

 
$
10,994,258

Average stockholder's equity
$
1,173,982

 
$
1,288,332

 
$
1,136,618

Charge-offs to average investment loans (annualized)
2.93
%
 
3.18
 %
 
8.99
 %
 
March 31, 2013
 
December 31, 2012
 
March 31, 2012
Equity-to-assets ratio
9.04
%
 
8.23
%
 
7.74
%
Book value per common share (5)
$
16.46

 
$
16.12

 
$
14.92

Number of common shares outstanding (5)
56,033,204

 
55,863,053

 
55,713,281

Mortgage loans serviced for others
$
73,933,296

 
$
76,821,222

 
$
68,207,554

Weighted average service fee (basis points)
29.3

 
29.2

 
28.7

Capitalized value of mortgage servicing rights
0.98
%
 
0.93
%
 
0.88
%
Ratio of allowance for loan losses to non-performing loans held-for-investment (6)
78.5
%
 
76.3
%
 
69.1
%
Ratio of allowance for loan losses to loans held-for-investment (6)
6.11
%
 
5.61
%
 
4.22
%
Ratio of non-performing assets to total assets (bank only)
3.70
%
 
3.70
%
 
3.67
%
Number of bank branches
111

 
111

 
113

Number of loan origination centers
41

 
31

 
28

Number of employees (excluding loan officers and account executives)
3,456

 
3,328

 
2,970

Number of loan officers and account executives
322

 
334

 
311

(1)
See Non-GAAP reconciliation.
(2)
Includes residential first mortgage and second mortgage loans.
(3)
Interest rate spread is the difference between the annualized average yield earned on average interest-earning assets for the period and the annualized average rate of interest paid on average interest-bearing liabilities for the period.
(4)
Net interest margin is the annualized effect of the net interest income divided by that period's average interest-earning assets.
(5)
Restated for a 1-for-10 reverse stock split announced September 27, 2012 and began trading on October 11, 2012.
(6)
Bank only and does not include non-performing loans held-for-sale.



11


Regulatory Capital
(Dollars in thousands)
(Unaudited)
 
March 31, 2013
 
December 31, 2012
 
March 31, 2012
 
Amount
Ratio
 
Amount
Ratio
 
Amount
Ratio
Tier 1 leverage (to adjusted tangible assets) (1)
1,318,770

10.14
%
 
1,295,841

9.26
%
 
1,207,237

8.64
%
Total adjusted tangible asset base
13,007,694

 
 
13,999,636

 
 
13,964,948

 
Tier 1 capital (to risk weighted assets) (1)
1,318,770

21.24
%
 
1,295,841

15.90
%
 
1,207,237

14.78
%
Total capital (to risk weighted assets) (1)
1,398,914

22.53
%
 
1,400,126

17.18
%
 
1,311,568

16.06
%
Risk weighted asset base
6,208,327

 
 
8,146,771

 
 
8,168,050

 

(1)
Based on adjusted total assets for purposes of core capital and risk-weighted assets for purposes of total risk-based capital. These ratios are applicable to the Bank only.

Loan Originations
(Dollars in thousands)
(Unaudited)
 
For the Three Months Ended
 
March 31, 2013
 
December 31, 2012
 
March 31, 2012
Consumer loans
 
 
 
 
 
 
 
 
    Mortgage (1)
$
12,423,364

99.4
%
 
$
15,356,795

99.3
%
 
$
11,169,409

97.7
%
    Other consumer (2)
8,553

0.1
%
 
7,589

%
 
4,479

%
Total consumer loans
12,431,917

99.5
%
 
15,364,384

99.3
%
 
11,173,888

97.7
%
Commercial loans (3)
66,186

0.5
%
 
105,869

0.7
%
 
266,966

2.3
%
Total loan originations
$
12,498,103

100.0
%
 
$
15,470,253

100.0
%
 
$
11,440,854

100.0
%
 
 
 
 
 
 
(1)
Includes residential first mortgage and second mortgage loans.
(2)
Other consumer loans include: warehouse lending, HELOC and other consumer loans.
(3)
Commercial loans include: commercial real estate, commercial and industrial and commercial lease financing loans.

Loans Held-for-Investment
(Dollars in thousands)
(Unaudited)
 
March 31, 2013
 
December 31, 2012
 
March 31, 2012
Consumer loans
 
 
 
 
 
 
 
 
Residential first mortgage
$
2,991,394

63.1
%
 
$
3,009,251

55.3
%
 
$
3,304,889

49.7
%
Second mortgage
112,385

2.4
%
 
114,885

2.1
%
 
132,463

2.0
%
Warehouse lending
750,765

15.8
%
 
1,347,727

24.8
%
 
1,104,205

16.6
%
HELOC
167,815

3.5
%
 
179,447

3.3
%
 
209,228

3.1
%
Other
44,488

0.9
%
 
49,611

0.9
%
 
62,111

0.9
%
    Total consumer loans
4,066,847

85.7
%
 
4,700,921

86.4
%
 
4,812,896

72.3
%
Commercial loans
 
 
 
 
 
 
 
 
Commercial real estate
562,916

11.9
%
 
640,315

11.8
%
 
1,157,911

17.3
%
Commercial and industrial
107,688

2.3
%
 
90,565

1.7
%
 
544,481

8.2
%
Commercial lease financing
5,815

0.1
%
 
6,300

0.1
%
 
144,250

2.2
%
    Total commercial loans
676,419

14.3
%
 
737,180

13.6
%
 
1,846,642

27.7
%
     Total loans held-for-investment
$
4,743,266

100.0
%
 
$
5,438,101

100.0
%
 
$
6,659,538

100.0
%


12


Allowance for Loan Losses
(Dollars in thousands)
(Unaudited)
 
For the Three Months Ended
 
March 31, 2013
 
December 31, 2012
 
March 31, 2012
Beginning balance
$
305,000

 
$
305,000

 
$
318,000

Provision for loan losses
20,415

 
50,351

 
114,673

Charge-offs
 
 
 
 
 
Consumer loans
 
 
 
 
 
     Residential first mortgage
(25,692
)
 
(33,802
)
 
(95,432
)
     Second mortgage
(1,955
)
 
(5,423
)
 
(5,283
)
     HELOC
(2,061
)
 
(5,000
)
 
(6,419
)
     Other
(699
)
 
(1,613
)
 
(1,190
)
 Total consumer loans
(30,407
)
 
(45,838
)
 
(108,324
)
Commercial loans
 
 
 
 
 
     Commercial real estate
(13,162
)
 
(13,443
)
 
(45,033
)
     Commercial and industrial

 
(3,011
)
 
(1,581
)
     Commercial lease financing

 
(1,191
)
 

 Total commercial loans
(13,162
)
 
(17,645
)
 
(46,614
)
Total charge-offs
(43,569
)
 
(63,483
)
 
(154,938
)
Recoveries
 
 
 
 
 
Consumer loans
 
 
 
 
 
     Residential first mortgage
5,353

 
5,530

 
550

     Second mortgage
390

 
196

 
249

     HELOC
105

 
67

 
257

     Other
454

 
731

 
212

Total consumer loans
6,302

 
6,524

 
1,268

Commercial loans
 
 
 
 
 
     Commercial real estate
1,843

 
6,600

 
1,992

     Commercial and industrial
9

 
8

 
5

Total commercial loans
1,852

 
6,608

 
1,997

Total recoveries
8,154

 
13,132

 
3,265

Charge-offs, net of recoveries
(35,415
)
 
(50,351
)
 
(151,673
)
Ending balance
$
290,000

 
$
305,000

 
$
281,000

Net charge-off ratio (annualized)
2.93
%
 
3.18
%
 
8.99
%



13


Representation and Warranty Reserve
(Dollars in thousands)
(Unaudited)
 
 
For the Three Months Ended
 
March 31, 2013
 
December 31, 2012
 
March 31, 2012
 
(Dollars in thousands)
 Balance, beginning of period
$
193,000

 
$
202,000

 
$
120,000

 Provision
 
 
 
 
 
 
Charged to gain on sale for current loan sales
5,817

 
7,285

 
5,051

 
Charged to representation and warranty reserve - change in estimate
17,396

 
25,231

 
60,538

 
Total
23,213

 
32,516

 
65,589

 Charge-offs, net
(31,213
)
 
(41,516
)
 
(43,589
)
 Balance, end of period
$
185,000

 
$
193,000

 
$
142,000


Composition of Allowance for Loan Losses
(In thousands)
(Unaudited)
March 31, 2013
Collectively Evaluated Reserves (1)
 
