Flagstar Bank (FLG) Q4 2015 earnings summary

Executive summary

• 2015 GAAP net loss was $47.2M, or $0.11 per diluted share, driven by a one-time debt repositioning charge; excluding the charge and merger costs, net income was $502.8M, or $1.11 per diluted share.

• A proposed Astoria merger and lower-cost replacement funding were positioned to support future earnings, franchise growth, and the transition to SIFI regulation.

Financial highlights

• Total assets reached $50.3B at Dec. 31, 2015, up $1.8B YoY; total loans were $38.2B and deposits were $28.4B.

• Adjusted net interest income was $1.182B; GAAP net interest income was $408.1M after the $773.8M pretax charge recorded in interest expense.

• Non-interest income increased to $210.8M from $201.6M; reported non-interest expense rose to $765.9M, including the debt charge and merger costs.

• Fourth-quarter GAAP net loss was $404.8M, or $0.87 per diluted share, primarily reflecting the debt repositioning charge.

Outlook and guidance

• Astoria merger, pending shareholder and regulatory approvals, was expected to close by Q4 2016; pro forma assets were estimated at $66.1B and deposits at $37.6B.

• The merger was expected to add 20% to 2017 earnings and 6% to tangible book value per share at close; earnings accretion estimate used Street consensus.

• Replacing $10.4B of borrowings was expected to add ~$100M to annual after-tax earnings from 2016 onward; first-quarter 2016 results were expected to begin reflecting the benefit.

• Assets were expected to cross the $50B SIFI threshold in Q2 2016; the quarterly dividend was reset to $0.17 per share beginning in Q1 2016.