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FLAGSTAR BANCORP, INC.

(FBC)
  Report
Delayed Nyse  -  04:00 2022-09-29 pm EDT
33.75 USD   -1.98%
08/24Black Knight Extends Strategic Relationship with Flagstar Bank for MSP Loan Servicing System and Default Capabilities to Support Rapid Growth of Servicing and Subservicing Portfolios
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08/09FLAGSTAR BANCORP INC Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)
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08/05FLAGSTAR BANCORP, INC. : Ex-dividend day for
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FLAGSTAR BANCORP INC Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

08/09/2022 | 05:23pm EDT
The following is Management's Discussion and Analysis of the financial condition
and results of operations of Flagstar Bancorp, Inc. for the second quarter of
2022, which should be read in conjunction with the financial statements and
related notes set forth in Part I, Item 1 of this Form 10-Q and Part II, Item 8
of Flagstar Bancorp, Inc.'s 2021 Annual Report on Form 10-K for the year ended
December 31, 2021.

Certain statements in this Form 10-Q, including but not limited to statements
included within Management's Discussion and Analysis of Financial Condition and
Results of Operations, are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995, as amended. These statements
are based on the current beliefs and expectations of our Management. Actual
results may differ from those set forth in forward-looking statements. See
Forward-Looking Statements on page 41 of this Form 10-Q, Part II, Item 1A, Risk
Factors of this Form 10-Q and Part I, Item 1A, Risk Factors of Flagstar Bancorp,
Inc.'s 2021 Annual Report on Form 10-K for the year ended December 31, 2021.
Additional information about Flagstar can be found on our website at
www.flagstar.com.

Where we say "we," "us," "our," the "Company," "Bancorp" or "Flagstar," we
usually mean Flagstar Bancorp, Inc. However, in some cases, a reference will
include our wholly-owned subsidiary Flagstar Bank, FSB (the "Bank"). See the
Glossary of Abbreviations and Acronyms on page 3 for definitions used throughout
this Form 10-Q.

Introduction

We are a savings and loan holding company founded in 1993. Our business is
primarily conducted through our principal subsidiary, the Bank, a federally
chartered stock savings bank founded in 1987. We provide commercial and consumer
banking services, and we are the 7th largest bank mortgage originator in the
nation and the 5th largest subservicer of mortgage loans nationwide. At June 30,
2022, we had 5,036 full-time equivalent employees. Our common stock is listed on
the NYSE under the symbol "FBC".

Our relationship-based business model leverages our full-service bank's
capabilities and our national mortgage platform to create financial solutions
for our customers. At June 30, 2022, we operated 158 full-service banking
branches that offer a full set of banking products to consumer, commercial, and
government customers. Our banking footprint spans Michigan, Indiana, California,
Wisconsin, Ohio and contiguous states.

We originate mortgages through a network of brokers and correspondents in all 50
states and our own loan officers, which includes our direct lending team, from
79 retail locations in 28 states and 3 call centers. We are also a leading
national servicer of mortgage loans and provide complementary ancillary
offerings including MSR lending, servicing advance lending and MSR recapture
services.

Strategic Merger with New York Community Bancorp, Inc.


On April 26, 2021, it was announced that New York Community Bancorp, Inc.
("NYCB") and Flagstar had entered into a definitive merger agreement (the
"Merger Agreement") under which the two companies will combine in an all stock
merger. Under the terms of the Merger Agreement, Flagstar shareholders will
receive 4.0151 shares of NYCB common stock for each Flagstar share they own. The
combined company expects to have over $85 billion in assets and operate nearly
400 traditional branches in nine states and over 80 loan production offices
across a 28 state footprint. On August 4, 2021, Flagstar's and NYCB's
shareholders each voted in their respective special meetings of shareholders to
approve the proposed business combination. The transaction is subject to
customary closing conditions, including regulatory approvals.

On April 26, 2022, NYCB and Flagstar entered into Amendment No. 1 (the
"Amendment") to the Merger Agreement. Under the Amendment, the parties have
agreed to: extend the termination date of the Merger Agreement to October 31,
2022; change the structure of the merger of the subsidiary banks, so that
Flagstar Bank, FSB will initially convert to a national bank charter and New
York Community Bank will merge with and into the national bank, with the
national bank as the surviving entity; and clarify that approvals of the FDIC
and the New York State Department of Financial Services are no longer required
but that the approval of the OCC will be required. Other than as expressly
modified by the Amendment, the Merger Agreement, remains in full force and
effect.

Completion of the transaction is subject to customary closing conditions, including receipt of regulatory approvals.

                                       4
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Operating Segments


Our operations are conducted through our three operating segments: Community
Banking, Mortgage Originations, and Mortgage Servicing. For further information,
see MD&A - Operating Segments and Note 17 - Segment Information.

                                       5
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Results of Operations


The following table summarizes our results of operations for the periods
indicated:

                                           Three Months Ended,                                                   Six Months Ended,
                                 June 30, 2022           March 31, 2022            Change              June 30, 2022             June 30, 2021            Change
                                                                    (Dollars in millions, except share data)
Net interest income             $         193          $           165          $       28          $         358              $          371          $     (13)
(Benefit) provision for credit             (9)                      (4)                 (5)                   (13)                        (72)                59
losses
Total noninterest income                  131                      160                 (29)                   291                         576               (285)
Total noninterest expense                 256                      261                  (5)                   517                         636               (119)
Provision for income taxes                 17                       15                   2                     32                          87                (55)
Net income                      $          60          $            53          $        7          $         113              $          296          $    (183)
Income per share
Basic                           $        1.13          $          0.99          $     0.14          $        2.12              $         5.61          $   (3.49)
Diluted                         $        1.12          $          0.99          $     0.13          $        2.11              $         5.54          $   (3.43)
Weighted average shares
outstanding:
Basic                              53,269,631               53,219,866              49,765             53,244,886                  52,719,959            524,927
Diluted                            53,535,448               53,578,001             (42,553)            53,556,607                  53,417,896            138,711



The following table summarizes our adjusted results of operations(1):

                                        Three Months Ended,                                                Six Months Ended,
                               June 30, 2022         March 31, 2022           Change             June 30, 2022           June 30, 2021           Change
                                                               (Dollars in millions, except share data)
Net interest income            $      193          $           165          $     28           $      358              $          371          $    

(13)

(Benefit) provision for credit         (9)                      (4)               (5)                 (13)                        (72)               59

losses

Total noninterest income              131                      160               (29)                 291                         576              

(285)

Total noninterest expense             253                      258                (5)                 511                         602               

(91)

Provision for income taxes             17                       16                 1                   33                          95               (62)
Net income                     $       63          $            55          $      8    $ -    $      118              $          322          $   (204)
Income per share
Basic                          $     1.18          $          1.03          $   0.15           $     2.21              $         6.11          $  (3.90)
Diluted                        $     1.17          $          1.02          $   0.15           $     2.20              $         6.03          $  (3.83)

(1)See Use of Non-GAAP Financial Measures for further information.

                                       6
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The following table summarizes certain selected ratios and statistics for the
periods indicated:

                                                            Three Months Ended,                           Six Months Ended
                                                   June 30, 2022          March 31, 2022         June 30, 2022         June 30, 2021
Selected Ratios:
Interest rate spread (1)                                   3.47  %                2.91  %               3.19  %               2.62  %
Net interest margin                                        3.69  %                3.11  %               3.40  %               2.86  %
Return on average assets                                   1.01  %                0.89  %               0.94  %               2.04  %
Adjusted return on average assets (2)                      1.05  %                0.92  %               0.98  %               2.22  %
Return on average common equity                            8.74  %                7.87  %               8.31  %              24.82  %
Return on average tangible common equity (2)               9.49  %                8.61  %               9.05  %              26.92  %

Adjusted return on average tangible common equity 10.09 %

       9.10  %               9.60  %              30.66  %

(2)

Common equity-to-assets ratio                             10.82  %               11.75  %              10.82  %               9.23  %
Common equity-to-assets ratio (average for the            11.54  %               11.12  %              11.33  %               8.21  %

period)

Efficiency ratio                                           79.1  %                80.4  %               79.7  %               67.2  %
Adjusted efficiency ratio (2)                              78.1  %                79.6  %               78.8  %               63.6  %
Selected Statistics:
Book value per common share                       $       50.50          $  

51.33 $ 50.50 $ 47.26 Tangible book value per share (2)

                 $       47.83          $  

48.61 $ 47.83 $ 44.38 Number of common shares outstanding

                  53,329,993             53,236,067            53,329,993            52,862,264


(1)Interest rate spread is the difference between the yield earned on average
interest-earning assets for the period and the rate of interest paid on average
interest-bearing liabilities.
(2) See Use of Non-GAAP Financial Measures for further information.

Overview


Net income for the quarter ended June 30, 2022 was $60 million, or $1.12 per
diluted share, compared to first quarter 2022 net income of $53 million, or
$0.99 per diluted share. Second quarter 2022 adjusted net income was $63
million, or $1.17 per diluted share, as compared to $55 million, or $1.02 per
diluted share, in the first quarter of 2022 when adjusting for the impact of
merger related expenses.

Net interest income increased $28 million, or 17 percent, as compared to the
first quarter 2022, driven by a 58 basis point increase in net interest margin,
which was partially offset by a $0.6 billion, or 3 percent, net decrease in
average earning assets. The net interest margin expansion was largely
attributable to our asset sensitivity, higher rates on newly purchased
investment securities and a lag on deposit pricing increases. We grew our loans
held for investment by $1.0 billion, led by our commercial portfolio; however,
this growth was more than offset by a $1.3 billion decrease in our mortgage
loans held-for-sale driven by lower mortgage volume.

Net gain on loan sales decreased $18 million, or 40 percent, compared to the
prior quarter, driven by lower gain on sale margins, which decreased 19 basis
points to 39 basis points for the second quarter 2022. The reduction in margin
was primarily due to a $1.1 billion, or 47 percent, decline in our retail
volume. This decline was primarily in the direct-to-consumer channel as a result
of lower refinance volumes caused by the rising rate environment. The net return
on mortgage servicing rights decreased $7 million to $22 million for the second
quarter 2022, compared to a $29 million return for the first quarter 2022.

Our benefit for credit losses for the quarter ended June 30, 2022 was $9
million, compared to a benefit of $4 million in the first quarter 2022. Our
benefit for credit losses in the second quarter reflects the strong performance
of our portfolio, low number of non-accrual loans and a reduction in reserves
for our loans with government guarantees as a result of pay-offs and
improvements in the delinquency trends of expired forbearance loans.

We serviced or subserviced 1.4 million accounts as of June 30, 2022, a 10 percent increase compared to March 31, 2022 as we continued to grow this business.

                                       7
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Net Interest Income

The following tables present details on our net interest margin and net interest income on a consolidated basis:


                                                                                 Three Months Ended,
                                                           June 30, 2022                                     March 31, 2022
                                              Average                    Annualized              Average                    Annualized
                                              Balance     Interest         Yield/                Balance     Interest         Yield/
                                                                            Rate                                               Rate
                                                                                (Dollars in millions)
Interest-Earning Assets
Loans held-for-sale                         $  3,571    $      36                4.10  %       $  4,833    $      40               3.31  %
Loans held-for-investment
Residential first mortgage                     1,789           16                3.68  %          1,500           13               3.35  %
Home equity                                      614            7                4.74  %            598            6               4.05  %
Other                                          1,302           16                4.80  %          1,253           15               4.86  %
Total consumer loans                           3,705           39                4.25  %          3,351           34               4.04  %
Commercial real estate                         3,366           41                4.78  %          3,226           29               3.60  %
Commercial and industrial                      2,169           26                4.65  %          1,834           16               3.52  %
Warehouse lending                              4,099           34                3.27  %          3,973           32               3.25  %
Total commercial loans                         9,634          101                4.11  %          9,033           77               3.43  %
Total loans held-for-investment (1)           13,339          140                4.15  %         12,384          111               3.59  %
Loans with government guarantees               1,161           15                5.13  %          1,402           15               4.40  %
Investment securities                          2,310           17                2.89  %          2,021           11               2.19  %
Interest-earning deposits                        577            1                0.64  %            929            -               0.16  %
Total interest-earning assets               $ 20,958    $     209                3.96  %       $ 21,569    $     177               3.30  %
Other assets                                   2,909                                              2,592
Total assets                                $ 23,867                                           $ 24,161
Interest-Bearing Liabilities
Retail deposits
Demand deposits                             $  1,725    $       1                0.10  %       $  1,626    $       -               0.09  %
Savings deposits                               4,251            2                0.16  %          4,253            2               0.14  %
Money market deposits                            926            -                0.16  %            887            -               0.09  %
Certificates of deposit                          851            1                0.35  %            929            1               0.35  %
Total retail deposits                          7,753            4                0.17  %          7,695            3               0.15  %
Government deposits                            1,699            1                0.32  %          1,879            1               0.17  %
Wholesale deposits and other                     935            2                0.98  %          1,071            2               0.89  %
Total interest-bearing deposits               10,387            7                0.26  %         10,645            6               0.23  %
Short-term FHLB advances and other             1,124            3                1.05  %            658            -               0.22  %
Long-term FHLB advances                          982            3                1.15  %          1,260            3               0.98  %
Other long-term debt                             396            3                3.07  %            396            3               3.23  %

Total interest-bearing liabilities $ 12,889 $ 16

     0.48  %       $ 12,959    $      12               0.39  %
Noninterest-bearing deposits
Retail deposits and other                      2,460                                              2,474
Custodial deposits (2)                         4,641                                              4,970
Total noninterest bearing deposits             7,101                                              7,444
Other liabilities                              1,123                                              1,071
Stockholders' equity                           2,754                                              2,687
Total liabilities and stockholders' equity  $ 23,867                                           $ 24,161
Net interest-earning assets                 $  8,069                                           $  8,610
Net interest income                                     $     193                                          $     165
Interest rate spread (3)                                                         3.47  %                                           2.91  %
Net interest margin (4)                                                          3.69  %                                           3.11  %
Ratio of average interest-earning assets to                                     162.6  %                                          166.4  %
interest-bearing liabilities
Total average deposits                      $ 17,488                                           $ 18,089


(1)Includes nonaccrual loans. For further information on nonaccrual loans, see
Note 4 - Loans Held-for-Investment.
(2)Includes noninterest-bearing custodial deposits that arise due to the
servicing of loans for others.
(3)Interest rate spread is the difference between rates of interest earned on
interest-earning assets and rates of interest paid on interest-bearing
liabilities.
(4)Net interest margin is net interest income divided by average
interest-earning assets.

