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FLAGSTAR FINANCIAL, INC. (FLG)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 narrowed GAAP diluted loss per share to $0.41 and non-GAAP adjusted loss to $0.34, with total revenues of $0.63B; credit costs fell sharply and NIM pressure persisted .
  • Capital strengthened: CET1 rose to 11.9% (top quartile), liquidity stood at $32B, and wholesale borrowings fell to $13.4B (-31% q/q) as brokered CDs were reduced by $2.5B .
  • Retail and Private Bank delivered a third straight quarter of deposit growth (+$0.9B retail, +$0.5B private), while multi-family and CRE exposures declined via payoffs/sales; non-accrual loans were $2.62B, ~60% current .
  • Management guided to lower 2025 NII vs prior due to a smaller balance sheet, offset by higher non-interest income and reduced expenses; 2025 provision unchanged and 2026 provision lowered; hiring ramp in C&I supports growth pipeline .
  • Wall Street consensus from S&P Global was unavailable; management stated results were better than internal projections and analyst forecasts, framing expense cuts, funding mix improvement, and CRE de-risking as catalysts .

What Went Well and What Went Wrong

What Went Well

  • “Our fourth quarter net loss per diluted share narrowed… and significantly exceeded expectations due largely to an improving credit quality profile,” with provision down 55% q/q and NCOs down 8% q/q .
  • Funding mix improved: wholesale borrowings down $5.9B q/q to 13% of assets; retail and private deposits grew sequentially despite lower deposit rates .
  • Capital build continues: CET1 increased >280 bps in 2024 to 11.9%, with strong liquidity (~$32B) and available capacity .

What Went Wrong

  • NIM compressed to 1.73% (down 6 bps q/q and 109 bps y/y) as asset yields fell faster than funding costs despite deleveraging .
  • Delinquencies rose: 30–89 day past due loans increased to $965M (vs $261M in Q3), driven largely by one multi-family borrower, though subsequent payments reduced the issue post year-end per call commentary .
  • Total revenues and net interest income remain lower y/y (NII $461M vs $740M in Q4’23) reflecting smaller loan balances after mortgage-related asset sales and higher interest-bearing liabilities .

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Total Revenues ($USD Millions)$867 $623 $625
Net Interest Income ($USD Millions)$740 $510 $461
Non-Interest Income ($USD Millions)$127 $113 $164
Provision for Credit Losses ($USD Millions)$552 $242 $108
Net Interest Margin (%)2.82% 1.79% 1.73%
GAAP Diluted EPS ($)$(11.27) $(0.79) $(0.41)
Adjusted Diluted EPS ($)$(0.80) $(0.69) $(0.34)
Adjusted Non-Interest Expense ($USD Millions)$607 $652 $556

Segment and Balance Mix

Loans HFI ($USD Millions)Dec 31, 2023Sep 30, 2024Dec 31, 2024
Multi-family$37,265 $35,140 $34,093
CRE & ADC$13,382 $12,482 $11,836
Commercial & Industrial$25,254 $16,474 $15,376
1–4 Family First Mortgage$6,061 $5,247 $5,201
Total Loans HFI$84,619 $71,116 $68,272

Deposit & Funding KPIs

KPIQ4 2023Q3 2024Q4 2024
Total Deposits ($USD Billions)$81.5 $83.0 $75.9
Non-Interest-Bearing Deposits ($USD Billions)$20.5 $18.6 $13.5
Certificates of Deposit ($USD Billions)$21.6 $29.3 $27.3
Savings Accounts ($USD Billions)$8.8 $13.5 $14.3
Wholesale Borrowings ($USD Billions)$20.3 $19.3 $13.4
Retail Deposit Growth (q/q)——+$0.9B
Private Bank Deposit Growth (q/q)——+$0.5B

Credit Quality KPIs

KPIQ4 2023Q3 2024Q4 2024
Non-Accrual Loans ($USD Millions)$428 $2,514 $2,615
NPLs / Total Loans (%)0.51% 3.54% 3.83%
Total ACL / Total Loans (%)1.23% 1.87% 1.78%
Net Charge-Offs ($USD Millions)$185 $240 $222
30–89 Day Delinquencies ($USD Millions)$250 $261 $965

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Balance Sheet EOP AssetsFY 2025Not specified in docs~$98B EOP assets Lowered
Net Interest Income (NII)FY 2025Not specified in docsSlightly lower vs prior guidance; offset by higher non-interest income and lower expenses Lowered
Provision ExpenseFY 2025UnchangedUnchanged Maintained
Provision ExpenseFY 2026Prior not quantifiedLowered vs prior guidance Lowered
Operating ExpensesFY 2025On-track run-rate reduction targetReduce OpEx by ~$600M (23%) vs 2024; program “on track” Maintained
Deposit Beta TargetOngoing55–60% targetOperating at/above target (66% in Nov; 58% in Dec) Maintained
Warrants Conversion (Share Count)Q4 2025Not specified previouslyAssumes full conversion; share count ~415M → ~480M New detail
Dividend (Common)Q1 2025—Declared $0.01 per share Maintained at $0.01

