Core Insights - Flagstar Bank reported a revenue of $557 million for the quarter ended December 2025, reflecting a year-over-year decline of 10.9% but exceeding the Zacks Consensus Estimate by 4.29% [1] - The earnings per share (EPS) was $0.06, a significant improvement from -$0.34 in the same quarter last year, resulting in an EPS surprise of 143.9% compared to the consensus estimate of $0.03 [1] Financial Performance Metrics - Net Interest Margin was reported at 2.1%, surpassing the six-analyst average estimate of 2% [4] - The Efficiency Ratio stood at 91.3%, higher than the five-analyst average estimate of 86% [4] - Book value per common share (GAAP) was $18.37, exceeding the average estimate of $17.07 based on five analysts [4] - Average Balances of Interest earning assets were $86.61 billion, slightly below the estimated $87.49 billion by four analysts [4] - Net charge-offs to average loans were 0.3%, better than the four-analyst average estimate of 0.4% [4] - Leverage Capital Ratio was reported at 9.2%, matching the average estimate based on two analysts [4] - Net Interest Income was $467 million, above the average estimate of $449.37 million from six analysts [4] - Total non-interest income was $90 million, exceeding the six-analyst average estimate of $84.31 million [4] - Fee income was $22 million, below the average estimate of $25.19 million from four analysts [4] - Bank-owned life insurance income was $17 million, significantly higher than the average estimate of $11.28 million [4] - Other non-interest income was $33 million, lower than the average estimate of $37.83 million from three analysts [4] - Net gain on loan sales and securitizations was $8 million, above the three-analyst average estimate of $6.8 million [4] Stock Performance - Flagstar Bank's shares have returned +7.6% over the past month, outperforming the Zacks S&P 500 composite's +0.9% change [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Financial Data and Key Metrics Changes - The company reported adjusted net income of $30 million or $0.06 per diluted share in Q4 2025, compared to a net loss of $0.07 per diluted share in the previous quarter [5][6] - The unadjusted pre-provision, pre-tax net revenue improved by $51 million quarter-over-quarter, while adjusted pre-provision, pre-tax net revenue improved by $45 million versus Q3 [14] - The net interest margin (NIM) expanded by 14 basis points quarter-over-quarter, reaching 2.14%, including a one-time hedge gain of approximately $20 million [17][19] Business Line Data and Key Metrics Changes - The company experienced a 2% growth in net commercial and industrial (C&I) loans on a linked quarter basis, with a total commitment increase of 28% to $3 billion and originations rising by 22% to $2.1 billion [7][10] - The overall commercial real estate (CRE) exposure was reduced by $2.3 billion, with a concentration ratio now below 400% [7][22] - The multifamily portfolio declined by 13% or $4.3 billion year-over-year, with a reserve coverage of 1.83% [22][24] Market Data and Key Metrics Changes - Total CRE balances decreased by $12.1 billion or 25% since year-end 2023, aiding the strategy to diversify the loan portfolio [22] - The company reported a significant reduction in criticized and classified loans, down $330 million quarter-over-quarter, and a decrease in non-accrual loans by $267 million [26] Company Strategy and Development Direction - The company aims to solidify its balance sheet and reposition for growth, focusing on diversifying the loan portfolio and reducing reliance on wholesale funding [9][10] - The strategic initiatives over the past couple of years are expected to drive sustainable growth and profitability going forward [10][30] - The company plans to generate deposit growth across various business lines while maintaining discipline on pricing [8][9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the bank's earning power continuing to strengthen in 2026, driven by growth in net interest income and margin expansion [8][30] - The management team highlighted the importance of proactive management of CRE exposure and improving the bank's credit profile [8][30] - The company anticipates a full year of profitability in 2026, with adjusted EPS forecasted to be in the range of $0.65-$0.70 [16] Other Important Information - The company reduced brokered deposits by almost $8 billion during the year, enhancing its liquidity position [10][19] - The CET1 capital ratio increased by almost 400 basis points, now ranking among the highest capitalized regional banks [9][18] Q&A Session Summary Question: Can you talk about the drivers behind the lowered net interest income guidance? - Management indicated that higher payoff activity, particularly related to multifamily and CRE loans, was the primary driver for the reduction [34][35] Question: How comfortable are you with funding loan growth through core deposit growth? - Management expressed confidence in core deposit growth, leveraging bank branches and new C&I relationships to drive deposits [46][50] Question: What are the prospects for capital return and stock buybacks? - Management noted that the board will consider how to deploy excess capital based on balance sheet growth and non-performing loans [52][53] Question: Can you provide updates on the rent-regulated portfolio and potential impacts from rent freezes? - Management stated that there is ongoing dialogue regarding rent regulations and emphasized that they have not seen a decline in liquidity in the multifamily portfolio [71][76] Question: What is the expected roll-on yield for new C&I and CRE loans? - New C&I loans are coming on at a spread to SOFR of 175 to 300 basis points, while new CRE loans are at 200-225 basis points [89]

