Flagstar Bank (FLG) Q4 2016 earnings summary

Executive summary

• 2016 net income was $495.4M, or $1.01 diluted EPS; assets ended at $48.9B and four-quarter average assets were $49.0B, below the $50B SIFI threshold.

• Core strategy centered on multi-family lending, conservative underwriting, and loan participations to support growth while managing asset levels and CRE concentration.

Financial highlights

• Net interest income was $1.287B in 2016 versus $408.1M in 2015; the 2015 figure included a $773.8M debt-repositioning charge in interest expense.

• Non-interest income declined $65.2M YoY to $145.6M; mortgage banking income fell $26.8M to $27.3M, partly reflecting MSR assumptions and higher prepayments.

• Operating expenses rose $22.5M YoY to $638.1M, including higher FDIC premiums, legal and professional fees, and compensation costs.

• Total loans, net, rose to $39.3B; deposits reached $28.9B, up $461.1M YoY, while total assets declined to $48.9B from $50.3B.

Outlook and guidance

• Asset levels were managed below the $50B SIFI threshold; stated plans included preparing for possible SIFI status while pursuing future growth.

• The Board declared a $0.17/share quarterly cash dividend on Jan. 24, 2017, payable Feb. 22, 2017.

• A 100-bp rate increase was modeled to reduce next-12-month net interest income 2.47%; a 200-bp increase implied a 5.56% decline.