Form 8-K FLAGSTAR BANCORP INC For: Oct 22

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October 23, 2018 6:58 AM EDT

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

Current Report

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): October 22, 2018

(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 October 23, 2018, Flagstar Bancorp, Inc. (the "Company") issued a press release regarding its preliminary results of operations and financial condition for the three months ended September 30, 2018. The text of the press release is furnished as Exhibit 99.1 to this report. The Company will include final financial statements and additional analyses for the three and nine months ended September 30, 2018 as part of its Quarterly Report on Form 10-Q.

On October 23, 2018, the Company will hold a conference call to review third quarter 2018 earnings. A copy of the slide presentation to be used by the Company on the conference call is furnished as Exhibit 99.2 to this Current Report on Form 8-K.



Item 5.02	Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

Compensatory Arrangements for Certain Officers

On October 22, 2018, Flagstar Bancorp, Inc. (the "Company") and Flagstar Bank, FSB (the "Bank") entered into separate employment agreements with Alessandro DiNello (the “DiNello Employment Agreement”), to continue serving as President and Chief Executive Officer of the Bank and the Company, and with Lee Smith (the “Smith Employment Agreement”) to continue serving as Executive Vice President and Chief Operating Officer of the Bank and the Company. These employment agreements replace the employment agreements, as amended, that the Company and the Bank had with each of Mr. DiNello and Mr. Smith. Under their respective agreements, Mr. DiNello's annual base salary will be not less than $1,000,000 and Mr. Smith’s annual base salary will be not less than $750,000. The DiNello Employment Agreement and the Smith Employment Agreement continue until December 31, 2021 and December 31, 2020, respectively, and each will automatically renew at the end of their respective terms for successive 12 month periods thereafter unless any party to each such agreement gives notice otherwise at least 180 days in advance. As with their prior employment agreements with the Company and the Bank, these agreements also provide for their participation in the Company’s bonus program, Executive Long Term Incentive Program, and other Company equity programs. In addition, both the DiNello Employment Agreement and the Smith Employment Agreement contain non-compete and non-solicit requirements that apply during the term of employment and for one year thereafter. The agreements also provide that Mr. DiNello will receive three times, and Mr. Smith will receive two times, their respective base salary and targeted bonus if terminated due to a “change in control” as defined therein.



Item 9.01	Financial Statements and Exhibits



Exhibits

99.1		Press release of Flagstar Bancorp, Inc. dated October 23, 2018

99.2		Flagstar Bancorp, Inc. Conference Call Presentation Slides - Earnings Presentation Third Quarter

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:	10/23/2018		By:	/s/ James K. Ciroli
				James K. Ciroli
				Executive Vice President and Chief Financial Officer

Exhibit Index



Exhibit No.		Description

99.1		Press release of Flagstar Bancorp, Inc. dated October 23, 2018

99.2		Flagstar Bancorp, Inc. Conference Call Presentation Slides - Earnings Presentation Third Quarter

EXHIBIT 99.1

NEWS RELEASE

For more information, contact:

David L. Urban

[email protected]

(248) 312-5970

Flagstar Reports Third Quarter 2018 Net Income of $48 million, or $0.83 per Diluted Share

Strong growth in earning assets and a widening of the net interest margin result in record net interest income levels

Key Highlights - Third Quarter 2018


•	Adjusted net income of $49 million, or $0.85 per diluted share, excluding costs for pending Wells Fargo branch acquisition.


•	Net interest income grew $9 million, or 8 percent from second quarter 2018, led by earning asset growth and net interest margin expansion.


•	Average loans held-for-investment rose 6 percent while average total deposits increased 9 percent from prior quarter.


•	Total serviced accounts increased 16 percent from last quarter to nearly 620,000 accounts.


•	Noninterest expense dropped $4 million, or 2 percent from prior quarter, driven by prudent expense management and lower mortgage expenses.


•	Pristine asset quality - minimal net charge-offs, very low delinquencies and strong allowance for loan loss coverage.

TROY, Mich., October 23, 2018 - Flagstar Bancorp, Inc. (NYSE: FBC), the holding company for Flagstar Bank, FSB, today reported third quarter 2018 net income of $48 million, or $0.83 per diluted share, and adjusted net income of $49 million, or $0.85 per diluted share, excluding $1.2 million of pre-tax expenses related to the pending acquisition of Wells Fargo branches. The Company reported net income of $50 million, or $0.85 per diluted share, in the second quarter 2018, and $40 million, or $0.70 per diluted share, in the third quarter 2017.

"Our third quarter results once again demonstrated the strength of our banking business,” said Alessandro DiNello, president and chief executive officer of Flagstar Bancorp, Inc. “Solid growth in banking along with disciplined cost control, helped us deliver an adjusted ROA of 1.1 percent.

"Our banking business provided a stable and growing source of income. Net interest income grew 8 percent from last quarter, as average earning assets increased 5 percent and the net interest margin expanded 7 basis points. Also, we saw total serviced accounts increase 16 percent in the quarter and we now service nearly 620,000 accounts. We expect this total to exceed 800,000 by year-end.

"Earnings were also helped by our expense discipline. In the third quarter 2018, total noninterest expense fell 2 percent to $173 million, despite strong growth in the balance sheet and increased mortgage originations, as we continued to scale businesses with a lower level of incremental expense, along with aggressively managing our mortgage expenses.

"Mortgage revenues declined in the quarter as fallout-adjusted locks decreased 8 percent to $8.3 billion and the net gain on loan sale margin fell 20 basis points to 0.51 percent. This decline was partially offset by a stronger MSR return.

"Looking ahead, we believe we are well positioned for continued success. Our pending acquisition of 52 Midwest branches of Wells Fargo, which we expect to close at the beginning of December 2018, will bring us low cost and low beta deposits. Additionally, with the lifting of our Federal Reserve Supervisory Agreement this quarter, we now have more flexibility in managing our capital to maximize risk-adjusted returns for our shareholders.”

Third Quarter 2018 Highlights:



Income Statement Highlights
	Three Months Ended
	September 30, 2018			June 30, 2018			March 31, 2018		December 31, 2017			September 30, 2017
	(Dollars in millions)
Net interest income	$	124		$	115		$	106	$	107		$	103
Provision (benefit) for loan losses	(2		)	(1		)	—		2			2
Noninterest income	107			123			111		124			130
Noninterest expense	173			177			173		178			171
Income before income taxes	60			62			44		51			60
Provision for income taxes (1)	12			12			9		96			20
Net income (loss)	$	48		$	50		$	35	$	(45	)	$	40

Income (loss) per share:
Basic	$	0.84		$	0.86		$	0.61	$	(0.79	)	$	0.71
Diluted	$	0.83		$	0.85		$	0.60	$	(0.79	)	$	0.70


(1)	The three months ended December 31, 2017 included an $80 million, or $1.37 per diluted share, non-cash charge to the provision for income taxes, resulting from the revaluation of the Company's net deferred tax asset at a lower statutory rate as a result of the Tax Cuts and Jobs Act.



Key Ratios
	Three Months Ended										Change (bps)
	September 30, 2018		June 30, 2018		March 31, 2018		December 31, 2017		September 30, 2017		Seq	Yr/Yr
Net interest margin	2.93	%	2.86	%	2.76	%	2.76	%	2.78	%	7	15
Return on average assets	1.0	%	1.1	%	0.8	%	(1.1	)%	1.0	%	(10)	—
Return on average equity	12.8	%	13.5	%	9.9	%	(12.1	)%	11.1	%	(70)	170
Efficiency ratio	74.6	%	74.4	%	79.7	%	77.1	%	73.5	%	20	110



Balance Sheet Highlights
	Three Months Ended										% Change
	September 30, 2018		June 30, 2018		March 31, 2018		December 31, 2017		September 30, 2017		Seq		Yr/Yr
	(Dollars in millions)
Average Balance Sheet Data
Average interest-earning assets	$	16,786	$	15,993	$	15,354	$	15,379	$	14,737	5	%	14	%
Average loans held-for-sale (LHFS)	4,393		4,170		4,231		4,537		4,476		5	%	(2	)%
Average loans held-for-investment (LHFI)	8,872		8,380		7,487		7,295		6,803		6	%	30	%
Average total deposits	11,336		10,414		9,371		9,084		9,005		9	%	26	%

Net Interest Income

Net interest income rose $9 million to $124 million for the third quarter 2018, as compared to the second quarter 2018. The results reflected a 5 percent increase in average earning assets, led by balanced growth in loans held-for-sale, commercial and consumer loans. The net interest margin expanded 7 basis points to 2.93 percent for the third quarter 2018 as higher yields on interest-earning assets more than offset higher deposit costs.

Loans held-for-investment averaged $8.9 billion for the third quarter 2018, increasing $492 million, or 6 percent, from the prior quarter. During the third quarter 2018, average commercial loans rose $253 million, or 5 percent, with average warehouse loans increasing $91 million, average commercial real estate loans rising $89 million and average commercial and industrial loans increasing $73 million. Average consumer loans rose $239 million, or 7 percent, driven by an increase in mortgage loans (primarily jumbo).

Average total deposits were $11.3 billion in the third quarter 2018, increasing $922 million, or 9 percent from the second quarter 2018, led primarily by higher custodial and retail deposits. Average custodial deposits rose $366 million, or 23 percent, led by a 16 percent increase in serviced accounts. Average retail deposits increased $211 million, or 3 percent, as higher demand deposits and certificates of deposit were partially offset by a drop in savings deposits.

Provision for Loan Losses

The Company experienced a provision benefit in the third quarter 2018, resulting primarily from a continued decline in loss rates in the held-for-investment portfolio. The provision benefit totaled $2 million for the third quarter 2018, as compared to $1 million for the second quarter 2018.

Noninterest Income

Noninterest income fell $16 million, or 13 percent, to $107 million in the third quarter of 2018, as compared to $123 million for the second quarter 2018. The decrease was primarily due to lower net gain on loan sales, partially offset by an increase in the net return on mortgage servicing rights.

Third quarter 2018 net gain on loan sales fell $20 million, or 32 percent, to $43 million, versus $63 million in the second quarter 2018. Fallout-adjusted locks decreased 8 percent to $8.3 billion, due to softer mortgage volume. The net gain on loan sale margin fell 20 basis points to 0.51 percent for the third quarter 2018, as compared to 0.71 percent for the second quarter 2018. The lower margin was primarily due to secondary margin compression and a mix shift toward lower margin, but lower cost delegated correspondent business. Excluding the secondary performance, the net gain on loan sale margin was 66 basis points.



Mortgage Metrics
																Change (% / bps)
	September 30, 2018			June 30, 2018			March 31, 2018			December 31, 2017			September 30, 2017			Seq		Yr/Yr
	(Dollars in millions)
For the three months ended:
Mortgage rate lock commitments (fallout-adjusted) (1)	$	8,290		$	9,011		$	7,722		$	8,631		$	8,898		(8	)%	(7	)%
Net margin on mortgage rate lock commitments (fallout-adjusted) (1) (2)	0.51		%	0.71		%	0.77		%	0.91		%	0.84		%	(20)		(33)
Net gain on loan sales	$	43		$	63		$	60		$	79		$	75		(32	)%	(43	)%
Net (loss) return on the mortgage servicing rights (MSR)	$	13		$	9		$	4		$	(4	)	$	6		44	%	117	%
Gain on loan sales + net (loss) return on the MSR	$	56		$	72		$	64		$	75		$	81		(22	)%	(31	)%
At the end of the period:
Residential loans serviced (number of accounts - 000's) (3)	619			535			470			442			415			16	%	49	%
Capitalized value of MSRs	1.43		%	1.34		%	1.27		%	1.16		%	1.15		%	9		28
N/M - Not meaningful
(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.
(2) Gain on sale margin is based on net gain on loan sales (excludes net gain on loan sales of $1 million from loans transferred from HFI in the three months ended December 31, 2017) to fallout-adjusted mortgage rate lock commitments.
(3) Includes loans serviced for own loan portfolio, serviced for others, and subserviced for others.

Net return on mortgage servicing rights (including the impact of hedges) increased $4 million, resulting in a net gain of $13 million for the third quarter 2018, as compared to a net gain of $9 million for the second quarter 2018. The increase from the prior quarter largely reflected higher service fee income due to a larger MSR portfolio and a $1.9 million fair value gain associated with a pending MSR sale of $4.7 billion UPB expected to close in the fourth quarter 2018.

Noninterest Expense

Noninterest expense fell to $173 million for the third quarter 2018, as compared to $177 million for the second quarter 2018, primarily due to lower compensation and benefits and commissions, partially offset by acquisition costs related to the Company's pending acquisition of Wells Fargo branches. Excluding $1.2 million of transaction costs from pending acquisitions, the Company's adjusted noninterest expense was $172 million.

During the third quarter 2018, compensation and benefits declined $4 million, primarily due to cost reduction initiatives and lower incentive compensation, while commissions decreased $4 million, reflecting lower mortgage expenses.

The Company's total efficiency ratio rose slightly to 75 percent for the third quarter 2018, as compared to 74 percent for the second quarter 2018, resulting from the decline in mortgage revenue. Revenue decreased 3 percent while expenses fell 2 percent in the third quarter 2018.