Individually Evaluated Reserves (2)
 
Total
Consumer loans
 
 
 
 
 
   Residential first mortgage
$
63,144

 
$
150,932

 
$
214,076

   Second mortgage
12,839

 
7,844

 
20,683

   Warehouse lending 
532

 

 
532

   HELOC
14,835

 
3,283

 
18,118

   Other
2,215

 

 
2,215

Total consumer loans
93,565

 
162,059

 
255,624

Commercial loans
 
 
 
 
 
   Commercial real estate
32,521

 
199

 
32,720

   Commercial and industrial
1,562

 
10

 
1,572

   Commercial lease financing 
84

 

 
84

Total commercial loans
34,167

 
209

 
34,376

Total allowance for loan losses
$
127,732

 
$
162,268

 
$
290,000

December 31, 2012
 
 
 
 
 
Consumer loans
 
 
 
 
 
   Residential first mortgage
$
68,685

 
$
150,545

 
$
219,230

   Second mortgage
13,173

 
7,028

 
20,201

   Warehouse lending 
899

 

 
899

   HELOC
15,274

 
3,074

 
18,348

   Other
2,040

 

 
2,040

Total consumer loans
100,071

 
160,647

 
260,718

Commercial loans
 
 
 
 
 
   Commercial real estate
38,772

 
2,538

 
41,310

   Commercial and industrial
2,868

 
10

 
2,878

   Commercial lease financing 
94

 

 
94

Total commercial loans
41,734

 
2,548

 
44,282

Total allowance for loan losses
$
141,805

 
$
163,195

 
$
305,000


(1)
Represents loans collectively evaluated for impairment in accordance with ASC 450-20, Loss Contingencies (formerly FAS 5), and pursuant to amendments by ASU 2010-20 regarding allowance for unimpaired loans.
(2)
Represents loans individually evaluated for impairment in accordance with ASC 310-10, Receivables (formerly FAS 114), and pursuant to amendments by ASU 2010-20 regarding allowance for impaired loans.


14


Non-Performing Loans and Assets
(Dollars in thousands)
(Unaudited)
 
March 31, 2013
 
December 31, 2012
 
March 31, 2012
Non-performing loans held-for-investment
$
369,303

 
$
399,825

 
$
406,583

Real estate and other non-performing assets, net
114,356

 
120,732

 
108,686

Non‑performing assets held-for-investment, net
483,659

 
520,557

 
515,269

Non-performing loans held-for-sale
394

 
1,835

 
2,842

Total non-performing assets including loans held-for-sale
$
484,053

 
$
522,392

 
$
518,111

Ratio of non-performing assets to total assets (Bank only)
3.70
%
 
3.70
%
 
3.67
%
Ratio of non-performing loans held-for-investment to loans held-for-investment
7.79
%
 
7.35
%
 
6.11
%
Ratio of non-performing assets to loans held for investment and repossessed assets
9.96
%
 
9.36
%
 
7.61
%



Asset Quality - Loans Held-for-Investment
(Dollars in thousands)
(Unaudited)
 
30-59 Days Past Due
60-89 Days Past Due
Greater than 90 days
Total Past Due
Total Investment Loans
March 31, 2013
 
 
 
 
 
Consumer loans (1)
$
58,368

$
20,481

$
303,168

$
382,017

$
4,066,847

Commercial loans (1)
1,465

6,400

66,135

74,000

676,419

     Total loans
$
59,833

$
26,881

$
369,303

$
456,017

$
4,743,266

December 31, 2012
 
 
 
 
 
Consumer loans (1)
$
66,687

$
18,578

$
313,418

$
398,683

$
4,700,921

Commercial loans (1)
6,979

6,990

86,408

100,377

737,180

     Total loans
$
73,666

$
25,568

$
399,826

$
499,060

$
5,438,101

March 31, 2012
 
 
 
 
 
Consumer loans (1)
$
67,719

$
39,133

$
314,232

$
421,084

$
4,812,896

Commercial loans (1)
11,133

8,802

92,351

112,286

1,846,642

     Total loans
$
78,852

$
47,935

$
406,583

$
533,370

$
6,659,538


(1)
Consumer loans include: residential first mortgage, second mortgage, warehouse lending, HELOC, and other consumer loans. Commercial loans include: commercial real estate, commercial and industrial, and commercial lease financing loans.


15


Troubled Debt Restructurings
(Dollars in thousands)
(Unaudited)
 
TDRs
 
Performing
 
Non-performing
 
Total
March 31, 2013
(Dollars in thousands)
Consumer loans
$
598,041

 
$
144,469

 
$
742,510

Commercial loans

 
1,446

 
1,446

Total TDRs
$
598,041

 
$
145,915

 
$
743,956

 
 
 
 
 
 
December 31, 2012
 
 
 
 
 
Consumer loans
$
588,475

 
$
143,188

 
$
731,663

Commercial loans
1,287

 
2,056

 
3,343

Total TDRs
$
589,762

 
$
145,244

 
$
735,006

 
 
 
 
 
 
March 31, 2012
 
 
 
 
 
Consumer loans
$
528,537

 
$
141,769

 
$
670,306

Commercial loans
8,700

 
17,360

 
26,060

Total TDRs
$
537,237

 
$
159,129

 
$
696,366


Gain on Loan Sales and Securitizations
(Dollars in thousands)
(Unaudited)
 
For the Three Months Ended
 
March 31, 2013
 
December 31, 2012
 
March 31, 2012
Description
 
 
 
 
 
 
 
 
Valuation gain (loss)
 
 
 
 
 
 
 
 
Value of interest rate locks
$
(35,327
)
(0.28
)%
 
$
(143,364
)
(0.94
)%
 
$
(2,700
)
(0.02
)%
Value of forward sales
(4,339
)
(0.03
)%
 
123,602

0.82
 %
 
43,810

0.40
 %
Fair value of loans held-for-sale
87,644

0.68
 %
 
213,512

1.38
 %
 
121,066

1.12
 %
LOCOM adjustments on loans held-for-investment
(1,797
)
(0.01
)%
 
(1,103
)
(0.01
)%
 
(21
)
 %
Total valuation gains
46,181

0.36
 %
 
192,647

1.25
 %
 
162,155

1.50
 %
 
 
 
 
 
 
 
 
 
Sales gains (losses)
 
 
 
 
 
 
 
 
Marketing gains, net of adjustments
25,859

0.21
 %
 
161,163

1.03
 %
 
131,512

1.21
 %
Pair-off (losses) gains
71,317

0.55
 %
 
(107,572
)
(0.70
)%
 
(83,763
)
(0.77
)%
Provision for representation and warranty reserve
(5,817
)
(0.05
)%
 
(7,285
)
(0.05
)%
 
(5,051
)
(0.05
)%
Total sales gains
91,359

0.71
 %
 
46,306

0.28
 %
 
42,698

0.39
 %
Total gain on loan sales and securitizations
$
137,540

 
 
$
238,953

 
 
$
204,853

 
Total mortgage rate lock commitments (gross)
$
12,142,000

 
 
$
16,242,000

 
 
$
14,867,000

 
Total loan sales and securitizations
$
12,822,879

1.07
 %
 
$
15,610,590

1.53
 %
 
$
10,829,798

1.89
 %
Total mortgage rate lock commitments (fallout adjusted) (1)
$
9,848,417

1.40
 %
 
$
12,587,980

1.90
 %
 
$
10,725,618

1.91
 %
 
 
 
 
 
 
(1)
Fallout adjusted mortgage rate lock commitments are adjusted by a percentage of mortgage loans in the pipeline that are not expected to close based on previous historical experience and the level of interest rates. The net margin is based on net gain on loan sales to fallout adjusted mortgage rate lock commitments.


