On Aug 12, the Zacks Investment Research upgraded Michigan-based Flagstar Bancorp, Inc. (NYSE:FBC) to a Zacks Rank #1 (Strong Buy).
Upgrade Drivers: Repayment of TARP Funds & Q2 Earnings Beat
On Aug 1, 2016, Flagstar Bancorp announced the repayment of $371 million of funds, earlier received under the Troubled Asset Relief Program (TARP). The repayment was done through the redemption of $267 million worth of company’s Fixed Rate Cumulative Perpetual Preferred Stock, which was originally issued to the U.S. Department of the Treasury, along with the payment of $104 million in accrued and unpaid dividends.
The company funded the redemption through a combination of its internal liquidity. This included $200 million worth of dividend from its wholly owned subsidiary, Flagstar Bank and $250 million from proceeds from the issuance of its 6.125% Senior Notes.
Alessandro P. DiNello, President and Chief Executive Officer, Flagstar Bancorp, said, “The resolution of TARP affirms the progress we have made in de-risking the balance sheet, building a strong management team, and creating a solid risk management organization.”
Flagstar Bancorp has boosted its return on equity by replacing this high-cost loan with senior notes and internal liquidity, which is expected to cost only one-third of the present expenditure, on an after-tax basis. Post the redemption, the company expects that its regulatory capital to remain strong and thereby enable it to remain on its long-term business plans.
On Jul 26, 2016, Flagstar Bancorp reported second-quarter 2016 earnings of 66 cents which outpaced the Zacks Consensus Estimate of 59 cents on higher revenues and lower provision for loan losses. Also, growth in average loan and deposit balance acted as a tailwind. However, higher operating expenses were an undermining factor.
Notably, the Zacks Consensus Estimate for 2016 has increased 7.6% over the past 30 days to $2.26 while the estimates for 2017 has remained constant at $2.38 for 2017, over the same time frame.
Other Stocks that Warrant a Look
Some similarly-ranked savings and loan stocks include First Defiance Financial Corp. (NASDAQ:FDEF) , HomeStreet, Inc. (NASDAQ:HMST) and Meta Financial Group, Inc. (NASDAQ:CASH) .
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FLAGSTAR BANCP (FBC): Free Stock Analysis Report
META FINL GRP (CASH): Free Stock Analysis Report
FIRST DEFIANCE (FDEF): Free Stock Analysis Report
HOMESTREET INC (HMST): Free Stock Analysis Report
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Zacks Investment Research