Income Taxes

The third quarter 2018 provision for income taxes totaled $12 million, unchanged from the second quarter 2018. The Company's effective tax rate was 20 percent for the third quarter 2018, unchanged from the prior quarter.

Asset Quality



Credit Quality Ratios
	Three Months Ended															Change (% / bps)
	September 30, 2018			June 30, 2018			March 31, 2018			December 31, 2017			September 30, 2017			Seq		Yr/Yr
	(Dollars in millions)
Allowance for loan loss to LHFI	1.5		%	1.5		%	1.7		%	1.8		%	2.0		%	0		(50)
Charge-offs, net of recoveries	$	1		$	1		$	1		$	2		$	2		—	%	(50	)%
Total nonperforming loans held-for-investment	$	25		$	27		$	29		$	29		$	31		(7	)%	(19	)%
Net charge-offs to LHFI ratio (annualized)	0.05		%	0.02		%	0.06		%	0.12		%	0.08		%	3		(3)
Ratio of nonperforming LHFI and TDRs to LHFI	0.28		%	0.30		%	0.35		%	0.38		%	0.44		%	(2)		(16)

N/M - Not meaningful

The allowance for loan losses was $134 million at September 30, 2018, compared to $137 million at June 30, 2018. The allowance for loan losses covered 1.5 percent of loans held-for-investment at September 30, 2018, unchanged from June 30, 2018.

Net charge-offs in the third quarter 2018 were $1 million, or 5 basis points of HFI loans, compared to $1 million, or 2 basis points in the prior quarter.

Nonperforming loans held-for-investment were $25 million at September 30, 2018, compared to $27 million at June 30, 2018. The ratio of nonperforming loans to loans held-for-investment was 0.28 percent at September 30, 2018, compared to 0.30 percent at June 30, 2018. At September 30, 2018, early stage consumer loan delinquencies totaled $3 million, or 0.08 percent of consumer loans, unchanged from June 30, 2018.

Capital



Capital Ratios (Bancorp)	Three Months Ended															Change (% / bps)
	September 30, 2018			June 30, 2018			March 31, 2018			December 31, 2017			September 30, 2017			Seq		Yr/Yr
Tangible common equity to assets ratio (1)	7.74		%	7.74		%	7.65		%	8.15		%	8.47		%	—		(73	)
Tier 1 leverage (to adj. avg. total assets)	8.36		%	8.65		%	8.72		%	8.51		%	8.80		%	(29)		(44)
Tier 1 common equity (to RWA)	11.01		%	10.84		%	10.80		%	11.50		%	11.65		%	17		(64)
Tier 1 capital (to RWA)	13.04		%	12.86		%	12.90		%	13.63		%	13.72		%	18		(68)
Total capital (to RWA)	14.20		%	14.04		%	14.14		%	14.90		%	14.99		%	16		(79)
MSRs to Tier 1 capital	20.3		%	16.9		%	16.2		%	20.1		%	17.3		%	340		300
Tangible book value per share (1)	$	25.13		$	24.37		$	23.62		$	24.04		$	25.01		3	%	—	%


(1)	See Non-GAAP Reconciliation for further information.

N/M - Not meaningful

The Company maintained a robust capital position with regulatory ratios well above current regulatory quantitative guidelines for "well capitalized" institutions. At September 30, 2018, the Company had a Tier 1 leverage ratio of

8.36 percent, as compared to 8.65 percent at June 30, 2018. The decrease in the ratio resulted primarily from balance sheet growth and higher MSRs, partially offset by earnings retention.

Under the terms of recently proposed changes to regulatory capital requirements, the Company's Tier 1 leverage ratio would have increased approximately 67 basis points and risk-based capital ratios by approximately 30-50 basis points at September 30, 2018 (pro forma basis).

Earnings Conference Call

As previously announced, the Company's third quarter 2018 earnings call will be held Tuesday, October 23, 2018 at 11 a.m. (ET).

To join the call, please dial (877) 260-1479 toll free or (334) 323-0522 and use passcode 9173210. Please call at least 10 minutes before the conference is scheduled to begin. A replay will be available for five business days by calling (888) 203-1112 toll free or (719) 457-0820 and using passcode 9173210.

The conference call will also be available as a live audiocast on the Investor Relations section of flagstar.com, where it will be archived and available for replay and download. The slide presentation accompanying the conference call will be posted on the site.

About Flagstar

Flagstar Bancorp, Inc. (NYSE: FBC) is an $18.7 billion savings and loan holding company headquartered in Troy, Mich. Flagstar Bank, FSB, provides commercial, small business, and consumer banking services through 108 branches in Michigan and California. It also provides home loans through a wholesale network of brokers and correspondents in all 50 states, as well as 81 retail locations in 27 states, representing the combined retail branches of Flagstar and its Opes Advisors mortgage division. Flagstar is a leading national originator and servicer of mortgage loans, handling payments and record keeping for $136 billion of home loans representing nearly 620,000 borrowers. For more information, please visit flagstar.com.

Use of Non-GAAP Financial Measures

In addition to results presented in accordance with GAAP, this news release includes non-GAAP financial measures, such as tangible book value per share, tangible common equity to assets ratio, adjusted net income, adjusted diluted earnings per share, adjusted noninterest expense and adjusted return on average assets. The Company believes these non-GAAP financial measures provide additional information that is useful to investors in helping to understand the capital requirements Flagstar will face in the future and underlying performance and trends of Flagstar.

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

Where non-GAAP financial measures are used, the most directly comparable GAAP or regulatory financial measure, as well as the reconciliation to the most directly comparable GAAP or regulatory financial measure, can be found in this news release. Additional discussion of the use of non-GAAP measures can also be found in conference call slides, the Form 8-K Current Report related to this news release and in periodic Flagstar reports

filed with the U.S. Securities and Exchange Commission. These documents can all be found on the Company’s website at flagstar.com.

Forward-Looking Statements

This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the current beliefs and expectations of Flagstar Bancorp, Inc.’s management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. The Company's actual results could differ materially from those described in the forward-looking statements depending upon various factors as described in periodic Flagstar reports filed with the U.S. Securities and Exchange Commission, which are available on the Company’s website (flagstar.com) and on the Securities and Exchange Commission's website (sec.gov). Other than as required under United States securities laws, Flagstar Bancorp does not undertake to update the forward-looking statements to reflect the impact of circumstances or events that may arise after the date of the forward-looking statements.

Flagstar Bancorp, Inc.

Consolidated Statements of Financial Condition

(Dollars in millions)

(Unaudited)



	September 30, 2018			June 30, 2018			December 31, 2017			September 30, 2017
Assets
Cash	$	150		$	139		$	122		$	88
Interest-earning deposits	114			220			82			145
Total cash and cash equivalents	264			359			204			233
Investment securities available-for-sale	1,857			1,871			1,853			1,637
Investment securities held-to-maturity	724			748			939			977
Loans held-for-sale	4,835			4,291			4,321			4,939
Loans held-for-investment	8,966			8,904			7,713			7,203
Loans with government guarantees	305			278			271			253
Less: allowance for loan losses	(134		)	(137		)	(140		)	(140		)
Total loans held-for-investment and loans with government guarantees, net	9,137			9,045			7,844			7,316
Mortgage servicing rights	313			257			291			246
Federal Home Loan Bank stock	303			303			303			264
Premises and equipment, net	360			355			330			314
Net deferred tax asset	111			119			136			248
Goodwill and intangible assets	70			71			21			21
Other assets	723			711			670			685
Total assets	$	18,697		$	18,130		$	16,912		$	16,880
Liabilities and Stockholders' Equity
Noninterest-bearing	$	3,096		$	2,781		$	2,049		$	2,272
Interest-bearing	8,493			7,807			6,885			6,889
Total deposits	11,589			10,588			8,934			9,161
Short-term Federal Home Loan Bank advances	3,199			3,840			4,260			4,065
Long-term Federal Home Loan Bank advances	1,280			1,280			1,405			1,300
Other long-term debt	495			494			494			493
Other liabilities	616			453			420			410
Total liabilities	17,179			16,655			15,513			15,429
Stockholders' Equity
Common stock	1			1			1			1
Additional paid in capital	1,519			1,514			1,512			1,511
Accumulated other comprehensive loss	(42		)	(32		)	(16		)	(8		)
Retained earnings/(accumulated deficit)	40			(8		)	(98		)	(53		)
Total stockholders' equity	1,518			1,475			1,399			1,451
Total liabilities and stockholders' equity	$	18,697		$	18,130		$	16,912		$	16,880

Flagstar Bancorp, Inc. Condensed Consolidated Statements of Operations (Dollars in millions, except per share data) (Unaudited)

														Third Quarter 2018 Compared to:
	Three Months Ended													Second Quarter 2018					Third Quarter 2017
	September 30, 2018			June 30, 2018			March 31, 2018		December 31, 2017			September 30, 2017		Amount			Percent		Amount			Percent
Interest Income
Total interest income	$	183		$	167		$	152	$	148		$	140	$	16		10	%	$	43		31	%
Total interest expense	59			52			46		41			37		7			13	%	22			59	%
Net interest income	124			115			106		107			103		9			8	%	21			20	%
Provision (benefit) for loan losses	(2		)	(1		)	—		2			2		(1		)	100	%	(4		)	N/M
Net interest income after provision (benefit) for loan losses	126			116			106		105			101		10			9	%	25			25	%
Noninterest Income
Net gain on loan sales	43			63			60		79			75		(20		)	(32	)%	(32		)	(43	)%
Loan fees and charges	23			24			20		24			23		(1		)	(4	)%	—			—	%
Deposit fees and charges	5			5			5		4			5		—			—	%	—			—	%
Loan administration income	5			5			5		5			5		—			—	%	—			—	%
Net return (loss) on the mortgage servicing rights	13			9			4		(4		)	6		4			44	%	7			117	%
Other noninterest income	18			17			17		16			16		1			6	%	2			13	%
Total noninterest income	107			123			111		124			130		(16		)	(13	)%	(23		)	(18	)%
Noninterest Expense
Compensation and benefits	76			80			80		80			76		(4		)	(5	)%	—			—	%
Commissions	21			25			18		23			23		(4		)	(16	)%	(2		)	(9	)%
Occupancy and equipment	31			30			30		28			28		1			3	%	3			11	%
Federal insurance premiums	6			6			6		5			5		—			—	%	1			20	%
Loan processing expense	14			15			14		16			15		(1		)	(7	)%	(1		)	(7	)%
Legal and professional expense	7			6			6		8			7		1			17	%	—			—	%
Other noninterest expense	18			15			19		18			17		3			20	%	1			6	%
Total noninterest expense	173			177			173		178			171		(4		)	(2	)%	2			1	%
Income before income taxes	60			62			44		51			60		(2		)	(3	)%	—			—	%
Provision for income taxes	12			12			9		96			20		—			—	%	(8		)	(40	)%
Net income (loss)	$	48		$	50		$	35	$	(45	)	$	40	$	(2	)	(4	)%	$	8		20	%
Income (loss) per share
Basic	$	0.84		$	0.86		$	0.61	$	(0.79	)	$	0.71	$	(0.02	)	(2	)%	$	0.13		18	%
Diluted	$	0.83		$	0.85		$	0.60	$	(0.79	)	$	0.70	$	(0.02	)	(2	)%	$	0.13		19	%

N/M - Not meaningful

Flagstar Bancorp, Inc. Consolidated Statements of Operations (Dollars in millions, except per data share) (Unaudited)

						Nine Months Ended September 30, 2018
	Nine Months Ended					Compared to: Nine Months Ended September 30, 2017
	September 30, 2018			September 30, 2017		Amount			Percent
Total interest income	$	502		$	379	$	123		32	%
Total interest expense	157			96		61			64	%
Net interest income	345			283		62			22	%
Provision (benefit) for loan losses	(3		)	4		(7		)	N/M
Net interest income after provision (benefit) for loan losses	348			279		69			25	%
Noninterest Income
Net gain on loan sales	166			189		(23		)	(12	)%
Loan fees and charges	67			58		9			16	%
Deposit fees and charges	15			14		1			7	%
Loan administration income	15			16		(1		)	(6	)%
Net return on the mortgage servicing rights	26			26		—			—	%
Other noninterest income	52			43		9			21	%
Total noninterest income	341			346		(5		)	(1	)%
Noninterest Expense
Compensation and benefits	236			219		17			8	%
Commissions	64			49		15			31	%
Occupancy and equipment	91			75		16			21	%
Federal insurance premiums	18			12		6			50	%
Loan processing expense	43			41		2			5	%
Legal and professional expense	19			22		(3		)	(14	)%
Other noninterest expense	52			47		5			11	%
Total noninterest expense	523			465		58			12	%
Income before income taxes	166			160		6			4	%
Provision for income taxes	33			52		(19		)	(37	)%
Net income	$	133		$	108	$	25		23	%
Income per share
Basic	$	2.32		$	1.90	$	0.42		22	%
Diluted	$	2.28		$	1.86	$	0.42		23	%

N/M - Not meaningful

Flagstar Bancorp, Inc.