                                       8
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                                                                                   Six Months Ended,
                                                           June 30, 2022                                      June 30, 2021
                                              Average                    Annualized              Average                    Annualized
                                              Balance     Interest         Yield/                Balance     Interest         Yield/
                                                                            Rate                                               Rate
                                                                                 (Dollars in millions)
Interest-Earning Assets
Loans held-for-sale                         $  4,199    $      77                3.65  %       $  7,181    $     105                2.94  %
Loans held-for-investment
Residential first mortgage                     1,645           29                3.53  %          2,009           32                3.23  %
Home equity                                      606           13                4.40  %            784           14                3.56  %
Other                                          1,278           30                4.83  %          1,071           25                4.80  %
Total consumer loans                           3,529           72                4.15  %          3,864           71                3.73  %
Commercial real estate                         3,296           70                4.21  %          3,068           52                3.36  %
Commercial and industrial                      2,002           42                4.14  %          1,467           27                3.62  %
Warehouse lending                              4,036           66                3.26  %          5,900          118                3.98  %
Total commercial loans                         9,334          178                3.78  %         10,435          197                3.75  %
Total loans held-for-investment (1)           12,863          250                3.88  %         14,299          268                3.74  %
Loans with government guarantees               1,281           30                4.73  %          2,422            8                0.67  %
Investment securities                          2,166           28                2.56  %          2,166           24                2.20  %
Interest-earning deposits                        752            1                0.35  %            150            -                0.14  %
Total interest-earning assets               $ 21,261    $     386                3.63  %       $ 26,218    $     405                3.09  %
Other assets                                   2,752                                              2,814
Total assets                                $ 24,013                                           $ 29,032
Interest-Bearing Liabilities
Retail deposits
Demand deposits                             $  1,676    $       1                0.10  %       $  1,768    $       -                0.07  %
Savings deposits                               4,252            3                0.15  %          4,015            3                0.14  %
Money market deposits                            907            1                0.12  %            724            -                0.06  %
Certificates of deposit                          890            1                0.35  %          1,209            5                0.80  %
Total retail deposits                          7,725            6                0.16  %          7,716            8                0.22  %
Government deposits                            1,788            2                0.24  %          1,784            2                0.21  %
Wholesale deposits and other                   1,002            5                0.93  %          1,101            8                1.47  %
Total interest-bearing deposits               10,515           13                0.25  %         10,601           18                0.35  %
Short-term FHLB advances and other               892            3                0.74  %          2,600            2                0.17  %
Long-term FHLB advances                        1,120            6                1.05  %          1,200            6                1.03  %
Other long-term debt                             396            6                3.13  %            424            8                3.68  %

Total interest-bearing liabilities $ 12,923 $ 28

     0.44  %       $ 14,825    $      34                0.47  %
Noninterest-bearing deposits
Retail deposits and other                      2,467                                              2,264
Custodial deposits (2)                         4,805                                              6,688
Total noninterest bearing deposits             7,272                                              8,952
Other liabilities                              1,098                                              2,871
Stockholders' equity                           2,721                                              2,384
Total liabilities and stockholders' equity  $ 24,014                                           $ 29,032
Net interest-earning assets                 $  8,338                                           $ 11,393
Net interest income                                     $     358                                          $     371
Interest rate spread (3)                                                         3.19  %                                            2.62  %
Net interest margin (4)                                                          3.40  %                                            2.86  %
Ratio of average interest-earning assets to                                     164.5  %                                           176.9  %
interest-bearing liabilities
Total average deposits                      $ 17,787                                           $ 19,554


(1)Includes nonaccrual loans. For further information on nonaccrual loans, see
Note 4 - Loans Held-for-Investment.
(2)Includes noninterest-bearing custodial deposits that arise due to the
servicing of loans for others.
(3)Interest rate spread is the difference between rates of interest earned on
interest-earning assets and rates of interest paid on interest-bearing
liabilities.
(4)Net interest margin is net interest income divided by average
interest-earning assets.

                                       9
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The following table presents the dollar amount of changes in interest income and
interest expense for the components of interest-earning assets and
interest-bearing liabilities. The table distinguishes between the changes
related to average outstanding balances (changes in volume while holding the
initial rate constant) and the changes related to average interest rates
(changes in average rates while holding the initial balance constant). The
rate/volume variances are allocated to rate. Rate and volume variances are
calculated on each line separate as an indication of the magnitude. Line items
may not aggregate to the totals due to mix changes.

                                                              Three Months Ended,                                Six Months Ended,
                                                  June 30, 2022 versus March 31, 2022 Increase           June 30, 2022 versus June 30, 2021
                                                               (Decrease) Due to:                           Increase (Decrease) Due to:
                                                      Rate             Volume          Total              Rate         Volume        Total
                                                                                    (Dollars in millions)
Interest-Earning Assets
Loans held-for-sale                             $           9    $           (13)   $      (4)         $     16    $       (44)   $    (28)
Loans held-for-investment
Residential first mortgage                                  -                  3            3                 3             (6)         (3)
Home equity                                                 1                  -            1                 2             (3)         (1)
Other                                                       -                  1            1                 -              5           5
Total consumer loans                                        1                  4            5                 7             (6)          1
Commercial real estate                                     10                  2           12                14              4          18
Commercial and industrial                                   6                  4           10                 5             10          15
Warehouse lending                                           1                  1            2               (15)           (37)        (52)
Total commercial loans                                     18                  6           24                 2            (21)        (19)
Total loans held-for-investment                            19                 10           29                 9            (27)        (18)
Loans with government guarantees                            3                 (3)           -                26             (4)         22
Investment securities                                       4                  2            6                 4              -           4
Interest-earning deposits and other                         2                 (1)           1                 1              -           1
Total interest-earning assets                   $          38    $          

(6) $ 32 $ 58 $ (77) $ (19) Interest-Bearing Liabilities Interest-bearing deposits

                       $           1    $          

- $ 1 $ (5) $ - $ (5) Short-term FHLB advances and other borrowings

               2                  1            3                 2             (1)          1
Long-term FHLB advances                                     1                 (1)           -                 -              -           -
Other long-term debt                                        -                  -            -                (1)            (1)         (2)
Total interest-bearing liabilities                          4                  -            4                (2)            (4)         (6)
Change in net interest income                   $          34    $            (6)   $      28          $     60    $       (73)   $    (13)



Comparison to Prior Quarter

Net interest income for the three months ended June 30, 2022 was $193 million,
an increase of $28 million, or 17 percent as compared to the first quarter 2022.
The results reflect a 58 basis point increase in net interest margin partially
offset by a $0.6 billion, or 3 percent, net decrease in average earning assets.
The $1.0 billion growth in our loans held for investment, led by our commercial
portfolio, was more than offset by a $1.3 billion decrease in our mortgage loans
held-for-sale, driven by lower mortgage volume.

The net interest margin increased 58 basis points to 3.69 percent for the
quarter ended June 30, 2022, as compared to 3.11 percent for the quarter ended
March 31, 2022. The increase in net interest margin was largely attributable to
our asset sensitivity, hedging strategies, higher rates on newly purchased
investment securities and a lag on deposit pricing increases.

Average total deposits were $17.5 billion in the second quarter 2022, decreasing
$0.6 billion, or 3 percent, from the first quarter 2022. The decrease was
primarily driven by a decrease of $0.3 billion, or 7 percent, in average
custodial deposits due to a reduction in mortgage refinance activity driven by
the higher rate environment.

                                       10
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Comparison to Prior Year to Date


Net interest income for the six months ended June 30, 2022 was $358 million, a
decrease of $13 million as compared to the six months ended June 30, 2021. The 4
percent decrease was driven by a decline in average earning assets, primarily
from mortgage loans held-for-sale and warehouse loans due to a smaller mortgage
origination market.

Net interest margin increased 54 basis points to 3.40 percent for the six months
ended June 30, 2022, as compared to 2.86 percent for the six months ended
June 30, 2021 primarily due to our asset sensitivity in a rising interest rate
environment. Additionally, in the first six months of 2021, the majority of our
$2.4 billion of LGG were not earning interest due to forbearance.

Average interest-bearing liabilities decreased $1.9 billion, primarily driven by
a decrease of $1.7 billion in short term FHLB borrowings due to a reduction in
our overall asset base due to a smaller mortgage origination market. Total
interest earning deposit costs decreased 10 basis points.

Noninterest Income


The following tables provide information on our noninterest income and other
mortgage metrics:

                                             Three Months Ended,                                                Six Months Ended,
                                    June 30, 2022         March 31, 2022           Change            June 30, 2022            June 30, 2021           Change
                                                                              (Dollars in millions)
Net gain on loan sales              $       27          $            45          $    (18)          $       72              $          395          $  (323)
Loan fees and charges                       29                       27                 2                   56                          79              (23)
Net return (loss) on mortgage               22                       29                (7)                  51                          (5)              56
servicing rights
Loan administration income                  33                       33                 -                   66                          54               12
Deposit fees and charges                     9                        9                 -                   18                          17                1
Other noninterest income                    11                       17                (6)                  28                          36               (8)
Total noninterest income            $      131          $           160          $    (29)   $ -    $      291       $ -    $          576          $  (285)



                                                  Three Months Ended,                                              Six Months Ended,
                                         June 30, 2022          March 31, 2022          Change           June 30, 2022          June 30, 2021            Change
                                                                                          (Dollars in millions)
Mortgage rate lock commitments          $       7,100          $       7,700          $   (600)         $      14,800          $      24,800          $ (10,000)
(fallout-adjusted) (1)(3)
Mortgage loans closed (3)               $       7,700          $       8,200          $   (500)         $      15,900          $      26,600      

$ (10,700) Mortgage loans sold and securitized (3) $ 6,900 $ 9,900 $ (3,000) $ 16,800 $ 27,600

          $ (10,800)
Net margin on mortgage rate lock                 0.39  %                0.58  %          (0.19) %                0.49  %                1.60  %           (1.11) %
commitments (fallout-adjusted) (1)(2)
Net margin on loans sold and                     0.39  %                0.45  %          (0.06) %                0.43  %                1.42  %           (0.99) %
securitized


(1)Fallout-adjusted refers to mortgage rate lock commitments which are adjusted
by estimates of the percentage of mortgage loans in the pipeline that are not
expected to close based on our historical experience and the impact of changes
in interest rates.
(2)Gain on sale margin is based on net gain on loan sales to fallout-adjusted
mortgage rate lock commitments.
(3)Rounded to nearest hundred million.

Comparison to Prior Quarter

Noninterest income decreased $29 million for the quarter ended June 30, 2022, compared to the quarter ended March 31, 2022, primarily due to the following:


•Net gain on loan sales decreased $18 million as compared to the first quarter
2022. Gain on sale margins decreased 19 basis points, to 39 basis points for the
second quarter 2022, as compared to 58 basis points for the first quarter 2022.
The overall decrease and reduction in margin was primarily due to a $1.1
billion, or 47 percent, decline in our retail volume. This decline was primarily
in the direct-to-consumer channel as a result of lower refinance volumes caused
by the rising interest rate environment.

•Net return on mortgage servicing rights was $22 million in the second quarter
of 2022, a decrease of $7 million compared to the first quarter of 2022. Both
quarters' returns reflected the reduced hedge ratio on this portfolio
                                       11
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implemented in the first quarter of 2022 to help mitigate the impact of higher mortgage rates on our mortgage origination revenue.

•Loan administration income was $33 million for the second quarter 2022, consistent with the first quarter 2022. During the second quarter, higher income from a 10 percent increase in loans serviced or subserviced for others was offset by higher LIBOR-based fees paid on custodial deposits that are subserviced.

Comparison to Prior Year to Date

Noninterest income decreased $285 million for the six months ended June 30, 2022, compared to the six months ended June 30, 2021, primarily due to the following:


•Net gain on loan sales decreased $323 million, primarily due to $10.0 billion
lower FOALs and a 111 basis points decrease in our gain on sale margin, driven
by the reduction in the mortgage origination market due to higher mortgage rates
which has resulted in increased competition and lower volume with the largest
decline being to our highest margin retail channel.

•Net return on mortgage servicing rights increased $56 million, primarily driven
by the increase in interest rates which resulted in improved valuations and
hedging results as we reduced our hedge ratio on this portfolio in the first
quarter of 2022 to help mitigate the impact of higher mortgage rates on our
mortgage origination revenue. We have also grown the average MSR asset by 31
percent for the six months ended June 30, 2022, as compared to the same period
one year ago.

•Loan administration income increased $12 million, primarily driven by higher overall subservicing fee income due to an increase in the average number of loans being subserviced.


•Loan fees and charges decreased $23 million, primarily driven by a 40 percent
decrease in mortgage loans closed. This decrease was partially offset by higher
ancillary fee income from our servicing business.

Noninterest Expense

The following table sets forth the components of our noninterest expense:

                                            Three Months Ended,                                                Six Months Ended,
                                   June 30, 2022          March 31, 2022           Change           June 30, 2022             June 30, 2021          Change
                                                                                     (Dollars in millions)
Compensation and benefits         $        122           $         127          $      (5)         $       249               $        266          $    (17)
Occupancy and equipment                     46                      45                  1                   91                         95                (4)
Commissions                                 22                      26                 (4)                  48                        112               (64)
Loan processing expense                     23                      21                  2                   44                         43                 1
Legal and professional expense              10                      11                 (1)                  21                         20                 1
Federal insurance premiums                   4                       4                  -                    8                         10                (2)
Intangible asset amortization                3                       2                  1                    5                          5               

-

General, administrative and other           26                      25                  1                   51                         85               (34)
Total noninterest expense         $        256           $         261          $      (5)         $       517               $        636          $   (119)
Efficiency ratio                          79.1   %                80.4  %            (1.3) %              79.7   %                   67.2  %           12.5  %
Number of FTE employees                  5,036                   5,341               (305)               5,036                      5,503              (467)


Comparison to Prior Quarter


Noninterest expense decreased to $256 million for the quarter ended June 30,
2022, compared to $261 million for the quarter ended March 31, 2022. Excluding
$3 million of merger costs in each of the first two quarters of 2022,
noninterest expense decreased $5 million, or 2 percent. The decrease in
noninterest expense is primarily due to the following:

•Compensation and benefits decreased $5 million from the prior quarter, primarily driven by lower compensation and benefits, primarily driven by a reduction in FTE and lower benefit and payroll tax.

•Commissions decreased $4 million, primarily due to a reduction in retail mortgage closings.

                                       12
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Comparison to Prior Year to Date

Noninterest expense decreased $119 million for the six months ended June 30, 2022, compared to the six months ended June 30, 2021, primarily due to the following:

•Mortgage commissions decreased $64 million, primarily driven by a 40 percent reduction in mortgage loan closings.

•Compensation and benefits decreased $17 million, primarily due to a decrease in incentive compensation and lower average FTE.

• Occupancy and equipment decreased $4 million due to lower merger related expenses.


•General, administrative and other noninterest expense decreased $34 million,
primarily driven by the $35 million DOJ final settlement expense recognized
during the six months ended June 30, 2021. The six months ended June 30, 2022
includes $6 million of merger expenses and the six months ended June 30, 2021
includes $9 million of merger expenses.

Provision for Income Taxes


The second quarter provision for income taxes totaled $17 million, as compared
to a provision for income taxes of $15 million for the first quarter 2022, with
an effective tax rate of 22 percent, in-line with the effective tax rate for the
first quarter 2022.

Provision for Credit Losses

Comparison to Prior Quarter


The benefit for credit losses was $9 million for the three months ended June 30,
2022, as compared to a $4 million benefit for credit losses for the three months
ended March 31, 2022. Our benefit for credit losses in the second quarter is
reflective of the strong performance of our portfolio, low number of non-accrual
loans and a meaningful improvement in forbearance-related delinquencies. During
the second quarter 2022, we had $1 million of net charge-offs.

Comparison to Prior Year to Date


The benefit for credit losses was $13 million for the six months ended June 30,
2022, as compared to a benefit of $72 million for the six months ended June 30,
2021. The decrease is reflective of improved economic forecasts and credit
conditions in 2021 as the economy continued to recover from the conditions
caused by the pandemic, as compared to the more stable economic forecasts in
2022.

For further information on the provision for credit losses, see MD&A - Credit Quality.


Operating Segments

Our operations are conducted through three operating segments: Community
Banking, Mortgage Originations, and Mortgage Servicing. The Other segment
includes the remaining reported activities. The operating segments have been
determined based on the products and services offered and reflect the manner in
which financial information is currently evaluated by Management. Each of the
operating segments is complementary to each other and because of the
interrelationships of the segments, the information presented is not indicative
of how the segments would perform if they operated as independent entities.

As a result of Management's evaluation of our segments, effective January 1,
2022, certain administrative departments have been realigned between the
Community Banking and the Other segment. The income and expenses relating to
these changes are reflected in our financial statements and all prior period
segment financial information has been recast to conform to the current
presentation.

