Financial Data and Key Metrics Changes - The CET1 capital ratio increased to 12.3%, ranking among the highest relative to peer groups [15][17][30] - Adjusted pre-provision, pre-tax net revenue was a positive $9 million, an improvement of $32 million from the previous quarter [18][27] - The net loss per diluted share narrowed to $0.19, with an adjusted loss of $0.14 compared to a loss of $0.23 in the first quarter [26][27] Business Line Data and Key Metrics Changes - New commitments in the C and I business increased by 80% to $1.9 billion, while originations rose by almost 60% to $1.2 billion [12][13] - The corporate, regional, commercial banking, and specialized industries portfolios increased by $422 million, or about 12% compared to the previous quarter [15] - Record CRE par payoffs reached approximately $1.5 billion, significantly reducing CRE exposure [31][32] Market Data and Key Metrics Changes - The overall cost of deposits decreased by 11 basis points quarter over quarter, and the overall cost of funds fell by 10 basis points compared to the prior quarter [20] - The multifamily portfolio has declined nearly $4 billion or 12% year over year, with a strong reserve coverage of 1.68% [32] Company Strategy and Development Direction - The company plans to merge its holding company into the bank to enhance corporate, legal, and regulatory structure, aiming for a reduction in operating expenses [9][10] - Focus areas for 2025 include improving earnings through margin expansion, fee income, and reducing operating expenses [11] - The strategy emphasizes growth in C and I and private banking, while proactively managing the CRE portfolio [11][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in continuing to grow C and I, which will diversify the loan portfolio and generate deposits and fee income [8] - The company anticipates further progress in the second half of the year, with a focus on returning to profitability [38] - Management highlighted the potential for stock price appreciation, indicating a valuation gap compared to peers [37] Other Important Information - The company has significantly improved its reserve coverage through a rigorous credit review process [18][22] - Approximately 50% of the criticized loans have already reset to a higher rate and are paying, with 40% expected to reprice by the end of 2026 [24][70] Q&A Session Summary Question: Can you provide details on the securities purchase and its impact on margin? - The company accelerated $2 billion in securities purchases to optimize NIM, with a weighted average coupon of about 5.25% [44] Question: Is stock repurchase still expected in mid-2026? - Currently, the focus is on investing excess capital in growth rather than stock buybacks, but this may be reconsidered if profitability is achieved [48][50] Question: What is the outlook for net charge-offs? - The company expects charge-offs to decrease as it moves into Q3 and Q4, supported by a significant reduction in criticized assets [94][95] Question: What is the health of the rent-stabilized multifamily landlords? - The multifamily portfolio is largely occupied, with a significant portion of loans rated as pass, indicating a stable outlook despite potential challenges [68][70] Question: Will the merger of the holding company into the bank have any downsides? - The merger is expected to reduce costs significantly and streamline regulatory supervision, with no major downsides anticipated [59][115]

Company Performance - Flagstar Financial reported a quarterly loss of $0.14 per share, which was worse than the Zacks Consensus Estimate of a loss of $0.12, but an improvement from a loss of $1.05 per share a year ago, indicating a significant year-over-year recovery [1] - The company posted revenues of $496 million for the quarter ended June 2025, missing the Zacks Consensus Estimate by 5.64% and down from $671 million in the same quarter last year [2] - Over the last four quarters, Flagstar Financial has surpassed consensus EPS estimates two times and topped consensus revenue estimates two times [2] Stock Performance - Flagstar Financial shares have increased by approximately 29.2% since the beginning of the year, significantly outperforming the S&P 500's gain of 8.2% [3] - The current consensus EPS estimate for the upcoming quarter is -$0.01 on revenues of $560.29 million, while for the current fiscal year, it is -$0.29 on revenues of $2.16 billion [7] Industry Outlook - The Zacks Industry Rank for Banks - Northeast, which includes Flagstar Financial, is currently in the top 21% of over 250 Zacks industries, suggesting a favorable industry outlook [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact Flagstar Financial's stock performance [5]

Financial Performance - Net loss attributable to common stockholders was $78 million, with a diluted loss per common share of $0.19[31, 82] - Adjusted operating expenses decreased by $178 million, or 28% year-over-year, and $25 million, or 5% quarter-over-quarter[44] - The company forecasts net interest income between $1.7 billion and $1.75 billion for 2025[33] Commercial Banking - New credit commitments increased by 80% to $1.9 billion in Q2'25[18] - New loan originations increased by 57% to $1.2 billion in Q2'25[18] - Specialized Industries loan originations increased by 91% to $624 million[18] - Corporate/Regional Banking loan originations increased by over 50% to $186 million[18] - Total Private Bank deposits increased by $2.0 billion since March 31, 2024, reaching $17.7 billion[18] Balance Sheet & Asset Quality - The CET1 ratio is 12.3%[46] - Deposits decreased by $4.2 billion, or 5.6% quarter-over-quarter, to $69.7 billion[50, 54] - Brokered deposits decreased by $4.1 billion, or 43.1% year-to-date[54] - Record CRE payoffs at par of $1.5 billion, with 45% of the payoffs from substandard loans in the second quarter[55]

