Flagstar Reports Third Quarter 2017 Net Income of $40 million, or $0.70 per Diluted Share

TROY, Mich., Oct. 24, 2017

Key Highlights - Third Quarter 2017

• Net interest income rose $6 million, or 6 percent, from second quarter 2017, driven by solid earning asset growth.
• Well-balanced loan growth with average commercial loans increasing $434 million, or 13 percent, from last quarter.
• Mortgage revenues, including gain on sale and return on MSR, increased $9 million, or 13 percent, from prior quarter, led by higher retail originations.
• Asset quality strong with minimal net charge-offs and low delinquencies across all loan portfolios.
• Strong capital position with Tier 1 leverage at 8.8 percent.

Flagstar Bancorp, Inc. (NYSE: FBC), the holding company for Flagstar Bank, FSB, today reported third quarter 2017 net income of $40 million, or $0.70 per diluted share, as compared to $41 million, or $0.71 per diluted share, in the second quarter 2017, and $57 million, or $0.96 per diluted share, in the third quarter 2016. Excluding a one-time benefit, the Company had adjusted non-GAAP third quarter 2016 net income of $41 million, or $0.69 per diluted share.

"Our transformation into a strong commercial bank continued this quarter," said Alessandro DiNello, president and chief executive officer of Flagstar Bancorp, Inc. "Net interest income rose $6 million on average earning asset growth of $717 million, or 5 percent, and a relatively stable net interest margin. Earning asset growth was, again, broad-based, with double-digit increases in all three commercial loan portfolios. We also continued to maintain our disciplined deposit growth, which saw average deposits increase $266 million, or 3 percent. Total mortgage revenues grew $9 million, or 13 percent, as our gain on sale margin expanded 11 basis points to 84 basis points, reflecting a full quarter of revenue from Opes Advisors."

"Our noninterest expense increased $17 million in the third quarter 2017, in line with our expectations, and largely due to a full quarter of expenses from Opes Advisors, plus costs of investing in new businesses. The integration of Opes is on track with our initial expectations and, while it's still early, the financial performance of this unit is slightly ahead of our expectations. The remaining expenses associated with balance sheet expansion reflected our cost discipline, and had a very low, incremental efficiency ratio. Credit costs were negligible, as the provision for loan losses replaced 8 basis points of net charge-offs."

"Finally, we are pleased to see the Capital Simplification proposal from our regulators. If enacted as proposed, it would accelerate the capital formation to support further balance sheet growth, improve our capital flexibility to better manage the uncertainties of the MSR market and allow us to hold more MSRs -- a high yielding asset that we fund efficiently and hedge well. We believe it should improve our position to continue to execute on our business model, matching superior asset generation capabilities, supported by the capital and liquidity to grow the bank prudently, thereby creating value for our shareholders."