We charge the lines of business for the net charge-offs that occur. In addition
to this amount, we charge them for the change in loan balances during the
period, applied at the budgeted credit loss factor. The difference between the
consolidated provision (benefit) for credit losses and the sum of total net
charge-offs and the change in loan balances is assigned to the
                                       13
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"Other" segment, which includes the changes related to the economic forecasts,
model changes, qualitative adjustments and credit downgrades. The amount
assigned to "Other" is allocated back to the lines of business through general,
administrative and other noninterest expense.

For detail on each segment's objectives, strategies, and priorities, please read this section in conjunction with Note 17 - Segment Information.

Community Banking


Our Community Banking segment serves commercial, governmental and consumer
customers in our banking footprint which spans throughout Michigan, Indiana,
California, Wisconsin, Ohio and contiguous states. We also serve home builders,
correspondents, and commercial customers on a national basis. The Community
Banking segment originates and purchases loans, while also providing deposit and
fee-based services to consumer, business and mortgage lending customers.

Our commercial customers operate in a diversified range of industries including financial, insurance, service, manufacturing, and distribution. We offer financial products to these customers for use in their normal business operations, as well as provide financing of working capital, capital investments, and equipment. Additionally, our CRE business supports income producing real estate and home builders. The Community Banking segment also offers warehouse lines of credit to non-bank mortgage lenders.

                                               Three Months Ended,                                               Six Months Ended
Community Banking                     June 30, 2022         March 31, 2022           Change            June 30, 2022           June 30, 2021           Change
                                                                               (Dollars in millions)
Summary of Operations
Net interest income                   $      136          $           122          $     14          $     258               $          305          $  

(47)

(Benefit) provision for credit losses         13                       22                (9)                35                          (13)            

48

Net interest income after (benefit)          123                      100                23                223                          318               (95)
provision for credit losses
Loan fees and charges                          -                        -                 -                  -                            1                (1)
Loan administration income                    (1)                       -                (1)                (1)                           -                (1)
Other noninterest income                      19                       18                 1                 37                           34                 3
Total noninterest income                      18                       18                 -                 36                           35                 1
Compensation and benefits                     28                       28                 -                 56                           51                 5
Commissions                                    -                        1                (1)                 1                            1                 -
Loan processing expense                        1                        2                (1)                 3                            3                 -
General, administrative and other             34                       18                16                 52                           33                19
Total noninterest expense                     63                       49                14                112                           88                24
Income before indirect overhead               78                       69                 9                147                          265              (118)
allocations and income taxes
Indirect overhead allocation                 (12)                     (10)               (2)               (22)                         (19)               (3)
Provision for income taxes                    11                       12                (1)                23                           52               (29)
Net income                            $       55          $            47          $      8          $     102               $          194          $    (92)

Key Metrics
Number of FTE employees                    1,215                    1,173                42              1,215                        1,155                60
Number of bank branches                      158                      158                 -                158                          158                 -


Comparison to Prior Quarter


The Community Banking segment reported net income of $55 million for the quarter
ended June 30, 2022, compared to net income of $47 million for the quarter ended
March 31, 2022. The $8 million decrease was driven by the following:

•Net interest income increased $14 million primarily due to rising interest rates and the impact on our asset sensitive variable rate loan portfolio.

                                       14
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•General, administrative and other noninterest expense increased $16 million due to higher intersegment expense.


•The provision for credit losses was $13 million in the second quarter 2022,
compared to a $22 million provision in the prior quarter. The decrease was
primarily driven by the $20 million charge-off associated with one commercial
credit in the first quarter, which was greater than the impact of the second
quarter volume driven increases.

Comparison to Prior Year to Date


The Community Banking segment reported net income of $102 million for the six
months ended June 30, 2022, compared to $194 million for the six months ended
June 30, 2021. The decrease was driven by the following:

•Net interest income decreased $47 million primarily due to a $1.9 billion
decline in our warehouse portfolio as a result of the reduction in the mortgage
origination market and higher intercompany funding rate charges on our assets.

•The provision for credit losses of $35 million for the six months ended
June 30, 2022 was primarily driven by a charge-off relating to one commercial
borrower and the impact of non-warehouse HFI loan growth. The $13 million
benefit for credit losses for the six months ended June 30, 2021 was primarily
due to a $16 million recovery on a previously charged-off loan.

•General, administrative and other noninterest expense increased $19 million due to higher intersegment expense allocations from the Other segment. This is primarily due to the larger decrease in ACL during the first half of 2021, resulting in a provision benefit, which caused a benefit to the Other segment.

                                       15
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Mortgage Originations


We are a leading national originator of residential first mortgages. Our
Mortgage Originations segment utilizes multiple distribution channels to
originate or acquire one-to-four family residential mortgage loans on a national
scale, primarily to sell. Subsequent to sale, we retain certain mortgage
servicing rights which are reported at their fair value. The fair value includes
service fee revenues, a cost to service which is an intercompany allocation paid
to our servicing business, and other financial line impacts. We originate and
retain certain mortgage loans in our LHFI portfolio which generate interest
income in the Mortgage Originations segment.

                                                   Three Months Ended,                                             Six Months Ended,
Mortgage Originations                     June 30, 2022          March 31, 2022          Change          June 30, 2022          June 30, 2021            Change
                                                                                 (Dollars in millions)
Summary of Operations
Net interest income                      $          46          $         

56 $ (10) $ 102 $ 114 $ (12) Provision (benefit) for credit losses

               (6)                     3               (9)                    (3)                    (4)           

1

Net interest income after provision                 52                     53               (1)                   105                    118                (13)
(benefit) for credit losses
Net gain on loan sales                              27                     45              (18)                    72                    395               (323)
Loan fees and charges                                7                      6                1                     13                     41                (28)
Loan administration expense                         (7)                    (7)               -                    (14)                   (20)                 6
Net return on mortgage servicing rights             22                     29               (7)                    51                     (5)                56
Other noninterest income                            (5)                     1               (6)                    (4)                     5                 (9)
Total noninterest income                            44                     74              (30)                   118                    416               (298)
Compensation and benefits                           37                     45               (8)                    82                    103                (21)
Commissions                                         22                     25               (3)                    47                    111                (64)
Loan processing expense                              9                      9                -                     18                     23                 (5)
General, administrative and other                    4                     11               (7)                    15                     42                (27)
Total noninterest expense                           72                     90              (18)                   162                    279               (117)
Income before indirect overhead                     24                     37              (13)                    61                    255           

(194)

allocations and income taxes
Indirect overhead allocation                       (16)                   (15)              (1)                   (31)                   (35)                 4
Provision for income taxes                           -                      4               (4)                     4                     46                (42)
Net income                               $           8          $          18          $   (10)         $          26          $         174          $    (148)

Key Metrics
Mortgage rate lock commitments           $       7,100          $       

7,700 $ (600) $ 14,800 $ 24,800

   $ (10,000)
(fallout-adjusted) (1)(2)
Noninterest expense to closing volume             0.94  %                1.11  %         (0.17) %                1.03  %                1.02  %            0.01  %
Number of FTE employees                          1,697                  2,044             (347)                 1,697                  2,134               (437)


(1)Fallout-adjusted refers to mortgage rate lock commitments which are adjusted
by a percentage of mortgage loans in the pipeline that are not expected to close
based on our historical experience and the impact of changes in interest rates.
(2)Rounded to nearest hundred million.

Comparison to Prior Quarter

The Mortgage Originations segment reported net income of $8 million for the quarter ended June 30, 2022 as compared to $18 million for the quarter ended March 31, 2022. The $10 million decrease was driven by the following:


•Net gain on loan sales decreased $18 million as compared to the first quarter
2022. Gain on sale margins decreased by 19 basis points to 39 basis points for
the second quarter 2022, as compared to 58 basis points for the first quarter
2022. The overall decrease and reduction in margin was primarily due to a $1.1
billion, or 47 percent, decline in our retail volume. This decline was primarily
in the direct-to-consumer channel as a result of lower refinance volumes caused
by the rising rate environment.

•Net interest income decreased $10 million primarily due to a $1.3 billion, or
26 percent, decline in the LHFS portfolio driven by the reduction in the
mortgage origination market and higher intercompany funding rate charges on our
assets.
                                       16
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•Net return on mortgage servicing rights decreased $7 million, to $22 million
for the second quarter 2022, compared to a $29 million net return for the first
quarter 2022.

•General, administrative and other noninterest expense decreased $7 million due to lower intersegment expense.

•Compensation and benefits declined $8 million driven by continued staffing reductions related to the decrease in the mortgage origination market. Commissions also decreased $3 million due to a reduction in retail mortgage closings.

Comparison to Prior Year to Date


The Mortgage Originations segment reported net income of $26 million for the six
months ended June 30, 2022 and $174 million for the six months ended June 30,
2021. The decrease was driven by the following:

•Net gain on loan sales decreased $323 million primarily due to $10.0 billion
lower FOALs and a 111 basis points decrease in our gain on sale margin driven by
the challenging mortgage market, competitive factors relative to the prior year
and a significant reduction in retail channel volumes, which also resulted in a
$28 million decline in loan fees and charges.

•The decline in volume was partially offset by our management of variable costs
that included a decline in commissions of $64 million due to the decrease in the
mortgage volume and a decline in compensation and benefits of $21 million driven
by staffing reductions.

•Net return on mortgage servicing rights, including the impact of economic hedges, increased $56 million primarily driven by the hedge ratio on this portfolio and the increase in interest rates during the first half of 2022.


•General, administrative and other noninterest expense decreased $27 million
primarily due to lower intersegment expense allocations from the Other segment
given the lower asset base and income of the business. Additionally, the
allocated benefits from the ACL reductions were larger in the first half of 2021
as compared to the first half of 2022.

Mortgage Servicing


The Mortgage Servicing segment services loans when we hold the MSR asset, and
subservices mortgage loans for others through a scalable servicing platform on a
fee for service basis. The loans we service generate custodial deposits which
provide a stable funding source supporting interest-earning asset generation in
the Community Banking and Mortgage Originations segments. We earn income from
other segments for the use of noninterest-bearing escrows. Revenue for serviced
and subserviced loans is earned on a contractual fee basis, with the fees
varying based on our responsibilities and the delinquency or payment status of
the underlying loans. Along with these contractual fees, we may also collect
ancillary fees related to these loans. The Mortgage Servicing segment also
services residential mortgages for our LHFI portfolio in the Community Banking
segment and our own MSR portfolio in the Mortgage Originations segment for which
it earns intersegment revenue on a fee per loan basis. Our continued growth in
our subservicing business and the strength of our platform has made us the 5th
largest subservicer in the nation.

                                       17
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                                                Three Months Ended,                                             Six Months Ended,
Mortgage Servicing                    June 30, 2022          March 31, 2022           Change          June 30, 2022          June 30, 2021            Change
                                                                              (Dollars in millions)
Summary of Operations
Net interest income                   $         4          $             3          $      1          $         7          $            7          $       -
Loan fees and charges                          22                       21                 1                   43                      37                  6
Loan administration income                     44                       43                 1                   87                      80                  7
Total noninterest income                       66                       64                 2                  130                     117                 13
Compensation and benefits                      18                       16                 2                   34                      32                  2
Loan processing expense                        12                        9                 3                   21                      15                  6
General, administrative and other              23                       21                 2                   44                      44                  -
Total noninterest expense                      53                       46                 7                   99                      91                  8
Income before indirect overhead                17                       21                (4)                  38                      33               

5

allocations and income taxes
Indirect overhead allocation                   (7)                      (6)               (1)                 (13)                    (10)              

(3)

Provision for income taxes                      2                        3                (1)                   5                       5                  -
Net income                            $         8          $            12          $     (4)         $        20          $           18          $       2

Key Metrics
Average number of residential loans     1,319,000                1,245,000            74,000            1,319,000               1,165,000            154,000
serviced (1)
Number of FTE employees                       748                      736                12                  748                     730                 18

(1)Rounded to nearest thousand.

The following table presents loans serviced and the number of accounts associated with those loans:

                                               June 30, 2022                              March 31, 2022                           December 31, 2021                          September 30, 2021                           June 30, 2021
                                        Unpaid                                     Unpaid                                     Unpaid                                     Unpaid                                     Unpaid
                                       Principal     Number of accounts           Principal     Number of accounts           Principal     Number of accounts           Principal     Number of accounts           Principal     Number of accounts
                                      Balance (1)                                Balance (1)                                Balance (1)                                Balance (1)                                Balance (1)
                                                                                                                                 (Dollars in millions)
Loan Servicing
Subserviced for others (2)          $    293,808       1,160,087               $    253,013       1,041,251               $    246,858       1,032,923               $    230,045       1,007,557               $    211,775        

975,467

Serviced for others (3)                   41,557         160,387                     40,065         154,404                     35,074         137,243                     31,354         124,665                     34,263        

139,029

Serviced for own loan portfolio (4)        7,959          62,217                      7,215          60,167                      8,793          63,426                     10,410          70,738                      9,685        

67,988

Total loans serviced                $    343,324       1,382,691               $    300,293       1,255,822               $    290,725       1,233,592               $    271,809       1,202,960               $    255,723       1,182,484


(1)UPB, net of write downs, does not include premiums or discounts.
(2)Loans subserviced for a fee for non-Flagstar owned loans or MSRs. Includes
temporary short-term subservicing performed as a result of sales of
servicing-released MSRs.
(3)Loans for which Flagstar owns the MSR.
(4)Includes LHFI (residential first mortgage, home equity and other consumer),
LHFS (residential first mortgage), LGG (residential first mortgage), and
repossessed assets.

Comparison to Prior Quarter


The Mortgage Servicing segment reported net income of $8 million for the quarter
ended June 30, 2022, compared to net income of $12 million for the quarter ended
March 31, 2022. The $4 million decline in net income was the result of higher
expenses driven by higher boarding fees on new loans serviced and higher FTE to
support growth and the remaining population of loans in forbearance.

Comparison to Prior Year to Date


The Mortgage Servicing segment reported net income of $20 million for the six
months ended June 30, 2022, compared to net income of $18 million for the six
months ended June 30, 2021. The $2 million increase in net income was driven by
an increase in the total number of loans serviced partially offset by higher
expenses related to this growth.

                                       18
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Other


The Other segment includes the treasury functions, which include the impact of
interest rate risk management, balance sheet funding activities and the
investment securities portfolios, as well as other expenses of a corporate
nature, including corporate staff, risk management, and legal expenses which are
charged to the line of business segments. The Other segment charges each
operating segment a daily funds transfer pricing rate on their average assets
which resets more rapidly than the underlying borrowing costs resulting in an
asset sensitive position. In addition, the Other segment includes revenue and
expenses not directly assigned or allocated to the Community Banking, Mortgage
Originations or Mortgage Servicing segments.

                                               Three Months Ended,                                            Six Months Ended,
Other                                 June 30, 2022         March 31, 2022           Change            June 30,           June 30, 2021           Change
                                                                                                         2022
                                                                             (Dollars in millions)
Summary of Operations
Net interest income                   $        7          $           (16)  

$ 23 $ (9) $ (55) $ 46 (Benefit) provision for credit losses (16)

                     (29)               13                (45)                    (55)               

10

Net interest income after (benefit)           23                       13                10                 36                       -                36
provision for credit losses
Net gain on loan sales                         -                        -                 -                  -                       -                 -
Loan fees and charges                          -                        -                 -                  -                       -                 -
Loan administration expense                   (3)                      (3)                -                 (6)                     (6)                -
Other noninterest income                       6                        7                (1)                13                      14                (1)
Total noninterest income                       3                        4                (1)                 7                       8                (1)
Compensation and benefits                     39                       38                 1                 77                      80                (3)
Commissions                                    -                        -                 -                  -                       -                 -
Loan processing expense                        1                        1                 -                  2                       2                 -
General, administrative and other             28                       37                (9)                65                      96               (31)
Total noninterest expense                     68                       76                (8)               144                     178               (34)
Income before indirect overhead              (42)                     (59)               17               (101)                   (170)               

69

allocations and income taxes
Indirect overhead allocation                  35                       31                 4                 66                      64                 2
Provision for income taxes                     4                       (4)                8                  -                     (16)               16
Net gain (loss)                       $      (11)         $           (24)         $     13          $     (35)         $          (90)         $     55

Key Metrics
Number of FTE employees                    1,375                    1,388               (13)             1,375                   1,484              (109)



Comparison to Prior Quarter

The Other segment reported a net gain of $11 million for the quarter ended
June 30, 2022, compared to a net loss of $24 million for the quarter ended March
31, 2022. The $13 million improvement was primarily driven by a $23 million
increase in net interest income as a result of the net impact of rising rates on
our overall net asset position and the hedging actions we took beginning in the
first quarter of 2022.