Executive Summary & Highlights Flagstar Financial, Inc. reported a net loss in Q2 2025, while demonstrating strong progress in C&I growth, credit quality improvement, expense reduction, and capital strengthening, with plans to merge its holding company into the bank [Second Quarter 2025 Performance Highlights](index=1&type=section&id=Second%20Quarter%202025%20Performance%20Highlights) Flagstar Financial, Inc. reported a net loss attributable to common stockholders of $0.19 per diluted share and an adjusted net loss of $0.14 per diluted share for Q2 2025, with key improvements in credit quality, NIM, and capital Second Quarter 2025 Key Financial Highlights | Metric | Q2 2025 | Change vs. Q1 2025 | Change vs. Q2 2024 | | :-------------------------------- | :------ | :----------------- | :----------------- | | Net Loss Attributable to Common Stockholders (per diluted share) | $(0.19) | 28% improvement | 77% improvement | | Adjusted Net Loss Attributable to Common Stockholders (per diluted share) | $(0.14) | - | - | | Non-accrual loans | - | Declined 4% | - | | Criticized loans | - | - | Declined 15% (since Dec 31, 2024) | | CRE exposure | - | Down $2.4 billion (5%) | - | | Multi-family loans | - | Down $1.5 billion (5%) | - | | CRE loans | - | Declined $874 million (8%) | - | | C&I new commitments | $1.9 billion | Up 80% | - | | C&I originations | $1.2 billion | Up 57% | - | | Brokered deposits | - | $2.2 billion decrease | - | | CET1 capital ratio | 12.33% | Improved | - | | Book value per common share | $18.28 | - | - | | Tangible book value per share | $17.24 | - | - | | PPNR, as adjusted | $9 million | Compared to loss of $23 million in prior quarter | - | | NIM | 1.81% | Increased 7 bps | - | | Non-interest expense | $513 million | Down $19 million (4%) | - | | Adjusted operating expenses | $460 million | Down $25 million (5%) | - | [CEO Commentary](index=3&type=section&id=CEO%20Commentary) CEO Joseph M. Otting expressed satisfaction with Q2 2025 progress, highlighting gains in C&I and Private Bank growth, improved credit quality, reduced operating expenses, decreased commercial real estate exposure, and increased net interest margin, anticipating a return to profitability in Q4 2025 - Company made significant progress in Q2 2025 across multiple fronts, including C&I and Private Bank growth, improved credit quality, lower operating expenses, reduced commercial real estate exposure, and increased net interest margin[6](index=6&type=chunk) - Anticipates a return to profitability in the fourth quarter of 2025[6](index=6&type=chunk) - Announced plans to enhance corporate structure by merging the holding company into Flagstar Bank, N.A., expecting further cost reduction, streamlined functions, and elimination of redundant activities[9](index=9&type=chunk) [Strategic Initiatives](index=1&type=section&id=Strategic%20Initiatives) Flagstar Financial announced plans to eliminate its bank holding company, demonstrated strong C&I momentum with significant increases in new loan originations and commitments, and achieved a 9% decline in criticized & classified assets from the prior quarter - Announces plans to eliminate Bank Holding Company[3](index=3&type=chunk) - Strong C&I momentum with new loan originations increasing **57%** and new commitments rising **80%** on a linked-quarter basis[3](index=3&type=chunk) - Criticized & classified assets declined **9%** from prior quarter and **15%** over the first half of the year[3](index=3&type=chunk) - Disciplined expense management pushed adjusted operating expenses down **5%** compared to prior quarter, on track to meet expense save goals[3](index=3&type=chunk) Financial Performance Overview The company significantly narrowed its net loss in Q2 2025, driven by increased net interest income, improved net interest margin, reduced provision for credit losses, and disciplined expense management [Net Income (Loss) and Adjusted Net Income (Loss)](index=3&type=section&id=Net%20Income%20%28Loss%29%20and%20Adjusted%20Net%20Income%20%28Loss%29) The company significantly narrowed its net loss in Q2 2025 and for the first six months of 2025 compared to prior periods, with the Q2 2025 net loss at $70 million, a 30% improvement QoQ and 78% YoY Net Loss and Adjusted Net Loss (in millions, except per share data) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | Change QoQ | Change YoY | | :------------------------------------------------ | :------ | :------ | :------ | :--------- | :--------- | | Net Loss (GAAP) | $(70) | $(100) | $(323) | 30% improvement | 78% improvement | | Net Loss Attributable to Common Stockholders (GAAP) | $(78) | $(108) | $(333) | 28% improvement | 77% improvement | | Diluted EPS (GAAP) | $(0.19) | $(0.26) | $(1.14) | 28% improvement | 77% improvement | | Adjusted Net Loss (Non-GAAP) | $(52) | $(86) | $(298) | - | - | | Adjusted Net Loss Attributable to Common Stockholders (Non-GAAP) | $(60) | $(94) | $(308) | - | - | | Adjusted Diluted EPS (Non-GAAP) | $(0.14) | $(0.23) | $(1.05) | - | - | Six Months Ended June 30, 2025 vs. 2024 (in millions, except per share data) | Metric | H1 2025 | H1 2024 | Change | % Change | | :------------------------------------------------ | :------ | :------ | :----- | :------- | | Net Loss (GAAP) | $(170) | $(650) | $480 | 74% improvement | | Net Loss Attributable to Common Stockholders (GAAP) | $(186) | $(668) | $482 | 72% improvement | | Diluted EPS (GAAP) | $(0.45) | $(2.48) | $2.03 | 82% improvement | | Adjusted Net Loss (Non-GAAP) | $(138) | $(472) | - | - | | Adjusted Net Loss Attributable to Common Stockholders (Non-GAAP) | $(154) | $(490) | - | - | | Adjusted Diluted EPS (Non-GAAP) | $(0.37) | $(1.82) | - | - | [Net Interest Income and Net Interest Margin](index=6&type=section&id=Net%20Interest%20Income%20and%20Net%20Interest%20Margin) Net interest income for Q2 2025 increased 2% QoQ to $419 million, driven by a lower cost of funds and average interest-bearing liabilities, despite a 25% YoY decline, with Net Interest Margin (NIM) improving by 7 basis points QoQ to 1.81% Net Interest Income (in millions) | Period | Net Interest Income | Change QoQ | Change YoY | | :---------------- | :------------------ | :--------- | :--------- | | Q2 2025 | $419 | 2% | -25% | | Q1 2025 | $410 | - | - | | Q2 2024 | $557 | - | - | | H1 2025 | $829 | - | -30% | | H1 2024 | $1,181 | - | - | Net Interest Margin (NIM) | Period | NIM | Change QoQ | Change YoY | | :---------------- | :------ | :--------- | :--------- | | Q2 2025 | 1.81% | +7 bps | -17 bps | | Q1 2025 | 1.74% | - | - | | Q2 2024 | 1.98% | - | - | | H1 2025 | 1.77% | - | -36 bps | | H1 2024 | 2.13% | - | - | - Linked-quarter NIM improvement resulted from a **10 basis point decrease** in the cost of average interest-bearing liabilities and a **3 basis point improvement** in the average interest-earning asset yield[27](index=27&type=chunk) [Provision for Credit Losses](index=10&type=section&id=Provision%20for%20Credit%20Losses) The provision for credit losses decreased by $15 million QoQ in Q2 2025, primarily due to strategic reductions in multi-family and CRE loan balances, a decrease in criticized assets, and stabilizing credit reviews, with net charge-offs relatively stable QoQ but significantly down YoY Provision for Credit Losses (in millions) | Period | Provision for Credit Losses | Change QoQ | Change YoY | | :---------------- | :-------------------------- | :--------- | :--------- | | Q2 2025 | $64 | -19% | -84% | | Q1 2025 | $79 | - | - | | Q2 2024 | $390 | - | - | | H1 2025 | $143 | - | -80% | | H1 2024 | $705 | - | - | Net Charge-offs (in millions, annualized % of average loans) | Period | Net Charge-offs | % of Average Loans | Change QoQ | Change YoY | | :---------------- | :-------------- | :----------------- | :--------- | :--------- | | Q2 2025 | $117 | 0.72% | 2% | -66% | | Q1 2025 | $115 | 0.68% | - | - | | Q2 2024 | $349 | 1.68% | - | - | | H1 2025 | $232 | 0.70% | - | -46% | | H1 2024 | $431 | 1.06% | - | - | [Pre-Provision Net Revenue (PPNR)](index=11&type=section&id=Pre-Provision%20Net%20Revenue%20%28PPNR%29) Pre-provision net loss (GAAP) for Q2 2025 was $17 million, an improvement from $42 million in Q1 2025, while adjusted PPNR turned positive at $9 million in Q2 2025, compared to a $23 million loss in Q1 2025 Pre-Provision Net Revenue (PPNR) (in millions) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | Change QoQ | Change YoY | | :------------------------------------------ | :------ | :------ | :------ | :--------- | :--------- | | PPNR (GAAP) | $(17) | $(42) | $(34) | NM | NM | | PPNR, as adjusted (Non-GAAP) | $9 | $(23) | $0 | NM | NM | Six Months Ended June 30, 2025 vs. 2024 PPNR (in millions) | Metric | H1 2025 | H1 2024 | % Change | | :------------------------------------------ | :------ | :------ | :------- | | PPNR (GAAP) | $(59) | $(100) | -41% | | PPNR, as adjusted (Non-GAAP) | $(15) | $98 | -115% | [Non-Interest Income](index=12&type=section&id=Non-Interest%20Income) Non-interest income in Q2 2025 was $77 million, relatively stable QoQ but down 32% YoY, primarily due to the sale of the mortgage servicing/sub-servicing business which impacted loan origination income and net return on MSRs, while other income increased 23% QoQ and 31% YoY Non-Interest Income (in millions) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | Change QoQ | Change YoY | | :-------------------------------- | :------ | :------ | :------ | :--------- | :--------- | | Total Non-Interest Income | $77 | $80 | $114 | -4% | -32% | | Net gain on loan sales and securitizations | $6 | $13 | $18 | -54% | -67% | | Other income | $38 | $31 | $29 | 23% | 31% | | Net return on mortgage servicing rights | $0 | $0 | $19 | NM | NM | - Year-over-year decline in non-interest income largely due to the sale of mortgage servicing/sub-servicing business, impacting loan origination income and net return on MSRs[42](index=42&type=chunk)[44](index=44&type=chunk) [Non-Interest Expense](index=13&type=section&id=Non-Interest%20Expense) Total non-interest expense decreased 4% QoQ to $513 million and 27% YoY in Q2 2025, with adjusted operating expenses, excluding notable items, at $460 million, down 5% QoQ and 28% YoY, reflecting disciplined expense management Non-Interest Expense (in millions) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | Change QoQ | Change YoY | | :-------------------------- | :------ | :------ | :------ | :--------- | :--------- | | Total Non-Interest Expense | $513 | $532 | $705 | -4% | -27% | | Adjusted Operating Expenses (Non-GAAP) | $460 | $485 | $638 | -5% | -28% | | Compensation and benefits | $237 | $244 | $312 | -3% | -24% | | FDIC insurance | $49 | $50 | $91 | -2% | -46% | | General and administrative | $133 | $147 | $183 | -10% | -27% | - Linked-quarter decreases in non-interest expense were mainly driven by declines in compensation and benefits expense and general and administrative expenses[48](index=48&type=chunk) [Income Taxes](index=14&type=section&id=Income%20Taxes) The company reported an income tax benefit of $11 million in Q2 2025, with an effective tax rate of 12.9% Income Tax Benefit and Effective Tax Rate | Period | Income Tax Benefit (in millions) | Effective Tax Rate | | :---------------- | :------------------------------- | :----------------- | | Q2 2025 | $(11) | 12.9% | | Q1 2025 | $(21) | 17.8% | | Q2 2024 | $(101) | 23.7% | | H1 2025 | $(32) | 15.9% | | H1 2024 | $(155) | 19.3% | Balance Sheet Analysis Total assets and deposits decreased in Q2 2025, reflecting strategic reductions in multi-family and CRE loans and a disciplined approach to deposit pricing, while available-for-sale securities grew [Assets](index=4&type=section&id=Assets) Total assets decreased 6% QoQ to $92.2 billion at June 30, 2025, driven by a decrease in total loans and cash balances, partially offset by growth in AFS investment securities, as the company continued its strategy to reduce multi-family and CRE loan exposure Key Asset Balances (in millions) | Asset | June 30, 2025 | March 31, 2025 | Dec 31, 2024 | Change QoQ | Change vs. Dec 31, 2024 | | :-------------------------------- | :------------ | :------------- | :----------- | :--------- | :----------------------- | | Total Assets | $92,237 | $97,628 | $100,160 | -6% | -8% | | Total Loans and Leases HFI | $64,121 | $66,592 | $68,272 | -4% | -6% | | Multi-family loans | $31,932 | $33,437 | $34,093 | -5% | -6% | | Commercial Real Estate (CRE) | $10,636 | $11,510 | $11,836 | -8% | -10% | | Commercial and Industrial (C&I) | $14,426 | $14,742 | $15,376 | -2% | -6% | | Available-for-sale (AFS) securities | $14,823 | $12,826 | $10,402 | 16% | 43% | | Cash and cash equivalents | $8,094 | $12,614 | $15,430 | -36% | -48% | - The decrease in multi-family and CRE portfolios is in line with the Company's ongoing strategy to reduce its overall exposure to multi-family and CRE loans to diversify the loan portfolio[12](index=12&type=chunk) [Liabilities and Stockholders' Equity](index=4&type=section&id=Liabilities%20and%20Stockholders%27%20Equity) Total deposits decreased 6% QoQ to $69.7 billion, primarily due to a disciplined deposit pricing approach leading to a reduction in high-cost CDs and brokered deposits, with wholesale borrowings also decreasing 8% QoQ Key Liabilities and Equity Balances (in millions) | Item | June 30, 2025 | March 31, 2025 | Dec 31, 2024 | Change QoQ | Change vs. Dec 31, 2024 | | :-------------------------- | :------------ | :------------- | :----------- | :--------- | :----------------------- | | Total Deposits | $69,745 | $73,906 | $75,870 | -6% | -8% | | Certificates of Deposit (CDs) | $24,212 | $25,887 | $27,324 | -6% | -11% | | Wholesale Borrowings | $12,150 | $13,150 | $13,400 | -8% | -9% | | Total Stockholders' Equity | $8,095 | $8,153 | $8,167 | -1% | -1% | - Company paid off **$2.2 billion** in brokered CDs at a weighted average cost of **4.92%** during Q2 2025, contributing to an **11 basis point** quarter-over-quarter improvement in the cost of deposits[16](index=16&type=chunk) Asset Quality Non-accrual loans decreased quarter-over-quarter but increased year-over-year, while the allowance for credit losses saw a slight decline, reflecting ongoing credit management efforts [Non-Accrual Loans](index=15&type=section&id=Non-Accrual%20Loans) Total non-accrual loans, including held-for-sale, decreased 4% QoQ to $3,184 million at June 30, 2025, but were up 7% compared to December 31, 2024, primarily due to higher multi-family non-accruals related to a previously disclosed borrower relationship Non-Accrual Loans (in millions) | Category | June 30, 2025 | March 31, 2025 | Dec 31, 2024 | Change QoQ | Change vs. Dec 31, 2024 | | :------------------------------------ | :------------ | :------------- | :----------- | :--------- | :----------------------- | | Total Non-Accrual Loans (HFI + HFS) | $3,184 | $3,301 | $2,938 | -4% | 7% | | Multi-family Non-Accrual Loans (HFI) | $2,388 | $2,361 | $1,755 | 1% | NM | | CRE Non-Accrual Loans (HFI) | $563 | $589 | $564 | -4% | 0% | | C&I Non-Accrual Loans (HFI) | $123 | $231 | $202 | -47% | -39% | Non-Accrual Loan Ratios | Ratio | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :------------------------------------------ | :------------ | :------------- | :------------ | | NPLs to total loans held for investment | 4.96% | 4.93% | 2.60% | | NPAs to total assets | 3.57% | 3.37% | 1.65% | [Allowance for Credit Losses](index=15&type=section&id=Allowance%20for%20Credit%20Losses) The total allowance for credit losses (ACL) declined slightly to $1,162 million at June 30, 2025, reflecting ongoing credit focus, reductions in total loans HFI, and stabilization in property values and borrower financials Allowance for Credit Losses (in millions) | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | Change QoQ | Change YoY | | :------------------------------------------ | :------------ | :------------- | :------------ | :--------- | :--------- | | Total ACL (incl. unfunded commitments) | $1,162 | $1,215 | $1,326 | -4% | -12% | | ACL on loans and leases | $1,106 | $1,168 | $1,268 | -5% | -13% | Allowance for Credit Losses Ratios | Ratio | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :------------------------------------------ | :------------ | :------------- | :------------ | | Total ACL % of total loans HFI | 1.81% | 1.82% | 1.78% | | ACL on loans and leases % of NPLs | 35% | 36% | 65% | Capital Position Flagstar Financial, Inc. and Flagstar Bank, N.A. maintained strong regulatory capital ratios, exceeding "Well Capitalized" minimums, with the company's CET1 ratio improving to 12.33% at June 30, 2025 Regulatory Capital Ratios (as of June 30, 2025) | Ratio | Flagstar Financial, Inc. | Flagstar Bank, N.A. | Well Capitalized Minimum | | :-------------------------- | :----------------------- | :------------------ | :----------------------- | | Common equity tier 1 ratio | 12.33% | 13.89% | 6.5% | | Tier 1 risk-based capital ratio | 13.12% | 13.89% | 8.00% | | Total risk-based capital ratio | 15.77% | 15.15% | 10.00% | | Leverage capital ratio | 8.61% | 9.11% | 5.00% | Company Information Flagstar Financial, Inc. is a regional bank with $92.2 billion in assets and 360 locations, which will host a conference call on July 25, 2025, to discuss its Q2 2025 performance [About Flagstar Financial, Inc.](index=16&type=section&id=About%20Flagstar%20Financial%2C%20Inc.) Flagstar Financial, Inc. is the parent company of Flagstar Bank, N.A., a large regional bank headquartered in Hicksville, New York, with $92.2 billion in assets, $64.4 billion in loans, $69.7 billion in deposits, and $8.1 billion in total stockholders' equity as of June 30, 2025, operating approximately 360 locations across nine states - Flagstar Financial, Inc. is the parent company of Flagstar Bank, N.A., a large regional bank headquartered in Hicksville, New York[62](index=62&type=chunk) Company Overview (as of June 30, 2025) | Metric | Amount (in billions) | | :---------------------- | :------------------- | | Total Assets | $92.2 | | Total Loans | $64.4 | | Deposits | $69.7 | | Total Stockholders' Equity | $8.1 | - Operates approximately **360 locations** across nine states, with strong footholds in the greater New York/New Jersey metropolitan region and in the upper Midwest, along with a significant presence in fast-growing markets in Florida and the West Coast[62](index=62&type=chunk) [Post-Earnings Release Conference Call](index=16&type=section&id=Post-Earnings%20Release%20Conference%20Call) Flagstar Financial will host a conference call on July 25, 2025, at 8:00 a.m. (Eastern Time) to discuss its Q2 2025 performance, with dial-in and webcast details provided for live access and replay - Conference call to discuss Q2 2025 performance on **July 25, 2025, at 8:00 a.m. (Eastern Time)**[63](index=63&type=chunk) - Access via phone (888) 596-4144 (domestic) or (646) 968-2525 (international), Conference ID: 5857240. Live webcast available at ir.flagstar.com under Events[63](index=63&type=chunk) - Replay available approximately three hours following completion of the call through **11:59 p.m. on July 29, 2025**, by calling (800) 770-2030 (domestic) or (609) 800-9909 (international), Conference ID: 5857240. Webcast archive available through **5:00 p.m. on August 22, 2025**[64](index=64&type=chunk) Forward-Looking Statements This section provides a cautionary statement regarding forward-looking statements, outlining various risks and uncertainties that could cause actual results to differ materially - Forward-looking statements are subject to numerous assumptions, risks, and uncertainties, which change over time, and actual results or future events could differ, possibly materially, from those anticipated in our statements[66](index=66&type=chunk) - Key risks and uncertainties include general economic conditions, changes in interest rates, conditions in securities, credit and financial markets, changes in deposit flows, real estate values, loan portfolio quality, regulatory changes, and impacts of past mergers (Flagstar Bancorp, Signature Bank acquisition)[67](index=67&type=chunk) - The Company does not assume any duty, and does not undertake, to update its forward-looking statements[66](index=66&type=chunk) Consolidated Financial Statements (Unaudited) This section presents the unaudited consolidated balance sheets and statements of (loss) income for Flagstar Financial, Inc. for the specified periods [Consolidated Statements of Condition](index=19&type=section&id=Consolidated%20Statements%20of%20Condition) Presents the unaudited consolidated balance sheet for Flagstar Financial, Inc. as of June 30, 2025, March 31, 2025, and December 31, 2024, detailing assets, liabilities, and stockholders' equity Consolidated Statements of Condition (in millions) | Item | June 30, 2025 | March 31, 2025 | December 31, 2024 | | :------------------------------------------ | :------------ | :------------- | :---------------- | | **Assets:** | | | | | Cash and cash equivalents | $8,094 | $12,614 | $15,430 | | Total securities net of ACL | $14,837 | $12,840 | $10,416 | | Loans held for sale | $319 | $531 | $899 | | Total loans and leases held for investment, net | $63,015 | $65,424 | $67,071 | | Total assets | $92,237 | $97,628 | $100,160 | | **Liabilities:** | | | | | Total deposits | $69,745 | $73,906 | $75,870 | | Total borrowed funds | $13,180 | $14,178 | $14,426 | | Total liabilities | $84,141 | $89,474 | $91,992 | | **Stockholders' Equity:** | | | | | Total stockholders' equity | $8,095 | $8,153 | $8,167 | [Consolidated Statements of (Loss) Income](index=20&type=section&id=Consolidated%20Statements%20of%20%28Loss%29%20Income) Presents the unaudited consolidated statements of (loss) income for the three and six months ended June 30, 2025, and comparative periods, detailing interest income, interest expense, net interest income, provision for credit losses, non-interest income, non-interest expense, and net loss Consolidated Statements of (Loss) Income (in millions, except per share data) - Q2 | Item | Q2 2025 | Q1 2025 | Q2 2024 | | :------------------------------------------ | :------ | :------ | :------ | | Total interest income | $1,143 | $1,164 | $1,548 | | Total interest expense | $724 | $754 | $991 | | Net interest income | $419 | $410 | $557 | | Provision for credit losses | $64 | $79 | $390 | | Total non-interest income | $77 | $80 | $114 | | Total non-interest expense | $513 | $532 | $705 | | Net (loss) income | $(70) | $(100) | $(323) | | Net (loss) income attributable to common stockholders | $(78) | $(108) | $(333) | | Diluted (loss) earnings per common share | $(0.19) | $(0.26) | $(1.14) | Consolidated Statements of (Loss) Income (in millions, except per share data) - H1 | Item | H1 2025 | H1 2024 | | :------------------------------------------ | :------ | :------ | | Total interest income | $2,307 | $3,061 | | Total interest expense | $1,478 | $1,880 | | Net interest income | $829 | $1,181 | | Provision for credit losses | $143 | $705 | | Total non-interest income | $157 | $123 | | Total non-interest expense | $1,045 | $1,404 | | Net (loss) income | $(170) | $(650) | | Net (loss) income attributable to common stockholders | $(186) | $(668) | | Diluted (loss) earnings per common share | $(0.45) | $(2.48) | Reconciliations of Non-GAAP Financial Measures This section provides detailed reconciliations of non-GAAP financial measures, such as tangible common stockholders' equity and adjusted net income, to their most directly comparable GAAP measures for performance evaluation - Non-GAAP measures like adjusted non-interest income, operating expenses, pre-provision net (loss) revenue, net income (loss), and diluted earnings (loss) per share are used to highlight underlying performance and facilitate comparisons by excluding items not indicative of core operating results (e.g., merger and restructuring expenses, impairment charges)[76](index=76&type=chunk) - Average tangible common stockholders' equity, tangible common stockholders' equity, average tangible assets, and tangible book value per share are important measures for evaluating the performance of