Summary of Selected Consolidated Financial and Statistical Data

(Dollars in millions, except share data)

(Unaudited)



	Three Months Ended									Nine Months Ended
	September 30, 2018			June 30, 2018			September 30, 2017			September 30, 2018			September 30, 2017
Selected Mortgage Statistics:
Mortgage rate lock commitments (fallout-adjusted) (1)	$	8,290		$	9,011		$	8,898		$	25,024		$	23,896
Mortgage loans originated (2)	$	9,199		$	9,040		$	9,572		$	26,125		$	24,659
Mortgage loans sold and securitized	$	8,423		$	9,260		$	8,924		$	24,930		$	22,397
Selected Ratios:
Interest rate spread (3)	2.57		%	2.58		%	2.58		%	2.57		%	2.56		%
Net interest margin	2.93		%	2.86		%	2.78		%	2.85		%	2.74		%
Net margin on loans sold and securitized	0.51		%	0.69		%	0.84		%	0.66		%	0.84		%
Return on average assets	1.04		%	1.12		%	0.99		%	1.00		%	0.94		%
Return on average equity	12.80		%	13.45		%	11.10		%	12.10		%	10.23		%
Efficiency ratio	74.6		%	74.4		%	73.5		%	76.2		%	73.9		%
Equity-to-assets ratio (average for the period)	8.13		%	8.29		%	8.95		%	8.23		%	9.16		%
Average Balances:
Average common shares outstanding	57,600,360			57,491,714			57,162,025			57,483,802			57,062,696
Average fully diluted shares outstanding	58,332,598			58,258,577			58,186,593			58,301,920			58,133,296
Average interest-earning assets	$	16,786		$	15,993		$	14,737		$	16,050		$	13,709
Average interest-paying liabilities	$	13,308		$	13,164		$	12,297		$	13,150		$	11,481
Average stockholders' equity	$	1,514		$	1,475		$	1,471		$	1,468		$	1,412


(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.


(2)	Includes residential first mortgage.


(3)	Interest rate spread is the difference between the annualized yield earned on average interest-earning assets for the period and the annualized rate of interest paid on average interest-bearing liabilities for the period.



	September 30, 2018			June 30, 2018			December 31, 2017			September 30, 2017
Selected Statistics:
Book value per common share	$	26.34		$	25.61		$	24.40		$	25.38
Tangible book value per share (1)	25.13			24.37			24.04			25.01
Number of common shares outstanding	57,625,439			57,598,406			57,321,228			57,181,536
Number of FTE employees	3,496			3,682			3,525			3,495
Number of bank branches	108			107			99			99
Ratio of nonperforming assets to total assets (2)	0.17		%	0.19		%	0.22		%	0.24		%
Common equity-to-assets ratio	8.12		%	8.14		%	8.27		%	8.60		%
MSR Key Statistics and Ratios:
Weighted average service fee (basis points)	34.3			32.4			28.9			28.2
Capitalized value of mortgage servicing rights	1.43		%	1.34		%	1.16		%	1.15		%
Mortgage servicing rights to Tier 1 capital	20.3		%	16.9		%	20.1		%	17.3		%


(1)	Excludes goodwill and intangibles of $70 million, $71 million, $21 million, and $21 million at September 30, 2018, June 30, 2018, December 31, 2017, and September 30, 2017, respectively. See Non-GAAP Reconciliation for further information.


(2)	Ratio excludes LHFS.

Average Balances, Yields and Rates

(Dollars in millions)

(Unaudited)



	Three Months Ended
	September 30, 2018						June 30, 2018						September 30, 2017
	Average Balance		Interest		Annualized Yield/Rate		Average Balance		Interest		Annualized Yield/Rate		Average Balance		Interest		Annualized Yield/Rate
Interest-Earning Assets
Loans held-for-sale	$	4,393	$	52	4.69	%	$	4,170	$	47	4.50	%	$	4,476	$	45	3.99	%
Loans held-for-investment
Residential first mortgage	3,027		27		3.63	%	2,875		25		3.53	%	2,594		22		3.32	%
Home equity	695		9		5.12	%	679		8		5.05	%	486		6		5.11	%
Other	128		2		5.54	%	57		1		5.39	%	26		—		4.52	%
Total Consumer loans	3,850		38		3.96	%	3,611		34		3.85	%	3,106		28		3.61	%
Commercial Real Estate	2,106		29		5.37	%	2,017		26		5.09	%	1,646		19		4.43	%
Commercial and Industrial	1,330		18		5.28	%	1,257		17		5.30	%	1,073		13		4.77	%
Warehouse Lending	1,586		21		5.10	%	1,495		19		5.03	%	978		12		4.82	%
Total Commercial loans	5,022		68		5.26	%	4,769		62		5.13	%	3,697		44		4.63	%
Total loans held-for-investment	8,872		106		4.70	%	8,380		96		4.58	%	6,803		72		4.16	%
Loans with government guarantees	292		3		4.20	%	280		2		3.66	%	264		3		4.58	%
Investment securities	3,100		21		2.81	%	3,049		21		2.72	%	3,101		20		2.58	%
Interest-earning deposits	129		1		2.38	%	114		1		1.72	%	93		—		1.23	%
Total interest-earning assets	16,786		$	183	4.32	%	15,993		$	167	4.17	%	14,737		$	140	3.77	%
Other assets	1,825						1,791						1,702
Total assets	$	18,611					$	17,784					$	16,439
Interest-Bearing Liabilities
Retail deposits
Demand deposits	$	727	$	3	1.62	%	$	704	$	1	0.60	%	$	489	$	—	0.14	%
Savings deposits	3,229		7		0.90	%	3,412		8		0.86	%	3,838		7		0.76	%
Money market deposits	252		—		0.62	%	247		—		0.54	%	276		—		0.57	%
Certificates of deposit	2,150		10		1.78	%	2,006		8		1.63	%	1,182		4		1.19	%
Total retail deposits	6,358		20		1.27	%	6,369		17		1.06	%	5,785		11		0.78	%
Government deposits
Demand deposits	283		1		0.59	%	243		—		0.47	%	250		—		0.43	%
Savings deposits	564		2		1.48	%	488		2		1.26	%	362		1		0.71	%
Certificates of deposit	327		1		1.52	%	380		1		1.35	%	329		1		0.89	%
Total government deposits	1,174		4		1.28	%	1,111		3		1.12	%	941		2		0.70	%
Wholesale deposits and other	537		3		2.03	%	264		1		1.96	%	35		—		1.49	%
Total interest-bearing deposits	8,069		27		1.32	%	7,744		21		1.10	%	6,761		13		0.78	%
Short-term Federal Home Loan Bank advances and other	3,465		18		2.10	%	3,646		17		1.85	%	3,809		11		1.17	%
Long-term Federal Home Loan Bank advances	1,280		7		2.11	%	1,280		7		2.25	%	1,234		6		1.99	%
Other long-term debt	494		7		5.62	%	494		7		5.60	%	493		7		5.09	%
Total interest-bearing liabilities	13,308		59		1.75	%	13,164		52		1.58	%	12,297		37		1.19	%
Noninterest-bearing deposits (1)	3,267						2,670						2,244
Other liabilities	522						475						427
Stockholders' equity	1,514						1,475						1,471
Total liabilities and stockholders' equity	$	18,611					$	17,784					$	16,439
Net interest-earning assets	$	3,478					$	2,829					$	2,440
Net interest income			$	124					$	115					$	103
Interest rate spread (2)					2.57	%					2.58	%					2.58	%
Net interest margin (3)					2.93	%					2.86	%					2.78	%
Ratio of average interest-earning assets to interest-bearing liabilities					126.1	%					121.5	%					119.9	%
Total average deposits	$	11,336					$	10,414					$	9,005


(1)	Includes noninterest-bearing custodial deposits that arise due to the servicing of loans for others.


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


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

Average Balances, Yields and Rates

(Dollars in millions)

(Unaudited)



	Nine Months Ended
	September 30, 2018						September 30, 2017
	Average Balance		Interest		Annualized Yield/Rate		Average Balance		Interest		Annualized Yield/Rate
Interest-Earning Assets
Loans held-for-sale	$	4,265	$	142	4.44	%	$	4,014	$	119	3.96	%
Loans held-for-investment
Residential first mortgage	2,893		76		3.52	%	2,497		62		3.34	%
Home equity	681		26		5.13	%	453		17		5.04	%
Other	71		3		5.37	%	26		1		4.52	%
Total Consumer loans	3,645		105		3.86	%	2,976		80		3.61	%
Commercial Real Estate	2,026		79		5.12	%	1,482		47		4.15	%
Commercial and Industrial	1,269		51		5.26	%	929		33		4.71	%
Warehouse Lending	1,312		51		5.08	%	840		30		4.70	%
Total Commercial loans	4,607		181		5.15	%	3,251		110		4.45	%
Total loans held-for-investment	8,252		286		4.58	%	6,227		190		4.05	%
Loans with government guarantees	288		8		3.86	%	300		10		4.41	%
Investment securities	3,127		64		2.74	%	3,093		59		2.55	%
Interest-earning deposits	118		2		1.95	%	75		1		1.08	%
Total interest-earning assets	16,050		$	502	4.15	%	13,709		$	379	3.68	%
Other assets	1,784						1,697
Total assets	$	17,834					$	15,406
Interest-Bearing Liabilities
Retail deposits
Demand deposits	$	660	$	4	0.89	%	$	502	$	1	0.16	%
Savings deposits	3,376		21		0.85	%	3,899		22		0.76	%
Money market deposits	235		1		0.54	%	264		1		0.49	%
Certificates of deposit	1,927		24		1.64	%	1,116		9		1.12	%
Total retail deposits	6,198		50		1.09	%	5,781		33		0.76	%
Government deposits
Demand deposits	256		1		0.54	%	228		1		0.41	%
Savings deposits	512		5		1.29	%	410		2		0.59	%
Certificates of deposit	369		4		1.34	%	314		1		0.73	%
Total government deposits	1,137		10		1.14	%	952		4		0.59	%
Wholesale deposits and other	325		5		1.99	%	16		—		1.21	%
Total interest-bearing deposits	7,660		65		1.13	%	6,749		37		0.74	%
Short-term Federal Home Loan Bank advances and other	3,713		50		1.81	%	3,028		23		1.01	%
Long-term Federal Home Loan Bank advances	1,283		21		2.15	%	1,211		17		1.92	%
Other long-term debt	494		21		5.53	%	493		19		5.06	%
Total interest-bearing liabilities	13,150		157		1.58	%	11,481		96		1.12	%
Noninterest-bearing deposits (1)	2,721						2,098
Other liabilities	495						415
Stockholders' equity	1,468						1,412
Total liabilities and stockholders' equity	$	17,834					$	15,406
Net interest-earning assets	$	2,900					$	2,228
Net interest income			$	345					$	283
Interest rate spread (2)					2.57	%					2.56	%
Net interest margin (3)					2.85	%					2.74	%
Ratio of average interest-earning assets to interest-bearing liabilities					122.1	%					119.4	%
Total average deposits	$	10,381					$	8,847


(1)	Includes noninterest-bearing custodial deposits that arise due to the servicing of loans for others.


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


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

Flagstar Bancorp, Inc.

Earnings Per Share

(Dollars in millions, except share data)

(Unaudited)



	Three Months Ended									Nine Months Ended
	September 30, 2018			June 30, 2018			September 30, 2017			September 30, 2018			September 30, 2017
Net income	48			50			40			133			108
Weighted average shares
Weighted average common shares outstanding	57,600,360			57,491,714			57,162,025			57,483,802			57,062,696
Effect of dilutive securities
May Investor warrants	—			—			—			—			16,383
Stock-based awards	732,238			766,863			1,024,568			818,118			1,054,217
Weighted average diluted common shares	58,332,598			58,258,577			58,186,593			58,301,920			58,133,296
Earnings per common share
Basic earnings per common share	$	0.84		$	0.86		$	0.71		$	2.32		$	1.90
Effect of dilutive securities
May Investor warrants	—			—			—			—			—
Stock-based awards	(0.01		)	(0.01		)	(0.01		)	(0.04		)	(0.04		)
Diluted earnings per common share	$	0.83		$	0.85		$	0.70		$	2.28		$	1.86

Regulatory Capital - Bancorp

(Dollars in millions)

(Unaudited)



	September 30, 2018				June 30, 2018				December 31, 2017				September 30, 2017
	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
Tier 1 leverage (to adjusted avg. total assets)	$	1,540	8.36	%	$	1,525	8.65	%	$	1,442	8.51	%	$	1,423	8.80	%
Total adjusted avg. total asset base	$	18,426			$	17,630			$	16,951			$	16,165
Tier 1 common equity (to risk weighted assets)	$	1,300	11.01	%	$	1,285	10.84	%	$	1,216	11.50	%	$	1,208	11.65	%
Tier 1 capital (to risk weighted assets)	$	1,540	13.04	%	$	1,525	12.86	%	$	1,442	13.63	%	$	1,423	13.72	%
Total capital (to risk weighted assets)	$	1,677	14.20	%	$	1,665	14.04	%	$	1,576	14.90	%	$	1,554	14.99	%
Risk-weighted asset base	$	11,811			$	11,855			$	10,579			$	10,371

Regulatory Capital - Bank

(Dollars in millions)

(Unaudited)



	September 30, 2018				June 30, 2018				December 31, 2017				September 30, 2017
	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
Tier 1 leverage (to adjusted avg. total assets)	$	1,617	8.77	%	$	1,594	9.04	%	$	1,531	9.04	%	$	1,519	9.38	%
Total adjusted avg. total asset base	$	18,433			$	17,637			$	16,934			$	16,191
Tier 1 common equity (to risk weighted assets)	$	1,617	13.68	%	$	1,594	13.44	%	$	1,531	14.46	%	$	1,519	14.61	%
Tier 1 capital (to risk weighted assets)	$	1,617	13.68	%	$	1,594	13.44	%	$	1,531	14.46	%	$	1,519	14.61	%
Total capital (to risk weighted assets)	$	1,753	14.84	%	$	1,734	14.62	%	$	1,664	15.72	%	$	1,651	15.88	%
Risk-weighted asset base	$	11,818			$	11,863			$	10,589			$	10,396



Loan Originations (Dollars in millions) (Unaudited)
	Three Months Ended
	September 30, 2018				June 30, 2018				September 30, 2017
Residential first mortgage	$	9,199	96.1	%	$	9,040	95.2	%	$	9,572	96.3	%
Home equity (1)	80		0.8	%	77		0.8	%	82		0.8	%
Other	56		0.6	%	64		0.7	%	12		0.1	%
Total consumer loans	9,335		97.5	%	9,181		96.7	%	9,666		97.2	%
Commercial loans (2)	241		2.5	%	317		3.3	%	275		2.8	%
Total loan originations	$	9,576	100.0	%	$	9,498	100.0	%	$	9,941	100.0	%


(1)	Includes second mortgage loans, HELOC loans.


