Flagstar Bank, N.A. (NYSE:FLG) shares edged 1.09% lower in premarket trading after the regional lender reported second-quarter results that fell short of Wall Street expectations on both earnings and revenue, despite returning to profitability and posting higher year-on-year revenue.
The latest results reflect continued progress in the bank’s turnaround strategy, although weaker-than-expected financial performance weighed on investor sentiment.
Earnings and revenue miss forecasts
Flagstar reported adjusted earnings of $0.05 per share for the second quarter, below analysts’ consensus estimate of $0.07 per share.
Revenue totaled $516 million, missing market expectations of $541.97 million, although it represented a 4% increase from the $496 million reported in the same period last year.
The bank generated adjusted net income attributable to common shareholders of $23 million, or $0.05 per diluted share, compared with a loss of $0.14 per diluted share a year earlier.
On a GAAP basis, net income attributable to common shareholders was $26 million, equivalent to $0.06 per diluted share.
Profitability continues to improve
Net interest income increased 5% year-on-year to $440 million, although it declined 1% compared with the previous quarter.
The bank’s net interest margin narrowed slightly by two basis points from the first quarter to 2.13%.
Adjusted pre-provision net revenue rose sharply to $62 million, up 51% from $41 million in the previous quarter, reflecting improving operating performance.
“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,” said Executive Chairman and CEO Joseph M. Otting.
Loan and deposit growth remain positive
Total loans increased by $562 million during the quarter to reach $61.0 billion, representing annualised growth of 4%.
Commercial and industrial lending remained a key driver, with C&I loans rising $2.0 billion, or 12%, to $18.6 billion.
Deposits also continued to expand, increasing by $689 million, or 1%, to $67.5 billion.
Meanwhile, operating expenses declined 3% year-on-year to $427 million, supporting the bank’s ongoing efficiency initiatives.
Capital position remains strong
Alongside its quarterly results, Flagstar announced a new $250 million share repurchase programme, signalling confidence in its capital position.
The bank also maintained a Common Equity Tier 1 (CET1) capital ratio of 13.16%, providing a solid capital buffer as management continues to execute its long-term transformation strategy.
Flagstar Financial stock price