Comparison to Prior Year to Date


The Other segment reported a net loss of $35 million for the six months ended
June 30, 2022, compared to a net loss of $90 million for the six months ended
June 30, 2021. The $55 million improvement was primarily driven by a $46 million
increase in net interest income as a result of the net impact of rising rates on
our overall net asset position and the hedging actions we took beginning in the
first quarter of 2022. Additionally, in the first six months of 2021, we
recorded a $35 million final settlement expense for the DOJ Liability which did
not reoccur.

Risk Management

Certain risks are inherent in our business and include, but are not limited to,
credit, interest rate, liquidity, price, strategic, reputation, compliance, and
operational risks. We continuously invest in our risk management activities
which are focused on ensuring we properly identify, measure and manage such
risks across the entire enterprise to maintain safety and soundness and maximize
profitability. We hold capital to protect us from unexpected loss arising from
these risks.
                                       19
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A comprehensive discussion of risks affecting us can be found in the Risk
Factors section included in Part I, Item 1A of our Annual Report on Form 10-K
for the year ended December 31, 2021 and in Part II, Item 1A of this Quarterly
Report on Form 10-Q. Some of the more significant processes used to manage and
control credit, market, liquidity and operational risks are described in the
following paragraphs.

Credit Risk

Credit risk is the risk of loss to us arising from an obligor's inability or
failure to meet contractual payment or performance terms. We provide loans,
extend credit, and enter into financial derivative contracts, all of which have
related credit risk. We manage credit risk using a thorough process designed to
ensure we make prudent and consistent credit decisions. The process was
developed with a focus on utilizing risk-based limits and credit concentrations
while emphasizing diversification on a geographic, industry and customer level.
The process utilizes documented underwriting guidelines, comprehensive
documentation standards, and ongoing portfolio monitoring including the timely
review and resolution of credits experiencing deterioration. These activities,
along with the management of credit policies and credit officers' delegated
authority, are centrally managed by our credit risk team.

We maintain credit limits in compliance with regulatory requirements. Under
HOLA, the Bank may not make a loan or extend credit to a single or related group
of borrowers in excess of 15 percent of Tier 1 plus Tier 2 capital and any
portion of the ACL not included in Tier 2 capital. This limit was $473 million
as of June 30, 2022. We maintain a more conservative maximum internal Bank
credit limit than required by HOLA, generally not exceeding $100 million to any
one borrower/obligor relationship, with the exception of warehouse
borrower/obligor relationships, which have a higher internal Bank limit of $200
million. All warehouse advances are fully collateralized by residential mortgage
loans and this asset class has had very low levels of historical loss. We have a
tracking and reporting process to monitor lending concentration levels, and all
new commercial credit exposures to a single or related borrower that exceed $50
million and all new warehouse credit exposures to a single or related borrower
that exceed $75 million must be approved by the Board of Directors. Exceptions
to these levels are made to strong borrowers on a case by case basis, with the
approval of the Board of Directors.

Our commercial loan portfolio has been built on our relationship-based lending
strategy. We provide financing and banking products to our commercial customers
in our core banking footprint and we will follow those established customer
relationships to meet their financing needs in areas outside of our footprint.
We have also formed relationship lending on a national scale through our home
builder finance and warehouse lending businesses. At June 30, 2022, we had $10.5
billion UPB in our commercial loan portfolio, including our warehouse lending
and home builder finance businesses, which accounted for 56 percent of the
total. Of the remaining commercial loans in our portfolio, the majority of CRE
and C&I loans were with customers who have established relationships within our
core banking footprint.

Credit risk within the commercial loan portfolio is managed using concentration
limits based on line of business, industry, geography and product type. This is
managed through the use of strict underwriting guidelines detailed in credit
policies, ongoing loan level reviews, monitoring of the concentration limits and
continuous portfolio risk management reporting. The commercial credit policy
outlines the risks and underwriting requirements and provides a framework for
all credit and lending activities. Our commercial loan credit policies consider
maturity and amortization terms, maximum LTVs, minimum debt service coverage
ratios, construction loan monitoring procedures, appraisal requirements,
pro-forma analysis requirements and thresholds for product specific advance
rates.

We typically originate loans on a recourse basis with full or partial
guarantees. On a limited basis, we may approve loans without recourse if
sufficient consideration is provided in the loan structure. Non-recourse loans
primarily have low LTVs, strong cash flow coverage or other mitigating factors
supporting the lack of a guaranty. These guidelines also require an appraisal of
pledged collateral prior to closing and on an as-needed basis when market
conditions justify. We contract with a variety of independent licensed
professional firms to conduct appraisals that are in compliance with our
internal commercial credit and appraisal policies and regulatory requirements.

                                       20
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Our commercial loan portfolio includes leveraged lending. The Bank defines a
transaction as leveraged when two or more of the following conditions exist: 1)
proceeds from the loan are used for buyouts, acquisitions, recapitalization or
capital distributions, 2) the borrower's total funded debt to EBITDA ratio is
greater than four or Senior Funded Debt to EBITDA ratio is greater than three,
3) the borrower has a high debt to net worth ratio within its industry or sector
as defined by internal limits, and 4) debt leverage significantly exceeds
industry norms or historical levels for leverage as defined by internal limits.
Leveraged lending transactions typically result in leverage ratios that are
significantly above industry norms or historical levels. Our leveraged lending
portfolio and other loan portfolios with above-average default probabilities
tend to behave similarly during a downturn in the general economy or a downturn
within a specific sector. Consequently, we take steps to avoid undue
concentrations by setting limits consistent with our appetite for risk and our
financial capacity. In addition, there are specific underwriting conditions set
for our leveraged loan portfolio and there is additional emphasis on certain
items beyond the standard underwriting process including synergies, collateral
shortfall and projections.

Our commercial loan portfolio also includes loans that are considered to be
SNCs. A SNC is defined as any loan or loan commitment totaling at least $100
million that is shared by three or more unaffiliated supervised institutions. On
an annual basis, a joint regulatory task force performs a risk assessment of all
SNCs. When completed, these risk ratings are shared and our risk rating must be
no better than the risk rating listed in the SNC assessment. Exposure and credit
quality for SNCs are carefully monitored and reported internally.

For our CRE portfolio, including owner and nonowner-occupied properties and home builder finance lending, we obtain independent appraisals as part of our underwriting and monitoring process. These appraisals are reviewed by an internal appraisal group that is independent from our sales and credit teams.


The home builder finance group is a national relationship-based lending platform
that focuses on markets with strong housing fundamentals and higher population
growth potential. The team primarily originates construction and development
loans. We generally lend in metropolitan areas or counties where verifiable
market statistics and data are readily available to support underwriting and
ongoing monitoring. We also evaluate the jurisdictions and laws, demographic
trends (age, population and income), housing characteristics and economic
indicators (unemployment, economic growth, household income trends) for the
geographies where our borrowers primarily operate. We engage independent
licensed professionals to supply market studies and feasibility reports,
environmental assessments and project site inspections to complement the
procedures we perform internally. Further, we perform ongoing monitoring of the
projects including periodic inspections of collateral and annual portfolio and
individual credit reviews.

The consumer loan portfolio has been built on strong underwriting criteria and
within concentration limits intended to diversify our risk profile. Our consumer
loan portfolio includes high credit quality residential first and second lien
mortgage loans, non-auto boat and recreational vehicle indirect lending loans
and other unsecured consumer loans.

Loans Held-for-Investment

The following table summarizes the amortized cost of our LHFI by category:

                                                                                           December 31,
                                                 June 30, 2022       % of Total                2021           % of Total              Change
                                                                                     (Dollars in millions)
Consumer loans
Residential first mortgage                     $        2,205               15.0  %       $      1,536               11.5  %       $      669
Home equity (1)                                           645                4.4  %                613                4.5  %               32
Other                                                   1,331                9.1  %              1,236                9.2  %               95
Total consumer loans                                    4,181               28.5  %              3,385               25.2  %              796
Commercial loans
Commercial real estate                                  3,387               23.1  %              3,223               24.0  %              164
Commercial and industrial                               2,653               18.1  %              1,826               13.6  %              827
Warehouse lending                                       4,434               30.3  %              4,974               37.1  %             (540)
Total commercial loans                                 10,474               71.5  %             10,023               74.8  %              451
Total loans held-for-investment                $       14,655              100.0  %       $     13,408              100.0  %       $    1,247


(1)Includes second mortgages, HELOCs, and HELOANs.


Our commercial loan portfolio grew $451 million, or 4 percent, from December 31,
2021 to June 30, 2022, as growth of $991 million in our CRE and C&I portfolios
was partially offset by lower warehouse lending as a result of the weaker
                                       21
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mortgage origination market. Our commercial loan growth was led by MSR loans
which are included in our C&I portfolio. We also grew our consumer portfolio
$796 million led by growth in strong credit quality residential first mortgages.

Residential first mortgage loans. We originate or purchase various types of
conforming and non-conforming fixed and adjustable rate loans underwritten using
Fannie Mae and Freddie Mac guidelines for the purpose of purchasing or
refinancing owner occupied and second home properties. We typically hold certain
mortgage loans in LHFI that do not qualify for sale to the Agencies and that
have an acceptable yield and risk profile. The LTV requirements on our
residential first mortgage loans vary depending on occupancy, property type,
loan amount, and FICO scores. Loans with LTVs exceeding 80 percent are required
to obtain mortgage insurance. As of June 30, 2022, loans in this portfolio had
an average current FICO score of 733 and a weighted average current LTV of 69
percent. At June 30, 2022, the residential first mortgage loan portfolio
includes home equity loans in a first lien position totaling $73 million.

The following table presents amortized cost of our total residential first mortgage LHFI by major category:

                                                June 30, 2022       December 31, 2021
                                                        (Dollars in millions)
Estimated LTVs (1)
Less than 80% and current FICO scores (2):
Equal to or greater than 660                   $        1,508      $        

988

Less than 660                                              32               

50

80% and greater and current FICO scores (2):
Equal to or greater than 660                              552                     385
Less than 660                                             113                     113
Total                                          $        2,205      $            1,536
Geographic region
California                                     $          759      $              441
Michigan                                                  453                     400
Florida                                                   120                      68
Texas                                                     123                      83
Washington                                                126                      59
New York                                                   66                      38
Indiana                                                    31                      34
Colorado                                                   50                      30
Illinois                                                   40                      31
New Jersey                                                 26                      24
Other                                                     411                     328
Total                                          $        2,205      $            1,536


(1)LTVs reflect loan balance at the date reported, as a percentage of appraised
property value at loan closing.
(2)FICO scores are updated at least on a quarterly basis or more frequently, if
available.

The following table presents the amortized cost of our total residential first mortgage LHFI as of June 30, 2022, by year of closing:


                                      2022        2021        2020        

2019 2018 and Prior Total

                                                                (Dollars in 

millions)

Residential first mortgage loans    $ 908       $ 339       $ 179       $ 244       $         535       $ 2,205
Percent of total                     41.2  %     15.4  %      8.1  %     11.1  %             24.2  %      100.0  %



Home equity. Our home equity portfolio includes second mortgage loans in the
form of HELOANs and HELOCs. These loans are underwritten and priced in an effort
to ensure credit quality and loan profitability. Our debt-to-income ratio on
HELOANs and HELOCs is capped at 43 percent and 45 percent, respectively. We
currently limit the maximum CLTV to 89.99 percent and FICO scores to a minimum
of 700. HELOANs are fixed rate loans and are available with terms up to 20
years. HELOCs are variable-rate loans that contain a 10-year interest only draw
period followed by a 20-year amortizing period. As of June 30, 2022, loans in
this portfolio had an average current FICO score of 753.

Other consumer loans. Our other consumer loan portfolio consists of secured and
unsecured loans originated through our indirect lending business, third party
closings and our Community Banking segment.
                                       22
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The following table presents amortized cost of our other consumer loan portfolio
by purchase type:

                                                        June 30, 2022                                    December 31, 2021
                                              Balance           % of Portfolio                   Balance             % of Portfolio
                                                                               (Dollars in millions)
Indirect lending                          $        972                         73  %       $            926                         75  %
Point of sale                                      300                         23  %                    272                         22  %
Other                                               59                          4  %                     38                          3  %
Total other consumer loans                $      1,331                        100  %       $          1,236                        100  %



Other consumer loans increased $95 million to $1.3 billion as of June 30, 2022,
compared to $1.2 billion at December 31, 2021, driven by growth in our non-auto
indirect lending and point of sale portfolios. Within the indirect lending
portfolio, 69 percent is secured by boats and 31 percent is secured by
recreational vehicles. As of June 30, 2022, loans in our indirect portfolio had
an average current FICO score of 749. Point of sale loans consist of unsecured
consumer installment loans originated for home improvement purposes through a
third-party financial technology company who also provides us a level of credit
loss protection.

Commercial real estate loans. The CRE portfolio contains loans collateralized by
diversified property types which are primarily income producing in the normal
course of business. The majority of our retail exposure is to neighborhood
centers and single tenant locations, which include pharmacies and hardware
stores. Generally, the maximum underwritten LTV is 80 percent, or 90 percent for
owner-occupied real estate, and the minimum underwritten debt service coverage
is 1.20. Our CRE loans primarily earn interest at a variable rate.

Our national home builder finance program within our commercial portfolio
contained $3.4 billion in commitments with $1.5 billion in outstanding loans as
of June 30, 2022. Of these outstanding loans $993 million are collateralized and
included in our CRE portfolio while our C&I portfolio includes $480 million
unsecured loans.

As of June 30, 2022, our CRE portfolio included $160 million of SNCs compared to
$186 million of SNCs as of December 31, 2021. As of June 30, 2022, the SNC
portfolio had eight borrowers with an average amortized cost of $20 million and
an average commitment of $25 million. There were no nonperforming SNCs as of
June 30, 2022 and there were no SNC loans that were rated as substandard or
special mention as of June 30, 2022. There were no leveraged loans outstanding
in the CRE portfolio as of June 30, 2022 or December 31, 2021.

The following table presents the amortized cost of our total CRE LHFI by collateral location and collateral type:

                                                                                                       % by collateral
                             MI         TX         CA         CO         OH       Other      Total           type
                                                              (Dollars in millions)
June 30, 2022
Home builder             $    29    $   194    $   132    $   189    $     -    $   449    $   993               29.3  %
Multi family                 194         41         72         33         44         73        457               13.5  %
Owner occupied               284          3         19          -         13         52        371               11.0  %
Hotel                        155          -         26          -         30        181        392               11.6  %
Retail (1)                   207          -          2          3         55         25        292                8.6  %
Senior living facility       125         24          -          -         70         59        278                8.2  %
Office                       178          -         20          -          4         49        251                7.4  %
Industrial                    55          -          8          -          -         28         91                2.7  %
Parking garage/lot            46          -          -          -          -         20         66                1.9  %
Shopping Mall                  -          -         17          -          -          -         17                0.5  %
All other (2)                 25         48          7          5          -         94        179                5.3  %
Total                    $ 1,298    $   310    $   303    $   230    $   216    $ 1,030    $ 3,387              100.0  %
Percent by state            38.3  %     9.2  %     8.9  %     6.8  %     

6.4 % 30.4 % 100.0 %



(1)Includes multipurpose retail space, neighborhood centers, shopping centers
and single-use retail space.
(2)All other primarily includes: mini-storage facilities, data centers, movie
theaters, etc.

