Flagstar Financial, Inc.

Flagstar reported net income attributable to common stockholders of $0.06 per diluted share on a GAAP basis and $0.05 per diluted share on an adjusted basis. PPNR increased $34 million unadjusted and $22 million adjusted; operating expenses were $427 million, down 3% sequentially and down 7% year over year. The bank said core deposits excluding brokered deposits rose $700 million, deposit costs fell 5 basis points quarter over quarter and 65 basis points year over year, and the CET1 ratio ended at 13.16%. On the balance sheet, total C&I loans grew $2 billion to $18.6 billion, balance sheet growth was about $600 million, CRE balances/payoffs totaled $1.5 billion, and net charge-offs were $100 million. Management now expects 2026 EPS of $0.40 to $0.50 and 2027 EPS of $1.60 to $1.70; it also said 2026 interest income guidance was lowered due to higher CRE/multifamily payoffs and that noninterest income guidance was reduced because of the higher-for-longer rate environment.

Joseph Otting emphasized that the quarter showed execution across the company’s transformation plan, with profitability, balance sheet growth, deposit growth and continued CRE reduction all moving in the intended direction. He said the bank is early in a multiyear growth story and pointed to the new $250 million buyback as a sign of confidence in the capital position and long-term outlook. His tone was constructive but measured, noting that higher rates and rent-control decisions have created headwinds, even as he said the team is on the right path.

Lee Smith highlighted the mechanics behind the quarter’s improvement: PPNR rose, expenses fell 3% to $427 million, the CET1 ratio ended at 13.16%, and the bank has about $1.6 billion of excess capital versus the low end of its target operating range. He said core deposits excluding brokered deposits increased $700 million, the cost of interest-bearing deposits declined 5 basis points quarter over quarter, and the bank paid down another $250 million of FHLB advances. On guidance, he lowered interest income and noninterest income expectations, set 2026 EPS at $0.40 to $0.50 and 2027 EPS at $1.60 to $1.70, and said the $250 million buyback is not included in the forecast.

Analysts focused on the buyback, the sustainability of C&I growth, the path for NIM and the credit outlook. Management said capital deployment will depend on three variables: core earnings growth, credit quality and the balance between CRE payoffs and capital needed to support C&I growth; it also said the buyback is not baked into guidance. On margins, Lee Smith said June NIM of 2.19% should act as a floor, supported by lower-coupon multifamily runoff, market-rate C&I originations, some new CRE production, deposit-cost improvement and lower wholesale borrowings. On credit, management said it expects year-end nonaccrual loans around $2.3 billion, net charge-offs were elevated at $100 million but about half had already been reserved, and the multifamily/New York rent-regulated portfolio remains heavily monitored with substantial charge-off and reserve coverage.