Flagstar Bank (FLG) Q4 2023 earnings summary

Executive summary

• FY2023 net income available to common stockholders was $2.341B reported and $609M adjusted; reported results included a $2.150B Signature bargain purchase gain. Adjusted diluted EPS was $0.80.

• Q4 reported net loss was $252M, or $(0.36) diluted EPS; adjusted net loss was $185M, or $(0.27) per diluted share. Adjusted net loss available to common stockholders was $193M.

• Year-end assets reached $116.3B after the Signature transaction and Flagstar integration; systems conversion was targeted for mid-February 2024.

• Preparations for Category IV standards included building reserves and liquidity, strengthening risk management, and reducing the quarterly common dividend.

Financial highlights

• Q4 net interest income was $740M, down 16% QoQ; provision for credit losses rose to $552M from $62M, leaving net interest income after provision of $188M.

• Q4 reported PPNR was $191M and adjusted PPNR was $285M, down 32% QoQ; adjusted noninterest income declined $22M, or 13%.

• Q4 noninterest expense was $695M; operating expenses excluding merger/restructuring costs, intangible amortization, and the $39M FDIC assessment were $557M, down $28M QoQ.

• Total assets rose $5.1B QoQ to $116.3B; total loans reached $84.6B, up $624M, while deposits were $81.4B, down $1.3B including custodial deposit runoff.

• Cash balances increased $4.6B QoQ to $11.5B; tangible book value per common share was $10.06, down from $10.25.

Outlook and guidance

• FY2024 ending loans guided down 3%–5% from $84.6B; deposits guided up 3%–5% from $82.4B, with cash and securities up ~$7.5B combined.

• FY2024 NIM guidance was 2.40%–2.50%, incorporating higher on-balance-sheet liquidity for Regulation YY compliance; noninterest income guidance was $570M–$620M, including mortgage-related income of $220M–$260M.

• FY2024 adjusted noninterest expense guidance was $2.3B–$2.4B, excluding merger expenses and intangible amortization; tax rate was ~23%, with holding-company CET1 targeted at 10% by year-end.

• Expense outlook rose from $2.088B in 2023 to $2.353B in 2024, including $175M from an additional quarter of Signature, $70M for private banking teams, $80M for Category IV and compensation, and $60M of conversion savings.

• Initial capital plan submission was anticipated in April 2024; the systems conversion was planned for mid-February, followed by a rebranding campaign. Sale of the co-op loan held for sale was expected in Q1 2024.