                                       23
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Commercial and industrial loans. C&I LHFI facilities typically include lines of
credit and term loans to businesses for use in normal business operations to
finance working capital, equipment and capital purchases, acquisitions and
expansion projects. We lend to customers with a history of profitability and a
long-term business model. Generally, leverage conforms to industry standards and
the minimum debt service coverage is 1.20 times. Of our C&I loans, 96 percent
earn interest at a variable rate.

As of June 30, 2022, our C&I portfolio included $1.5 billion of SNCs. The
finance and insurance sector and the services sector comprised the majority of
the portfolio's NBV with 45 and 31 percent of the balance, respectively. The SNC
portfolio had fifty-three borrowers with an average net book value of
$28 million and an average commitment of $43 million. There were no NPLs, no
loans were rated as special mention, and one borrower with loans totaling
$23 million of amortized cost were rated as substandard as of June 30, 2022.

As of June 30, 2022, our C&I portfolio included $339 million of leveraged
lending, of which $220 million were SNCs, which were also included in the SNC
portfolio discussed in the prior paragraph. The manufacturing sector comprised
44 percent of the leveraged lending portfolio, and the financial and insurance
sector comprised 20 percent. There were no NPLs as of June 30, 2022, and three
loans totaling $25 million were rated substandard and one loan totaling
$9 million was rated as special mention.

Included in the financial and insurance sector within our C&I portfolio are
$687 million in loans outstanding to 12 borrowers that are collateralized by MSR
assets with an average net book value of $57 million and an average commitment
of $85 million. The ratio of the loan outstanding to the fair market value of
the collateral ranges from 14 percent to 70 percent.

The following table presents the amortized cost of our total C&I LHFI by borrower's geographic location and industry type as defined by the North American Industry Classification System:


                              MI       FL       NY       SC       TX       

CA NJ OH WI IN Other Total % by industry

                                                                       (Dollars in millions)
June 30, 2022
Financial & Insurance      $  96    $ 163    $ 305    $ 184    $ 143    $  21    $  87    $  41    $  34    $   -    $ 153    $ 1,227                 46.2  %
Services                     121       20        1       31       14       10       11        1        -        3      109        321                 12.1  %
Manufacturing                248        -        -        -        -        -        -        -        6        -       30        284                 10.7  %
Home Builder Finance           -      168        -       45       69      143        -        -        -        -       56        481                 18.1  %
Rental & Leasing             117       33       29        -        -        -        -        -        -        9       36        224                  8.4  %
Distribution                  36        -        -        -        -       14        -        1        -        1        3         55                  2.2  %
Healthcare                     3        -        -        -        -        1        -       18        -        -       11         33                  1.3  %
Government & Education         2        -        -        -        -        -        -        -        -        -       12         14                  0.5  %
Commodities                    -        -        -        -        -        5        -        -        -        1        8         14                  0.5  %
Total                      $ 623    $ 384    $ 335    $ 260    $ 226    $ 194    $  98    $  61    $  40    $  14    $ 418    $ 2,653                100.0  %
Percent by state            23.5  %  14.5  %  12.6  %   9.8  %   8.5  %   

7.3 % 3.7 % 2.3 % 1.5 % 0.5 % 15.8 % 100.0 %




Warehouse lending. We have a national platform with relationship managers across
the country. We offer warehouse lines of credit to other mortgage lenders which
allow the lender to fund the closing of residential mortgage loans. Each
extension, advance, or draw-down on the line is fully collateralized by
residential mortgage loans and is paid off when the lender sells the loan to an
outside investor or, in some instances, to the Bank.

Underlying mortgage loans are predominantly originated using the Agencies'
underwriting standards. The guideline for debt to tangible net worth is 15 to 1.
The aggregate committed amount of warehouse lines of credit granted to other
mortgage lenders at June 30, 2022 was $12.0 billion, of which $4.4 billion was
outstanding, compared to $12.0 billion at December 31, 2021, of which $5.0
billion was outstanding. Of the total warehouse loans outstanding as of June 30,
2022, 52 percent were collateralized by agency and conventional loans, 20
percent were collateralized by government loans, 17 percent were collateralized
by non-qualified mortgage loans and 11 percent were collateralized by jumbo
loans.

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Credit Quality


Our focus on effectively managing credit risk through our careful underwriting
standards and processes has resulted in strong trends in certain credit quality
characteristics in our loan portfolios. The credit quality of our loan
portfolios is demonstrated by low delinquency levels, minimal charge-offs and
low levels of NPLs.

For all loan categories within the consumer and commercial loan portfolio, loans
are placed on nonaccrual status when any portion of principal or interest is 90
days past due (or nonperforming), or earlier when we become aware of information
indicating that collection of principal and interest is in doubt. While it is
the goal of Management to collect on loans under their original legal terms, we
attempt to work out a satisfactory repayment schedule or modification with past
due borrowers and will undertake foreclosure proceedings if the delinquency is
not satisfactorily resolved. Our practices regarding past due loans are designed
to both assist borrowers in meeting their contractual obligations and minimize
losses incurred by the Bank. When a loan is placed on nonaccrual status, the
accrued interest income is reversed. Loans return to accrual status when
principal and interest become current and are anticipated to be fully
collectible.

Nonperforming assets

The following table sets forth our nonperforming assets:

                                                              June 30, 2022          December 31, 2021
                                                                        (Dollars in millions)
LHFI
Residential first mortgage (1)                               $          70          $            38
Home equity                                                              7                        7
Other consumer                                                           2                        4
Commercial and industrial                                                -                       32
Total nonperforming LHFI                                                79                       81

TDRs

Residential first mortgage                                              18                       11
Home equity                                                              2                        2
Total nonperforming TDRs                                                20                       13
Total nonperforming LHFI and TDRs                                       99                       94
Real estate and other nonperforming assets, net                          5                        6
LHFS                                                                    20                       17
Total nonperforming assets                                   $         124          $           117
Nonperforming assets to total assets (2)                              0.42  %                  0.39    %
Nonperforming LHFI and TDRs to LHFI                                   0.68  %                  0.70    %
Nonperforming assets to LHFI and repossessed assets (2)               0.71  %                  0.74    %


(1)Includes $35 million of first residential mortgage loans that are current in
accordance with their forbearance exit plan and have not yet returned to accrual
status as of June 30, 2022.
(2)Ratio excludes LHFS, which are recorded at fair value.

The following table sets forth activity related to our total nonperforming LHFI
and TDRs:

                                             Three Months Ended,                             Six Months Ended,
                                    June 30, 2022          March 31, 2022          June 30, 2022           June 30, 2021
                                            (Dollars in millions)                          (Dollars in millions)
Beginning balance                  $        107          $            93          $          93          $           56
Additions                                    16                       54                     70                      33
Reductions                                    -                        -                      -                       -
Principal payments                           (8)                     (10)                   (18)                    (10)
Charge-offs                                  (1)                     (25)                   (26)                     (2)
Return to performing status                 (15)                      (5)                   (20)                     (2)
Transfers to REO                              -                        -                      -                       -
Total nonperforming LHFI and TDRs  $         99          $           107          $          99          $           75

(1)

(1)Includes less than 90 days past due performing loans which are deemed nonaccrual. Interest is not being accrued on these loans.

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Delinquencies


The following table sets forth loans 30-89 days past due in our LHFI portfolio:

                                                     June 30, 2022                               December 31, 2021
                                              Amount            % of LHFI                   Amount             % of LHFI
                                                                         (Dollars in millions)
Performing loans past due 30-89:
Consumer loans
Residential first mortgage               $          12                  0.08  %       $            48                  0.36  %
Home equity                                          3                  0.02  %                     9                  0.07  %
Other consumer                                       7                  0.05  %                     5                  0.04  %
Total consumer loans                                22                  0.15  %                    62                  0.46  %
CRE                                                  -                     -  %                     -                     -  %
C&I                                                  -                     -  %                     -                     -  %
Total commercial loans                               -                     -  %                     -                     -  %
Total performing loans past due 30-89    $          22                  0.15  %       $            62                  0.46  %
days


For further information, see Note 4 - Loans Held-for-Investment.

Payment Deferrals


Beginning in March 2020, as a response to COVID-19, we offered our consumer
borrowers principal and interest payment deferrals, forbearance and/or
extensions up to a maximum period of 18 months. Consumer borrowers were not
required to provide proof of hardship to be granted forbearance or payment
deferral. Typically, payment history is the primary tool used to identify
consumer borrowers who are experiencing financial difficulty. Forbearance or
payment deferrals make this determination more challenging. In addition,
consumer borrowers who have requested forbearance or payment deferrals are not
being aged and remain in the aging category they were in prior to forbearance or
payment deferral while they remain in a forbearance or payment deferral status.

The table below summarizes borrowers in our consumer loan portfolios that are in active forbearance or were granted a payment deferral:

                                                                As of June 30, 2022                                    As of December 31, 2021
                                                 Number of Borrowers     UPB         Percent of           Number of Borrowers     UPB         Percent of
                                                                                     Portfolio                                                Portfolio
                                                                              (Dollars in millions, actual number of borrowers)
Loans Held-For-Investment
Consumer loans
Residential first mortgage                                       138 $     25                1.1  %                       212 $     35                2.3  %
Home equity                                                       26        3                0.5  %                        48        5                0.8  %
Other consumer                                                    62        2                0.2  %                        96        4                0.3  %
Total consumer loan deferrals/forbearance                        226 $     30                0.7  %                       356 $     44                1.3  %

Loans Held-For-Sale
Residential first mortgage                                        14 $      5                0.2  %                        47 $     13                0.3  %


There were no performing commercial borrowers in payment deferral as of June 30, 2022 or December 31, 2021.



                                       26
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The table below summarizes the percent of our residential loan servicing portfolio in forbearance as of June 30, 2022:


                                     Total Population                                              Loans in Forbearance
                              Unpaid                                       Unpaid                                                     Percent of
                             Principal      Number of accounts           Principal      Number of accounts         Percent of UPB      Accounts
                            Balance (1)                                 Balance (1)
                                                                            (Dollars in millions)
Loan servicing
Subserviced for others    $    293,808         1,160,087               $     1,940             8,457                        0.7  %           0.7  %
(2)
Serviced for others (3)         41,556           160,385                       291             1,119                        0.7  %           0.7  %
Serviced for own loan            7,960            62,219                       113               619                        1.4  %           1.0  %
portfolio (4)
Total loans serviced      $    343,324         1,382,691               $     2,344            10,195                        0.7  %           0.7  %


(1)UPB, net of write downs, does not include premiums or discounts.
(2)Loans subserviced for non-Flagstar owned loans or MSRs, in each case
subserviced for a fee. Includes temporary short-term subservicing performed as a
result of sales of servicing-released MSRs.
(3)Loans for which Flagstar owns the MSR.
(4)Includes LHFI (residential first mortgage, home equity and other consumer),
LHFS (residential first mortgage), and LGG (residential first mortgage).

The table below summarizes the percent of our residential loan servicing portfolio in forbearance as of December 31, 2021:

                                     Total Population                                              Loans in Forbearance
                              Unpaid                                       Unpaid                                                     Percent of
                             Principal      Number of accounts           Principal      Number of accounts         Percent of UPB      Accounts
                            Balance (1)                                 Balance (1)
                                                                            (Dollars in millions)
Loan servicing
Subserviced for others    $    247,081         1,033,711               $     3,946            18,313                        1.6  %           1.8  %
(2)
Serviced for others (3)         35,097           137,315                       514             2,158                        1.5  %           1.6  %
Serviced for own loan            8,645            63,039                       220             1,158                        2.5  %           1.8  %
portfolio (4)
Total loans serviced      $    290,823         1,234,065               $     4,680            21,629                        1.6  %           1.8  %


(1)UPB, net of write downs, does not include premiums or discounts.
(2)Loans subserviced for non-Flagstar owned loans or MSRs, in each case
subserviced for a fee. Includes temporary short-term subservicing performed as a
result of sales of servicing-released MSRs.
(3)Loans for which Flagstar owns the MSR.
(4)Includes LHFI (residential first mortgage, home equity and other consumer),
LHFS (residential first mortgage), and LGG (residential first mortgage).

As the MSR owner for loans serviced for others, the Agencies require us to advance payments on past due loans as follows:

                                Principal and Interest        Taxes and Insurance
Fannie Mae and Freddie Mac             4 months                  No time limit
GNMA                                No time limit                No time limit



We believe that we have ample liquidity to handle servicing advances related to
these loans. We initially provide advances on a short-term basis for loans we
subservice and are reimbursed by the MSR owner. Our advance receivable for our
subserviced loans is therefore insignificant.

Troubled debt restructurings (held-for-investment)


TDRs are modified loans in which a borrower demonstrates financial difficulties
and for which a concession has been granted as a result. Nonperforming TDRs are
included in nonaccrual loans. TDRs remain in nonperforming status until a
borrower has made payments and is current for at least six consecutive months.
Performing TDRs are not considered to be nonaccrual so long as we believe that
all contractual principal and interest due under the restructured terms will be
collected.

Since March 2020, as a response to COVID-19, we have offered our consumer and
commercial customers principal and interest payment deferrals and extensions up
to a maximum period of 18 months. We considered these programs in the context of
whether or not the short-term modifications of these loans and the programs
offered to return to paying status would constitute a TDR. We considered the
CARES Act, interagency guidance and related guidance from the FASB, which
provided that short-term modifications made on a good faith basis in response to
COVID-19 to borrowers who were current prior to any relief are not required to
be accounted for as TDRs. As a result, we have determined that loans modified
under these programs are not TDRs. We believe our application of the referenced
guidance and accounting for these programs is appropriate.
                                       27
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The following table sets forth a summary of TDRs by performing status:


                                                               June 30, 2022            December 31, 2021
                                                                         (Dollars in millions)
Performing TDRs
Consumer Loans
Residential first mortgage                                   $            16          $               14
Home equity                                                                6                           8
Total consumer loans                                                      22                          22
Commercial Loans
Commercial and industrial                                                  -                           2
Total commercial loans                                                     -                           2
Total performing TDRs                                                     22                          24
Nonperforming TDRs
Nonperforming TDRs                                                         6                           8
Nonperforming TDRs, performing for less than six months                   14                           5
Total nonperforming TDRs                                                  20                          13
Total TDRs                                                   $            42          $               37



At June 30, 2022 our total TDR loans increased $5 million to $42 million
compared to $37 million at December 31, 2021 primarily driven by new additions
out-pacing principal payments and payoffs. Of our total TDR loans, 52 percent
and 65 percent were in performing status at June 30, 2022 and December 31, 2021,
respectively. For further information, see Note 4 - Loans Held-for-Investment.

Allowance for Credit Losses

The ACL represents Management's estimate of lifetime losses in our LHFI portfolio which have not yet been realized. For further information see Note 1 - Basis of Presentation and Note 4 - Loans Held-for-Investment.

