Flagstar Bank (FLG) Q4 2014 earnings summary

Executive summary

• FY14 net income rose to $485.4M from $475.5M; diluted EPS was $1.09 vs. $1.08. Asset growth and stronger credit quality offset lower net interest income and mortgage banking revenue.

• Assets increased 4.0% to $48.6B; deposits grew 10.4% to $28.3B, supporting 10.7% growth in loans held for investment to $33.0B.

• The strategy emphasized multi-family lending, conservative underwriting, organic deposit growth, and managing asset levels below the $50B average-asset SIFI threshold while strengthening regulatory readiness.

Financial highlights

• Net interest income fell $26.3M YoY to $1.14B; net interest margin declined to 2.67% from 3.01%.

• Net income was $485.4M vs. $475.5M; pre-tax income increased $25.9M to $773.1M. Diluted EPS was $1.09 vs. $1.08.

• Non-interest income declined to $201.6M from $218.8M; mortgage banking income fell to $63.0M from $78.3M as refinancing and loan-sale production slowed.

• Non-interest expense fell $20.1M to $587.5M; operating expenses were $579.2M and CDI amortization was $8.3M.

• Total assets rose 4.0% to $48.6B; loans held for investment grew 10.7% to $33.0B, while securities declined $854.6M.

Outlook and guidance

• Near-term balance-sheet management aimed to keep average assets below the $50B SIFI threshold while preparations continued for heightened prudential requirements and regulatory implementation.

• Continued loan production focused on multi-family, CRE, and specialty finance; management cited a strong multi-family pipeline and record 2014 originations as evidence of competitive capacity.

• The modified LCR requirement was expected to apply after the four-quarter average asset threshold is exceeded; rules were scheduled to begin in 2016 and be fully phased in by 2017.