Flagstar Financial (NYSE:FLG) Q4 2025 Earnings call January 30, 2026 08:00 AM ET Company ParticipantsAnthony Elian - Equity ResearchChris McGratty - Head of US Bank ResearchChristopher Marinac - Director of ResearchDavid Smith - Head of Consumer LendingJanet Lee - Director of US Mid Cap Banks Equity ResearchJon Arfstrom - Managing Director and Associate Director of US ResearchJoseph Otting - Chairman, President and CEOLee Smith - SVP, President and CFOSal DiMartino - Director of Investor RelationsConference ...

Financial Data and Key Metrics Changes - The company reported adjusted net income of $30 million or $0.06 per diluted share in Q4 2025, compared to a net loss of $0.07 per diluted share in the previous quarter [4] - Pre-Provision Net Revenue increased by $45 million, with positive Operating Leverage of approximately 900 basis points [5] - The CET1 capital ratio increased by almost 400 basis points to 12.83%, ranking among the highest capitalized regional banks [7][12] Business Line Data and Key Metrics Changes - Net C&I loan growth was up 2% on a linked quarter basis, or about 9% on an analyzed basis [5] - The company reduced overall CRE exposure by $2.3 billion, resulting in a CRE concentration ratio now falling below 400 [5] - C&I lending commitments increased by 28% to $3 billion, while originations increased by 22% to $2.1 billion [8] Market Data and Key Metrics Changes - Total CRE balances declined by $12.1 billion or 25% since year-end 2023, aiding the strategy to diversify the loan portfolio [18] - The multifamily portfolio declined 13% or $4.3 billion year-over-year, with a reserve coverage of 1.83% [18] - Approximately 53% of the $9.2 billion New York City multifamily loans are pass-rated, while 47% are criticized or classified [20] Company Strategy and Development Direction - The company aims to transform into one of the best-performing regional banks with a diversified balance sheet and revenue streams [4] - Focus on further improving the credit profile by managing CRE exposure and diversifying the loan portfolio through growth in non-CRE loans [6] - Plans to generate deposit growth across various business lines while maintaining discipline on pricing [6] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in continued profitability in 2026, driven by growth in net interest income and margin expansion [6] - The company is optimistic about the trajectory of adjusted EPS, forecasting it to be in the $0.65-$0.70 range for 2026 [13] - Management highlighted the importance of proactive management of credit quality and the potential for further capital deployment [46] Other Important Information - The company reduced brokered deposits by almost $8 billion during the year [7] - The company expects to close the sale of properties related to a bankruptcy case before the end of Q1 2026 [72] - The company has a strong liquidity position, with cash and securities increasing to 25% of total assets [7] Q&A Session Summary Question: Drivers behind the lowered NII guidance - Management indicated that higher payoff activity, particularly in multifamily and CRE loans, was the primary driver for the lowered NII guidance [29][30] Question: Confidence in funding for loan growth - Management expressed confidence in core deposit growth, leveraging C&I relationships and private client banking to drive deposits [40][43] Question: Excess capital deployment prospects - Management noted that the board will consider how to deploy excess capital, including potential stock buybacks, depending on balance sheet growth and credit quality improvements [46] Question: Updates on the New York multifamily portfolio - Management is actively monitoring the portfolio and has not seen a decline in liquidity, despite potential rent freezes [64][67] Question: Update on the borrower in bankruptcy - Management confirmed that the auction process for the bankruptcy case was completed and expected to close soon, with no additional charge-offs anticipated [72][75]

Core Viewpoint - Flagstar Bank reported quarterly earnings of $0.06 per share, exceeding the Zacks Consensus Estimate of $0.03 per share, and showing a significant improvement from a loss of $0.34 per share a year ago, resulting in an earnings surprise of +143.90% [1] Financial Performance - The bank posted revenues of $557 million for the quarter ended December 2025, surpassing the Zacks Consensus Estimate by 4.29%, although this represents a decline from year-ago revenues of $625 million [2] - Over the last four quarters, Flagstar Bank has exceeded consensus EPS estimates two times and topped consensus revenue estimates two times [2] Stock Performance - Flagstar Bank shares have increased by approximately 7.6% since the beginning of the year, outperforming the S&P 500's gain of 1.8% [3] Future Outlook - The company's earnings outlook will be crucial for future stock performance, with current consensus EPS estimates at $0.05 for the coming quarter and $0.63 for the current fiscal year, with revenues expected to be $565.9 million and $2.54 billion respectively [7] - The estimate revisions trend for Flagstar Bank was mixed ahead of the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6] Industry Context - The Banks - Southeast industry, to which Flagstar Bank belongs, is currently ranked in the top 16% of over 250 Zacks industries, suggesting a favorable environment for performance [8]

Forward-Looking Information Fourth Quarter 2025 Results January 30, 2026 Cautionary Statement This earnings presentation and the associated conference call may include forward‐looking statements by us and our authorized officers pertaining to such matters as our goals, beliefs, intentions, and expectations regarding, among other things: (a) revenues, earnings, loan production, asset quality, liquidity position, capital levels, risk analysis, divestitures, acquisitions, and other material transactions, among ...