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The following tables present the changes in the ACL balance for the three and six months ended June 30, 2022:

                                                                                              Three Months Ended June 30, 2022
                                 Residential First     Home Equity     Other Consumer    Commercial Real    Commercial and      Warehouse       Total LHFI        Unfunded        Total ACL
                                    Mortgage (1)                                             Estate           Industrial         Lending      Portfolio (2)      Commitments
                                                                                                    (Dollars in millions)
Beginning allowance balance     $              43    $         16    $            34    $           22    $            13    $          3    $         131    $           14    $      145
Provision (benefit) for credit
losses:
Loan volume                                     4               1                  2                 1                  4               -               12                (1)           11
Economic forecast (3)                           2               1                 (4)                -                 (1)              -               (2)                -            (2)
Credit (4)                                    (16)              3                 (1)               (1)                (5)              1              (19)                -           (19)
Qualitative factor adjustments                  -               -                  -                 -                  -               -                -                 -             -
Charge-offs                                     -               -                 (3)                -                  -               -               (3)                -            (3)
Recoveries                                      -               -                  2                 -                  -               -                2                 -             2
Provision for net charge-offs                   -               -                  1                 -                  -               -                1                 -             1
Ending allowance balance        $              33    $         21    $            31    $           22    $            11    $          4    $         122    $           13    $      135


(1)Includes loans with government guarantees where insurance limits may result
in a loss in excess of all or part of the guarantee.
(2)Excludes loans carried under the fair value option.
(3)Includes changes in the lifetime loss rate based on current economic
forecasts as compared to forecasts used in the prior quarter.
(4)Includes changes in the probability of default and severity of default based
on current borrower and guarantor characteristics, as well as individually
evaluated reserves.
                                                                                               Six Months Ended June 30, 2022
                                 Residential First     Home Equity     Other Consumer    Commercial Real    Commercial and      Warehouse       Total LHFI        Unfunded        Total ACL
                                    Mortgage (1)                                             Estate           Industrial         Lending      Portfolio (2)      Commitments
                                                                                                    (Dollars in millions)
Beginning allowance balance     $              40    $         14    $            36    $           28    $            32    $          4    $         154    $           16    $      170
Provision (benefit) for credit
losses:
Loan volume                                     4               1                  3                 1                  7               -               16                (3)           13
Economic forecast (3)                           3               3                 (4)                1                 (3)              -                -                 -             -
Credit (4)                                    (14)              3                 (4)               (7)                (3)              -              (25)                -           (25)
Qualitative factor adjustments                  -               -                  -                (1)                (4)              -               (5)                -            (5)
Charge-offs                                    (1)              -                 (5)                -                (20)              -              (26)                -           (26)
Recoveries                                      -               1                  3                 -                  -               -                4                 -             4
Provision for net charge-offs   $               1    $         (1)   $             2    $            -    $             2    $          -                4    $            -             4
Ending allowance balance        $              33    $         21    $            31    $           22    $            11    $          4    $         122    $           13    $      135


(1)Includes loans with government guarantees where insurance limits may result
in a loss in excess of all or part of the guarantee.
(2)Excludes loans carried under the fair value option.
(3)Includes changes in the lifetime loss rate based on current economic
forecasts as compared to forecasts used in the prior quarter.
(4)Includes changes in the probability of default and severity of default based
on current borrower and guarantor characteristics, as well as individually
evaluated reserves.

The ACL was $135 million at June 30, 2022, compared to $145 million at March 31,
2022. The decrease in the allowance is primarily due to positive delinquency
trends related to loans with government guarantees exiting forbearance programs.
We utilized the Moody's May scenarios in our forecast: a growth forecast,
weighted at 30 percent; a baseline forecast, weighted at 40 percent; and an
adverse forecast, weighted at 30 percent. Within our composite forecast,
unemployment ends 2022 at 4 percent, increasing to 4.5 percent in 2023, and will
slightly recover in 2024, ending the year at 4 percent. GDP continues to recover
throughout 2022 and returns to pre-COVID levels in 2023. HPI decreases by 2
percent from the second quarter of 2022 through the fourth quarter of 2022
before increasing 1 percent by the fourth quarter of 2023.

The ACL as a percentage of LHFI was 0.9 percent as of June 30, 2022 compared to
1.3 percent as of December 31, 2021. Excluding warehouse loans, the allowance as
a percentage of LHFI was 1.3 percent at June 30, 2022 compared to 2.0 percent at
December 31, 2021. The decrease in the allowance as a percentage of LHFI is
reflective of the strong credit performance of our portfolio with no
nonperforming commercial loans as of June 30, 2022. At June 30, 2022, we had a
2.1 percent and 0.5 percent allowance coverage on our consumer loan portfolio
and our commercial loan portfolio, respectively.

                                       29
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The following tables set forth certain information regarding the allocation of our allowance to each loan category, including the allowance amount as a percentage of amortized cost and average loan life:


                                                                                   June 30, 2022
                                                   LHFI          Percent of         Allowance      Allowance as a   Weighted Average
                                               Portfolio (1)      Portfolio        Amount (2)     Percent of Loan       Loan Life
                                                                                                     Portfolio         (in years)
                                                                               (Dollars in millions)
Consumer loans
Residential first mortgage                     $    2,184                14.9  % $         33                1.5  %                 5
Home equity                                           643                 4.4  %           21                3.3  %                 3
Other consumer                                      1,331                 9.1  %           32                2.4  %                 3
Total consumer loans                                4,158                28.4  %           86                2.1  %
Commercial loans
Commercial real estate                         $    3,387                23.2  % $         28                0.8  %                 2
Commercial and industrial                           2,653                18.1  %           16                0.6  %                 2
Warehouse lending                                   4,434                30.3  %            5                0.1  %            -
Total commercial loans                             10,474                71.6  %           49                1.5  %
Total consumer and commercial loans            $   14,632               100.0  % $        135                3.6  %
Total consumer and commercial loans excluding  $   10,198                69.7  % $        130                3.5  %

warehouse

(1) Excludes loans carried under the fair value option. (2) Includes ALLL and reserve for unfunded commitments.


                                                                                  December 31, 2021
                                               LHFI Portfolio     Percent of         Allowance      Allowance as a   Weighted Average
                                                    (1)            Portfolio        Amount (2)     Percent of Loan       Loan Life
                                                                                                      Portfolio         (in years)
                                                                                (Dollars in millions)
Consumer loans
Residential first mortgage                     $     1,521                11.4  % $         40                2.6  %                 5
Home equity                                            611                 4.6  %           14                2.3  %                 3
Other consumer                                       1,236                 9.2  %           37                3.0  %                 3
Total consumer loans                                 3,368                25.2  %           91                2.7  %
Commercial loans
Commercial real estate                         $     3,223                24.1  % $         38                1.2  %                 1
Commercial and industrial                            1,826                13.6  %           36                2.0  %                 2
Warehouse lending                                    4,974                37.1  %            5                0.1  %            -
Total commercial loans                              10,023                74.8  %           79                0.8  %
Total consumer and commercial loans            $    13,391               100.0  % $        170                1.3  %
Total consumer and commercial loans excluding  $     8,417                62.9  % $        165                2.0  %

warehouse

(1) Excludes loans carried under the fair value option. (2) Includes ALLL and reserve for unfunded commitments.

Market Risk


Market risk is the risk of reduced earnings and/or declines in the net market
value of the balance sheet due to changes in market rates. Our primary market
risk is interest rate risk which impacts our net interest income, fee income
related to interest sensitive activities such as mortgage closing and servicing
income, and loan and deposit demand.

We are subject to interest rate risk due to:


•The maturity or repricing of assets and liabilities at different times or for
different amounts
•Differences in short-term and long-term market interest rate changes
•The remaining maturity of various assets or liabilities may shorten or lengthen
as interest rates change

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Our ALCO, which is composed of our executive officers and certain other members
of management, monitors interest rate risk on an ongoing basis in accordance
with policies approved by our Board of Directors. The ALCO reviews interest rate
positions and considers the impact projected interest rate scenarios have on
earnings, capital, liquidity, business strategies, and other factors. However,
Management has the latitude to change interest rate positions within certain
limits if, in Management's judgment, the change will enhance profitability or
minimize risk.

To assess and manage interest rate risk, sensitivity analysis is used to determine the impact on earnings and the net market value of the balance sheet across various interest rate scenarios, balance sheet trends, and strategies.

Net interest income sensitivity


Management uses a simulation model to analyze the sensitivity of net interest
income to changes in interest rates across various interest rate scenarios which
demonstrates the level of interest rate risk inherent in the existing balance
sheet. The analysis holds the current balance sheet values constant and does not
take into account management intervention. In addition, we assume certain
correlation rates, often referred to as a "deposit beta", for non-maturity
interest-bearing deposits, wherein the rates paid to customers change relative
to changes in benchmark interest rates. The effect on net interest income over a
12-month time horizon due to hypothetical changes in market interest rates is
presented in the table below. In this interest rate shock simulation, as of the
periods presented, interest rates have been adjusted by instantaneous parallel
changes rather than in a ramp simulation which applies interest rate changes
over time. All rates, short-term and long-term, are changed by the same amount
(e.g. plus 100 basis points) resulting in the shape of the yield curve remaining
unchanged.

                                       June 30, 2022
                  Scenario    Net interest income    $ Change   % Change
                                  (Dollars in millions)
                    100              $929              $36        4.1%
                  Constant            893               -          -%
                   (100)              853              (40)      (4.5)%
                                     December 31, 2021
                  Scenario    Net interest income    $ Change   % Change
                                  (Dollars in millions)
                    100              $882              $122       16.1%
                  Constant            760               -          -%
                   (100)              695              (65)      (8.5)%



In the net interest income simulations, our balance sheet exhibits asset
sensitivity. When interest rates rise, our net interest income increases.
Conversely, when interest rates fall, our net interest income decreases. The
reduction in our interest income sensitivity as of June 30, 2022 compared to
December 31, 2021 is primarily driven by changes in our hedging activities as
described in Note 8 - Derivative Financial Instruments. The decline in the
sensitivity of net interest income to changes in rates since December 31, 2021
resulted from actions taken late in the first quarter 2022 and early in the
second quarter 2022 to both terminate certain interest rate swaps under which we
received a variable rate and paid a fixed rate and to establish new hedging
relationships through the use of interest rate swaps under which we received a
fixed rate and paid a variable rate. The new hedger was largely designated as
hedging our variable rate assets in our CRE and C&I portfolios.

The net interest income sensitivity analysis has certain limitations and makes
various assumptions. Key elements of this interest rate risk exposure assessment
include maintaining a static balance sheet and parallel rate shocks. Future
interest rates not moving in a parallel manner across the yield curve, how the
balance sheet will respond and shift based on a change in future interest rates,
the impact of interest rate floors on certain of our commercial loans and how
the Company will respond are not included in this analysis and limit the
predictive value of these scenarios.

Economic value of equity


Management also utilizes EVE, a point in time analysis of the economic value of
our current balance sheet position, which measures interest rate risk over a
longer term. The EVE calculation represents a hypothetical valuation of equity,
and is defined as the market value of assets, less the market value of
liabilities, adjusted for the market value of off-balance sheet instruments. The
assessment of both the short-term earnings (Net Interest Income Sensitivity) and
long-term valuation (EVE) approaches, rather than Net Interest Income
Sensitivity alone provides a more comprehensive analysis of interest rate risk
exposure.
                                       31
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There are assumptions and inherent limitations in any methodology used to
estimate the exposure to changes in market interest rates and as such,
sensitivity calculations used in this analysis are hypothetical and should not
be considered to be predictive of future results. This analysis evaluates risks
to the current balance sheet only and does not incorporate future growth
assumptions. Additionally, the analysis assumes interest rate changes are
instantaneous and the new rate environment is constant but does not include
actions Management may undertake to manage risk in response to interest rate
changes. Each rate scenario reflects unique prepayment and repricing
assumptions. Management derives these assumptions by considering published
market prepayment expectations, repricing characteristics, our historical
experience, and our asset and liability management strategy. This analysis
assumes that changes in interest rates may not affect or could partially affect
certain instruments based on their characteristics.

The following table is a summary of the changes in our EVE that are projected to
result from hypothetical changes in market interest rates as well as our
internal policy limits for changes in our EVE based on the different scenarios.
The interest rates, as of the dates presented, are adjusted by instantaneous
parallel rate increases and decreases as indicated in the scenarios shown in the
table below.

                           June 30, 2022                                                             December 31, 2021
  Scenario       EVE         EVE %       $ Change      % Change                Scenario         EVE         EVE %      $ Change      % Change           Policy Limits
                                                                                                                                                         for % Change
                                                              (Dollars in millions)
     300      $ 4,635          19.1  % $     511            12.4  %              300         $ 4,579          18.2  % $  1,042            29.5  %             (22.5) %
     200        4,480          18.5  %       356             8.6  %              200           4,232          16.8  %      695            19.6  %             (15.0) %
     100        4,331          17.3  %       207             5.0  %              100           3,939          15.6  %      402            11.4  %              (7.5) %
   Current      4,124          17.0  %         -               -  %            Current         3,537          14.0  %        -               -  %                 -  %
    (100)            N/M           N/M          N/M             N/M             (100)               N/M           N/M         N/M             N/M               7.5  %



Our balance sheet exhibits asset sensitivity in various interest rate scenarios.
The increase in EVE as rates rise is the result of the amount of assets that
would be expected to reprice exceeding the amount of liabilities repriced. The
amount of the change in EVE decreased as of June 30, 2022 compared to
December 31, 2021 primarily driven by changes in our hedging activities as
described in Note 8 - Derivative Financial Instruments. For each scenario shown,
the percentage change in our EVE is within our Board policy limits.

Derivative financial instruments


As a part of our risk management strategy, we use derivative financial
instruments to minimize fluctuation in earnings caused by market risk. We use
forward sales commitments to hedge our unclosed mortgage closing pipeline and
funded mortgage LHFS. All of our derivatives and mortgage loan production
originated for sale are accounted for at fair market value and we do not apply
hedge accounting related to the management of these risks. Changes to our
unclosed mortgage closing pipeline are based on changes in fair value of the
underlying loan, which is impacted most significantly by changes in interest
rates and changes in the probability that the loan will not fund within the
terms of the commitment, referred to as a fallout factor or, inversely, a
pull-through rate. Market risk on interest rate lock commitments and mortgage
LHFS is managed using corresponding forward sale commitments. The adequacy of
these hedging strategies, and the ability to fully or partially hedge market
risk, rely on various assumptions or projections, including a fallout factor,
which is based on a statistical analysis of our actual rate lock fallout
history.

We have designated certain interest rate swaps as fair value hedges of our
subordinated debt. Additionally, we designated certain interest rate swaps as
cash flow hedges on LIBOR-based variable interest payments on certain commercial
loans. For further information, see Note 8 - Derivative Financial Instruments
and Note 16 - Fair Value Measurements.

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Mortgage Servicing Rights (MSRs)


Our MSRs are sensitive to changes in interest rates and are highly susceptible
to prepayment risk, basis risk, market volatility and changes in the shape of
the yield curve. We utilize derivatives, including interest rate swaps and
swaptions, as part of our overall hedging strategy to manage the impact of
changes in the fair value of the MSRs, however these risk management strategies
do not completely eliminate all risk. Our hedging strategies rely on assumptions
and projections regarding assets and general market factors, many of which are
outside of our control. In certain interest rate environments, such as those
environments that have existed throughout the first six months of 2022, we may
also change our hedge ratio on this portfolio. The resulting hedge ratio is
intended to help mitigate the impact of higher mortgage rates on our mortgage
origination revenue. For further information, see Note 7 - Mortgage Servicing
Rights, Note 8 - Derivative Financial Instruments and Note 16 - Fair Value
Measurements.

Liquidity Risk


Liquidity risk is the risk that we will not have sufficient funds, at a
reasonable cost, to meet current and future cash flow needs as they become due.
The liquidity of a financial institution reflects the ability to, at a
reasonable cost, meet loan demand, to accommodate possible outflows in deposits
and to take advantage of interest rate and market opportunities. The ability of
a financial institution to meet current financial obligations is a function of
the balance sheet structure, the ability to liquidate assets and access to
various sources of funds.

Parent Company Liquidity


The Company currently obtains its liquidity primarily from dividends paid by the
Bank. The primary uses of the Company's liquidity are debt service, operating
expenses and the payment of cash dividends to shareholders, which remained at
$0.06 per share in the second quarter 2022. The Company holds $150 million of
subordinated debt which is scheduled to mature on November 1, 2030. The Bank did
not pay any dividends to the Company in the second quarter of 2022 and at
June 30, 2022, the Company held $191 million of cash on deposit at the Bank
which is sufficient to cover the cash outflows needed to service the
subordinated debt interest, pay dividends and cover the operating expenses of
the Company in excess of 2 years, which is our policy requirement.

