Flagstar Financial (FLG) Q3 2024 earnings summary

Executive summary

• Reported a GAAP net loss attributable to common stockholders of $289 million ($0.79 per diluted share) for Q3 2024, improving from Q2 but sharply lower than Q3 2023 net income; adjusted net loss was $252 million ($0.69 per share), reflecting merger and asset sale items.

• Deposits grew $4 billion (5%) to $83 billion, with strong growth in retail and private bank segments; wholesale borrowings reduced by 31%.

• CRE and multi-family loan exposures continued to decline as part of a de-risking strategy, with significant charge-offs and nearly complete asset quality review.

• Board and management transformation completed, with new leadership and key hires in commercial, private banking, and risk management.

• Announced rebranding to Flagstar Financial, Inc. and ticker change to FLG, effective October 25, 2024.

Financial highlights

• Net interest income for Q3 2024 was $510 million, down 8% sequentially and 42% year-over-year; net interest margin fell to 1.79% from 1.98% in Q2 2024 and 3.27% in Q3 2023.

• Provision for credit losses was $242 million, down from $390 million in Q2 2024 but up from $62 million in Q3 2023; net charge-offs were $240 million.

• Non-interest income was $113 million, flat sequentially but down 29% year-over-year; adjusted non-interest income was $135 million.

• Total assets at September 30, 2024 were $114.4 billion; tangible book value per share was $18.18.

• Allowance for credit losses (ACL) to total loans at 1.87%, up from 1.78% in Q2 2024 and 0.79% in Q3 2023.

Outlook and guidance

• Core EPS guidance for 2024 is $(3.10)-(3.00), improving to $2.10-$2.20 by 2027, with efficiency ratio expected to improve from 95-100% in 2024 to 45-50% by 2027.

• Sale of mortgage servicing business expected to increase CET1 ratio by ~60 basis points in Q4 2024; impairment and severance charges anticipated.

• Margin expected to have bottomed in Q3, with improvement projected from Q4 2024 through 2027; noninterest expense expected to decline from $2.45-$2.5 billion in 2024 to $1.65-$1.7 billion in 2027.

• Continued focus on deposit growth, funding mix improvement, and risk management investments.

• Flat balance sheet projected through 2026, with C&I loan growth offsetting CRE runoff.