Financial Performance - Flagstar Bank reported net income attributable to common stockholders of $21 million, or $0.05 per diluted share, for Q4 2025, compared to a net loss of $45 million, or $0.11 per diluted share, in Q3 2025[5]. - For the full year 2025, the net loss attributable to common stockholders was $210 million, or $0.50 per diluted share, compared to a net loss of $1,153 million, or $3.49 per diluted share, in 2024[6]. - The diluted loss earnings per share (GAAP) for the year ended December 31, 2025, was $(0.47), compared to $(3.49) for the year ended December 31, 2024[89]. - The net (loss) income (GAAP) for the year ended December 31, 2025, was $29 million, a significant improvement from $(1,118) million in 2024[91]. Loan and Credit Quality - Non-accrual loans decreased by $267 million, or 8%, compared to Q3 2025, while criticized/classified loans declined by $330 million, or 2%[2]. - Total non-accrual loans held for investment decreased by 8% to $2,975 million compared to $3,241 million in Q3 2025, and increased by 14% from $2,615 million in Q4 2024[101]. - Net charge-offs for Q4 2025 totaled $46 million, down 37% from Q3 2025 and down 79% from Q4 2024, representing 0.30% of average loans outstanding[34]. - For the year ended December 31, 2025, total net charge-offs were $351 million, with a charge-off rate of 0.55%, down from $892 million and 1.16% in 2024[107]. - The provision for credit losses in Q4 2025 decreased by $35 million or 92% to $3 million compared to Q3 2025, and down $142 million or 98% year-over-year[33]. Revenue and Income - Total revenues for the year ended 2025 were $2.062 billion, down 19% from $2.552 billion in 2024[39]. - Non-interest income for Q4 2025 was $90 million, down 4% from Q3 2025 and down 45% from Q4 2024[42]. - The year-over-year decline in non-interest income was primarily due to the sale of the Bank's mortgage servicing/subservicing business[43]. - For the year ended 2025, net interest income was $1.721 billion, a decrease of 20% from $2.152 billion in 2024[39]. Expenses and Efficiency - Operating expenses decreased by 3% compared to Q3 2025 and were down 26% for the full year 2025[3]. - Total non-interest expense decreased by 2% to $509 million compared to $522 million in the previous quarter and down 29% from $718 million a year ago[78]. - For the year ended 2025, total non-interest expense was $2.1 billion, down $762 million or 27% compared to 2024[51]. - Efficiency ratio improved to 91.27% for Q4 2025, down from 100.46% in Q3 2025 and 114.98% in Q4 2024[98]. Capital and Assets - The bank's CET1 capital ratio improved to 12.83%, with excess capital of $1.4 billion after tax[2]. - Total assets were $87.5 billion, with total stockholders' equity of $8.1 billion as of December 31, 2025[65]. - Total assets decreased by 5% to $87,512 million compared to $91,668 million in the previous quarter and down 13% from $100,160 million a year ago[76]. - The common equity tier 1 ratio was 12.83% as of December 31, 2025, up from 11.83% a year earlier[64]. Deposits and Funding - Total deposits were $66.0 billion, a decrease of $3.2 billion, or 5%, linked-quarter and down $9.9 billion, or 13%, year-over-year[17]. - The bank reduced brokered deposits by $7.8 billion, or 77%, year-to-date, leading to a 26 basis point improvement in the cost of deposits[18]. - Average interest-bearing deposits decreased by $1.6 billion or 3% to $56 billion from Q3 2025, and declined $9.9 billion or 15% year-over-year[26]. Future Outlook - The bank will host a conference call on January 30, 2026, to discuss its fourth quarter 2025 performance[66]. - The merger with Flagstar Bancorp completed in December 2022 and the acquisition of portions of the former Signature Bank in March 2023 may not yield expected benefits or synergies[71].

