MW Flagstar, formerly NYCB, reports a wider-than-expected loss as charge-offs jump
By Tomi Kilgore
Losses were wider than forecast for a fourth straight quarter, as net charge-offs rose tenfold
Shares of Flagstar Financial Inc., formerly known as New York Community Bancorp, took a dive Friday after the struggling bank reported yet another loss that was wider than Wall Street's expectations, as it continued to write down its troubled commercial real-estate portfolio.
The bank said net charge-offs for the quarter totaled $240 million, up from $24 million in the same period a year ago, but down from $349 million in the second quarter. And the provision for credit losses was $242 million, up from $62 million last year but down from $390 million the previous quarter.
"On the asset quality front, we have completed 97% of our annual review of the multifamily and commercial real-estate portfolios and have taken substantial charge-offs across the portfolio," said Chief Executive Joseph Otting. "Our CRE exposure continues to decline through a combination of par payoffs and proactively managing problem loans."
He said total CRE loans declined 3% from the second quarter and have decreased 6% year to date.
The stock $(NYCB)$, which will see its ticker symbol change to "FLG" at 5 p.m. Eastern, sank 8.5% toward a six-week low in morning trading.
The bank swung to a net loss for the third quarter of $289 million, or 79 cents a share, from net income of $199 million, or 81 cents a share, in the same period a year ago.
The per-share loss was wider than the FactSet loss consensus of 41 cents.
That's the fourth straight quarter the bank reported a loss, which was wider than expected, and marked the fifth consecutive quarter of a bottom-line miss.
Read: NYCB stock drops on steeper-than-expected losses on office and multifamily loans.
Also read: Fitch cuts NYCB's debt rating deeper into junk territory but says outlook remains stable.
Total revenue fell 40.2% to $623 million but beat the FactSet consensus of $611.9 million, to snap a three-quarter streak of misses.
Net interest income dropped 42.2% to $510 million, below the FactSet consensus of $513.3 million. The decline was due primarily to lower average loan balances following the sale of the mortgage warehouse business, continued payoffs in the multifamily and CRE portfolios and a drop in the commercial and industrial loan portfolio.
Net interest margin dropped to 1.79% from 3.27%, and missed the FactSet consensus of 1.91%, amid a higher level of interest-bearing liabilities and an increase in the average cost of funds.
Meanwhile, non-interest income declined 29.4% to $113 million but topped expectations of $92.8 million.
Looking ahead, the company said it expects a 2024 core per-share loss of $3.10 to $3.00, which is wider than the FactSet loss consensus of $2.71.
For 2025, the per-share loss is expected to be 35 cents to 30 cents, while the FactSet consensus is for a per-share profit of 6 cents.
"Following the end of the quarter, we took actions to reduce costs across our entire organization," Otting said. "These steps reflect our commitment to our financial objectives, and we anticipate further cost reductions as we continue to implement efficiency initiatives."
The bank also expects net interest income for 2024 of $2.15 billion to $2.20 billion and for 2025 of $2.05 billion to $2.10 billion. Both are below the FactSet consensus for 2024 of $2.22 billion and for 2025 of $2.19 billion, respectively.
The stock has tumbled 65.7% year to date, while the SPDR S&P Bank ETF KBE has climbed 18.5% and the S&P 500 index SPX has advanced 22.5%.
-Tomi Kilgore
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October 25, 2024 09:58 ET (13:58 GMT)
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