16


Average Balances, Yields and Rates
(Dollars in thousands)
(Unaudited)
 
For the Three Months Ended
 
March 31, 2013
 
December 31, 2012
 
March 31, 2012
 
Average Balance
Annualized
Yield/Rate
 
Average Balance
Annualized
Yield/Rate
 
Average Balance
Annualized
Yield/Rate
Interest-Earning Assets
 
Loans held-for-sale
$
3,616,195

2.97
%
 
$
3,633,394

3.47
%
 
$
2,393,725

4.05
%
Loans repurchased with government guarantees
1,774,235

3.38
%
 
1,912,722

3.13
%
 
2,022,338

3.38
%
Loans held-for-investment
 
 
 
 
 
 
 
 
Consumer loans (1)
4,136,420

4.15
%
 
4,608,093

4.28
%
 
4,990,828

4.33
%
Commercial loans (1)
698,269

4.27
%
 
1,722,609

3.78
%
 
1,755,917

4.21
%
Loans held-for-investment
4,834,689

4.16
%
 
6,330,702

4.14
%
 
6,746,745

4.30
%
Securities classified as available-for-sale or trading
348,525

2.41
%
 
362,819

2.51
%
 
786,275

4.36
%
Interest-earning deposits and other
1,501,568

0.26
%
 
1,110,354

0.24
%
 
691,585

0.24
%
Total interest-earning assets
12,075,212

3.15
%
 
13,349,991

3.44
%
 
12,640,668

3.89
%
Other assets
1,617,359

 
 
1,670,359

 
 
1,566,508

 
Total assets
$
13,692,571

 
 
$
15,020,350

 
 
$
14,207,176

 
Interest-Bearing Liabilities
 
 
 
 
 
 
 
 
Retail deposits
 
 
 
 
 
 
 
 
Demand deposits
$
388,466

0.25
%
 
$
379,721

0.28
%
 
$
346,542

0.26
%
Savings deposits
2,316,859

0.75
%
 
1,891,901

0.68
%
 
1,610,197

0.83
%
Money market deposits
387,699

0.35
%
 
427,792

0.43
%
 
486,907

0.54
%
Certificate of deposits
2,931,558

0.90
%
 
3,253,647

1.02
%
 
3,084,884

1.35
%
Total retail deposits
6,024,582

0.76
%
 
5,953,061

0.82
%
 
5,528,530

1.06
%
Government deposits
 
 
 
 
 
 
 
 
Demand deposits
98,442

0.44
%
 
81,555

0.44
%
 
98,724

0.49
%
Savings deposits
308,811

0.47
%
 
287,289

0.51
%
 
270,601

0.57
%
Certificate of deposits
471,842

0.60
%
 
444,668

0.62
%
 
392,656

0.66
%
Total government deposits
879,095

0.53
%
 
813,512

0.56
%
 
761,981

0.61
%
Wholesale deposits
81,976

4.92
%
 
157,960

4.04
%
 
357,532

3.74
%
Total deposits
6,985,653

0.78
%
 
6,924,533

0.86
%
 
6,648,043

1.15
%
FHLB advances
3,105,556

3.16
%
 
3,145,341

3.13
%
 
4,097,630

2.69
%
Other
247,435

2.71
%
 
248,511

2.72
%
 
248,585

2.88
%
Total interest-bearing liabilities
10,338,644

1.54
%
 
10,318,385

1.60
%
 
10,994,258

1.76
%
Other liabilities (2)
2,179,945

 
 
3,413,633

 
 
2,076,300

 
Stockholder's equity
1,173,982

 
 
1,288,332

 
 
1,136,618

 
Total liabilities and stockholder's equity
$
13,692,571

 
 
$
15,020,350

 
 
$
14,207,176

 

(1)
Consumer loans include: residential first mortgage, second mortgage, warehouse lending, HELOC and other consumer loans. Commercial loans include: commercial real estate, commercial and industrial, and commercial lease financing loans.
(2)
Includes company controlled deposits that arise due to the servicing of loans for others, which do not bear interest.
 
 









17


Non-GAAP Reconciliation
(Dollars in thousands)
(Unaudited)
 
For the Three Months Ended
 
March 31, 2013
 
December 31, 2012
 
March 31, 2012
Pre-tax, pre-credit-cost revenue
 
 
 
 
 
Income (loss) before tax provision
$
23,607

 
$
(88,577
)
 
$
(7,309
)
Add back
 
 
 
 
 
Provision for loan losses
20,415

 
50,351

 
114,673

Asset resolution
16,445

 
21,241

 
36,770

Other than temporary impairment on AFS investments

 

 
1,175

Representation and warranty reserve - change in estimate
17,395

 
25,231

 
60,538

Write down of residual interest
174

 
780

 
409

Total credit-related costs
54,429

 
97,603

 
213,565

Pre-tax, pre-credit-cost net revenue
$
78,036

 
$
9,026

 
$
206,256

 
 
 
 
 
 
Efficiency ratio (credit-adjusted)
 
 
 
 
 
Net interest income (a)
$
55,669

 
$
73,941

 
$
74,733

Non-interest income (b)
184,943

 
285,795

 
221,377

Add: Representation and warranty reserve - change in estimate (d)
17,395

 
25,231

 
60,538

Adjusted income
258,007

 
384,967

 
356,648

Non-interest expense (c)
196,590

 
397,962

 
188,746

Less: Asset resolution expense (e)
(16,445
)
 
(21,241
)
 
(36,770
)
Adjusted non-interest expense
$
180,145

 
$
376,721

 
$
151,976

Efficiency ratio (c/(a+b)) (1)
81.7
%
 
110.6
%
 
63.7
%
Efficiency ratio (credit-adjusted) ((c-e)/((a+b)+d))) (1)
69.8
%
 
97.9
%
 
42.6
%
 
March 31, 2013
 
December 31, 2012
 
March 31, 2012
Non-performing assets / Tier 1 capital + allowance for loan losses
 
 
 
 
 
Non-performing assets
$
483,659

 
$
520,557

 
$
515,269

 
 
 
 
 
 
Tier 1 capital (2)
$
1,318,770

 
$
1,295,841

 
$
1,207,237

Allowance for loan losses
290,000

 
305,000

 
281,000

Tier 1 capital + allowance for loan losses
$
1,608,770

 
$
1,600,841

 
$
1,488,237

Non-performing assets / Tier 1 capital + allowance for loan losses
30.1
%
 
32.5
%
 
34.6
%

(1)
Ratios include expenses related to the legal accruals for pending and threatened litigation, including amounts paid in anticipation of a future settlement, of $188.5 million during the three months ended December 31, 2012.
(2)
Represents Tier 1 capital for Bank.


18

fbcq12013presentationsli
Earnings Presentation First Quarter 2013 April 24, 2013


 
Cautionary Statement This presentation contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Forward-looking statements, by their nature, involve estimates, projections, goals, forecasts, assumptions, risks and uncertainties that could cause actual results or outcomes to differ materially from those expressed in a forward-looking statement. Examples of forward-looking statements include statements regarding our expectations, beliefs, plans, goals, objectives and future financial or other performance. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates" and variations of such words and similar expressions are intended to identify such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made. Except to fulfill our obligations under the U.S. securities laws, we undertake no obligation to update any such statement to reflect events or circumstances after the date on which it is made. There are a number of important factors that could cause future results to differ materially from historical performance and these forward-looking statements. Factors that might cause such a difference include: 1. Volatile interest rates that impact, amongst other things, (i) the mortgage business, (ii) our ability to originate loans and sell assets at a profit, (iii) prepayment speeds and (iv) our cost of funds, could adversely affect earnings, and our ability to pay dividends to stockholders; 2. Competitive factors for mortgage loan originations could negatively impact gain on loan sale margins; 3. Competition from banking and non-banking companies for deposits and loans can affect our earnings, gain on sale margins and market share; 4. Changes in the regulation of financial services companies and government-sponsored housing enterprises, and in particular, declines in the liquidity of the residential mortgage loan secondary market, could adversely affect our business; 5. Changes in regulatory capital requirements or an inability to achieve or maintain desired capital ratios could adversely affect our earnings opportunities and our ability to originate certain types of loans, as well as our ability to sell certain types of assets for fair market value; 6. General business and economic conditions, including unemployment rates, movements in interest rates, the slope of the yield curve, any increase in mortgage fraud and other related criminal activity and the further decline of asset values in certain geographic markets, may significantly affect our business activities, loan losses, reserves, earnings and business prospects; 7. Repurchases and indemnity demands by mortgage loan purchasers, guarantors and insurers, uncertainty related to foreclosure procedures, and the outcome of current and future legal or regulatory proceedings could result in unforeseen consequences and adversely affect our business activities and earnings; 8. The Dodd-Frank Wall Street Reform and Consumer Protection Act has resulted in the elimination of the Office of Thrift Supervision (the "OTS"), tightening of capital standards, and the creation of a new Consumer Financial Protection Bureau and has resulted, or will result, in new laws and regulations, such as the emerging mortgage servicing standards, that are expected to increase our costs of operations. In addition, the change to the Board of Governors of the Federal Reserve System (the "Federal Reserve") as our primary federal regulator and to the Office of the Comptroller of the Currency (the "OCC") as Flagstar Bank, FSB's (the "Bank") primary federal regulator may result in interpretations affecting our operations different than those of the OTS; 9. Both the volume and the nature of consumer actions and other forms of litigation against financial institutions have increased and to the extent that such actions are brought against us or threatened, the cost of defending such suits as well as potential exposure could increase our costs of operations; 10. Our compliance with the terms and conditions of the agreement with the U.S. Department of Justice, the impact of performance and enforcement of commitments under, and provisions contained in the agreement, and our accuracy and ability to estimate the financial impact of that agreement, including the fair value of the future payments required, could accelerate our litigation settlement expenses relating thereto; 11. Our, or the Bank's, failure to comply with the terms and conditions of the Supervisory Agreement with the Federal Reserve or the Consent Order with the OCC, respectively, could result in further enforcement actions against us, which could negatively affect our results of operations and financial condition; and 12. The downgrade of the long-term credit rating of the U.S. by one or more ratings agencies could materially affect global and domestic financial markets and economic conditions, which may affect our business activities, financial condition, and liquidity. Please also refer to Item 1A to Part I of our Annual Report on Form 10-K for further information on these and other factors affecting us. All of the above factors are difficult to predict, contain uncertainties that may materially affect actual results, and may be beyond our control. New factors emerge from time to time, and it is not possible for our management to predict all such factors or to assess the effect of each such factor on our business. Although we believe that these forward-looking statements are based on reasonable, estimates and assumptions, they are not guarantees of future performance and are subject to known and unknown risks, uncertainties, contingencies and other factors. Accordingly, we cannot give you any assurance that our expectations will in fact occur or that actual results will not differ materially from those expressed or implied by such forward-looking statements. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements or our objectives and plans will be achieved. 2 1st Quarter 2013 Earnings Presentation