Core Insights - Flagstar Bank returned to profitability in Q4 2025, reporting net income of $29 million compared to a net loss of $36 million in Q3 2025 and a net loss of $188 million in Q4 2024 [1][2] - The bank's adjusted net income attributable to common stockholders was $30 million or $0.06 per diluted share in Q4 2025, compared to a net loss of $31 million or $0.07 per diluted share in Q3 2025 [2][3] - For the full year 2025, Flagstar reported a net loss of $177 million, significantly improved from a net loss of $1,118 million in 2024 [1][2] Financial Performance - Operating expenses decreased by 3% quarter-over-quarter and 26% year-over-year, reflecting strong expense management [1][2] - Net interest margin (NIM) increased by 23 basis points to 2.14% quarter-over-quarter, driven by a decline in the cost of funds [1][3] - Total loans and leases held for investment decreased to $60.7 billion, down 3% from Q3 2025 and down 11% year-over-year [2][3] Asset Quality - Non-accrual loans decreased by 8% compared to Q3 2025, with net charge-offs improving to 0.30% of average loans [1][2] - The allowance for credit losses (ACL) was $1.1 billion, or 1.79% of total loans held for investment [1][5] - Criticized/classified loans declined by 2% compared to Q3 2025 and by 19% since December 31, 2024 [1][5] Capital Position - The common equity tier 1 (CET1) capital ratio improved to 12.83%, exceeding regulatory minimums [5] - Tangible book value per share was reported at $15.82, with excess capital of $1.4 billion after tax [1][5] - Total stockholders' equity stood at $8.1 billion as of December 31, 2025 [5] Strategic Focus - The bank has strategically reduced its commercial real estate (CRE) exposure, with CRE loans declining by 8% compared to Q3 2025 [1][2] - C&I lending commitments increased by 28% to $3 billion, with originations up 22% to $2.1 billion [1][2] - The bank added over 250 experienced bankers to enhance its C&I banking platform, contributing to loan growth in specialized industries and regional commercial banking [1][2]

Core Insights - The partnership between Cognizant and Flagstar Bank marks a significant milestone in Flagstar's technology transformation, enhancing client experiences and operational efficiency [1][2][3] Group 1: Partnership Overview - Cognizant has acted as a strategic partner to Flagstar, supporting its multi-year technology transformation initiative named "Simple, Sophisticated" (S2) [2][3] - The S2 initiative aims to create a modern technology platform that drives innovation, enhances client experiences, and supports employees while managing risks [2][4] Group 2: Impact on Operations - The partnership has integrated Cognizant into Flagstar's technology and operations ecosystem, delivering services across various banking sectors including Commercial & Industrial Banking, Consumer Banking, and Risk & Compliance [3][4] - Establishment of co-branded development centers in Hyderabad, India, and Manila, Philippines, reflects the commitment to building a seamless operational environment [3] Group 3: Efficiency and Client Satisfaction - Cognizant's expertise has streamlined Flagstar's tools and processes, leading to improved efficiency and reduced costs [4] - The partnership has resulted in higher customer satisfaction scores, indicating a positive impact on Flagstar's stakeholders [4] Group 4: Future Initiatives - Both companies are focused on innovation, with plans to explore an AI Center of Excellence in India to unlock new opportunities in artificial intelligence [5] - The collaboration aims to position Flagstar at the forefront of technology-driven banking solutions [5] Group 5: Social Responsibility - Flagstar and Cognizant have partnered in a social outreach program to provide software education to under-resourced communities in rural areas around Hyderabad [6] Group 6: Company Background - As of September 30, 2025, Flagstar Financial, Inc. had $91.7 billion in assets, $63.2 billion in loans, and $69.2 billion in deposits, operating approximately 340 locations across nine states [8][9]

Core Viewpoint - Flagstar Bank is expected to report a year-over-year increase in earnings despite lower revenues, with the actual results being crucial for stock price movement [1][2]. Earnings Expectations - The upcoming earnings report is anticipated to be released on January 30, with a consensus EPS estimate of $0.02 per share, reflecting a year-over-year increase of +105.9% [3]. - Revenues are projected to be $534.09 million, which is a decrease of 14.6% from the same quarter last year [3]. Estimate Revisions - The consensus EPS estimate has been revised down by 7.45% over the last 30 days, indicating a reassessment by analysts [4]. - The Most Accurate Estimate for Flagstar Bank is higher than the Zacks Consensus Estimate, resulting in an Earnings ESP of +1.59% [12]. Earnings Surprise Prediction - The Zacks Earnings ESP model suggests that a positive Earnings ESP reading is a strong predictor of an earnings beat, especially when combined with a Zacks Rank of 1, 2, or 3 [10]. - Flagstar Bank currently holds a Zacks Rank of 3, indicating a likelihood of beating the consensus EPS estimate [12]. Historical Performance - In the last reported quarter, Flagstar Bank was expected to post a loss of $0.06 per share but actually reported a loss of -$0.07, resulting in a surprise of -16.67% [13]. - Over the past four quarters, the company has beaten consensus EPS estimates two times [14]. Market Context - The performance of Flagstar Bank's stock may be influenced by broader market factors, as earnings beats or misses alone do not guarantee stock price movement [15][17]. - Investors are encouraged to consider the Earnings ESP and Zacks Rank when evaluating potential investments ahead of earnings releases [16].