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q4 2024)Trend
CRE de-risking~$1B par payoffs per quarter trend (last three quarters) $960M CRE/multifamily payoffs; ACL coverage higher on perceived risk assets Improving risk profile; continued payoffs
Deposit growth (Retail/Private)Indicated multi-quarter growth trajectoryThird consecutive quarter of deposit growth (+$0.9B retail; +$0.5B private) Sustained growth despite lower rates
Funding cost optimization—Deleveraging reduced FHLB/BTFP/brokered CDs; FDIC expense down $24M q/q Lower funding/FDIC costs to aid NIM
C&I buildoutQ3: hired ~30 bankers Q4: hired 24 more; 43/65 started in Q4; $572M commitments; $460M pipeline Ramping production/pipeline
Rate sensitivity—Neutral to slightly asset sensitive; fewer cuts than initially modeled Earnings sensitivity manageable
Regulatory posture—CET1 11.9%; building Cat-4 risk governance; top quartile capital Strong capital/governance focus
Delinquencies—30–89 day DPD rose to $965M; largely a single borrower with subsequent cure Monitored; idiosyncratic concentration

Management Commentary

  • CEO: “2024 was a transitional year… [we] significantly bolstered capital… enhanced liquidity… completed a review of the entire commercial real estate portfolio… and continued to invest in commercial banking and risk management” .
  • CEO: “Our fourth quarter… significantly exceeded expectations due largely to an improving credit quality profile… provision for credit losses decreased 55% q/q” .
  • CFO: “We are planning to reduce operating expenses by $600,000,000 or 23% compared to 2024 and we are on track to get there… [we] deleveraged and paid down high cost wholesale borrowings” .
  • CFO: “We originated $572,000,000 of new [C&I] commitments in the fourth quarter, 18 new relationships… pipeline of $460,000,000 into 2025” .
  • CEO: “Our CET1 capital ratio… up over 280 basis points during the year and ranking us within the top quartile of our peers” .

Q&A Highlights

  • Real estate footprint: Plan to consolidate ~60 retail branches plus ~20 private client locations and some operating centers to optimize occupancy costs over phases in 2025 .
  • Securities/AOCI: Considering growth in the securities portfolio in 2025; AOCI losses were rate-driven; deployment will be dynamic .
  • Capital deployment vs buybacks: No buyback discussions; priority is using excess capital to grow earning assets via C&I and consumer businesses .
  • Rate path and sensitivity: Modeled 3 cuts initially; now 2; bank neutral to slightly asset sensitive—no material impact to guided earnings .
  • Deposits: Core deposit growth expected while brokered CDs and escrow deposits run off; CD repricing ($5B Q1) should reduce costs; retention of maturing CDs ~75–80% .
  • Credit/Provisions: 2025 provision held conservative; 2026 lowered; reserve coverage increased on higher-risk classes; appraisals not as punitive as feared .

Estimates Context

  • S&P Global Wall Street consensus estimates were unavailable at the time of retrieval (tool request limit exceeded). As a result, formal beat/miss vs consensus cannot be determined. Management stated Q4 results were “better than… analysts’ forecast” and internal projections, driven by improved credit quality and lower provision .

Key Takeaways for Investors

  • Expense reset: ~$600M (23%) OpEx reduction targeted for 2025 is on track, with FDIC insurance expense already down $24M q/q—supports PPNR improvement into 2025 .
  • Funding tailwinds: Significant deleveraging of FHLB/BTFP/brokered CDs and CD repricing in Q1 2025 should aid NIM sequentially despite asset yield pressure .
  • CRE risk containment: Continued par payoffs and loan sales, increased ACL on perceived risk assets, and proactive reviews suggest declining NPLs and substandard balances in 2025 (management expects ~30% decline in NPLs by YE) .
  • C&I growth ramp: Experienced banker hires and early production ($572M commitments, $460M pipeline) set up loan growth and fee income expansion, especially in treasury/capital markets .
  • Capital strength and governance: CET1 at 11.9% and Cat-4 infrastructure build provide room to redeploy capital into higher-return assets—valuation re-rating could follow sustained profitability .
  • Watch the delinquencies: The Q4 spike (mostly one borrower) warrants monitoring, but subsequent cures mitigate immediate risk; continued discipline on multifamily resets/maturities is key .
  • Share count dynamics: Assumed warrant conversion by Q4 2025 lifts diluted shares to ~480M—model EPS dilution accordingly in forward estimates .

Appendix: Additional Q4 2024 Press Releases

  • Dividend: Declared $0.01 quarterly common dividend; preferred dividends detailed for Series A/B/D .
  • Mortgage servicing sale close: ~$1.3B cash proceeds to Mr. Cooper; ~60 bps CET1 accretion (pro forma at 9/30/24) .
  • Earnings date and conference call logistics .