(2)	Includes CRE and C&I loans that were net funded within the period.



Loan Originations (Dollars in millions) (Unaudited)
	Nine Months Ended
	September 30, 2018				September 30, 2017
Residential first mortgage	$	26,125	96.1	%	$	24,659	95.5	%
Home equity (1)	220		0.8	%	209		0.8	%
Other	122		0.4	%	16		0.1	%
Total consumer loans	26,467		97.3	%	24,884		96.4	%
Commercial loans (2)	727		2.7	%	946		3.6	%
Total loan originations	$	27,194	100.0	%	$	25,830	100.0	%


(1)	Includes second mortgage loans, HELOC loans.


(2)	Includes CRE and C&I loans that were net funded within the period.

Residential Loans Serviced

(Dollars in millions)

(Unaudited)



	September 30, 2018			June 30, 2018			December 31, 2017			September 30, 2017
	Unpaid Principal Balance (1)		Number of accounts	Unpaid Principal Balance (1)		Number of accounts	Unpaid Principal Balance (1)		Number of accounts	Unpaid Principal Balance (1)		Number of accounts
Serviced for own loan portfolio (2)	$	8,033	35,185	$	7,303	32,012	$	7,013	29,493	$	7,376	31,135
Serviced for others	21,835		88,410	19,249		78,898	25,073		103,137	21,342		87,215
Subserviced for others (3)	106,297		494,950	93,761		424,331	65,864		309,814	62,351		296,913
Total residential loans serviced	$	136,165	618,545	$	120,313	535,241	$	97,950	442,444	$	91,069	415,263


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


(2)	Includes loans held-for-investment (residential first mortgage and home equity), loans-held-for-sale (residential first mortgage), loans with government guarantees (residential first mortgage), and repossessed assets.


(3)	Includes temporary short-term subservicing performed as a result of sales of servicing-released mortgage servicing rights. Includes repossessed assets.

Loans Held-for-Investment

(Dollars in millions)

(Unaudited)



	September 30, 2018				June 30, 2018				December 31, 2017				September 30, 2017
Consumer loans
Residential first mortgage	$	3,085	34.4	%	$	2,986	33.5	%	$	2,754	35.7	%	$	2,665	37.0	%
Home equity	704		7.9	%	685		7.7	%	664		8.6	%	496		6.9	%
Other	150		1.7	%	88		1.0	%	25		0.3	%	26		0.4	%
Total consumer loans	3,939		43.9	%	3,759		42.2	%	3,443		44.6	%	3,187		44.3	%
Commercial loans
Commercial real estate	2,160		24.1	%	2,020		22.7	%	1,932		25.1	%	1,760		24.4	%
Commercial and industrial	1,317		14.7	%	1,324		14.9	%	1,196		15.5	%	1,097		15.2	%
Warehouse lending	1,550		17.3	%	1,801		20.2	%	1,142		14.8	%	1,159		16.1	%
Total commercial loans	5,027		56.1	%	5,145		57.8	%	4,270		55.4	%	4,016		55.7	%
Total loans held-for-investment	$	8,966	100.0	%	$	8,904	100.0	%	$	7,713	100.0	%	$	7,203	100.0	%

Allowance for Loan Losses

(Dollars in millions)

(Unaudited)



	As of/For the Three Months Ended
	September 30, 2018			June 30, 2018			September 30, 2017
Allowance for loan losses
Residential first mortgage	$	40		$	45		$	52
Home equity	20			19			20
Other	2			1			1
Total consumer loans	62			65			73
Commercial real estate	46			45			42
Commercial and industrial	20			21			19
Warehouse lending	6			6			6
Total commercial loans	72			72			67
Total allowance for loan losses	$	134		$	137		$	140
Charge-offs
Total consumer loans	(2		)	(2		)	(3		)
Total commercial loans	—			—			—
Total charge-offs	$	(2	)	$	(2	)	$	(3	)
Recoveries
Total consumer loans	1			1			1
Total commercial loans	—			—			—
Total recoveries	1			1			1
Charge-offs, net of recoveries	$	(1	)	$	(1	)	$	(2	)
Net charge-offs to LHFI ratio (annualized) (1)	0.05		%	0.02		%	0.08		%
Net charge-offs/(recoveries) to LHFI ratio (annualized) by loan type (1):
Residential first mortgage	0.10		%	0.04		%	0.12		%
Home equity and other consumer	0.21		%	0.10		%	0.52		%
Commercial and industrial	—		%	(0.01		)%	(0.01		)%


(1)	Excludes loans carried under the fair value option.

Allowance for Loan Losses

(Dollars in millions)

(Unaudited)



	As of/For the Nine Months Ended
	September 30, 2018			September 30, 2017
Total allowance for loan losses	$	134		$	140
Charge-offs
Total consumer loans	(6		)	(10		)
Total commercial loans	—			—
Total charge-offs	$	(6	)	$	(10	)
Recoveries
Total consumer loans	3			4
Total commercial loans	—			—
Total recoveries	3			4
Charge-offs, net of recoveries	$	(3	)	$	(6	)
Net charge-offs to LHFI ratio (annualized) (1)	0.05		%	0.12		%
Net charge-offs/(recoveries) to LHFI ratio (annualized) by loan type (1):
Residential first mortgage	0.09		%	0.26		%
Home equity and other consumer	0.19		%	0.28		%
Commercial real estate	(0.01		)%	(0.01		)%
Commercial and industrial	(0.01		)%	(0.01		)%


(1)	Excludes loans carried under the fair value option.

Nonperforming Loans and Assets

(Dollars in millions)

(Unaudited)



	September 30, 2018			June 30, 2018			December 31, 2017			September 30, 2017
Nonperforming LHFI	$	12		$	13		$	13		$	16
Nonperforming TDRs	4			4			5			4
Nonperforming TDRs at inception but performing for less than six months	9			10			11			11
Total nonperforming LHFI and TDRs (1)	25			27			29			31
Real estate and other nonperforming assets, net	7			7			8			9
LHFS	$	10		$	7		$	9		$	8
Total nonperforming assets	$	42		$	41		$	46		$	48

Ratio of nonperforming assets to total assets (2)	0.17		%	0.19		%	0.22		%	0.24		%
Ratio of nonperforming LHFI and TDRs to LHFI	0.28		%	0.30		%	0.38		%	0.44		%
Ratio of nonperforming assets to LHFI and repossessed assets (2)	0.35		%	0.38		%	0.48		%	0.58		%


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


(2)	Ratio excludes LHFS.

Asset Quality - Loans Held-for-Investment

(Dollars in millions)

(Unaudited)



	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 days (1)		Total Past Due		Total Loans Held-for-Investment
September 30, 2018
Consumer loans	$	2	$	1	$	25	$	28	$	3,939
Commercial loans	—		—		—		—		5,027
Total loans	$	2	$	1	$	25	$	28	$	8,966
June 30, 2018
Consumer loans	$	3	$	—	$	27	$	30	$	3,759
Commercial loans	—		—		—		—		5,145
Total loans	$	3	$	—	$	27	$	30	$	8,904
December 31, 2017
Consumer loans	$	3	$	2	$	29	$	34	$	3,443
Commercial loans	—		—		—		—		4,270
Total loans	$	3	$	2	$	29	$	34	$	7,713
September 30, 2017
Consumer loans	4		1		30		$	35	$	3,187
Commercial loans	—		—		1		1		4,016
Total loans	$	4	$	1	$	31	$	36	$	7,203


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

Troubled Debt Restructurings

(Dollars in millions)

(Unaudited)



	TDRs
	Performing		Nonperforming		Total
September 30, 2018
Consumer loans	$	43	$	13	$	56
Total TDR loans	$	43	$	13	$	56
June 30, 2018
Consumer loans	$	43	$	14	$	57
Total TDR loans	$	43	$	14	$	57
December 31, 2017
Consumer loans	$	43	$	16	$	59
Total TDR loans	$	43	$	16	$	59
September 30, 2017
Consumer loans	$	46	$	15	$	61
Total TDR loans	$	46	$	15	$	61

Non-GAAP Reconciliation

(Dollars in millions)

(Unaudited)

Tangible book value per share, tangible common equity to assets ratio, adjusted net income, adjusted diluted earnings per share, adjusted noninterest expense and adjusted return on average assets. In addition to analyzing the Company's results on a reported basis, management reviews the Company's results and the results on an adjusted basis. This non-GAAP measure reflects the adjustments of the reported U.S.GAAP results for significant items that management does not believe are reflective of the Company's current and ongoing operations. The Company believes that tangible book value per share, tangible common equity to assets ratio, adjusted net income, adjusted diluted earnings per share, adjusted noninterest expense and adjusted return on average assets provide a meaningful representation of its operating performance on an ongoing basis. Management uses these measures to assess performance of the Company against its peers and evaluate overall performance. The Company believes these non-GAAP financial measures provide useful information for investors, securities analysts and others because it provides a tool to evaluate the Company’s performance on an ongoing basis and compared to its peers.

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

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



	September 30, 2018			June 30, 2018			March 31, 2018			December 31, 2017			September 30, 2017
	(Dollars in millions, except share data)
Total stockholders' equity	$	1,518		$	1,475		$	1,427		$	1,399		$	1,451
Goodwill and intangibles	70			71			72			21			21
Tangible book value	$	1,448		$	1,404		$	1,355		$	1,378		$	1,430

Number of common shares outstanding	57,625,439			57,598,406			57,399,993			57,321,228			57,181,536
Tangible book value per share	$	25.13		$	24.37		$	23.62		$	24.04		$	25.01

Total Assets	$	18,697		$	18,130		$	17,736		$	16,912		$	16,880
Tangible common equity to assets ratio	7.74		%	7.74		%	7.65		%	8.15		%	8.47		%

Adjusted Net Income, Diluted Earnings per Share, Noninterest Expense and Return on Average Assets



	Three Months Ended
	September 30, 2018			June 30, 2018
	(Dollars in millions) (Unaudited)
Net income (loss)	$	48		$	50
Adjustment for acquisition costs (net of tax)	1			—
Adjusted net income	$	49		$	50

Weighted average diluted common shares	58,332,598			58,258,577
Adjusted diluted earnings per share	$	0.85		$	0.85

Total noninterest expense	$	173		$	177
Adjustment for acquisition costs (net of tax)	1			—
Adjusted total noninterest expense	$	172		$	177

Average total assets	$	18,611		$	17,784
Return on average assets	1.04		%	1.12		%
Adjusted return on average assets	1.05		%	1.12		%

3rd Quarter 2018 Flagstar Bancorp, Inc. (NYSE: FBC) Earnings Presentation 3rd Quarter 2018 October 23, 2018

