Key Takeaways:
- FLG reported Q2 adjusted EPS of $0.05, missing the $0.06 consensus estimate.
- Revenue of $516 million fell 5.3% short of analyst expectations.
- Net interest income rose 5% while credit provisions dropped 72% year over year.
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Flagstar Bank falls 5.9% as Q2 earnings miss on fee income weakness
Flagstar Bank reported Q2 adjusted EPS of $0.05, missing estimates by a penny, as non-interest income declined 1% year over year.
"Flagstar's second quarter operating performance reflects our third consecutive quarter of profitability and improved earnings and represents continued progress on our path to transforming into a top-performing regional bank," Joseph M. Otting, Executive Chairman and Chief Executive Officer, said.
Revenue of $516 million missed the $545 million consensus by 5.3%, though it rose 4% from $496 million a year earlier. Net interest income climbed 5% to $440 million, while the net interest margin expanded 32 basis points to 2.13%. Non-interest expenses fell 12% to $450 million, and the provision for credit losses dropped 72% to $18 million.
Shares fell 5.9% on Friday, paring the stock's year-to-date gain to 16.8%, still outpacing the S&P 500's 8.2% advance. The miss on revenue and fee income overshadowed improvements in credit quality and capital ratios.
The bank reported GAAP net income of $26 million, compared with a net loss of $78 million in the year-ago quarter. Net charge-offs declined 15% to $100 million, and non-accrual loans fell 12% to $2.8 billion.
Total loans and leases held for investment rose 1% sequentially to $60.9 billion, driven by commercial and industrial growth, partially offset by reductions in multifamily and commercial real estate portfolios. Deposits increased 1% sequentially to $67.5 billion, supported by higher Commercial and Private Bank deposits.
Flagstar's capital position strengthened. The common equity tier 1 ratio improved to 13.16% from 12.33% a year earlier, and the total risk-based capital ratio rose to 16.58% from 15.77%. Tangible book value per share of $17.51 narrowly topped analyst estimates of $17.34, though it has declined from $20.89 two years ago.
The company did not disclose forward guidance for the current quarter.
The results signal that Flagstar's turnaround is progressing on costs and credit but revenue growth remains uneven. Investors will watch the Q3 earnings call for evidence that fee income can stabilize and loan growth can accelerate beyond the current 1% sequential pace.
This article is for informational purposes only and does not constitute investment advice.