The OCC and the FRB regulate all capital distributions made by the Bank,
directly or indirectly, to the holding company, including dividend payments.
Whether an application or notice is required is based on a number of factors
including whether the institution qualifies for expedited treatment under the
OCC rules and regulations or if the total amount of all capital distributions
(including each proposed capital distribution) for the applicable calendar year
exceeds net income for that year to date plus the retained net income for the
preceding two years, or the Bank would not be at least adequately capitalized
following the dividend. Additional restrictions on dividends apply if the Bank
fails the QTL test for more than three out of the prior twelve months. As of
June 30, 2022, the Bank is in compliance with the QTL test, having qualified
assets above the 65 percent requirement for twelve consecutive months. At
June 30, 2022, our QTL ratio was 81 percent. At June 30, 2022, the Bank is able
to pay dividends to the holding company of approximately $1 billion without
submitting an application to the OCC and remain well capitalized.

Bank Liquidity


Our primary sources of funding are deposits from retail and government
customers, custodial deposits related to loans we service and FHLB borrowings.
We use the FHLB of Indianapolis as a significant source for funding our
residential mortgage origination business due to the flexibility in terms which
allows us to borrow or repay borrowings as daily cash needs require. The amount
we can borrow, or the value we receive for the assets pledged to our liquidity
providers, varies based on the amount and type of pledged collateral, as well as
the perceived market value of the assets and the "haircut" of the market value
of the assets. That value is sensitive to the pricing and policies of our
liquidity providers and can change with little or no notice.

Further, other sources of liquidity include our LHFS portfolio and unencumbered
investment securities. We primarily originate agency-eligible LHFS and therefore
the majority of new residential first mortgage loan closings are readily
convertible to cash, either by selling them as part of our monthly agency sales,
RMBS, private party whole loan sales, or by pledging them to the FHLB and
borrowing against them. In addition, we have the ability to sell unencumbered
investment securities or use them as collateral. At June 30, 2022, we had $2.1
billion available in unencumbered investment securities.

Our primary measure of liquidity is a ratio of ready liquidity to volatile
funding, the volatile funds coverage ratio ("VFCR"). The VFCR is a liquidity
coverage ratio that is customized to our business and ensures we have adequate
coverage to
                                       33
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meet our liquidity needs during times of liquidity stress. Volatile funds are
the portion of the Bank's funding identified as being at a higher risk of runoff
in times of stress. Ready liquidity consists of cash on reserve at the Federal
Reserve and unused borrowing capacity provided by the loan and investments
portfolios. The VFCR is calculated, reported, and forecasted daily as part of
our liquidity management framework and as of June 30, 2022 was 121 percent and
in compliance with our board policy limit of 90 percent.

Our liquidity position is continuously monitored and adjustments are made to the
balance between sources and uses of funds as deemed appropriate. We balance the
liquidity of our loan assets to our available funding sources. Our LHFI
portfolio is funded with stable core deposits whereas our warehouse loans and
LHFS may be funded with FHLB borrowings and custodial deposits. Warehouse loans
are typically more liquid than other loan assets, as loans are paid within a
short amount of time, when the lender sells the loan to an outside investor or,
in some instances, to the Bank. As not all asset categories require the same
level of liquidity, our loan-to-deposit ratio shows how we manage our liquidity
position, how much liquidity we have and the agility of our balance sheet. The
Company's average HFI loan-to-deposit ratio was 76.3 percent for the three
months ended June 30, 2022. Excluding warehouse loans, which have draws that
typically pay off within a few weeks, and custodial deposits, which represent
mortgage escrow accounts on deposit with the Bank, the average HFI
loan-to-deposit ratio was 71.9 percent for the three months ended June 30, 2022.

As governed and defined by our policy, we maintain adequate excess liquidity
levels appropriate to cover unanticipated liquidity needs. In addition to this
liquidity, we also maintain targeted minimum levels of unused borrowing capacity
as another cushion against unexpected liquidity needs. Each business day, we
forecast 90 days of daily cash needs. This allows us to determine our projected
near term daily cash fluctuations and also to plan and adjust, if necessary,
future activities. As a result, in an adverse environment, we believe we would
be able to make adjustments to operations as required to meet the liquidity
needs of our business, including adjusting deposit rates to increase deposits,
planning for additional FHLB borrowings, accelerating sales of LHFS (agencies
and/or private), selling LHFI or investment securities, borrowing through the
use of repurchase agreements, reducing closings, making changes to warehouse
funding facilities, or borrowing from the discount window.

The following table presents primary sources of funding as of the dates
indicated:
                                           June 30, 2022       December 31, 2021       Change
                                                          (Dollars in millions)
 Retail deposits                          $        9,957      $           10,264      $  (307)
 Government deposits                               1,717                   2,000         (283)
 Wholesale deposits                                  836                   1,141         (305)
 Custodial deposits                                4,139                   4,604         (465)
 Total deposits                                   16,649                  18,009       (1,360)
 FHLB advances and other short-term debt           4,001                   3,280          721
 Other long-term debt                                394                     396           (2)
 Total borrowed funds                              4,395                   3,676          719
 Total funding                            $       21,044      $           21,685      $  (641)



                                       34
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The following table presents our borrowing capacity as of the dates indicated:

                                                       June 30, 2022           December 31, 2021            Change
                                                                          (Dollars in millions)
FLHB Borrowing capacity
Line of credit available                             $           29          $               30          $      (1)
Collateralized borrowing capacity                               439                       3,792             (3,353)
Total unused borrowing capacity                      $          468          $            3,822          $  (3,354)

FRB discount window
Collateralized borrowing capacity                    $        1,783          $            1,666          $     117

Unencumbered investment securities
Agency - Commercial (1)                              $        1,586          $              123          $   1,463
Agency - Residential (1)                                        448                          55                393
Municipal obligations                                            14                          18                 (4)
Corporate debt obligations                                       37                          54                (17)
Other                                                             1                           1                  -
Total unencumbered investment securities                      2,086                         251              1,835

Total liquidity sources and borrowing capacity $ 4,337

  $            5,739          $  (1,402)


(1) These securities are not currently pledged to the FHLB but are eligible to be pledged, at our discretion.

Deposits

The following table presents the composition of our deposits:

                                                             June 30, 2022                            December 31, 2021
                                                     Balance          % of Deposits             Balance        % of Deposits             Change
                                                                                       (Dollars in millions)
Retail deposits
Branch retail deposits
Savings accounts                                 $       3,745                  22.5  %       $   3,751                  20.8  %       $     (6)
Certificates of deposit/CDARS (1)                          816                   4.9  %             951                   5.3  %           (135)
Demand deposit accounts                                  1,941                  11.7  %           1,946                  10.8  %             (5)
Money market demand accounts                               483                   2.9  %             494                   2.7  %            (11)
Total branch retail deposits                             6,985                  42.0  %           7,142                  39.7  %           (157)
Commercial deposits (2)
Demand deposit accounts                                  2,117                  12.7  %           2,194                  12.2  %            (77)
Savings accounts                                           425                   2.6  %             520                   2.9  %            (95)
Money market demand accounts                               430                   2.6  %             408                   2.3  %             22
Total commercial retail deposits                         2,972                  17.9  %           3,122                  17.3  %           (150)
Total retail deposits                            $       9,957                  59.8  %       $  10,264                  57.0  %       $   (307)
Government deposits
Savings accounts                                 $         621                   3.7  %       $     721                   4.0  %       $   (100)
Demand deposit accounts                                    618                   3.7  %             664                   3.7  %            (46)
Certificates of deposit/CDARS (1)                          472                   2.8  %             609                   3.4  %           (137)
Money market demand accounts                                 6                     -  %               6                     -  %              -
Total government deposits                                1,717                  10.3  %           2,000                  11.1  %           (283)
Custodial deposits (3)                                   4,139                  24.9  %           4,604                  25.6  %           (465)
Wholesale deposits                                         836                   5.0  %           1,141                   6.3  %           (305)
Total deposits (4)                               $      16,649                 100.0  %       $  18,009                 100.0  %       $ (1,360)


(1)The aggregate amount of CD with a minimum denomination of $100,000 was
approximately $949 million and $1.2 billion at June 30, 2022 and December 31,
2021, respectively.
(2)Contains deposits from commercial and business banking customers.
(3)Represents investor custodial accounts and escrows controlled by us in
connection with loans serviced or subserviced for others that have been placed
on deposit with the Bank.
(4)Total exposure related to uninsured deposits over $250,000 was approximately
$4.6 billion and $6.0 billion at June 30, 2022 and December 31, 2021,
respectively.
                                       35
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Total deposits decreased $1.4 billion, or 7.6 percent, at June 30, 2022 compared
to December 31, 2021, primarily driven by a decrease in custodial, wholesale,
and government deposits.

We utilize local governmental agencies and other public units as an additional
source for deposit funding. At June 30, 2022, we were required to hold
collateral for certain Michigan, California, Indiana, Wisconsin and Ohio
government deposits based on a variety of factors including, but not limited to,
the size of individual deposits, FDIC limits and external bank ratings. At
June 30, 2022, collateral held on government deposits was $202 million. At
June 30, 2022, government deposit accounts included $472 million of CDs with
maturities typically less than one year and $1.2 billion of checking and savings
accounts.

Custodial deposits arise due to our servicing or subservicing of loans for
others and represent the portion of the investor custodial accounts on deposit
with the Bank. For certain subservice agreements, we give a LIBOR-based fee
credit that reduces subservicing income from the MSR owners who control the $3.5
billion custodial deposit against subservicing income. This cost is a component
of net loan administration income and for the six month period ended June 30,
2022 was $8 million.

We participate in the CDARS program, through which certain customer CDs are
exchanged for CDs of similar amounts from other participating banks and
customers may receive FDIC insurance up to $50 million. This program helps the
Bank secure larger deposits and attract and retain customers. At June 30, 2022,
we had $86 million of total CDs enrolled in the CDARS program, a decrease of
$29 million from December 31, 2021.

FHLB Advances


The FHLB provides loans, also referred to as advances, on a fully collateralized
basis, to savings banks and other member financial institutions. We are required
to maintain a minimum amount of qualifying collateral securing FHLB advances. In
the event of default, the FHLB advance is similar to a secured borrowing,
whereby the FHLB has the right to sell the pledged collateral to settle the fair
value of the outstanding advances.

We rely upon advances from the FHLB as a source of funding for the closing or
purchase of loans for sale in the secondary market and for providing duration
specific short-term and long-term financing. The outstanding balance of FHLB
advances fluctuates from time to time depending on our current inventory of
mortgage LHFS and the availability of lower cost funding sources. Our portfolio
includes short-term fixed rate advances and long-term fixed rate advances.

We are currently authorized through a resolution of our Board of Directors to
apply for advances from the FHLB using approved loan types as collateral, which
includes residential first mortgage loans, HELOC, CRE loans and investment
securities. As of June 30, 2022, our Board of Directors authorized and approved
a line of credit with the FHLB of up to $10 billion, which is further limited
based on our total assets and qualified collateral, as determined by the FHLB.
At June 30, 2022, we had $4.0 billion of advances outstanding and an additional
$0.4 billion of collateralized borrowing capacity available at the FHLB.
Additionally, we had $2.0 billion of unencumbered investment securities that are
eligible to be pledged to the FHLB at our discretion.

Federal Reserve Discount Window


We have arrangements with the FRB of Chicago to borrow from its discount window.
The discount window is a borrowing facility that we may utilize for short-term
liquidity needs arising from special or unusual circumstances. The amount we are
allowed to borrow is based on the lendable value of the collateral that we
provide. To collateralize the line, we pledge investment securities and loans
that are eligible based on FRB of Chicago guidelines.

At June 30, 2022, we pledged collateral, which included commercial loans,
municipal bonds, and agency bonds, to the FRB of Chicago amounting to
$2.6 billion with a lendable value of $1.8 billion. At December 31, 2021, we
pledged collateral to the FRB of Chicago amounting to $2.3 billion with a
lendable value of $1.7 billion. We do not typically utilize this available
funding source, and at June 30, 2022 and December 31, 2021, we had no borrowings
outstanding against this line of credit.

Other Unsecured Borrowings


We have access to overnight federal funds purchased lines with other Federal
Reserve member institutions. We utilize this source of funding for short-term
liquidity needs, depending on the availability and cost of our other funding
sources. At June 30, 2022 we had no borrowings outstanding under this source of
funding. Additional borrowing capacity under this and other sources of funding
can vary depending on market conditions.

                                       36
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Debt


As part of our overall capital strategy, we previously raised capital through
the issuance of junior subordinated notes to our special purpose trusts formed
for the offerings, which issued Tier 1 qualifying preferred stock ("trust
preferred securities"). The trust preferred securities are callable by us at any
time. Interest is payable on a quarterly basis; however, we may defer interest
payments for up to 20 quarters without default or penalty. At June 30, 2022, we
are current on all interest payments. Additionally, we have $150 million of
subordinated debt outstanding (the "Notes"), which mature on November 1, 2030.
As of June 30, 2022, both the bank and the holding company have investment grade
ratings of subordinated debt from Moody's and Kroll, of Baa3 and BBB
respectively. Accordingly, we believe that we could raise additional funding in
the credit markets, if such needs would exist in the future.

Operational Risk


Operational risk is the risk to current or projected financial condition and
resilience arising from inadequate or failed internal processes or systems,
human errors or misconduct, or adverse external events which may include vendor
failures, fraudulent activities, disasters, and security risks. We continuously
strive to adapt our system of internal controls to ensure compliance with laws,
rules, and regulations, and to improve the oversight of our operational risk.

Flagstar recently experienced a cyber incident that involved unauthorized access
to our network and other customer data. We do not believe that the impact of the
incident will have a material impact on our operations or have a material
financial impact due to cyber insurance we have in place that we believe, at
this time, is sufficient to cover the costs of this incident.

We continuously evaluate internal systems, processes and controls to identify
potential vulnerabilities and mitigate potential loss from cyber-attacks. The
goal of this framework is to implement effective operational risk techniques and
strategies, minimize operational and fraud losses, and enhance our overall
performance.

Loans with Government Guarantees


Substantially all our LGG continue to be insured or guaranteed by the FHA or the
U.S. Department of Veterans Affairs ("VA"). In the event of a government
guaranteed loan borrower default, the Bank has a unilateral option to repurchase
loans sold to GNMA if the loan is due, but unpaid, for three consecutive months
(typically referred to as 90 days past due) and can recover losses through a
claims process from the guarantor. Nonperforming repurchased loans in this
portfolio earn interest at a rate based upon the 10-year U.S. Treasury note rate
from the time the underlying loan becomes 60 days delinquent until the loan is
conveyed to HUD (if foreclosure timelines are met), which is not paid by the FHA
until claimed. Additionally, if the Bank cures the loan, it can be resold to
GNMA, usually at a gain. If not, the Bank can begin the process of collecting
the government guarantee by filing a claim in accordance with established
guidelines. Certain loans within our portfolio may be subject to indemnification
obligations and insurance limits which expose us to limited credit risk.

Additional expenses or charges may arise on LGG due to Veteran's Affairs loan
insurance limits and FHA property foreclosure and preservation requirements that
may result in a loss in excess of all, or part of, the guarantee. During the six
months ended June 30, 2022, we had $0.5 million in net charge-offs related to
LGG and have reserved for the remaining risks within other assets and as a
component of our ALLL on residential first mortgages.