 
Summary of Financial Results 3 (1) Net servicing revenue includes net loan administration income and net gain (loss) on trading securities. (2) See Non-GAAP reconciliation. 1st Quarter 2013 Earnings Presentation ($ in millions, except per share data) Q1 2013 Q4 2012 Q1 2012 Net Interest Income $55.7 $73.9 $74.7 Provision $20.4 $50.4 $114.7 Gain on Loan Sale $137.5 $239.0 $204.9 Net Servicing Revenue (1) $20.4 $25.0 $32.9 Net Income (Loss) Applicable to Common Shareholders $22.2 ($94.2) ($8.7) Diluted Earnings / (Loss) per Share $0.33 ($1.75) ($0.22) Total Assets $13,094.2 $14,082.0 $14,042.3 Total Stockholders' Equity $1,184.0 $1,159.4 $1,087.4 Book Value per Common Share $16.46 $16.12 $14.92 NPLs / Gross Loans HFI 7.79% 7.35% 6.11% NPAs / Total Assets (Bank) 3.70% 3.70% 3.67% ALLL / NPLs 78.5% 76.3% 69.1% ALLL / Gross Loans HFI 6.11% 5.61% 4.22% NPAs / Tier 1 Capital + Allowance for Loan Losses (2) 30.1% 32.5% 34.6% NPAs/ Loans HFI and Repossessed Assets 9.96% 9.36% 7.61% Tier 1 Leverage to Adjusted Assets Ratio 10.14% 9.26% 8.64% Total Risk Based Capital Ratio 22.53% 17.18% 16.06% Total Equity / Total Assets 9.04% 8.23% 7.74%


 
Highlights (as compared to Q4 2012) 4 1st Quarter 2013 Earnings Presentation • Financial performance: • Net income applicable to common stockholders of $22.2 million, or $0.33 per diluted share. • Return on average assets of 0.65% and return on average equity of 7.55%. • Decrease in legal and professional expense of $184.6 million. • Decrease in total credit-related costs of $43.2 million • Decrease in gain on loan sales of $101.4 million. • Gross mortgage rate lock commitments decreased to $12.1 billion, as compared to $16.2 billion. • Gain on loan sale margin (based on loan sales) decreased to 1.07 percent, as compared to 1.53 percent for the fourth quarter 2012. • Decrease in net interest income of $18.3 million. • Strengthened capital and liquidity, improved mix of deposits: • Tier 1 leverage ratio increased by 88 basis points to 10.14 percent. • Cash on hand and interest-earning deposits increased by $1.3 billion to $2.2 billion. • Completed bulk sales of mortgage servicing rights related to $10.7 billion in underlying mortgage loans. • Consistent with emphasis on growing retail core deposits in Michigan, experienced a 2.3 percent increase in the average balance of demand deposits (12.1 percent increase as compared to first quarter 2012) and a 22.5 percent increase in the average balance of savings deposits (43.9 percent increase as compared to first quarter 2012). • Improved credit quality: • Total non-performing loans decreased by 7.6 percent to $369.3 million. • Net charge-offs decreased by 29.7 percent to $35.4 million. • Ratio of allowance for loan losses to non-performing loans increased to 78.5 percent. • Net charge-offs of loan repurchases decreased by 24.8 percent to $31.2 million. • Total repurchase pipeline decreased by 16.6 percent to $187.0 million.


 
Condensed Income Statement 5 (1) The preferred stock dividend/accretion represents only the accretion. On January 27, 2012, the Company elected to defer payment of dividends and interest on the preferred stock. (2) Restated for a one-for-ten reverse stock split announced September 27, 2012 and began trading on October 11, 2012. Totals may not foot due to rounding 1st Quarter 2013 Earnings Presentation ($ in millions, except per share data) Q1 2013 Q4 2012 Q1 2012 Net interest income $55.7 $73.9 $74.7 Provision for loan losses 20.4 50.4 114.7 Net interest income (expense) after provision for loan losses 35.3 23.6 (39.9) Non-interest income 184.9 285.8 221.4 Non-Interest expense 196.6 398.0 188.7 Income (loss) before federal income taxes 23.6 (88.6) (7.3) Provision for federal income taxes - 4.2 - Net income (loss) 23.6 (92.8) (7.3) Preferred stock dividend/accretion (1) (1.4) (1.4) (1.4) Net income (loss) applicable to common stockholders $22.2 ($94.2) ($8.7) Diluted Earnings (loss) per Share (2) $0.33 ($1.75) ($0.22)


 
Q4 2012 to Q1 2013 Income Bridge 6 1st Quarter 2013 Earnings Presentation ($ in millions)


 
Select Balance Sheet Items 7 ($ in millions) March 31, 2013 December 31, 2012 March 31, 2012 Total assets $13,094.2 $14,082.0 $14,042.3 Cash and interest earning deposits $2,230.7 $952.8 $757.9 Residential first mortgage loans 2,991.4 3,009.2 3,304.9 Second mortgage loans 112.4 114.9 132.5 Commercial real estate loans 562.9 640.3 1,157.9 Warehouse loans 750.8 1,347.7 1,104.2 Consumer lending (including HELOC and other) 212.3 229.1 271.3 Other commercial loans 113.5 96.9 688.7 Investment loan portfolio $4,743.3 $5,438.1 $6,659.5 Mortgage Loans held for sale $2,608.6 $3,012.0 $2,492.9 Commercial Loans held for sale 68.7 927.7 - Loans repurchased with government guarantees 1,604.9 1,841.3 2,003.0 Securities classified as trading 170.1 170.1 307.4 Securities classified as available for sale 169.8 184.4 448.1 Mortgage servicing rights 727.2 710.8 596.8 Totals may not foot due to rounding 1st Quarter 2013 Earnings Presentation


 
8 Regulatory Capital Ratios 1st Quarter 2013 Earnings Presentation 9.12% 9.61% 9.87% 10.07% 9.31% 8.95% 8.64% 9.07% 9.31% 9.26% 10.14% 16.87% 18.55% 20.51% 19.73% 17.64% 16.64% 16.06% 17.03% 17.58% 17.18% 22.53% 5.00% 10.00% 15.00% 20.00% Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Tier 1 leverage ratio Total risk-based capital ratio -- Regulatory capital ratios increased from the prior quarter, driven by a decrease in higher risk-weighted commercial loans and an increase in capital resulting from profitable operations during the quarter.


