Flagstar Bancorp in Troy, Mich., said that its fourth-quarter profit improved as higher interest rates and low-cost deposits acquired from Wells Fargo boosted its net interest margin.
The $18.5 billion-asset company’s net income was $42 million. Earnings per share of 72 cents matched the mean estimate of analysts compiled by FactSet Research Systems. In the fourth quarter of 2017, Flagstar reported a one-time loss of $45 million that was tied to federal tax overhaul.
Analysts’ estimates for the fourth quarter of 2018 excluded two one-time items. Flagstar recorded a $29 million benefit for hedging gains that were recognized as a result of its December acquisition of 52 branches from Wells Fargo. The bank also recorded $14 million of acquisition-related expenses. When both items are included, Flagstar’s net income was $54 million, or 93 cents per share.
Flagstar said in its earnings announcement Tuesday that the exodus of Wells depositors has slowed in recent weeks.
From the date of the deal announcement in June and the acquisition closing in December,
“We remain confident in the benefits of the acquisition, which boosts our net interest margin and provides substantial, low-cost stable liquidity,” CEO Alessandro DiNello said in a news release.
Net interest income rose 15% to $123 million. Average interest-earning assets increased 7% to $16.4 billion. The average yield on those assets improved 58 basis points to 4.39%. The net interest margin rose 94 basis points to 3.7%.
Noninterest income dropped 21% to $98 million on a smaller net gain on loan sales.
Noninterest expense declined 2% to $175 million, partly as a result of paying lower sales commissions.