Cautionary statements 3rd Quarter 2018 This presentation contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Forward-looking statements are based on management’s current expectations and assumptions regarding the Company’s business and performance, the economy and other future conditions, and forecasts of future events, circumstances and results. However, they are not guarantees of future performance and are subject to known and unknown risks, uncertainties, contingencies and other factors. Generally, forward-looking statements are not based on historical facts but instead represent our management’s beliefs regarding future events. Such statements may be identified by words such as believe, expect, anticipate, intend, plan, estimate, may increase, may fluctuate, and similar expressions or future or conditional verbs such as will, should, would and could. Such statements are based on management’s current expectations and are subject to risks, uncertainties and changes in circumstances. Actual results and capital and other financial conditions may differ materially from those included in these statements due to a variety of factors, including without limitation those found in periodic Flagstar reports filed with the U.S. Securities and Exchange Commission, which are available on the Company’s website (flagstar.com) and on the Securities and Exchange Commission's website (sec.gov). Any forward-looking statements made by or on behalf of us speak only as to the date they are made, and we do not undertake to update forward-looking statements to reflect the impact of circumstances or events that arise after the date the forward-looking statements were made, except as required under United States securities laws. In addition to results presented in accordance with GAAP, this presentation includes non-GAAP financial measures. The Company believes these non-GAAP financial measures provide additional information that is useful to investors in helping to understand the capital requirements Flagstar will face in the future and underlying performance and trends of Flagstar. Non-GAAP financial measures have inherent limitations, which are not required to be uniformly applied. Readers should be aware of these limitations and should be cautious with respect to the use of such measures. To compensate for these limitations, we use non-GAAP measures as comparative tools, together with GAAP measures, to assist in the evaluation of our operating performance or financial condition. Also, we ensure that these measures are calculated using the appropriate GAAP or regulatory components in their entirety and that they are computed in a manner intended to facilitate consistent period-to-period comparisons. Flagstar’s method of calculating these non-GAAP measures may differ from methods used by other companies. These non-GAAP measures should not be considered in isolation or as a substitute for those financial measures prepared in accordance with GAAP or in-effect regulatory requirements. Where non-GAAP financial measures are used, the most directly comparable GAAP or regulatory financial measure, as well as the reconciliation to the most directly comparable GAAP or regulatory financial measure, can be found in these conference call slides. Additional discussion of the use of non-GAAP measures can also be found in the Form 8-K Current Report related to this presentation and in periodic Flagstar reports filed with the U.S. Securities and Exchange Commission. These documents can all be found on the Company’s website at flagstar.com. 2

Executive Overview 3rd Quarter 2018 Sandro DiNello, CEO

Strategic highlights 3rd Quarter 2018 Unique • Third quarter 2018 results demonstrated strength of banking business relationship-based • Pending acquisition of 52 Midwest branches of Wells Fargo will transform banking franchise business model - Provides low cost, low beta deposits; more than doubles customer base with 200,000 new customer relationships • Solid growth in banking and disciplined cost control delivered solid profitability Grow community - Net interest income of $124 million; up 8% vs. 2Q18 and 20% vs. 3Q17 banking - Adjusted noninterest expense(1) of $172 million; down 3% vs. 2Q18 and up 1% vs. 3Q17 Strengthen • Mortgage business continued to be challenged by industry overcapacity and secondary margin compression mortgage revenues - Mortgage revenue(2) of $56 million; down 22% vs. 2Q18 and down 31% vs. 3Q17 • Adjusted net income(1) of $0.85 per diluted share; unchanged vs. 2Q18 and up 21% vs. 3Q17 Highly profitable • Built scale and profitability in servicing business; nearly 620,000 loans serviced, up 16% vs. 2Q18 operations • Adjusted return on assets(1) 1.1%; adjusted return on average equity(1) 13.0% • Strong credit metrics and low delinquency levels supported by 1.5% allowance coverage ratio Positioned to thrive in any market • Strong total risk based capital ratio of 14.2%; Capital Simplification NPR would improve total risk based capital ratio to 14.5%(1) 1) Non-GAAP number. Please see reconciliation on page 46. 2) Mortgage revenue is defined as net gain on loan sales plus net return on MSRs. 4

Financial Overview 3rd Quarter 2018 Jim Ciroli, CFO

Financial highlights 3rd Quarter 2018 • Adjusted net income(1) of $49 million, or $0.85 per diluted share, in 3Q18 Solid earnings with - Higher net interest income; average earning assets up 5%; net interest margin up 7 bps to 2.93% cost discipline - Net gain on loan sales of $43 million; lowest quarter since 4Q11 - Lower noninterest expense reflecting lower mortgage expenses and cost reduction initiatives • Net interest income rose $9 million, or 8%, led by growth of high quality, relationship-based loans Strong growth in - Average earning assets up $793 million, driven by growth of LHFI of $492 million, or 6% community banking - Net interest margin expanded as increased deposit growth allowed a reduction in FHLB borrowings • Mortgage revenue(2) down $16 million, or 22%, on lower net gain on loan sales, partially offset by improved MSR return Lower mortgage - Net gain on loan sales fell $20 million, or 32%, reflecting lower GOS margin (down 20 bps) revenue - Net return on MSRs $4 million higher reflecting lower prepayments and stronger valuations • Negligible net charge-offs Pristine asset • Nonperforming loan ratio fell to 0.28%; early stage consumer delinquencies low quality • Allowance for loan losses covered 1.5% of loans HFI • Capital remained strong with regulatory capital ratios well above current “well capitalized” guidelines Robust capital - Total risk based capital ratio at 14.2%; up 16 bps vs. 2Q18 position - Company expects total risk based capital ratio to be 13.7% at 12/31/2018, reflecting Wells Fargo branch acquisition, recognition of deferred hedging gains in AOCI, and enactment of Capital Simplification regulations 1) Non-GAAP number. Please see reconciliation on page 46. 2) Mortgage revenue is defined as net gain on loan sales HFS plus the net return on the MSRs. 6

Quarterly income comparison 3rd Quarter 2018 $mm Observations A 3Q18 2Q18 $ Variance % Variance Net interest income A Net interest income $124 $115 $9 8% • Net interest income rose $9mm, or 8% Provision (benefit) for loan losses ("PLL") (2) (1) (1) N/M - Average earning assets increased 5%, led by Net interest income after PLL 126 116 10 9% balanced growth in loans HFS, commercial and Net gain on loan sales 43 63 (20) (32%) consumer loans Loan fees and charges 23 24 (1) (4%) - Average deposits increased 9%, led by higher Loan administration income 5 5 - - custodial, brokered and commercial deposits Net return on mortgage servicing rights 13 9 4 44% Other noninterest income 23 22 1 5% B Noninterest income Total noninterest income B 107 123 (16) (13%) Compensation and benefits 76 80 (4) (5%) • Noninterest income decreased $16mm, or 13% Commissions and loan processing expense 35 40 (5) (13%) - Net gain on loan sales fell $20mm, or 32%, on Other noninterest expenses 61 (1) 57 4 7% lower GOS margin, primarily due to secondary marketing performance and a mix shift toward Total noninterest expense C 172 (1) 177 (5) (3%) delegated correspondent channel Income before income taxes 61 (1) 62 (1) (2%) - Net return on MSRs improved $4mm Provision for income taxes 12 12 - - Net income $49 (1) $50 ($1) (2%) C Noninterest expense Diluted income per share $0.85 (1) $0.85 - - • Noninterest expense fell $4mm, or 2%; down Profitability $5mm, or 3%, excluding Wells Fargo branch Net interest margin 2.93% 2.86% 7 bps acquisition costs Total revenues $233 $239 ($6) (3%) - Commissions and loan processing expense fell Net gain on loan sales / total revenue 18% 26% (800 bps) $5mm, or 13%, reflecting shift in channel mix Mortgage rate lock commitments, fallout adjusted $8,290 $9,011 ($721) (8%) Mortgage closings $9,199 $9,040 $159 2% - Compensation and benefits declined $4mm, or Net gain on loan sale margin, HFS 0.51% 0.71% (20 bps) 5%, led by cost reduction initiatives and lower incentive compensation 1) Non-GAAP number. Number shown excludes $1 million of transaction costs related to pending Wells Fargo branch acquisition. Please see reconciliation on page 46. N/M – not meaningful 7

Average balance sheet highlights 3rd Quarter 2018 3Q18 ($mm) Observations Average Balance Sheet Interest-earning assets Incr (Decr)(1) $ $ % • Solid gains in commercial loan portfolio; warehouse loans increased $91mm, or 6%, CRE loans increased $88mm, Loans held-for-sale $4,393 $223 5% or 4%, and C&I loans increased $74mm, or 6% (2) Consumer loans 3,850 239 7% • Consumer loans up $239mm, or 7%; focus on adding Commercial loans(2) 5,022 253 5% residential mortgage and indirect marine/RV loans with high risk adjusted returns Total loans held-for-investment 8,872 492 6% (3) Other earning assets 3,521 78 2% Interest-bearing liabilities Interest-earning assets $16,786 $793 5% • Custodial deposits increased $366mm, or 23%, on higher Other assets 1,825 34 2% subserviced accounts Total assets $18,611 $827 5% • Brokered deposits increased $273mm Deposits $11,336 $922 9% • Commercial demand deposits increased $259mm, or 25% Short-term FHLB advances & other 3,465 (181) (5%) - Provides additional risk based capital and funding at Long-term FHLB advances 1,280 - 0% cost favorable to marginal alternatives Other long-term debt 494 - - Other liabilities 522 47 10% Equity(4) Total liabilities $17,097 $788 5% Stockholders' equity 1,514 39 3% • Tangible common equity to asset ratio of 7.74% Total liabilities and stockholders' equity $18,611 $827 5% • FBC closing share price of $30.14 on October 22, 2018 is 120% of tangible book value per share Tangible book value per common share(4) $25.13 $0.76 3% 1) Measured vs. the prior quarter. 2) Consumer loans include first and second mortgages, HELOC and other loans; commercial loans include commercial real estate, commercial & industrial and warehouse loans. 3) Other earning assets include interest earning deposits, investment securities and loans with government guarantees. 4) Tangible book value per common share references a non-GAAP number. Please see reconciliation on page 46. 8

Asset quality 3rd Quarter 2018 Delinquencies ($mm) Performing TDRs and NPLs ($mm) Performing TDRs NPLs $36 $34 $34 $30 $28 $77 $78 $72 $70 $68 31 29 29 27 25 46 43 49 43 43 9/30/2017 12/31/2017 3/31/2018 6/30/2018 9/30/2018 9/30/2017 12/31/2017 3/31/2018 6/30/2018 9/30/2018 Allowance coverage(1) (% of loans HFI) Nonperforming loan and asset ratios (2) (2) Total Consumer Commercial NPA/LHFI & Repos NPL & TDRs/LHFI NPA/Total Assets 2.3% 0.58% 0.48% 2.0% 2.0% 2.0% 0.42% 0.38% 1.8% 1.7% 0.35% 1.7% 1.6% 0.44% 0.38% 1.5% 0.35% 1.7% 1.5% 1.6% 0.30% 0.28% 1.5% 0.24% 0.22% 1.4% 1.4% 0.19% 0.19% 0.17% 9/30/2017 12/31/2017 3/31/2018 6/30/2018 9/30/2018 9/30/2017 12/31/2017 3/31/2018 6/30/2018 9/30/2018 1) Excludes loans carried under the fair value option and loans with government guarantees. 2) Excludes loans held-for-sale 9

Robust capital 3rd Quarter 2018 Flagstar Bancorp Capital Ratios Observations 3Q18 Balance sheet impact Net earnings contribution Change in MSR balance Goodwill / intangibles from Wells Fargo acquisition Tier 1 CET-1 Tier 1 Total RBC Proforma ratio under Capital Simplification proposal(1) Recognition of hedging gains currently in AOCI, Leverage to RWA to RWA to RWA net of merger expenses 3Q18 Actual 8.4% 11.0% 13.1% 14.2% 2Q18 Actual 8.7% 10.8% 12.9% 14.0% Total Risk Based Capital 14.52% 14.17% • With pending acquisition of Wells Fargo branches, Company is 13.30% 14.04% +5bps 14.20% now constrained by total risk based capital ratio -34bps +45bps -134bps - Wells Fargo acquisition reduces ratio to 13.3% (pro forma as of -15bps +12bps 12.83% 9/30/2018), led by decrease from acquired goodwill and intangible assets, partially offset by recognition of deferred hedging gains in AOCI and enactment of Capital Simplification regulations Well Well Capitalized Capitalized - Long-term target range of 13-14% 10.0% 10.0% - Given low level of residual risk, Company is comfortable operating in bottom half of targeted range • Lifting of Supervisory Agreement provides increased flexibility in capital management - Investing capital in the business provides highest risk-adjusted returns - If not deployed in business, Company expects to consider other options for excess capital, including share repurchases and dividends 6/30/2018 9/30/2018 9/30/2018 Pro Forma 1) Non-GAAP number. Please see reconciliation on page 46. 10

Business Segment Overview 3rd Quarter 2018 Lee Smith, COO

Community banking 3rd Quarter 2018 Average commercial loans ($bn) Quarter-end commercial loan commitments ($bn) Commercial and Industrial Commercial Real Estate Warehouse Commercial and Industrial Commercial Real Estate Warehouse $9.1 $9.3 $9.2 $4.8 $5.0 $7.6 $4.0 $4.0 $7.2 $3.7 1.6 1.5 4.3 4.2 4.0 1.0 0.8 2.8 1.0 2.7 2.0 2.1 1.9 2.0 3.0 3.2 1.6 2.7 2.9 2.9 1.1 1.1 1.2 1.3 1.3 1.8 1.9 1.9 2.1 2.0 3Q17 4Q17 1Q18 2Q18 3Q18 9/30/2017 12/31/2017 3/31/2018 6/30/2018 9/30/2018 Average consumer loans ($bn) Average deposit funding(1) ($bn) Residential First Mortgages Other Consumer Loans Retail (2) Government Custodial deposits $11.3 $3.9 $10.4 $3.5 $3.6 $3.3 $9.1 $9.4 2.0 $3.1 0.9 $9.0 1.6 0.7 0.7 1.5 1.2 0.5 0.6 1.5 1.6 1.2 0.9 1.0 1.1 2.7 2.8 2.9 3.0 7.6 8.1 2.6 6.6 6.5 6.8 3Q17 4Q17 1Q18 2Q18 3Q18 3Q17 4Q17 1Q18 2Q18 3Q18 1) Includes custodial deposits which are included as part of mortgage servicing. 2) Includes brokered certificates of deposit ($0.5 bn in 3Q18) 12