 
9 $ in millions Q1 2013 Q4 2012 Q3 2012 Q2 2012 Q1 2012 Compensation and benefits $77.2 $72.1 $67.4 $65.4 $66.0 Commissions 17.5 22.2 19.9 17.8 15.5 Occupancy and equipment 19.4 19.2 18.8 18.7 17.0 Loan processing expense 17.1 18.6 15.7 11.1 10.7 Legal and professional expense 28.8 213.4 57.2 13.1 16.8 Other (1) 20.1 31.2 42.0 22.5 26.0 Total $180.1 $376.7 $221.0 $148.6 $152.0 1st Quarter 2013 Earnings Presentation Non-Interest Expense Note: Excludes asset resolution expense. -- Non-interest expense decreased from the prior quarter, driven primarily by a $184.6 million decline in legal and professional expense related to the previously announced reserve increases for pending and threatened litigation, which incurred during the fourth quarter 2012. (1) Includes FDIC assessment, advertising, communication, other taxes and general and administrative.


 
10 Net Gain on Loan Sales and Margin 1st Quarter 2013 Earnings Presentation Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Fallout Adjusted Mortgage Locks (billions) $10.7 $13.3 $14.0 $12.6 $9.8 Net Margin (fallout adjusted) 1.91% 1.59% 2.39% 1.90% 1.40% Loans sales and securitizations $10.8 $12.8 $13.9 $15.6 $12.8 Net Margin (loan sales) 1.89% 1.66% 2.42% 1.53% 1.07% Gross Mortgage Locks (billions) $14.9 $17.5 $18.1 $16.2 $12.1 Mortgage Originations (billions) $11.2 $12.5 $14.5 $15.4 $12.4 $204.9 $212.7 $334.4 $239.0 $137.5 $0 $50 $100 $150 $200 $250 $300 $350 $400 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Net gain on loan sales ($ in millions) -- Net gain on loan sales decreased from the prior quarter, equally attributable to a decrease in the volume of mortgage rate lock commitments and a lower gain on sale margin.


 
$2,189 $3,325 $3,268 $2,916 $2,339 $8,981 $9,223 $11,246 $12,441 $10,084 $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000 $18,000 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Purchase originations Refinance originations $12,547 $14,514 $15,357 $12,423 $729 $751 $962 $999 $697 $2,909 $3,157 $4,118 $4,525 $3,201 $7,531 $8,639 $9,434 $9,833 $8,525 $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000 $18,000 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Retail Broker Correspondent 11 Residential First Mortgage Origination Breakout $15,357 $14,514 $12,547 $11,169 $12,423 1st Quarter 2013 Earnings Presentation $11,169 ($ in millions) ($ in millions) ($ in millions) $441.3 $1,522.9 $1,741.0 $1,521.7 $1,168.0 $697.8 $699.5 $1,314.2 $1,566.5 $1,032.5 $10,030.0 $10,324.6 $11,458.8 $12,268.7 $10,222.5 $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 HARP 2.0 Jumbo Conventional and other


 
12 Net Servicing Revenue Note: Net servicing revenue includes net loan administration income and net gain (loss) on trading securities. 1st Quarter 2013 Earnings Presentation $32.9 $28.7 $11.3 $25.0 $20.4 $0 $5 $10 $15 $20 $25 $30 $35 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Net servicing revenue ($ in millions) -- Net servicing revenue, which is income arising from mortgage servicing rights plus hedges, continues to be positive.


 
Primary Credit-Related Costs 1st Quarter 2013 Earnings Presentation 13 $114.7 $58.4 $52.6 $50.4 $20.4 $36.8 $20.9 $12.5 $21.2 $16.4 $60.5 $46.0 $124.5 $25.2 $17.4 $0 $50 $100 $150 $200 $250 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Provision for loan losses Asset resolution Representation and warranty reserve – change in estimate ($ in millions) -- Credit-related costs declined from the prior quarter, driven primarily by an improvement in the residential first mortgage portfolio and lower expenses related to the representation and warranty reserve.


 
917 1,572 1,100 826 1,037 217 208 216 199 202 0 200 400 600 800 1000 1200 1400 1600 1800 2000 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Repurchase Demands (Units) Fannie Mae Freddie Mac 2,785 2,910 1,224 1,659 2,572 1,202 1,502 1,664 1,595 803 0 500 1000 1500 2000 2500 3000 3500 4000 4500 5000 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Audit File Pulls (Units) Fannie Mae Freddie Mac $357.4 $469.8 $425.6 $224.2 $187.0 29.3% 21.1% 9.0% 15.0% 9.9% 0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% 80.00% $0 $100 $200 $300 $400 $500 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Repurchase Pipeline Repurchase pipeline % demands 180+ days old 14 Representation and Warranty Reserve 1st Quarter 2013 Earnings Presentation ($ in millions) 1Q12 2Q12 3Q12 4Q12 1Q13 Beginning balance $120.0 $142.0 $161.0 $202.0 $193.0 Additions $65.6 $51.7 $130.9 $32.5 $23.2 Net charge-offs ($43.6) ($32.7) ($89.9) ($41.5) ($31.2) Ending Balance $142.0 $161.0 $202.0 $193.0 $185.0 Totals may not foot due to rounding ($ in millions) 3,987 4,412 2,888 3,254 1,025 1,134 1,780 1,316 3,375 1,239


 
15 Allowance for Loan Losses -- Allowance for loan losses decreased from the prior quarter, driven by a release of reserves associated with the commercial loan sales, and a decrease in the consumer reserves driven by portfolio run-off and lower loss rates. 1st Quarter 2013 Earnings Presentation $281.0 $287.0 $305.0 $305.0 $290.0 69.1% 66.5% 76.5% 76.3% 78.5% 0% 20% 40% 60% 80% 100% 120% $0 $50 $100 $150 $200 $250 $300 $350 $400 Allowance for loan losses ALLL / non-performing loans ($ in millions)


 
$107.1 $23.5 $23.5 $39.3 $24.1 $44.6 $28.9 $11.1 $11.1 $11.3 $- $50 $100 $150 $200 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Consumer Commercial $151.7 $52.4 $34.6 $50.4 $35.4 16 Net Charge-offs Note: Consumer loans include: residential first mortgage, second mortgage, warehouse lending, HELOC, and other consumer loans. Commercial loans include: commercial real estate, commercial and industrial , and commercial lease financing loans. 1st Quarter 2013 Earnings Presentation ($ in millions) -- Net charge-offs decreased overall, driven by a significant decrease in residential first mortgage net charge-offs.


 
1st Quarter 2013 Earnings Presentation 17 Summary Asset Quality (1) Consumer loans include: residential first mortgage, second mortgage, warehouse lending, HELOC, and other consumer loans. Commercial loans include: commercial real estate, commercial and industrial, and commercial lease financing loans Totals may not foot due to rounding $ in millions Q1 2013 Q4 2012 Q1 2012 Consumer (1) $58.4 $66.7 $67.7 Commercial (1) $1.5 $7.0 $11.1 Total 30 - 59 Days Past Due $59.8 $73.7 $78.8 Consumer (1) $20.5 $18.6 $39.1 Commercial (1) $6.4 $7.0 $8.8 Total 60 - 89 Days Past Due $26.9 $25.6 $47.9 Consumer (1) $303.2 $313.4 $314.2 Commercial (1) $66.1 $86.4 $92.4 Total Greater than 90 days Past Due $369.3 $399.8 $406.6 Non-performing Assets $483.7 $520.6 $515.3 To Total Assets (Bank only) 3.70% 3.70% 3.67% Provision for Loan Losses $20.4 $50.4 $114.7 Charge-offs, Net of Recoveries $35.4 $50.4 $151.7 Allowance for Loan Losses $290.0 $305.0 $281.0 To Loans Held for Investment 6.11% 5.61% 4.22% To Non-performing Loans 78.5% 76.3% 69.1% Real Estate Owned $114.4 $120.7 $108.7 -- Total non-performing loans decreased by 7.6% from the prior quarter, and the ratio of allowance for loan losses to non- performing loans improved to 78.5%.


