Flagstar Bank (FLG) Q4 2019 earnings summary

Executive summary

• 2019 marked the start of the growth phase of the strategic plan: assets, loans and deposits expanded, while Q4 net interest income and margin rebounded.

• Year-end assets were $53.6B, loans held for investment $41.9B and deposits $31.7B; YoY increases were 3%, 4% and 3%, respectively.

Financial highlights

• FY2019 net income was $395.0M versus $422.4M in 2018; diluted EPS was $0.77 versus $0.79.

• Net interest income declined 7% to $957.4M; interest expense rose $189.1M to $847.8M, outpacing the $115.5M increase in interest income.

• Non-interest expense fell $35.4M, or 6.5%, to $511.2M; it included $10.4M of severance and branch-rationalization costs.

• Non-interest income was $84.2M, down 8%; 2018 included $20.3M from the wealth-management business sold in 2019, while 2019 included $7.7M net securities gains and a $7.9M branch sale-leaseback gain.

Outlook and guidance

• Management entered 2020 confident, expecting lower funding costs to lift NIM and net interest income as $14.2B of CDs and $3.7B of wholesale funding repriced lower during the year.

• Management expected wider credit spreads on new loans to support performance, while noting the pandemic’s economic impact remained highly uncertain.

• Pandemic response included temporary retail-fee waivers, 90-day residential mortgage forbearances and case-by-case commercial borrower restructuring or deferrals.