Mortgage originations 3rd Quarter 2018 Closings by purpose ($bn) Fallout-adjusted locks ($bn) Purchase originations Refinance originations $9.0 $8.9 $8.6 $9.6 $9.7 $8.3 $9.0 $9.2 $7.7 $7.9 2.4 4.1 4.4 2.6 3.4 6.4 6.8 5.5 5.3 4.5 3Q17 4Q17 1Q18 2Q18 3Q18 3Q17 4Q17 1Q18 2Q18 3Q18 Purchase 55% 54% 59% 72% 71% Mix % Closings by mortgage type ($bn) Net gain on loan sales – revenue and margin Conventional Government Jumbo Gain on loan sale ($mm) Gain on sale margin (HFS) $9.6 $9.7 $79 $9.0 $9.2 $75 2.5 $7.9 $63 2.9 2.2 2.2 $60 1.9 2.3 $43 2.2 2.7 2.6 2.1 0.84% 0.91% 0.77% 0.71% 0.51% 4.9 4.5 3.9 4.1 4.4 3Q17 4Q17 1Q18 2Q18 3Q18 3Q17 4Q17 1Q18 2Q18 3Q18 13

Mortgage servicing 3rd Quarter 2018 Quarter-end loans serviced (000’s) $ UPB of MSRs sold ($bn) Serviced for Others Subserviced for Others Flagstar Loans HFI Bulk Sales Flow Transactions 619 535 35 $12.0 470 442 32 415 12.0 29 32 31 495 $6.4 424 297 310 361 $4.3 $4.4 6.4 $2.0 4.3 3.9 87 103 77 79 89 1.6 9/30/2017 12/31/2017 3/31/2018 6/30/2018 9/30/2018 3Q17 4Q17 1Q18 2Q18 3Q18 Average custodial deposits ($bn) MSR / regulatory capital (Bancorp) MSR to Tier 1 Common MSR to Tier 1 Capital $2.0 $1.6 $1.6 $1.5 $1.5 24% 24% 20% 19% 20% 21% 20% 17% 16% 17% 3Q17 4Q17 1Q18 2Q18 3Q18 9/30/17 12/31/17 3/31/2018 6/30/2018 9/30/2018 14

Noninterest expense and efficiency ratio 3rd Quarter 2018 Quarterly noninterest expense ($mm) and efficiency ratio Adjusted noninterest expense (1) Adjusted efficiency ratio (1) $178 $177 $171 $173 $172 80% 77% 74% 74% 74% 3Q17 4Q17 1Q18 2Q18 3Q18 1) References non-GAAP number for 3Q18; number excludes acquisition costs of $1 million related to Wells Fargo branch acquisition. Please see reconciliation on page 46. 15

Closing Remarks / Q&A 3rd Quarter 2018 Sandro DiNello, CEO

Earnings guidance(1) 3rd Quarter 2018 4th Quarter 2018 Outlook • Net interest income up slightly Net interest income - Average earning assets down moderately, led by seasonally lower loans HFS and warehouse loans - Net interest margin expands approximately 15 bps on Wells Fargo branch acquisition • Net gain on loan sales flat - Fallout-adjusted locks (FOAL) down seasonally, offset by an increase in GOS margin Noninterest income • Net return on mortgage servicing rights approximates 6-8% before transaction costs from closing 4Q18 MSR sales ($5 billion UPB) • Noninterest expense to increase to between $175-$180 million, not including expenses associated with Noninterest expense Wells Fargo branch acquisition 1) See cautionary statements on slide 2. 17

Appendix 3rd Quarter 2018 Company overview 19 Financial performance 24 Community banking 29 Mortgage originations 40 Mortgage servicing 42 Capital and liquidity 43 Non-GAAP reconciliation 46

COMPANY OVERVIEW Flagstar at a glance 3rd Quarter 2018 Corporate Overview • Traded on the NYSE (FBC) • Headquartered in Troy, MI 108 52 41 40 Pending Flagstar Opes Flagstar Acquisition of retail home retail home • Market capitalization $1.7bn Bank Wells Fargo lending lending Branches(1) • Member of the Russell 2000 Index Branches offices(2) offices(3) 99 Branches in Community banking Michigan • Leading Michigan-based bank with a balanced, diversified lending platform • $18.7bn of assets and $11.6bn of deposits • More than 125k household & 17k business relationships Mortgage origination • Leading national originator of residential mortgages ($35.9bn during last twelve months to September 30, 2018) • 81 retail home lending offices operating in 27 states with direct-to-consumer in all 50 states • More than 1,100 correspondent and 800 broker relationships Mortgage servicing • 7th largest sub-servicer of mortgage loans nationwide Operations center • Servicing nearly 620k loans as of September 30, 2018 • Efficiently priced deposits from escrow balances 1) Includes 8 Desert Community Bank branches in the High Desert region of San Bernardino County, CA. 2) Includes seven home lending offices located in banking branches. 3) Opes has one retail lending office in Honolulu, HI that is not pictured on this map. 19

COMPANY OVERVIEW Flagstar’s integrated business model 3rd Quarter 2018 ● Illustrative case studies detailed below: Residential MBS Investor Home Builder Wholesale Originator Initial relationship Initial relationship Initial relationship • Bulk sale of MSRs with subservicing • Provided home builder line of credit • Established correspondent lending retained (2013 - 2014) (2016) relationship (2017) Expanded relationship - Secured real estate commitment of - Purchased nearly $300mm of $15mm (currently $50mm) mortgages since inception (2017) • Provided MSR lending facility (2016) Expanded relationship Expanded relationship - Commitments of $50mm collateralized by FNMA MSRs • Established 36 additional deposit • Warehouse line of credit (2017) accounts (2016-2018) - Subservice non-Flagstar mortgage - Commitments of $15mm accounts providing fee income - Average deposit balance of $6mm • Initiated subservicing agreement • Portfolio recapture services provided • Warehouse line of credit (2017) (2017) with direct-to-consumer refinancings of over $325mm since inception - Commitments of $10mm - Entire portfolio of newly originated (2016) mortgage loans are on-boarded with Flagstar • Additional bulk and flow sales of MSRs with subservicing retained (2017 and 2018) 20

COMPANY OVERVIEW Flagstar has a strong executive team 3rd Quarter 2018 Board of Directors John Lewis Chairman Chief Audit Officer Sandro DiNello Brian Dunn President & CEO • CEO since 5/13 • Over 35 years of banking experience with Flagstar and its predecessors with a strong emphasis on community banking, including the management of retail operations and product strategy Chief Chief Mortgage Community Chief Risk General Operating Officer Financial Officer Banking Banking Officer Counsel Lee Smith Jim Ciroli Kristy Fercho Drew Ottaway Steve Figliuolo Patrick McGuirk • COO since 5/13 • CFO since 8/14 • Appointed • Executive Vice • CRO since 6/14 • General Counsel • Formerly a partner • More than 30 years President of President, Michigan • Over 35 years of since 6/15 of MatlinPatterson of banking and Mortgage effective Market President financial services • Over 20 years of Global Advisors and financial services 9/17 and Managing experience with financial services a Senior Director at experience with • Has 15 years Director, Lending Citizens Republic, legal experience Zolfo Cooper First Niagara, experience with • With Flagstar since Fleet Boston with the FDIC and • Extensive expe- Huntington and Fannie Mae in 12/15 and has 30 Financial, First Sidley Austin LLP rience in financial KeyCorp various executive years of banking Union and Chase management and and leadership and commercial Manhattan operations roles focused on lending experience building banking in southeast • Chartered Accoun- relationships and Michigan with tant in England and growth initiatives Comerica and NBD Wales 21

Risk management COMPANY OVERVIEW Best-in-class risk management platform with 226 FTEs(1) 3rd Quarter 2018 Board of Directors Risk Committee Enterprise Sandro DiNello Risk Committee President & CEO Karen Sabatowski Steve Figliuolo Chief Compliance Chief Risk Officer Officer Chief QC / Financial Regulatory MFIU Fraud Loan Operational Credit Appraisal Crimes Compliance Affairs Investigations Review Risk Officer Review (BSA/AML) FTEs 5 70 49 12 8 11 44 27 1) Does not include 28 FTEs in internal audit. 22

COMPANY OVERVIEW Strong growth opportunities 3rd Quarter 2018 Grow community banking Build mortgage subservicing business • Opportunistic team lift outs • Grow subservicing operations • Grow national lending platforms(1) - Retain subservicing on MSR sales - Expand warehouse lending (275bp spread) - Acquire new 3rd party subservicing relationships where Flagstar was not the originator - Grow home builder finance (450bp spread) - Cross-sell additional revenue capabilities Build - Build MSR lending (350bp spread; LTVs<60%) • Cultivate middle-market and business banking relationships • Add specialty lending disciplines and teams 1) Indicated spreads are targets and may not be reflective of actual spreads. 23

FINANCIAL PERFORMANCE Financial performance 3rd Quarter 2018 ● Solid growth in banking and subservicing has created more stable earnings ● Heightened focus on efficiency and expense management Revenue Composition and Earnings Metrics 9/30/2017 9/30/2018 Percentage Revenue (millions) YTD YTD Increase Community Banking $ 186 $ 248 33% Mortgage Servicing 56 70 25% Subtotal 242 318 31% Mortgage Origination 369 352 (5%) Other 18 16 (11%) Total $ 629 $ 686 9% Diluted Earnings per Share (1) $ 1.89 $ 2.30 22% Return on Average Assets (1) 0.95% 1.00% Return on Average Equity (1) 10.38% 12.18% 1) Non-GAAP number. Number shown excludes $1 million of transaction costs related to pending Wells Fargo branch acquisition in 3Q18 and $2 million of transaction costs related to Sterns and Opes acquisitions in 1Q17 and 2Q17. Please see reconciliation on page 46. 24

FINANCIAL PERFORMANCE Long-term targets 3rd Quarter 2018 Revenues Banking Mortgage • Lender of choice in key markets (banking • Nationally recognized leader footprint and national lending platforms) • Growth trajectory 10 - 15% • Maintain market share - Every additional $1bn of earning assets increases - Widen margin pre-tax profits ~$20mm – $25mm - Rotate lower spread assets to higher spread assets - Expand retail originations while minimizing capital costs • Every 100k in new loans sub-serviced generates - Scalable platforms with balance sheet growth at low $4mm - $6mm of incremental pre-tax profits incremental cost Financial Performance Return on assets Return on equity • Long-term target of 1.1 – 1.7% • Long-term target of 12 - 17% - Add incremental revenue with low incremental cost - Add / increase high ROE businesses - Improved risk management will deliver long-run savings 25

FINANCIAL PERFORMANCE Higher net interest income is stabilizing earnings 3rd Quarter 2018 ● Achieving earning asset growth without diminishing net interest income growth - Growing and expanding net interest margin ● Transition to more stable net interest income Average earning assets and net interest income Net interest income ($mm) Average earning assets ($bn) $16.8 CAGR 19% $16.0 $15.4 $15.4 $124 $14.7 $14.0 $115 CAGR 21% $107 $106 $12.8 $103 $12.3 $12.3 $97 $11.9 $11.6 $11.2 $87 $10.4 $10.7 $80 $83 $9.4 $76 $79 $77 $8.7 $73 $73 $65 $61 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 26

FINANCIAL PERFORMANCE Price target has increased on improved prospects 3rd Quarter 2018 Analyst rating history $46 100% 8 out of 9 analysts (89%) at Buy at 9/30/18 $42 75% $38 50% $34 As of 10/22/2018 25% Actual Price: $30.14 $30 Target Price: $40.88 $26 0% 9/17 10/17 11/17 12/17 1/18 2/18 3/18 4/18 5/18 6/18 7/18 8/18 9/18 Hold Buy Actual Price Target Price Source: Analyst ratings and target price (consensus estimate) as reported by First Call as of 10/15/2018. 27

FINANCIAL PERFORMANCE Valuation metrics 3rd Quarter 2018 Observation: FBC trades at a discount to its banking peers Market / tangible book Price / LTM earnings . FBC valuation vs. SNL U.S. Bank and Thrift Index . FBC valuation vs. SNL U.S. Bank and Thrift Index Market value gap: ~$1.0B MarketMarket value value gap: gap: ~$0.7B ~$0.6B 72% 68% 63% 75% 63% 68% 1/31/2017 2/28/2017 3/31/2017 4/30/2017 5/31/2017 6/30/2017 7/31/2017 8/31/2017 9/30/2017 1/31/2018 2/28/2018 3/31/2018 4/30/2018 5/31/2018 6/30/2018 7/31/2018 8/31/2018 9/30/2018 1/31/2017 1/31/2017 2/28/2017 2/28/2017 3/31/2017 3/31/2017 4/30/2017 4/30/2017 5/31/2017 5/31/2017 6/30/2017 7/31/2017 6/30/2017 8/31/2017 7/31/2017 9/30/2017 8/31/2017 9/30/2017 1/31/2018 2/28/2018 3/31/2018 1/31/2018 4/30/2018 2/28/2018 5/31/2018 3/31/2018 6/30/2018 4/30/2018 7/31/2018 8/31/2018 5/31/2018 9/30/2018 6/30/2018 12/31/2016 10/31/2017 11/30/2017 12/31/2017 12/31/2016 12/31/2016 10/31/2017 11/30/2017 10/31/2017 12/31/2017 11/30/2017 12/31/2017 Source: SNL Financial; as of 10/15/2018 28