 
18 HFI Delinquent Loan Trends Note: Consumer loans include: residential first mortgage, second mortgage, warehouse lending, HELOC, and other consumer loans. Commercial loans include: commercial real estate, commercial and industrial, and commercial lease financing loans. -- The level of both 90+ days past due and 30 – 60 day past due loans decreased from the prior quarter. 1st Quarter 2013 Earnings Presentation $0.0 $50.0 $100.0 $150.0 $200.0 $250.0 $300.0 $350.0 $400.0 $450.0 $500.0 30-60 days past due 60-90 days past due 90+ days past due ($ in millions) $0.0 $10.0 $20.0 $30.0 $40.0 $50.0 $60.0 $70.0 30 - 60 Days Past Due Residential Commercial / Other ($ in millions) $0.0 $5.0 $10.0 $15.0 $20.0 $25.0 $30.0 $35.0 $40.0 60 - 90 ays Past Due Residential Commercial / Other ($ in millions) $0.0 $50.0 $100.0 $150.0 $200.0 $250.0 $300.0 $350.0 90+ Days Past Due Residential Commercial / Other ($ in millions)


 
19 Troubled Debt Restructurings (TDRs) 1st Quarter 2013 Earnings Presentation ($ in millions) $65.9 $58.2 $55.4 $60.5 $56.5 $93.3 $74.8 $54.1 $84.7 $89.4 $537.2 $576.0 $614.3 $589.8 $598.0 $0 $100 $200 $300 $400 $500 $600 $700 $800 Q1 2012 Q2 2012 Q3 2012 Q42012 Q1 2013 Non-performing TDRs Performing nonaccrual Performing accrual $696.4 $709.0 $723.8 $735.0 $743.9 -- TDRs increased slightly from the prior quarter, given the continued emphasis on helping consumers stay in their homes.


 
20 Bank Net Interest Income and Margin 1st Quarter 2013 Earnings Presentation -- Net interest margin decreased from the prior quarter as a result of the sales of commercial loans completed during the quarter and a decline in residential first mortgage loans held-for-sale and warehouse loans, combined with a relatively flat level of interest-bearing liabilities from the prior quarter. ($ in millions) $76.5 $77.2 $74.8 $75.6 $57.3 2.41% 2.37% 2.21% 2.26% 1.89% 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50% 4.00% $0 $10 $20 $30 $40 $50 $60 $70 $80 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Net interest income Net interest margin (Bank)


 
21 Asset Concentration 1st Quarter 2013 Earnings Presentation -- Total assets decreased by $1.0 billion from the prior quarter, driven primarily by decreases in commercial loans held-for-sale, mortgage loans held-for-sale and warehouse loans, partially offset by an increase in cash and interest-earnings deposits. ($ in millions)


 
22 Cost of Funds -- Average cost of funds improved by 6 basis points from the prior quarter, driven by a decrease in the balance and average rate paid on retail certificates of deposits, as longer-term maturities paid off and were replaced with lower-cost core deposits. 1st Quarter 2013 Earnings Presentation $19.0 $18.3 $17.8 $15.0 $13.5 $27.4 $27.4 $27.1 $24.8 $24.2 $1.8 $1.7 $1.8 $1.7 $1.7 1.76% 1.72% 1.73% 1.60% 1.54% 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50% $0 $5 $10 $15 $20 $25 $30 $35 $40 $45 $50 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Deposit interest expense FHLB interest expense Other interest expense Average funding cost ($ in millions)


 
1st Quarter 2013 Earnings Presentation 23 Deposit Mix Note: Represents the ending balance and rate for period noted. Retail core deposits include demand, savings and money market accounts. Totals may not foot due to rounding -- Total deposits decreased from the prior quarter, driven by a decrease in company-controlled custodial deposits and retail certificates of deposits, which were replaced with core deposits. ($ in millions) March 31, 2013 December 31, 2012 March 31, 2012 Balance Rate Balance Rate Balance Rate Retail Deposits: Demand deposits $ 728 0.13% $ 682 0.16% $ 648 0.17% Savings deposits 2,513 0.78% 2,108 0.72% 1,757 0.79% Money market deposits 370 0.29% 402 0.41% 468 0.47% Certificates of deposit (1) 2,613 0.89% 3,175 0.93% 3,120 1.29% Total retail deposits 6,224 0.72% 6,367 0.74% 5,993 0.96% Core retail deposits / retail deposits 58.02% 50.13% 47.94% Government Banking Deposits: Demand deposits 103 0.37% 99 0.38% 93 0.41% Savings deposits 213 0.29% 264 0.53% 312 0.56% Certificates of deposit 459 0.53% 456 0.57% 375 0.63% Total government banking deposits 775 0.44% 819 0.53% 780 0.57% Company controlled deposits 774 0.00% 1,008 0.00% 1,480 0.00% Wholesale deposits 74 4.80% 99 4.41% 346 3.49% Total deposits $ 7,847 0.66% $ 8,294 0.68% $8,599 0.86% Number of banking branches 111 111 113 (1) Approximately $678 million of retail CDs represent government deposit relationships that have been exchanged for retail CDs as part of our participation in the CDARs program.


 
Note: Retail core deposits include checking accounts, savings accounts, and money market accounts. 24 Retail Core Deposits -- Core retail deposits, both in total and as a percentage of retail deposits, increased significantly from the prior quarter. 1st Quarter 2013 Earnings Presentation $2,873 $2,950 $2,795 $3,192 $3,611 47.9% 48.6% 46.1% 50.1% 58.0% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Retail core deposits Retail core deposits / retail deposits ($ in millions)


 
1st Quarter 2013 Earnings Presentation 25 Appendix


 
1st Quarter 2013 Earnings Presentation 26 Commercial HFI Portfolio $ in thousands Held For Investment Property Type Balance 30 - 59 Days Past Due 60 - 89 Days Past Due 90+ Days Past Due Total Reserves Commercial Real Estate: One-to-four family conventional $1,963 - - $168 43 Multi-family conventional 45,242 - 6,400 1,853 3,079 Commercial non-owner occupied 438,292 - - 59,543 26,299 Secured by non-farm, non-residential 72,852 1,465 - 2,852 2,991 Other 4,567 - - 1,679 308 Total $562,916 1,465 6,400 $66,095 $32,720 Commercial and Industrial Loans: $107,688 - - $40 $1,572 Commercial lease financing: $5,815 - - - 84 Total: $676,419 $1,465 $6,400 $66,135 $34,376 Totals may not foot due to rounding


 
1st Quarter 2013 Earnings Presentation 27 Commercial RE HFI Portfolio – by State Note: Unpaid principal balance does not include premiums or discounts. Excludes commercial letters of credit. Totals may not foot due to rounding $ in thousands State One-to-Four Family Conventional Multi-Family Conventional Commercial non- owner occupied Secured by non-farm, non-residential Other Commercial Real Estate Total MI $1,963 $44,149 $265,171 $54,785 $422 $366,490 IN - - 33,892 4,946 4,708 43,547 VA - - 30,524 - - 30,524 GA - - 27,717 1,655 - 29,372 FL - - 9,686 4,585 - 14,272 CA - - 13,853 - - 13,853 KY - - 10,698 - - 10,698 IL - - 7,403 1,215 - 8,619 NC - - 4,508 3,806 - 8,314 TX - - 7,471 - - 7,471 OH - - 5,596 850 - 6,446 OK - - 6,132 - - 6,132 TN - - 4,610 - - 4,610 SC - - 4,222 - - 4,222 AZ - - 2,164 - - 2,164 Other - 1,093 4,647 1,009 - 6,749 Total $1,963 $45,242 $438,292 $72,852 $5,130 $563,479


 
1st Quarter 2013 Earnings Presentation 28 Commercial RE HFI Portfolio – by Vintage Note: Unpaid principal balance does not include premiums or discounts. Excludes commercial letters of credit. Totals may not foot due to rounding $ in thousands Vintage One-to-Four Family Conventional Multi-Family Conventional Commercial non- owner occupied Secured by non- farm, non-residential Other Commercial and Industrial Commercial lease financing Total Older $212 $6,987 $16,829 $3,842 $0 $961 $0 $28,831 2003 - 2,811 13,214 2,354 - - - $18,379 2004 - 1,853 57,826 1,912 - 109 - $61,700 2005 - 13,347 27,866 1,164 - 43 - $42,421 2006 - 3,405 55,789 5,699 - 59 - $64,951 2007 - 2,279 98,654 16,057 1,679 39 - $118,709 2008 120 3,715 67,612 1,454 - 92 - $72,992 2009 - 5,600 280 89 - $5,969 2010 1,192 6,223 4,986 - 675 - $13,076 2011 13 17,578 9,145 3,172 37,161 5,073 $72,141 2012 427 4,620 49,875 21,513 - 43,194 - $119,628 2013 - - 22,464 9,713 - 25,613 - $57,790 Total $1,963 $45,242 $438,292 $72,852 $5,131 $108,035 $5,073 $676,587