the business without the impact of intangible assets[77](index=77&type=chunk) Tangible Common Stockholders' Equity & Assets (in millions) | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :------------------------------------------ | :------------ | :------------- | :------------ | | Total Stockholders' Equity (GAAP) | $8,095 | $8,153 | $8,397 | | Less: Other intangible assets | $(433) | $(459) | $(557) | | Less: Preferred stock - Series A and D | $(503) | $(503) | $(503) | | Tangible common stockholders' equity (Non-GAAP) | $7,159 | $7,191 | $7,337 | | Total Assets (GAAP) | $92,237 | $97,628 | $119,055 | | Less: Other intangible assets | $(433) | $(459) | $(557) | | Tangible Assets (Non-GAAP) | $91,804 | $97,169 | $118,498 | Adjusted Net (Loss) Income and EPS (in millions, except per share data) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :------------------------------------------ | :------ | :------ | :------ | | Net (loss) income - GAAP | $(70) | $(100) | $(323) | | Total adjustments (pre-tax) | $25 | $19 | $34 | | Tax effect on adjustments | $(7) | $(5) | $(9) | | Net (loss) income, as adjusted - non-GAAP | $(52) | $(86) | $(298) | | Diluted (Loss) Earnings Per Share - GAAP | $(0.19) | $(0.26) | $(1.14) | | Diluted (Loss) Earnings Per Share, as adjusted - non-GAAP | $(0.14) | $(0.23) | $(1.05) | Net Interest Income Analysis This section details average balances, interest income/expense, and average yields/costs for interest-earning assets and interest-bearing liabilities, illustrating components of net interest income and margin Average Balances, Interest, and Yield/Cost - Q2 2025 (in millions) | Item | Average Balance | Interest | Average Yield/Cost | | :------------------------------------------ | :-------------- | :------- | :----------------- | | Total loans and leases | $65,824 | $840 | 5.12% | | Securities | $15,169 | $170 | 4.48% | | Total interest-earning assets | $93,047 | $1,143 | 4.93% | | Total interest-bearing deposits | $59,989 | $559 | 3.74% | | Borrowed funds | $14,105 | $165 | 4.70% | | Total interest-bearing liabilities | $74,094 | $724 | 3.92% | | Net interest income | - | $419 | - | | Net interest margin | - | - | 1.81% | Average Balances, Interest, and Yield/Cost - H1 2025 (in millions) | Item | Average Balance | Interest | Average Yield/Cost | | :------------------------------------------ | :-------------- | :------- | :----------------- | | Total loans and leases | $67,011 | $1,700 | 5.12% | | Securities | $14,124 | $318 | 4.50% | | Total interest-earning assets | $94,328 | $2,307 | 4.93% | | Total interest-bearing deposits | $60,853 | $1,146 | 3.80% | | Borrowed funds | $14,240 | $332 | 4.71% | | Total interest-bearing liabilities | $75,093 | $1,478 | 3.97% | | Net interest income | - | $829 | - | | Net interest margin | - | - | 1.77% | Consolidated Financial Highlights This section presents key financial ratios, including efficiency ratios and effective tax rates, alongside a summary of asset quality measures for comparative periods [Other Financial Measures](index=28&type=section&id=Other%20Financial%20Measures) This section presents key financial ratios and metrics, including the efficiency ratio (GAAP and adjusted), operating expenses to average assets, and effective tax rate for the three and six months ended June 30, 2025, and comparative periods Other Financial Measures | Metric | Q2 2025 | Q1 2025 | Q2 2024 | H1 2025 | H1 2024 | | :------------------------------------------ | :------ | :------ | :------ | :------ | :------ | | Efficiency ratio (GAAP) | 103.37% | 108.70% | 105.07% | 106.02% | 107.67% | | Efficiency ratio, as adjusted (Non-GAAP) | 95.34% | 101.25% | 95.05% | 98.28% | 88.40% | | Operating expenses to average assets | 1.96% | 2.00% | 2.16% | 0.50% | 0.52% | | Effective tax rate | 12.9% | 17.8% | 23.7% | 15.9% | 19.3% | [Asset Quality Summary](index=28&type=section&id=Asset%20Quality%20Summary) This table summarizes the company's asset quality measures, including non-accrual loans held for investment by type, repossessed assets, and key asset quality ratios as of June 30, 2025, and prior periods Asset Quality Summary (in millions) | Item | June 30, 2025 | March 31, 2025 | December 31, 2024 | | :------------------------------------------ | :------------ | :------------- | :---------------- | | Total non-accrual loans held for investment | $3,180 | $3,280 | $2,615 | | Repossessed assets | $11 | $12 | $14 | | Non-accrual held for investment loans to total loans held for investment | 4.96% | 4.93% | 3.83% | | Allowance for credit losses on loans to non-accrual loans held for investment | 34.78% | 35.61% | 45.93% | Supplemental Financial Information This section provides supplemental details on loans 30 to 89 days past due and a breakdown of net charge-offs (recoveries) by loan type for various periods [Loans 30 to 89 Days Past Due](index=29&type=section&id=Loans%2030%20to%2089%20Days%20Past%20Due) This table presents a breakdown of loans that are 30 to 89 days past due, categorized by loan type, for June 30, 2025, and comparative periods Loans 30 to 89 Days Past Due (in millions) | Loan Type | June 30, 2025 | March 31, 2025 | December 31, 2024 | Change QoQ | Change vs. Dec 31, 2024 | | :-------------------------- | :------------ | :------------- | :---------------- | :--------- | :----------------------- | | Multi-family | $392 | $806 | $749 | -51% | -48% | | Commercial real estate | $115 | $85 | $70 | 35% | 64% | | Commercial and industrial | $38 | $92 | $110 | -59% | -65% | | Total loans 30 to 89 days past due | $604 | $1,020 | $965 | -41% | -37% | [Net Charge-offs (Recoveries) by Loan Type](index=29&type=section&id=Net%20Charge-offs%20%28Recoveries%29%20by%20Loan%20Type) This table provides a detailed summary of net charge-offs (recoveries) by loan type, along with average balances and annualized percentages, for the three and six months ended June 30, 2025, and comparative periods Net Charge-offs (Recoveries) by Loan Type - Q2 2025 (in millions, annualized %) | Loan Type | Net Charge-offs (Recoveries) | Average Balance | % | | :-------------------------- | :--------------------------- | :-------------- | :------ | | Multi-family | $96 | $32,847 | 1.17% | | Commercial real estate | $13 | $11,061 | 0.47% | | Commercial and industrial | $3 | $14,486 | 0.08% | | Total | $117 | $65,100 | 0.72% | Net Charge-offs (Recoveries) by Loan Type - H1 2025 (in millions, annualized %) | Loan Type | Net Charge-offs (Recoveries) | Average Balance | % | | :-------------------------- | :--------------------------- | :-------------- | :------ | | Multi-family | $176 | $33,378 | 1.05% | | Commercial real estate | $15 | $11,251 | 0.27% | | Commercial and industrial | $31 | $14,706 | 0.42% | | Total | $232 | $66,052 | 0.70% |