COMMUNITY BANKING Strong market position in Midwest 3rd Quarter 2018 Market characteristics Flagstar’s Midwest branch network Leading position in Michigan 2018 Rank Deposits ($mm) % YoY Overall MI-based Institution Branches Total Share Change 1 Chase 229 $43,637 20% 0% 2 Comerica 196 30,158 14% 2% 3 Bank of America 106 19,225 9% 8% 4 PNC 185 17,234 8% -1% 5 Fifth Third 208 16,451 8% -3% 6 Huntington 316 15,767 7% 7% 7 1 Chemical 186 13,123 6% 13% 8 2 Flagstar(1)(2) 113 10,297 5% 7% 9 Citizens 89 5,641 3% 2% 10 TCF 51 3,194 1% 6% Top 10 1,679 $174,726 81% 3% Attractive Midwest markets Flagstar Deposits Deposit Median Proj HHI Proj pop Market $mm % of total mkt share HHI(3) grow th(3)(4) grow th(3)(4) Oakland County(2) 4,341 38.8% 8.0% 79,065 10.9% 2.6% Fort Wayne(5) 962 8.6% 8.7% 56,120 9.6% 2.5% Grand Rapids MSA 435 3.9% 2.0% 65,403 11.5% 4.7% Ann Arbor MSA 301 2.7% 3.4% 72,826 12.3% 4.3% Key Flagstar markets 6,039 53.9% 6.3% 74,114 10.8% 2.8% Existing Flagstar Michigan branches (99) as of June 30, 2018 National aggregate 61,045 8.8% 3.6% Wells Fargo branches pending acquisition (52) Source: S&P Global Market Intelligence; Note: Deposit data as of June 30, 2018 and projections based on 2018 estimates; MI-based banks highlighted. 1) Reflects the pending acquisition of 14 Wells Fargo branches located in Michigan. 2) Oakland County data excludes $1.7bn of custodial deposits held at company headquarters. 3) Key Flagstar Markets Median HHI, projected HHI growth and projected population growth are deposit weighted based on Flagstar’s portfolio. 4) 2019–2024 CAGR. 5) Fort Wayne, IN deposit data is based on Fort Wayne, IN Fed District. Fort Wayne, IN demographic data is based on counties within Fort Wayne, IN Fed District, deposit weighted based on Flagstar’s portfolio. 29

Deposits COMMUNITY BANKING Portfolio and strategy overview 3rd Quarter 2018 Total average deposits ($bn) Retail deposits(2) Other deposits $11.3 $10.4 $9.4 $9.0 $9.1 3.2 • Flagstar gathers deposits from consumers, 2.8 2.5 2.6 2.6 businesses and select governmental entities – Traditionally, CDs and savings accounts 7.6 8.1 represented the bulk of our branch-based retail 6.5 6.5 6.8 depository relationships – Today, we are focused on growing DDA 3Q17 4Q17 1Q18 2Q18 3Q18 balances with consumer, business banking and 3Q18 total average deposits commercial relationships Government, – We additionally maintain depository Custodial, 11% 17% relationships in connection with our mortgage origination and servicing businesses, and with DDA, 17% Michigan governmental entities CD(2), (1) – Cost of total deposits equal to 0.94% 24% 72% retail MMDA, Savings, 2% 29% Total : $11.3bn 0.94% cost of total deposits(1) 1) Total deposits include noninterest bearing deposits. 2) Includes brokered CDs 30

COMMUNITY BANKING Deposit growth opportunities 3rd Quarter 2018 Core Deposits Other Deposits Retail Government • Average balance of $7.1bn during 3Q18 of which 50% are • Average balance of $1.2bn during 3Q18 demand & savings accounts • Cost of total government deposits: 1.22%(2) during 3Q18 • Cost of total core deposits(1): 1.12%(2) during 3Q18 • Michigan deposits are not required to be collateralized • Average core deposits of $75mm per branch • Strong, long-term relationships across the state • Flagstar’s branding is helping grow core deposits • Branch acquisitions significantly enhance core deposit base Commercial Custodial • Average balance of $1.0bn during 3Q18 • Average balance of $2.0bn during 3Q18 on nearly 620k loans serviced and subserviced • Flagstar is focused on growing commercial deposits • Deposit balances increase along with the number of loans - Increasing balances with growing lines of serviced and subserviced business, including home builder finance • Offer complete line of treasury management services 1) Core deposits = total deposits excluding government deposits and custodial deposits. 2) Total deposits include noninterest bearing deposits. 31

Pending Wells Fargo Branch Acquisition COMMUNITY BANKING Transaction Overview 3rd Quarter 2018 • Flagstar is acquiring 52 branches located in Indiana, Michigan, Wisconsin and Ohio from Wells Fargo - Approximately $2.1 billion of deposits at an average cost of 0.06%(1) Transaction - 66% of deposits are located in IN (33 branches); 21 branches in Fort Wayne, IN (leading market share) (2) summary - 27% are located in the Upper Peninsula of MI (14 branches); #1 market share (2) - 7% are located in WI (4 branches) and OH (1 branch) - Approximately $114 million of loans(1) • Effective deposit premium of approximately 7 percent based on balances at closing Financial • Expected to be accretive to earnings per share in 2019 consideration • Tangible book value payback period of less than 5 years • Additional one-time integration costs of approximately $10 million during fourth quarter 2018 • Conducted comprehensive due diligence Other • Intend to keep all branches and retain all employees considerations • Target an 13 – 14 percent total risk based capital ratio at close. Any capital needed is expected to be met through a combination of earnings retention and balance sheet management (1) As of September 30, 2018. (2) Source: FDIC Summary of Deposits as of June 30, 2018; acquired branch data as of September 30, 2018; Fort Wayne, IN market area includes Fort Wayne, IN Fed District; Upper Peninsula of MI market area includes the counties of Delta, Dickinson, Gogebic, Houghton, Iron, Marquette, and Menominee, MI. 32

Pending Wells Fargo Branch Acquisition COMMUNITY BANKING Strategic Rationale 3rd Quarter 2018 • Improves ability to increase presence in well-known Midwest market - Leading market share in Fort Wayne, IN; #1 market share in Upper Peninsula of MI markets(1) Builds Midwest footprint • Adds nearly 200,000 new customers/relationships; more than doubles customer base • Completion of the proposed Wells Fargo branch acquisition together with the recently completed DCB branch acquisition will significantly expand branch network in short time • Transformational banking transaction Enhances franchise • Moves funding from wholesale borrowings to core deposits, reducing rate sensitivity of funding base value - Interest-bearing demand deposits increase to 11 percent of total deposits - Total funding cost drops 25 basis points(2) • Transaction provides low-cost, stable funding • At closing, liquidity will be used to repay FHLB advances Transforms funding - Wholesale funding ratio falls 12 percentage points to 20 percent(3) source - HFI loan-to-deposit ratio declines 14 percentage points to 64 percent(4) • Longer-term, larger branch network expands access to core deposits and other business opportunities (1) Source: FDIC Summary of Deposits as of June 30, 2018; acquired branch data as of September 30, 2018; Fort Wayne, IN market area includes Fort Wayne, IN Fed District; Upper Peninsula of MI market area includes the counties of Delta, Dickinson, Gogebic, Houghton, Iron, Marquette, and Menominee, MI. (2) Pro-forma as of September 30, 2018. Total funding cost is interest expense on interest-bearing liabilities divided by average funding liabilities (interest-bearing liabilities plus noninterest-bearing deposits). (3) Pro-forma as of September 30, 2018. Wholesale funding ratio is average wholesale funding (wholesale deposits plus FHLB advances) divided by average funding liabilities. (4) Pro-forma as of September 30, 2018. HFI loan-to-deposit ratio is average HFI loans (excluding warehouse loans) divided by total average deposits (excluding custodial deposits). 33

Pending Wells Fargo Branch Acquisition COMMUNITY BANKING Improved Deposit Mix 3rd Quarter 2018 Pro forma total deposits as of 9/30/2018 ($mm) Interest-bearing demand Interest-bearing 9% demand 11% Interest- bearing Savings / Savings / demand MMDA MMDA 24% Savings / 38% Noninterest- 36% MMDA Noninterest- bearing 49% 28% Noninterest- bearing bearing 28% 21% Certificates of Certificates deposit of deposit 23% 27% Certificates of deposit 6% Flagstar(1) Wells Fargo(2) Pro forma $ bps $ bps $ bps Noninterest-bearing(3) 3,268 0.00% $451 0.00% $3,719 0.00% Interest-bearing demand 1,010 1.33% 518 0.03% 1,528 0.89% Savings / MMDA 4,044 0.96% 1,033 0.04% 5,077 0.77% Certificates of deposit(4) 3,013 1.79% 117 0.48% 3,130 1.74% Total deposits $11,336 0.94% $2,119 0.06% $13,455 0.80% (1) Average balances for the quarter ended September 30, 2018. (2) Acquired branch data as of September 30, 2018. (3) Includes noninterest-bearing custodial deposits from mortgage servicing business. (4) Includes wholesale deposits. 34

Lending COMMUNITY BANKING Portfolio and strategy overview 3rd Quarter 2018 Total average loans ($bn) Loans HFS Loans HFI Loans with government guarantees $13.6 $12.8 • Flagstar’s largest category of earning assets consists $11.6 $12.1 $12.0 of loans held-for-investment which averaged $8.9bn during 3Q18 8.9 6.8 7.3 7.5 8.3 – Loans to consumers consist of residential first and second mortgage loans, HELOC and other – C&I / CRE lending is an important growth strategy, 4.5 4.5 4.2 4.2 4.4 offering risk diversification and asset sensitivity 3Q17 4Q17 1Q18 2Q18 3Q18 – Warehouse lending to both originators that sell to Flagstar and those who sell to other investors 3Q18 average loans • Flagstar maintains a balance of mortgage loans held- 1st Mortgage for-sale which averaged $4.4bn during 3Q18 HFI, 22% – Essentially all of our mortgage loans originated are 1st Mortgage HFS, 33% sold into the secondary market 2nds, HELOC – Flagstar has the option to direct a portion of the & other, 6% mortgage loans it originates to its own balance sheet Loans with Warehouse, government 12% guarantees, 2% CRE and C&I, 25% 35

COMMUNITY BANKING Community banking growth model 3rd Quarter 2018 Relationship-based growth platform New banker additions (past 2 years) # of Avg Years • Primary focus is to build relationships Line of Service Additions Experience(1) - Recruit experienced bankers from larger regional banks Business Banking 11 24 - Retain seasoned bankers within our organization Commercial Lending 9 24 • Leverage deep industry experience and client Consumer Finance 1 18 relationships CRE Lending 6 21 - Focus on moving relationships and credit facilities to Flagstar Equip Financing Group 3 25 • Low incremental efficiency ratio Homebuilder Finance 5 17 - Marginal cost of 15-30% that varies with type of Indirect Lending 4 24 loans underwritten Warehouse Lending 5 26 • Estimated pre-tax contribution of $5bn loan growth could contribute ~ $1.00 earnings per share Wealth Management 3 13 Grand Total 47 22 (1) We focus on recruitment of bankers with larger, regional bank lending experience. 36

Commercial lending COMMUNITY BANKING Diversified relationship-based commercial lending capabilities 3rd Quarter 2018 Overview Warehouse - $1.6bn (9/30/18) • Warehouse lines with approximately 330 active % Advances sold to Flagstar relationships nationwide, of which approximately 82% Warehouse sell a portion of their loans to Flagstar • Collateralized by mortgage loans being funded which are paid off once the loan is sold ~135 borrowers • Diversified property types which are primarily income- sell <25% Commercial producing in the normal course of business Real Estate • Focused on experienced top-tier developers with significant deposit and non-credit product opportunities ~70 ~120 borrowers borrowers • Lines of credit and term loans for working capital sell 25% - 75% sell >75% Commercial needs, equipment purchases, and expansion projects & Industrial • Primarily Michigan based relationships or relationships with national finance companies Average 24% advances sold to Flagstar Commercial Real Estate - $2.1bn (9/30/18) Commercial & Industrial - $1.3bn (9/30/18) Property type Industry Manufacturing 16% Office Owner occupied Healthcare Retail 10% 15% 15% Services 8% Multi- 23% Hospitality Distribution family 7% 8% 17% Financial, Home insurance & Government & builder Other real estate finance 7% education 38% Other 29% 6% 1% 67% Relationship-Based Lending(1) 1) Includes Michigan lending, national finance lending, and home builder finance lending 37

