Flagstar Bank (FLG) Q4 2022 earnings summary

Executive summary

• FY 2022 net income reached a record $650M; diluted EPS was $1.26, with only one month of acquired-bank results included.

• The December acquisition expanded scale and diversified loans and funding; year-end assets were $90.1B, loans $69.0B and deposits $58.7B.

• 2023 was framed as a transition year focused on integration, expense reduction, deposit growth and building out businesses.

Financial highlights

• FY 2022 net interest income was $1.396B, up 8% YoY; provision for credit losses was $133M versus $3M in 2021.

• Net income available to common stockholders was $617M; excluding merger-related items, it was $603M versus $585M in 2021. Non-GAAP diluted EPS was $1.23.

• Non-interest income was $247M, including a $159M bargain purchase gain; excluding that gain, income was $88M, up 44% YoY.

• Non-interest expense was $684M; excluding $75M merger costs and $5M intangible amortization, operating expenses were $604M, up 17% YoY.

Outlook and guidance

• 2023 mortgage originations were forecast to decline 25% YoY to $1.8T, following a 46% drop in 2022; the mortgage market was expected to remain challenging.

• Retail home lending was shifting to an in-footprint model across nine states, reducing retail offices 69% to lower costs and improve mortgage profitability through the downturn.

• Integration and systems conversion were planned for early 2024; 2023 priorities included reducing expenses and growing deposits.

• The March 2023 Signature transaction added approximately $34B of deposits, $25B cash and $13B mostly commercial loans; proceeds were expected to repay wholesale borrowings and support EPS and tangible book value.