 
1st Quarter 2013 Earnings Presentation 29 First Mortgage Portfolio – by State Note: Reflects unpaid principal balance of underlying loans before accounting adjustments for discounts and other items. Also excludes loans eligible for repurchase from Ginnie Mae pools. Totals may not foot due to rounding $ in thousands State HFS HFI ARM Fixed Balloon Total % of Total ARM Fixed Balloon Total % of Total CA $ 41,934 $ 845,237 $ - $ 887,171 35.3% $ 472,800 $ 364,494 $ 70,940 $ 908,235 30.6% FL 1,299 171,923 - 173,222 6.9% 247,126 146,271 14,785 408,181 13.8% MI 3,660 131,314 - 134,974 5.4% 216,827 55,624 14,686 287,137 9.7% WA 3,756 95,000 - 98,756 3.9% 83,910 47,021 5,997 136,928 4.6% AZ 417 66,370 - 66,787 2.7% 73,594 42,976 3,651 120,221 4.1% CO 1,459 65,047 - 66,507 2.6% 54,018 23,932 5,060 83,011 2.8% MD 618 61,809 - 62,428 2.5% 44,046 35,577 5,126 84,749 2.9% NY 721 73,977 - 74,698 3.0% 31,932 38,958 3,926 74,816 2.5% VA 376 59,823 - 60,198 2.4% 43,969 21,941 4,715 70,625 2.4% TX 1,113 150,524 - 151,637 6.0% 28,525 39,873 2,542 70,940 2.4% NJ 1,211 42,654 - 43,866 1.7% 30,678 26,805 3,224 60,707 2.0% NV - 17,526 - 17,526 0.7% 39,447 14,081 3,240 56,768 1.9% IL 1,342 49,860 - 51,202 2.0% 32,209 23,334 2,475 58,018 2.0% GA - 47,157 - 47,157 1.9% 30,419 25,090 3,757 59,266 2.0% OH - 21,108 - 21,108 0.8% 34,099 9,429 938 44,466 1.5% OTHER 4,536 551,170 - 555,706 22.1% 240,839 177,219 21,717 439,775 14.8% Total : $ 62,443 $ 2,450,498 $ - $ 2,512,941 100% $ 1,704,439 $ 1,092,624 $ 166,781 $ 2,963,844 100%


 
1st Quarter 2013 Earnings Presentation 30 First Mortgage Portfolio – by Vintage Note: Reflects unpaid principal balance of underlying loans before accounting adjustments for discounts and other items. Also excludes loans eligible for repurchase from Ginnie Mae pools. Totals may not foot due to rounding $ in thousands Year HFS HFI ARM Fixed Balloon Total % of Total ARM Fixed Balloon Total % of Total Older $ - $ - $ - $ - 0.0% 199,352 47,963 3,791 251,106 8.5% 2004 - 79 - 79 0.0% 497,850 40,120 7,669 545,639 18.4% 2005 - 206 - 206 0.0% 516,824 58,992 14,195 590,010 19.9% 2006 - 83 - 83 0.0% 119,637 146,057 19,519 285,213 9.6% 2007 - 2,070 - 2,070 0.1% 293,402 585,654 39,849 918,906 31.0% 2008 - 8,723 - 8,723 0.3% 15,763 115,739 78,284 209,786 7.1% 2009 - 8,683 - 8,683 0.3% 7,462 51,457 3,474 62,393 2.1% 2010 - 10,588 - 10,588 0.4% 9,057 15,570 - 24,627 0.8% 2011 - 5,250 - 5,250 0.2% 19,766 16,038 - 35,804 1.2% 2012 340 5,872 - 6,212 0.2% 21,171 14,934 - 36,105 1.2% 2013 62,103 2,408,945 - 2,471,048 98.3% 4,154 101 - 4,255 0.1% Total : $ 62,443 $ 2,450,498 $ - $ 2,512,941 100% $ 1,704,439 $ 1,092,624 $ 166,781 $ 2,963,844 100%


 
1st Quarter 2013 Earnings Presentation 31 First Mortgage Portfolio – by Original FICO Note: Reflects unpaid principal balance of underlying loans before accounting adjustments for discounts and other items. Also excludes loans eligible for repurchase from Ginnie Mae pools. Totals may not foot due to rounding $ in thousands FICO HFS HFI ARM Fixed Balloon Total % of Total ARM Fixed Balloon Total % of Total < 580 $ - $ 7,690 $ - $ 7,690 0.3% $ 21,878 $ 67,052 $ 2,036 $ 90,966 3.1% 580 - 619 - 9,955 - 9,955 0.4% 22,897 49,015 1,688 73,600 2.5% 620 - 659 319 129,060 - 129,379 5.1% 104,486 108,107 7,446 220,040 7.4% 660 - 699 860 313,475 - 314,335 12.5% 451,108 280,367 52,747 784,221 26.5% > 699 61,264 1,990,318 - 2,051,582 81.6% 1,104,070 588,083 102,863 1,795,017 60.6% Total : $ 62,443 $ 2,450,498 $ - $ 2,512,941 100% $ 1,704,439 $ 1,092,624 $ 166,781 $ 2,963,844 100%


 
1st Quarter 2013 Earnings Presentation 32 First Mortgage Portfolio – by Original LTV Note: Reflects unpaid principal balance of underlying loans before accounting adjustments for discounts and other items. Also excludes loans eligible for repurchase from Ginnie Mae pools. Totals may not foot due to rounding $ in thousands Original LTV HFS HFI ARM Fixed Balloon Total % of Total ARM Fixed Balloon Total % of Total <=70.00% $ 45,263 $ 720,151 $ - $ 765,414 30.5% $ 449,781 $ 311,775 $ 32,482 $ 794,037 26.8% >70.00% - 79.99% 11,500 687,583 - 699,083 27.8% 1,042,992 549,343 111,598 1,703,933 57.5% >80.00% - 89.99% 2,350 228,889 - 231,239 9.2% 110,467 86,067 14,258 210,791 7.1% >90.00% - 99.99% 3,107 620,943 - 624,050 24.8% 96,045 133,541 8,214 237,801 8.0% 100.00% -109.99% 222 94,788 - 95,010 3.8% 5,153 9,155 - 14,307 0.5% 110.00% -124.99% - 58,129 - 58,129 2.3% - 2,117 110 2,228 0.1% >125.00% - 40,015 - 40,015 1.6% - 626 119 745 0.0% Total: $ 62,443 $ 2,450,498 $ - $ 2,512,941 100% $ 1,704,439 $ 1,092,624 $ 166,781 $ 2,963,844 100%


 
1st Quarter 2013 Earnings Presentation 33 First Mortgage Portfolio – by HPI Adjusted LTV Note: Reflects unpaid principal balance of underlying loans before accounting adjustments for discounts and other items. Also excludes loans eligible for repurchase from Ginnie Mae pools. The housing price index (HPI adjusted) LTV is updated from the original LTV based on Metropolitan Statistical Area- level Office of Federal Housing Enterprise Oversight (OFHEO) data. Totals may not foot due to rounding $ in thousands HPI Adjusted LTV HFS HFI ARM Fixed Balloon Total % of Total ARM Fixed Balloon Total % of Total <=70.00% $ 45,627 $ 794,891 $ - $ 840,517 33.4% $ 417,646 $ 148,171 $ 17,294 $ 583,111 19.7% 70.00% - 79.99% 11,136 617,165 - 628,302 25.0% 312,135 128,901 9,138 450,173 15.2% 80.00% - 89.99% 2,350 226,398 - 228,748 9.1% 283,864 153,916 25,055 462,835 15.6% 90.00% - 99.99% 3,107 571,583 - 574,691 22.9% 216,440 184,782 41,466 442,688 14.9% 100.00% -109.99% 222 130,603 - 130,826 5.2% 171,987 164,169 25,023 361,179 12.2% 110.00% -124.99% - 64,191 - 64,191 2.6% 180,257 178,338 28,205 386,799 13.1% >=125.00% - 45,667 - 45,667 1.8% 122,111 134,347 20,600 277,058 9.3% Total : $ 62,443 $ 2,450,498 $ - $ 2,512,941 100% $ 1,704,439 $ 1,092,624 $ 166,781 $ 2,963,844 100%