Core Viewpoint - Flagstar Financial, Inc. reported significant improvements in its financial performance for the second quarter of 2025, with a notable reduction in net losses compared to previous quarters and the same period last year, indicating progress in its transformation strategy into a well-diversified regional bank [3][4][5]. Asset Quality - Non-accrual loans declined by 4% compared to Q1 2025, and criticized loans decreased by $2.2 billion or 15% since December 31, 2024 [1]. - Total allowance for credit losses (ACL) was $1,162 million, representing 1.81% of total loans held for investment, slightly down from 1.82% in the previous quarter [1]. - Net charge-offs (NCOs) remained stable at 0.72% of average loans, with a significant year-over-year decrease in net charge-offs by 66% compared to Q2 2024 [34][36]. Loans and Deposits - Total loans and leases held for investment (HFI) decreased to $64.1 billion, down $2.5 billion or 4% from Q1 2025 [9]. - New credit commitments in commercial and industrial (C&I) lending rose to $1.9 billion, an increase of 80% compared to Q1 2025 [10]. - Total deposits were $69.7 billion, reflecting a decrease of $4.2 billion or 6% from the previous quarter, primarily due to a reduction in high-cost certificates of deposit [12][13]. Capital - The Common Equity Tier 1 (CET1) capital ratio improved to 12.33%, aligning with or exceeding peer group levels [1]. - Book value per common share was reported at $18.28, with tangible book value per share at $17.24 [1]. Profitability - The net loss for Q2 2025 was $70 million, a 30% improvement from Q1 2025 and a 78% improvement from Q2 2024 [3][4]. - Pre-provision net revenue (PPNR) was positive at $9 million, compared to a loss of $23 million in the previous quarter [37]. - Net interest margin (NIM) increased by 7 basis points to 1.81% compared to the prior quarter [1][23]. Non-Interest Income and Expenses - Non-interest income for Q2 2025 was $77 million, down 32% year-over-year, primarily due to the sale of the mortgage servicing/sub-servicing business [40][42]. - Total non-interest expense decreased to $513 million, down 4% from the previous quarter and down 27% year-over-year [44][48].

Core Viewpoint - Flagstar Financial, Inc. has announced a merger agreement with Flagstar Bank, where the Company will merge into the Bank, simplifying its organizational structure and operations [1][2][4] Group 1: Merger Details - The merger will result in Flagstar Bank, N.A. as the surviving entity, with its common stock continuing to trade under the ticker symbol "FLG" on the NYSE [1] - The reorganization aims to reduce costs, streamline operations, and eliminate redundant corporate activities [2] Group 2: Approval Process - The merger is subject to regulatory and shareholder approval, with a proxy statement expected to be filed with the SEC in Q3 2025 [3] - The Company anticipates completing the merger before the end of 2025, assuming all approvals are received [3] Group 3: Company Overview - As of March 31, 2025, Flagstar Financial, Inc. had $97.6 billion in assets, $67.1 billion in loans, $73.9 billion in deposits, and total stockholders' equity of $8.2 billion [4] - Flagstar Bank operates approximately 400 locations across nine states, with a strong presence in the New York/New Jersey metropolitan area and significant markets in Florida and the West Coast [4]

Core Viewpoint - Flagstar Financial (FLG) is expected to report a year-over-year increase in earnings despite lower revenues, with the consensus outlook being crucial for assessing the company's earnings picture [1][2]. Earnings Expectations - The upcoming earnings report is anticipated to be released on July 25, with a consensus EPS estimate of a loss of $0.12 per share, reflecting an 88.6% year-over-year change. Revenues are projected to be $527.48 million, down 21.4% from the previous year [3][2]. - The consensus EPS estimate has been revised 26.41% higher in the last 30 days, indicating a reassessment by analysts [4]. Earnings Surprise Prediction - The Zacks Earnings ESP model shows a positive Earnings ESP of +9.47% for Flagstar Financial, suggesting analysts have become more optimistic about the company's earnings prospects [12]. - The stock currently holds a Zacks Rank of 3, indicating a hold position, which combined with the positive Earnings ESP suggests a likelihood of beating the consensus EPS estimate [12]. Historical Performance - In the last reported quarter, Flagstar Financial was expected to post a loss of $0.26 per share but actually reported a loss of -$0.23, resulting in a surprise of +11.54% [13]. - Over the past four quarters, the company has beaten consensus EPS estimates two times [14]. Industry Comparison - Midland States Bancorp (MSBI), another player in the Zacks Banks - Northeast industry, is expected to report an EPS of $0.63 for the same quarter, indicating a year-over-year change of +215% with revenues expected to be $77.4 million, up 6.5% from the previous year [18]. - The consensus EPS estimate for Midland States Bancorp has been revised 1.5% higher, but a lower Most Accurate Estimate results in an Earnings ESP of -3.18%, making it difficult to predict a beat on the consensus EPS estimate [19].