COMMUNITY BANKING Warehouse lending 3rd Quarter 2018 ● National relationship-based lending platform ● Attractive asset class with good spreads and low credit risk ● Strong growth potential and scalable platform ● Flagstar is well positioned to gain market share, leveraging relationships in complementary lines of business, including home builder finance and mortgage originations Warehouse lenders ranked by commitments ($mm) FBC warehouse loan commitments ($bn) YOY 2Q18 Outstandings Unfunded Commitments Rank Institution Growth Total Share $4.3 $4.2 1 JPMorgan Chase 24% $13,000 19% $4.0 2 Texas Capital 14% 5,923 9% 3 Wells Fargo 0% 5,800 9% 4 (1) 64% 4,195 6% $2.7 $2.8 2.4 Flagstar Bancorp 2.9 2.4 5 BB&T -2% 3,700 6% 6 TIAA FSB (Everbank) -10% 3,500 5% 1.5 1.7 7 Comerica -8% 3,400 5% 8 Customers Bank -6% 3,300 5% 1.8 9 First Tennessee -5% 3,000 4% 1.4 1.6 1.2 1.1 10 U.S. Bancorp 3% 2,918 4% Top 10 9% $48,736 73% 9/30/17 12/31/2017 3/31/2018 6/30/2018 9/30/2018 1) Flagstar acquired Santander mortgage warehouse business on 3/12/2018. Source: Inside Mortgage Finance as of September 14, 2018. 38

COMMUNITY BANKING Home builder finance 3rd Quarter 2018 Overview Tightening housing supply(1) ● National relationship-based lending platform launched in 1Q16 Existing home sales (mm) Months supply of existing homes for sale (left axis) (right axis) - Attractive asset class with good spreads (~450bps) 8 12 - Meaningful cross-sell opportunities including warehouse loans, 7 commercial deposits and purchase originations 10 6 ● Flagstar is well positioned to gain market share given builder and 8 5 mortgage relationships 4 6 - Focused on markets with strong housing fundamentals and 3 higher growth potential 4 - We currently have direct relationships with 6 of the top 10 and 2 2 do business with 52 of the top 100 builders nationwide 1 - We are well positioned to take advantage of supply/demand 0 0 imbalance in housing market 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1) Source: Bloomberg (through 8/31/18) Home builder finance footprint Home builder loan commitments(2) ($mm) Unpaid principal balance Unused $1,421 $1,413 $1,266 $1,293 $1,178 $702 $507 $567 $765 $559 $786 $619 $699 $656 $711 9/30/17 12/31/2017 3/31/2018 6/30/2018 9/30/2018 2) Commitments are for loans classified as commercial real estate and commercial & industrial. 39

MORTGAGE ORIGINATIONS National distribution through multiple channels 3rd Quarter 2018 Residential mortgage originations by channel ($bn) Correspondent Broker Retail $7.3 $7.0 $7.0 $6.6 $5.8 $1.3 $1.3 $1.3 $1.2 $1.1 $1.1 $1.0 $1.2 $1.0 $1.2 3Q17 4Q17 1Q18 2Q18 3Q18 3Q17 4Q17 1Q18 2Q18 3Q18 3Q17 4Q17 1Q18 2Q18 3Q18 (1) • 4.7% market share with #5 national ranking(1) • 2.3% market share with #7 national ranking • Retail distribution share of 13% in 3Q18 • More than 1,100 correspondent partners • More than 800 brokerage relationships • Opes acquisition and organic growth has • Top 10 relationships account for 13% of overall expanded our retail footprint to 81 locations in correspondent volume • Top 10 relationships account for 12% of overall 27 states • Warehouse lines with more than 300 brokerage volume correspondent relationships • Direct-to-consumer is 11% of retail volume 1) Data source: As reported by Inside Mortgage Finance for 2Q18 published August 24, 2018. 40

Flagstar has restructured its operations to be profitable MORTGAGE ORIGINATIONS even at historical lows for the mortgage origination market 3rd Quarter 2018 U.S. residential mortgage origination market (historical and projected volumes) 5.8 $ in in $ trillions 4.5 4.2 4.0 3.7 3.6 3.1 3.0 2.5 2.4 2.3 2.2 2.1 2.0 2.0 2.0 1.9 1.9 1.8 1.7 1.7 1.6 1.6 1.6 1.5 1.5 1.4 1.3 1.3 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018F 2019F Nominal ($) 0.6 0.9 1.0 0.8 0.6 0.8 0.8 1.7 1.4 1.1 2.2 2.9 3.8 2.8 3.0 2.7 2.4 1.5 2.0 1.7 1.4 2.0 1.8 1.3 1.7 2.1 1.7 1.6 1.6 Real(1) ($) 1.0 1.6 1.8 1.3 1.1 1.2 1.3 2.5 2.1 1.7 3.2 4.0 5.2 3.7 3.9 3.4 2.9 1.8 2.3 2.0 1.6 2.2 2.0 1.4 1.8 2.1 1.7 1.6 1.6 Adjusted(2) ($) 1.3 2.0 2.2 1.6 1.3 1.5 1.5 3.0 2.4 1.9 3.6 4.5 5.8 4.0 4.2 3.7 3.1 1.9 2.5 2.0 1.7 2.3 2.0 1.4 1.8 2.1 1.7 1.6 1.6 Source: Mortgage Bankers Association for actual periods and a blended average of forecast by Fannie Mae, Freddie Mac and Mortgage Bankers Association. 1. Adjusted for historical inflation as reported by Bureau of Labor Statistics (2018 = 100). 2. Adjusted for population growth as reported by the U.S. Census Bureau (2016 = 100). 41

MORTGAGE SERVICING MSR portfolio 3rd Quarter 2018 MSR portfolio statistics MSR portfolio characteristics (% UPB) Byby Vintage Measure ($mm) 6/30/2018 9/30/2018 Difference 2013 & Unpaid principal balance $19,249 $21,835 $2,586 prior; 5% Fair value of MSR $257 $313 $56 2014; Capitalized rate (% of UPB) 1.34% 1.43% 9 bps 4% Multiple 4.105 4.152 0.047 2017 Note rate 4.213% 4.355% 14.2 bps 31% Service fee 0.325% 0.345% 2 bps 2015; 2016 12% 3% Average Measure ($000) UPB per loan $244 $247 $3 2018 2016 & 2015 FICO 694 693 (1) 62% later; 79% & prior Loan to value 84.90% 86.52% 162 bps 4% Net (loss) return on mortgage servicing rights ($mm) By Investor $ Return 3Q17 4Q17 1Q18 2Q18 3Q18 Net hedged profit (loss) $0 ($1) ($1) ($1) ($1) Carry on asset 9 11 8 11 12 Run-off (4) (7) (5) (3) (4) GNMA Private Gross return on the 65% 3% $5 $3 $2 $7 $7 mortgage servicing rights Sale transaction & P/L 1 (3) 1 0 3 Freddie Model changes 0 (4) 1 2 3 17% Net return on the Fannie $6 ($4) $4 $9 $13 mortgage servicing rights 15% Average mortgage $212 $269 $269 $224 $270 servicing rights 42

CAPITAL AND LIQUIDITY Balance sheet composition 3rd Quarter 2018 3Q18 average balance sheet (%) 1% Cash 17% Agency MBS ~69% of assets are in lower risk-content 18% 50% 61% Deposits excluding Deposits excluding assets: cash, marketable Mortgage loans held-for-investment custodial deposits custodial deposits securities, warehouse 61% Deposits excluding loans, loans held-for-sale custodial deposits and freshly-originated, high-FICO conforming 24% mortgages underwritten Loans held-for-sale by Flagstar 11% Custodial deposits 9% Warehouse loans 910%% CustodialCustodial deposits deposits Attractive relationship 25% lending with very low FHLB borrowings 23% 16%15% delinquencies Commercial loans FHLBFHLB borrowings borrowings and other LHFI (2) 3% Other long-term debt 3% Other long-term debt 1% MSR 3% Other liabilities 3% Other liabilities Primarily low risk, stable 7% assets (FHLB stock, BOLI, Other assets 8% Common equity 8% Common equity premises & equipment, (1) deferred tax asset, etc.) Assets Liabilities & Equity Pro forma Liabilities and Equity 1) Pro forma liabilities and equity reflect the pending acquisition of 52 Wells Fargo branches. 2) Other LHFI includes home equity and other consumer loans. 43

CAPITAL AND LIQUIDITY Liquidity and funding 3rd Quarter 2018 HFI loan-to-deposit ratio(1) Commentary ■ Flagstar has invested 78% significantly in building its Community Bank, which 64% provides attractive core deposit funding for its balance sheet ■ These retail deposits are supplemented by custodial deposits from the servicing business 3Q18 Pro Forma ³ ■ Much of the remainder of Flagstar’s balance sheet is self- (2) Liquidity ratio funding given it is eligible collateral for FHLB advances Cash & investment securities FHLB borrowing capacity (which provides significant liquidity capacity) 40% ■ Pro forma HFI loan-to-deposit 30% ratio(1) declines 14 percentage 22% points to 64 percent 12% ■ Pro forma liquidity ratio(2) at September 30, 2018 increases 18% 18% 10 percentage points to 40 percent 9/30/2018 Pro Forma ³ 1) HFI loan-to-deposit ratio is total average loans HFI (excluding warehouse loans) expressed as a percentage of total average deposits (excluding custodial deposits). 2) Cash, investment securities and FHLB borrowing capacity expressed as a percentage of total assets. 3) Pro-forma as of September 30, 2018 for the pending acquisition of 52 Wells Fargo branches. 44

CAPITAL AND LIQUIDITY Low interest rate risk 3rd Quarter 2018 Net interest margin – 12 month horizon instantaneous shocks ($mm) up 100 bps Bear Flattener 9/30/2018 500bps 450bps 400bps 350bps 300bps 250bps 200bps 150bps 100bps 50bps 0bps 1 3 6 1 2 3 5 7 10 20 30 month months months year years years years years years years years Scenario ($ in mm) +100bps Bear Flattener Net interest income $32 ($18) Noninterest Income ($32) to $0 $0 to $18 Economic value of equity, trend (9/30/17 – 9/30/18) 4% down 100bps up 100bps +/-100bps limit 2% 0% -2% -4% -6% -8% 9/30/2017 12/31/2017 3/31/2018 6/30/2018 9/30/2018 45

NON-GAAP RECONCILIATION Non-GAAP reconciliation 3rd Quarter 2018 $mm A djusted N et Inco me, D iluted EP S, R OA , R OE, and Efficiency R atio 3 mo nths ended 3 mo nths ended 9 mo nths ended 9 mo nths ended September 30, 2018 June 30, 2018 September 30, 2018 September 30, 2017 Noninterest Expanse $ 173 $ 177 Adjustment to remove acquisition costs (after-tax) 1 - A djusted N o ninterest Expense $ 172 $ 177 Net Income $ 48 $ 50 $ 133 $ 108 Adjustment to remove acquisition costs (after-tax) 1 - 1 2 A djusted N et Inco me $ 49 $ 50 $ 134 $ 110 Diluted Earnings per Share $ 0.83 $ 0.85 $ 2.28 $ 1.86 Adjustment to remove acquisition costs (after-tax) 0.02 - 0.02 0.03 A djusted D iluted Earnings per Share $ 0.85 $ 0.85 $ 2.30 $ 1.89 Return on Average Assets 1.0% 1.1% 1.0% 0.9% Adjustment to remove acquisition costs (after-tax) 0.1% 0.0% 0.0% 0.1% A djusted R eturn o n A verage A ssets 1.1% 1.1% 1.0% 1.0% Return on Average Equity 12.8% 13.5% 12.1% 10.2% Adjustment to remove acquisition costs (after-tax) 0.2% 0.0% 0.1% 0.2% A djusted R eturn o n A verage Equity 13.0% 13.5% 12.2% 10.4% Efficiency Ratio 75% 74% Adjustment to remove acquisition costs (after-tax) (1%) 0% A djusted Efficiency R atio 74% 74% T angible B o o k Value per Share and T angible C o mmo n Equity to A ssets R atio as o f September 30, 2018 as o f June 30, 2018 Total stockholders' equity $ 1,518 $ 1,475 Goodwill and intangible assets 70 71 Tangible book value $ 1,448 $ 1,404 Number of common shares outstanding 57,625,439 57,598,406 T angible bo o k value per share $ 25.13 $ 24.37 Total Assets $ 18,697 $ 18,130 T angible co mmo n equity to assets ratio 7.74% 7.74% R egulato ry C apital under C apital Simplificatio n as o f September 30, 2018 T o tal R B C R atio (pro fo rma T o tal R B C R atio with pending Wells F argo branch acquisitio n) R egulato ry capital - B asel III to capital simplificatio n Basel III $ 1,677 $ 1,531 Net change in deductions to DTAs, M SRs and other capital components 136 147 Basel III with capital simplification $ 1,813 $ 1,678 R isk-weighted assets – B asel III to capital simplificatio n Basel III assets $ 11,799 $ 11,932 Net change in assets 673 683 Basel III with capital simplification $ 12,472 $ 12,615 C apital ratio s Basel III 14.2% 12.8% B asel III with capital simplificatio n 14.5% 13.3% 46

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Form 8-K FLAGSTAR BANCORP INC For: Oct 22

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