Our LGG portfolio totaled $1.1 billion at June 30, 2022, as compared to
$1.7 billion at December 31, 2021. GNMA has granted borrowers with an option to
seek forbearance on their mortgage repayments. $0 million of GNMA loans are in
forbearance as of June 30, 2022. When a GNMA loan is due, but unpaid, for three
consecutive months (typically referred to as 90 days past due) the loan is
required to be re-recognized on the balance sheet by the MSR owner. These loans
are recorded in LGG, and a liability to repurchase the loans is recorded in
other liabilities on the Consolidated Statements of Financial Condition.

For further information, see Note 5 - Loans with Government Guarantees and the Credit Risk - Payment Deferrals section of the MD&A.

                                       37
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Capital


Management actively reviews and manages our capital position and strategy. We
conduct quarterly capital stress tests and capital adequacy assessments which
utilize internally defined scenarios. These analyses are designed to help
Management and the Board better understand the integrated sensitivity of various
risk exposures through quantifying the potential financial and capital impacts
of hypothetical stressful events and scenarios. We make adjustments to our
balance sheet composition taking into consideration potential business risks,
regulatory requirements and the flexibility to support future growth. We
prudently manage our capital position and work with our regulators to ensure
that our capital levels are appropriate considering our risk profile.

The capital standards we are subject to include requirements contemplated by the
Dodd-Frank Act as well as guidelines reached by Basel III. These risk-based
capital adequacy guidelines are intended to measure capital adequacy with regard
to a banking organization's balance sheet, including off-balance sheet exposures
such as unused portions of loan commitments, letters of credit, and recourse
arrangements. Our capital ratios are maintained at levels in excess of those
considered to be "well-capitalized" by regulators. Tier 1 leverage was 12.17
percent at June 30, 2022 providing a 717 basis point stress buffer above the
minimum level needed to be considered "well-capitalized." Additionally, total
risk-based capital to RWA was 15.68 percent at June 30, 2022 providing a 568
basis point buffer above the minimum level needed to be considered
"well-capitalized".

Dodd-Frank Act Section 171, commonly known as the Collins Amendment, established
minimum Tier 1 leverage and risk-based capital requirements for insured
depository institutions, depository institution holding companies, and non-bank
financial companies that are supervised under the Federal Reserve. Under the
amendment, certain hybrid securities, such as trust preferred securities, may be
included in Tier 1 capital for bank holding companies that had total assets
below $15 billion as of December 31, 2009. As we were below $15 billion in
assets as of December 31, 2009, the trust preferred securities classified as
long-term debt on our balance sheet will be included as Tier 1 capital, unless
we complete an acquisition of a depository institution holding company or a
depository institution and we report total assets greater than $15 billion in
the quarter in which the acquisition occurs. Should that event occur, our trust
preferred securities would be included in Tier 2 capital.

Regulatory Capital


The Bank and Flagstar are subject to the Basel III-based U.S. rules, including
capital simplification. These standards
limit the amount of MSRs to 25 percent of CET1 and should the level of mortgage
servicing rights exceed 25 percent of common equity Tier 1 capital, we are
required to deduct the excess in determining our regulatory capital levels. As
of June 30, 2022, we had $622 million in MSRs and an MSR to Common Equity Tier 1
Capital ratio of 23 percent. We settled a $213 million MSR purchase on July 1,
2022, which would have resulted in an MSR to Common Equity Tier 1 capital ratio
of 31 percent.

In response to COVID-19 in 2020, U.S. banking regulators issued a final rule
that allows banking organizations the option to delay the initial adoption
impact of CECL on regulatory capital for two years followed by a three-year
transition period. During the two-year delay we added back to CET1 capital 100
percent of the initial adoption impact of CECL plus 25 percent of the cumulative
quarterly changes in the ACL (i.e., quarterly transitional amounts). Starting on
January 1, 2022, the quarterly transitional amounts along with the initial
adoption impact of CECL are phased out of CET1 capital over the three-year
transition period.

For the period presented, the following table sets forth our capital ratios as well as our excess capital over well-capitalized minimums.


                                                                                                                                Excess Capital Over
Flagstar Bancorp                                                           Well-Capitalized Under Prompt Corrective              Well-Capitalized
                                           Actual                                      Action Provisions                              Minimum
                                  Amount             Ratio                          Amount                   Ratio                    Capital
                                                                                                                                  Simplification
                                                                              (Dollars in millions)
June 30, 2022
Tier 1 leverage capital
(to adjusted avg. total               2,900             12.17  %                               1,192              5.0  %       $            1,708
assets)
Common equity Tier 1 capital          2,660             13.22  %                               1,308              6.5  %                    1,352
(to RWA)
Tier 1 capital (to RWA)               2,900             14.41  %                               1,610              8.0  %                    1,290
Total capital (to RWA)                3,155             15.68  %                               2,013             10.0  %                    1,142



                                       38
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As presented in the table above, our constraining capital ratio is our total
capital to risk weighted assets at 15.68 percent. It would take a $1.1 billion
after-tax loss, with the balance sheet remaining constant, for our total
risk-based capital ratio to fall below the level considered to be
"well-capitalized".

For additional information on our capital requirements, see Note 14 - Regulatory Matters.

Use of Non-GAAP Financial Measures


In addition to results presented in accordance with GAAP, this report includes
certain non-GAAP financial measures. We believe these non-GAAP financial
measures provide additional information that is useful to investors in helping
to understand the underlying performance and trends of the Company.

Non-GAAP financial measures have inherent limitations, which are not required to
be uniformly applied and are not audited. Readers should be aware of these
limitations and should be cautious with respect to the use of such measures. To
mitigate these limitations, we have practices in place to ensure that these
measures are calculated using the appropriate GAAP or regulatory components in
their entirety and to ensure that our performance is properly reflected to
facilitate consistent period-to-period comparisons. Our method of calculating
these non-GAAP measures may differ from methods used by other companies.
Although we believe the non-GAAP financial measures disclosed in this report
enhance investors' understanding of our business and performance, these non-GAAP
measures should not be considered in isolation, or as a substitute for those
financial measures prepared in accordance with GAAP. 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 report.

Tangible book value per share, return on average tangible common equity, adjusted return on average tangible common equity, adjusted return on average assets, adjusted noninterest expense, adjusted provision for income taxes, adjusted net income, adjusted basic earnings per share, adjusted diluted earnings per share, adjusted net interest margin and adjusted efficiency ratio.


The Company believes that these non-GAAP financial measures provide a meaningful
representation of its operating performance on an ongoing basis for investors,
securities analysts, and others.

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

                                                   June 30, 2022           March 31, 2022        December 31, 2021        September 30, 2021            June 30, 2021
                                                                                                 (Dollars in millions)
Total stockholders' equity                     $               2,693       $         2,733       $            2,718       $             2,645       $               2,498
Less: Goodwill and intangible assets                             142                   145                      147                       149                         152
Tangible book value/Tangible common equity     $               2,551       $         2,588       $            2,571       $             2,496       $               2,346

Number of common shares outstanding                       53,329,993            53,236,067               53,197,650                52,862,383          
       52,862,264
Tangible book value per share                  $               47.83       $         48.61       $            48.33       $             47.21       $               44.38

Total assets                                   $              24,899       $        23,244       $           25,483       $            27,042       $              27,065
Tangible common equity to assets ratio                      10.25  %              11.13  %                 10.09  %                   9.23  %                     8.67  %



                                       39
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                                                  Three Months Ended,                     Six Months Ended,
                                            June 30, 2022    March 31, 2022         June 30, 2022    June 30, 2021
                                                   (Dollars in millions, except share data)
Net income                                 $          60    $          53          $         113    $        296
Plus: Intangible asset amortization, net               3                1                      4               4
of tax
Tangible net income                        $          63    $          54          $         117    $        300

Total average equity                       $       2,754    $       2,687          $       2,721    $      2,384
Less: Average goodwill and intangible                144              146                    145             155
assets
Total average tangible equity              $       2,610    $       2,541          $       2,576    $      2,229

Return on average tangible common equity            9.49  %          8.61  %                9.05  %        26.92  %
Adjustment to remove DOJ settlement                    -  %             -  %                   -  %         3.86  %

expense

Adjustment for former CEO SERP agreement               -  %             -  %                   -  %        (1.09) %
Adjustment for merger costs                         0.60  %          0.49  %                0.55  %         0.97  %
Adjusted return on average tangible common         10.09  %          9.10  %                9.60  %        30.66  %
equity

Return on average assets                            1.01  %          0.89  %                0.94  %         2.04  %
Adjustment to remove DOJ                               -  %             -  %                   -  %         0.18  %
Adjustment for former CEO SERP agreement               -  %             -  %                   -  %        (0.05) %
Adjustment for merger costs                         0.04  %          0.03  %                0.04  %         0.05  %
Adjusted return on average assets                   1.05  %          0.92  %                0.98  %         2.22  %



Adjusted HFI loan-to-deposit ratio.


                                                                                        Three Months Ended
                                                     June 30,                                December 31,       September 30,        June 30,
                                                       2022            March 31, 2022            2021               2021               2021
                                                                                       (Dollars in millions)
Average LHFI                                        $ 13,339          $      12,384          $  13,314          $  13,540           $ 13,688
Less: Average warehouse loans                          4,099                  3,973              5,148              5,392              5,410
Adjusted average LHFI                               $  9,240          $       8,411          $   8,166          $   8,148           $  8,278

Average deposits                                    $ 17,488          $      18,089          $  19,816          $  19,686           $ 19,070
Less: Average custodial deposits                       4,641                  4,970              6,309              6,180              6,188
Adjusted average deposits                           $ 12,847          $      13,119          $  13,507          $  13,506           $ 12,882

HFI loan-to-deposit ratio                               76.3  %                68.5  %            67.2  %            68.8   %           71.8  %
Adjusted HFI loan-to-deposit ratio                      71.9  %                64.1  %            60.5  %            60.3   %           64.3  %



                                       40
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                                                Three Months Ended,                      Six Months Ended,
                                          June 30, 2022    March 31, 2022         June 30, 2022    June 30, 2021
                                                                   (Dollars in millions)
Noninterest expense                      $         256    $         261          $         517    $         636
Adjustment to remove DOJ settlement                  -                -                      -               35

expense

Adjustment for former CEO SERP agreement             -                -                      -              (10)
Adjustment for merger costs                          3                3                      6                9
Adjusted noninterest expense             $         253    $         258          $         511    $         602

Income before income taxes               $          77    $          68          $         145    $         383
Adjustment to remove DOJ settlement                  -                -                      -               35

expense

Adjustment for former CEO SERP agreement             -                -                      -              (10)
Adjustment for merger costs                          3                3                      6                9

Adjusted income before income taxes $ 80 $ 71

$ 151 $ 417


Provision for income taxes               $          17    $          15          $          32    $          87
Adjustment to remove DOJ settlement                  -                -                      -               (8)

expense

Adjustment for former CEO SERP agreement             -                -                      -                2
Adjustment for merger costs                          -               (1)                    (1)              (2)

Adjusted provision for income taxes $ 17 $ 16

     $          33    $          95

Net income                               $          60    $          53          $         113    $         296
Adjusted net income                      $          63    $          55          $         118    $         322

Weighted average common shares              53,269,631       53,219,866             53,244,886       52,719,959
outstanding
Weighted average diluted common shares      53,535,448       53,578,001             53,556,607       53,417,896
Adjusted basic earnings per share        $        1.18    $        1.03          $        2.21    $        6.11
Adjusted diluted earnings per share      $        1.17    $        1.02     

$ 2.20 $ 6.03

Average interest earning assets $ 20,958 $ 21,569

      $      21,261    $      26,219
Net interest margin                               3.69  %          3.11  %                3.40  %          2.86  %
Adjustment for LGG loans available for            0.01  %          0.01  %                0.01  %          0.18  %
repurchase
Adjusted net interest margin                      3.70  %          3.12  %                3.41  %          3.04  %

Efficiency Ratio                                  79.1  %          80.4  %                79.7  %          67.2  %
Adjustment to remove DOJ settlement                  -  %             -  %                   -  %          (3.7) %

expense

Adjustment for former CEO SERP agreement             -  %             -  %                   -  %           1.0  %
Adjustment for merger costs                       (1.0) %          (0.8) %                (0.9) %          (0.9) %
Adjusted efficiency ratio                         78.1  %          79.6  %                78.8  %          63.6  %


Critical Accounting Estimates


Various elements of our accounting policies, by their nature, are subject to
estimation techniques, valuation assumptions and other subjective assessments.
Certain accounting policies that, due to the judgment, estimates and assumptions
are critical to an understanding of our Consolidated Financial Statements and
the Notes, are described in Item 1. These policies relate to: (a) the
determination of our ACL and (b) fair value measurements. We believe the
judgment, estimates and assumptions used in the preparation of our Consolidated
Financial Statements and the Notes are appropriate given the factual
circumstances at the time. However, given the sensitivity of our Consolidated
Financial Statements and the Notes to these critical accounting policies, the
use of other judgments, estimates and assumptions could result in material
differences in our results of operations and/or financial condition.

For further information on our critical accounting policies, please refer to our
Form 10-K for the year ended December 31, 2021, which is available on our
website, flagstar.com, under the Investor Relations section, or on the website
of the Securities and Exchange Commission, at sec.gov.

                                       41
--------------------------------------------------------------------------------

                          Forward - Looking Statements

Certain statements in this Form 10-Q, including but not limited to statements
included within the Management's Discussion and Analysis of Financial Condition
and Results of Operations, are "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995, as amended. In
addition, we may make forward-looking statements in our other documents filed
with or furnished to the SEC, and Management may make forward-looking statements
orally to analysts, investors, representatives of the media and others.

Generally, forward-looking statements are not based on historical facts but
instead represent Management's current beliefs and expectations regarding future
events and are subject to significant risks and uncertainties. Such statements
may be identified by words such as believe, expect, anticipate, intend, plan,
estimate, and similar expressions or future or conditional verbs such as will,
should, would and could. Our actual results and capital and other financial
conditions may differ materially from those described in the forward-looking
statements depending upon a variety of factors, including without limitation:
the occurrence of any event, change or other circumstances that could give rise
to the right of one or both of the parties to terminate the definitive merger
agreement among NYCB, 615 Corp. and Flagstar; the outcome of any legal
proceedings that may be instituted against NYCB or Flagstar; the possibility
that the proposed transaction will not close when expected or at all because
required regulatory or other approvals are not received or other conditions to
the closing are not satisfied on a timely basis or at all, or are obtained
subject to conditions that are not anticipated; the ability of NYCB and Flagstar
to meet expectations regarding the timing, completion and accounting and tax
treatments of the proposed transaction; the risk that any announcements relating
to the proposed transaction could have adverse effects on the market price of
the common stock of NYCB or Flagstar; the possibility that the anticipated
benefits of the proposed transaction will not be realized when expected or at
all, including as a result of the impact of, or problems arising from, the
integration of the two companies or as a result of the strength of the economy
and competitive factors in the areas where NYCB and Flagstar do business;
certain restrictions during the pendency of the proposed transaction that may
impact the parties' ability to pursue certain business opportunities or
strategic transactions; the possibility that the proposed transaction may be
more expensive to complete than anticipated, including as a result of unexpected
factors or events; diversion of management's attention from ongoing business
operations and opportunities; the possibility that the parties may be unable to
achieve expected synergies and operating efficiencies in the proposed
transaction within the expected timeframes or at all and to successfully
integrate Flagstar's operations and those of NYCB; such integration may be more
difficult, time consuming or costly than expected; revenues following the
proposed transaction may be lower than expected; potential adverse reactions or
changes to business or employee relationships, including those resulting from
the announcement or completion of the proposed transaction; NYCB's and
Flagstar's success in executing their respective business plans and strategies
and managing the risks involved in the foregoing; and the precautionary
statements included within the discussion and analysis of our results of
operations and the risk factors listed and described in Item 1A to Part I, of
our Annual Report on Form 10-K for the year ended December 31, 2021, which are
incorporated by reference herein.

Other than as required under United States securities laws, we do 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.
                                       42

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