Core Viewpoint - Flagstar Bank is significantly expanding its Specialized Industries Group, which consists of 12 distinct industry verticals aimed at enhancing client service and driving growth through tailored financial solutions [1][2][3] Group Overview - The Specialized Industries Group is led by Adam Feit and is integral to Flagstar's growth strategy, emphasizing industry expertise and relationship-driven client service [2][3] - The group aims to provide strategic guidance, capital access, and product support tailored to each client's business model and market conditions [2] Key Industry Verticals - **Subscription Finance**: Focuses on private equity and venture capital, led by Dan Koch, who has over 20 years of experience in fund finance [4][5] - **Technology, Media & Communications (TMC)**: Led by David Sozio, this vertical leverages over 25 years of industry experience to support clients across the TMC ecosystem [6][7] - **Entertainment**: Managed by Crockett Woodruff, this team specializes in financing for film, TV, music, and live events, drawing on over 20 years of experience [8][9] - **Sports**: Led by Amit Mahajan, this vertical focuses on financing solutions for professional sports leagues and teams, with over 27 years of industry experience [10][11] - **Power & Renewables**: Jerry Wells leads this team, which specializes in financing clean energy projects, leveraging over 15 years of experience [12][13] - **Oil & Gas**: Managed by Michael Dombroski, this vertical provides capital solutions for energy companies, with over 20 years of experience [14][15] - **Insurance**: Led by David Albanesi, this team offers tailored financial solutions for insurance firms, drawing on 30 years of industry experience [16][17] Additional Verticals - Other active verticals within the Specialized Industries Group include Sponsor Finance, Lender Finance, Franchise Finance, Healthcare Finance, and Asset-Based Lending (ABL), each led by seasoned experts [18] Company Overview - Flagstar Financial, Inc. is headquartered in Hicksville, New York, and as of March 31, 2025, had $97.6 billion in assets, $67.1 billion in loans, and $73.9 billion in deposits [19]

Group 1 - The Conservative Income Portfolio aims to target value stocks with high margins of safety while reducing volatility through well-priced options [1] - The Enhanced Equity Income Solutions Portfolio is designed to generate yields of 7-9% while minimizing volatility [1] - The Covered Calls Portfolio focuses on lower volatility income investing with an emphasis on capital preservation [2][3] Group 2 - Trapping Value consists of a team of analysts with over 40 years of combined experience in generating options income and capital preservation [3] - The investment group operates the Conservative Income Portfolio in collaboration with Preferred Stock Trader, featuring two income-generating portfolios and a bond ladder [3]

Summary of Flagstar Financial (FLG) 2025 Conference Call Company Overview - **Company**: Flagstar Financial (FLG) - **Event**: 2025 Conference on June 11, 2025 Key Industry Insights - **Strategic Vision**: Flagstar aims to be one of the best-performing regional banks in the U.S. within three to five years, focusing on customer experience and diversification across business lines [3][4] - **Commercial Real Estate (CRE) Focus**: The bank is actively managing its CRE portfolio, with significant paydowns from substandard loans, indicating improving credit quality [5][6][7] - **C&I Lending Strategy**: Flagstar is expanding its Commercial and Industrial (C&I) lending, with a focus on specialty lending verticals and mid-market clients [21][22][24] Financial Performance and Projections - **Financial Metrics**: By 2027, Flagstar aims to align its financial metrics with peers, targeting a loan-to-deposit ratio of about 80% [51][52] - **NIM Improvement**: The bank expects its Net Interest Margin (NIM) to improve to 2.8% to 2.9% by 2027, driven by the resetting of multifamily loans and effective management of deposit costs [58][59] Risk Management and Credit Quality - **Credit Quality Improvement**: The bank has seen a reduction in criticized assets and charge-offs, with expectations for continued improvement [7][14] - **Non-Accrual Loans**: Flagstar is managing over $3 billion in non-accrual loans, with strategies in place to convert these to performing loans [55][56] Operational Efficiency - **Cost Reduction Initiatives**: The bank is targeting $600 million in net expense reductions while investing in risk governance and C&I growth [35][36][39] - **Employee Reduction**: The workforce has been reduced from 9,000 to approximately 5,700, contributing to cost savings [36] Deposit Strategy - **Core Deposit Growth**: Flagstar is focusing on growing core deposits while reducing reliance on wholesale funding, having paid down $2 billion in brokered deposits [43][44] - **Retail CDs**: The bank has $4.9 billion in retail CDs maturing, which will help lower deposit costs as they reset [45] Regulatory Environment - **Regulatory Changes**: The bank is optimistic about the new regulatory environment, expecting more pragmatic approaches and potential increases in capital thresholds for Category 4 banks [69][73] Conclusion - **Execution of Strategy**: Flagstar is on track with its strategic goals, focusing on improving credit quality, expanding C&I lending, and enhancing operational efficiency while managing regulatory changes effectively [63][64]