Flagstar Bank (FLG) Q4 2020 earnings summary

Executive summary

• FY2020 net income was $511.1M, up 29% YoY; diluted EPS was $1.02, up from $0.77. Excluding a $68.4M CARES Act tax benefit, adjusted net income was $442.7M, up 12%.

• Assets reached $56.3B, loans held for investment $42.9B, deposits $32.4B, and stockholders’ equity $6.8B at year-end.

• NIM expansion, higher loan production and flat operating expenses supported results, while the pandemic increased credit-loss provisioning and uncertainty.

Financial highlights

• Net interest income rose 15% YoY to $1.1B; total interest expense fell 28.3% as deposit and funding costs declined.

• Provision for credit losses was $62.2M versus $7.1M in 2019; non-interest income fell 27.5% to $61.1M, largely from lower fee income and waived retail fees.

• Non-interest expense was $511.2M, essentially flat YoY; 2020 included a $4.4M lease termination benefit, while 2019 included $10.4M of severance and branch-rationalization costs.

• Loans originated totaled $12.9B, up 21.3% YoY, led by a 46% increase in multi-family originations.

Outlook and guidance

• Strategy priorities include expanding core deposits through borrower cash-management services, retail banking products and digital channels, while continuing multi-family and specialty-finance growth.

• Management cited refinancing and new borrower relationships as multi-family growth drivers, and expects specialty finance demand to benefit as the economy improves.

• Early 2021 indicators in New York City included higher apartment rentals, fewer landlord concessions, more residential sale contracts, rising subway ridership and fewer retail closures.

• The January 2021 common dividend was declared at $0.17 per share, payable February 16, 2021.