 
1st Quarter 2013 Earnings Presentation 34 Real Estate Owned Portfolio Totals may not foot due to rounding $ in thousands Commercial % Receivership % Construction % Manufactured Homes % Single Family Homes % Multi Family Dwelling % Total % Current Month $9,252 21.5% $137 0.0% $947 37.8% $92 34.4% $14,074 26.3% $0 0.0% $24,502 21.4% 30 days 918 2.1% - 0.0% - 0.0% - 0.0% 4,062 7.6% - 0.0% 4,980 4.4% 60 days 7,774 18.0% - 0.0% 215 8.6% - 0.0% 5,525 10.3% 6 4.1% 13,520 11.8% 90 days 909 2.1% - 0.0% - 0.0% 36 13.4% 1,965 3.7% 125 80.5% 3,034 2.7% 91 - 180 days 9,294 21.6% 4,760 64.2% 907 36.2% 53 20.1% 9,880 18.5% - 0.0% 24,895 21.8% 181 - 365 days 11,697 27.1% - 0.0% 21 0.8% 29 10.9% 9,389 17.6% 24 15.5% 21,159 18.5% 1 - 2 years 2,015 4.7% 2,523 34.0% 415 16.6% 30 11.2% 6,331 11.9% - 0.0% 11,313 9.9% 2 - 3 years 763 1.8% - 0.0% - 0.0% 27 10.1% 1,295 2.4% - 0.0% 2,084 1.8% 3 - 4 years 448 1.0% - 0.0% - 0.0% - 0.0% 614 1.1% - 0.0% 1,062 0.9% 4 - 5 years 42 0.1% - 0.0% - 0.0% - 0.0% 281 0.5% - 0.0% 323 0.3% Loans to Facilitate - 0.0% - 0.0% - 0.0% - 0.0% - 0.0% - 0.0% 7,484 6.5% Total $43,111 100.0% $7,420 100.0% $2,504 100.0% $266 100.0% $53,415 100.0% $155 100.0% $114,356 100.0%


 
1st Quarter 2013 Earnings Presentation 35 Asset Quality by Loan Type - HFI Note: Non-performing loans include 90+ days delinquent and matured, and performing non-accruals. Totals may not foot due to rounding $ in thousands Loan Type Balance Non-performing Loans % of Balance % of Overall NPLs Q1 '13 Charge Offs, Net of Recoveries Collectively Evaluated Reserves (1) Individually Evaluated Reserves (2) Total Reserves Residential first mortgage $2,991,394 $296,395 9.91% 80.26% ($20,339) $63,144 $150,932 $214,076 Second mortgage 112,385 4,298 3.82% 1.16% (1,565) 12,839 7,844 20,683 Warehouse 750,765 - 0.00% 0.00% - 532 532 HELOC 167,815 2,343 1.40% 0.63% (1,956) 14,835 3,283 18,118 Consumer 44,488 132 0.30% 0.04% (245) 2,215 - 2,215 Commercial RE 562,916 66,095 11.74% 17.90% (11,319) 32,521 199 32,720 Commercial NRE 113,503 40 0.04% 0.01% 9 1,646 10 1,656 Total: $4,743,266 $369,303 7.79% 100.00% ($35,415) $127,732 $162,268 $290,000 (1) Represents loans collectively evaluated for impairment in accordance with ASC 450-20, Loss Contingencies , and pursuant to amendments by ASU 2010-20 regarding allowance for unimpaired loans (2) Represents loans individually evaluated for impairment in accordance with ASC 310-10, Receivables , and pursuant to amendments by ASU 2010-20 regarding allowance for impaired loans.


 
1st Quarter 2013 Earnings Presentation 36 Non-performing Loans HFI – by State Note: Non-performing loans include 90+ days delinquent and matured, and performing non-accruals. Excludes participations and first mortgage repurchases. Totals may not foot due to rounding $ in thousands State Mortgage Percent of Mortgage Second Mortgage HELOC Commercial Real Estate Commercial Consumer Total Percent of Total CA $70,514 23.8% $611 $396 $1,833 $0 $0 $73,353 19.9% FL 58,667 19.8% 200 26 256 - - 59,149 16.0% MI 17,033 5.7% 1,638 1,069 19,802 40 129 39,710 10.8% VA 6,387 2.2% 89 - 30,524 - - 37,000 10.0% NY 15,606 5.3% 86 - - - - 15,692 4.2% NJ 13,265 4.5% 104 112 - - - 13,482 3.7% WA 12,206 4.1% 130 304 - - - 12,641 3.4% GA 5,134 1.7% 39 29 7,270 - 2 12,474 3.4% MD 10,174 3.4% 42 - - - - 10,216 2.8% TX 9,268 3.1% - - - - - 9,268 2.5% IL 6,525 2.2% 30 57 1,817 - - 8,429 2.3% AZ 6,776 2.3% 169 98 - - - 7,043 1.9% NV 5,838 2.0% 177 - - - - 6,015 1.6% IN 2,427 0.8% 245 90 1,679 - 2 4,443 1.2% HI 4,194 1.4% - - 116 - - 4,309 1.2% Other 52,380 17.7% 739 162 2,797 - 0 56,079 15.2% Total $296,395 100.0% $4,298 $2,343 $66,095 $40 $132 $369,303 100.0%


 
1st Quarter 2013 Earnings Presentation 37 Non-performing Loans HFI – by Vintage Totals may not foot due to rounding Note: Non-performing loans include 90+ days delinquent and matured, and performing non-accruals. Excludes participations and first mortgage repurchases. $ in thousands Vintage Mortgage Percent of Mortgage Second Mortgage HELOC Commercial Real Estate Commercial Consumer Total Percent of Total Older $17,099 5.8% $1,507 $1,230 $2,042 $0 $17 $21,894 5.9% 2004 27,170 9.2% 161 174 3,492 - 3 31,000 8.4% 2005 33,571 11.5% 146 189 1,852 - 2 35,760 9.7% 2006 29,907 10.1% 264 - 15,868 - 1 46,041 12.5% 2007 117,681 40.0% 2,076 750 27,590 - 5 148,102 40.1% 2008 47,568 16.2% 144 - 3,534 2 1 51,249 13.9% 2009 12,979 4.2% - - 73 - - 13,052 3.5% 2010 4,515 1.4% - - 167 - 31 4,713 1.3% 2011 4,913 1.4% - - 8,837 38 4 13,793 3.7% 2012 649 0.2% - - - - 68 717 0.2% 2013 343 0.0% - - 2,638 - - 2,981 0.8% Total $296,395 100.0% $4,298 $2,343 $66,095 $40 $132 $369,303 100% Note: Excludes participations


 
1st Quarter 2013 Earnings Presentation 38 Non – GAAP Reconciliation Totals may not foot due to rounding $ in millions Q1 2013 Q4 2012 Q3 2012 Q2 2012 Q1 2012 Pre-tax, pre-credit-cost revenue Income (loss) before tax provision $23.6 ($88.6) $60.7 $87.9 ($7.3) Add back Provision for loan losses 20.4 50.4 52.6 58.4 114.7 Asset resolution 16.4 21.2 12.5 20.9 36.8 Other than temporary impairment on AFS investments - - - 1.0 1.2 Representation and warranty reserve - change in estimate 17.4 25.2 124.5 46.0 60.5 Write down of residual interest 0.2 0.8 0.1 1.2 0.4 Total credit-related costs $54.4 $97.6 $189.7 127.6 $213.6 Pre-tax, pre-credit-net revenue $78.0 $9.0 $250.4 215.5 $206.3 Efficiency ratio (credit-adjusted) Net interest income (a) 55.7 73.9 73.1 75.5 74.7 Non-interest income (b) 184.9 285.8 273.7 240.3 221.4 Add: Representation and warranty reserve - change in estimate (d) 17.4 25.2 124.5 46.0 60.5 Adjusted income $258.0 $384.9 471.3 361.8 $356.6 Non-interest expense (c) 196.6 397.9 233.5 169.5 188.7 Less: Asset resolution expense (e) (16.4) (21.2) (12.5) (20.9) (36.7) Adjusted non-interest expense 180.1 376.7 221.0 148.6 152 Efficiency ratio (c/(a+b)) 81.7% 110.6% 67.3% 53.7% 63.7% Efficiency ratio (credit-adjusted) ((c-e)/((a+b)+d))) 69.8% 97.9% 46.9% 41.2% 42.6%


 
39 $ in millions March 31, 2013 December 31, 2012 March 31, 2012 Non-performing assets $483.7 $520.6 $515.3 Tier 1 Capital 1,318.8 1,295.8 1,207.2 Allowance for Loan Losses 290.0 305.0 281.0 Tier 1 Capital + Allowance for Loan Losses $1,608.8 $1,600.8 $1,488.2 Non-performing assets/ Tier 1 Capital + Allowance for Loan Losses 30.1% 32.52% 34.62% Non – GAAP Reconciliation (cont’d) 1st Quarter 2013 Earnings Presentation


 
FBC LISTED NYSE 40 1st Quarter 2013 Earnings Presentation