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]

[Financial Highlights](index=6&type=section&id=Financial%20Highlights) Flagstar reported a reduced net loss in Q1 2025, reflecting strategic portfolio reductions and cost optimization amidst a challenging interest rate environment [Overall Performance](index=6&type=section&id=Overall%20Performance) Flagstar reported a reduced net loss in Q1 2025, reflecting strategic portfolio reductions and cost optimization amidst a challenging interest rate environment Key Financial Metrics | Financial Metric | Q1 2025 | Q4 2024 | Q1 2024 | | :--- | :--- | :--- | :--- | | **Net (Loss)** | ($100M) | ($188M) | ($327M) | | **Net (Loss) Attributable to Common** | ($108M) | ($196M) | ($335M) | | **Diluted (Loss) Per Share** | ($0.26) | ($0.47) | ($1.36) | | **Net Interest Income** | $410M | $461M | $624M | | **Net Interest Margin (NIM)** | 1.74% | 1.73% | 2.28% | - The net loss in Q4 2024 was impacted by an **$89 million** gain on the sale of Mortgage Operations, a **$77 million** long-term asset impairment, and **$31 million** in severance costs[23](index=23&type=chunk) - As of March 31, 2025, the company had total assets of **$97.6 billion**, loans of **$67.1 billion**, and deposits of **$73.9 billion**[19](index=19&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=6&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides a detailed analysis of the company's financial performance, condition, and risk management strategies for the period [Results of Operations](index=6&type=section&id=Results%20of%20Operations) Operating results reflect a reduced net loss, driven by lower net interest income from strategic portfolio reductions, decreased provision for credit losses, and reduced non-interest expenses [Net Interest Income](index=6&type=section&id=Net%20Interest%20Income) Net interest income declined quarter-over-quarter and year-over-year due to strategic loan reductions and lower interest-earning asset balances Net Interest Income and Margin Trends | Metric | Q1 2025 ($ millions) | Q4 2024 ($ millions) | Q1 2024 ($ millions) | | :--- | :--- | :--- | :--- | | **Net Interest Income** | $410M | $461M | $624M | | **Net Interest Margin (NIM)** | 1.74% | 1.73% | 2.28% | - Net interest income decreased by **$51 million** quarter-over-quarter, primarily due to lower average balances on mortgage, CRE, and C&I loans from strategic reductions, and lower average interest-earning cash, partly offset by paying off higher-cost brokered CDs[29](index=29&type=chunk)[30](index=30&type=chunk) - Compared to the prior year, net interest income fell by **$214 million**, driven by the sale of the Mortgage Operations and warehouse lending portfolio, strategic loan reductions, and lower interest rates[29](index=29&type=chunk)[31](index=31&type=chunk) [Provision for Credit Losses](index=9&type=section&id=Provision%20for%20Credit%20Losses) The provision for credit losses significantly decreased due to lower net charge-offs and strategic loan portfolio reductions Provision for Credit Losses Trends | Period | Provision for Credit Losses ($ millions) | Change from Q4'24 | Change from Q1'24 | | :--- | :--- | :--- | :--- | | **Q1 2025** | $79M | -46% | -75% | | **Q4 2024** | $145M | | | | **Q1 2024** | $315M | | | - The decrease in provision was primarily due to lower net charge-offs, ongoing credit reviews, and the receipt of recent appraisals, with the Allowance for Credit Losses (ACL) balance also decreasing due to strategic portfolio reductions[33](index=33&type=chunk)[34](index=34&type=chunk) [Non-Interest Income](index=9&type=section&id=Non-Interest%20Income) Non-interest income declined quarter-over-quarter due to a one-time gain in the prior period but increased year-over-year due to a non-recurring prior-year reduction Non-Interest Income Breakdown | Category | Q1 2025 ($ millions) | Q4 2024 ($ millions) | Q1 2024 ($ millions) | | :--- | :--- | :--- | :--- | | Fee income | $22M | $33M | $34M | | Net gain on mortgage/servicing sale | $0M | $89M | $0M | | Net gain on loan sales | $13M | $5M | $20M | | Bargain purchase gain | $0M | $0M | ($121M) | | **Total Non-Interest Income** | **$80M** | **$164M** | **$9M** | - The **$84 million** quarter-over-quarter decrease was primarily due to the non-recurrence of an **$89 million** gain from the sale of Mortgage Operations in Q4 2024[36](index=36&type=chunk) - The **$71 million** year-over-year increase was mainly due to the non-recurrence of a **$121 million** reduction in the Signature Transaction bargain purchase gain recorded in Q1 2024[37](index=37&type=chunk) [Non-Interest Expense](index=10&type=section&id=Non-Interest%20Expense) Non-interest expenses significantly decreased quarter-over-quarter and year-over-year due to cost optimization and non-recurring prior-period charges Non-Interest Expense Breakdown | Category | Q1 2025 ($ millions) | Q4 2024 ($ millions) | Q1 2024 ($ millions) | | :--- | :--- | :--- | :--- | | Compensation and benefits | $244M | $302M | $333M | | General and administrative | $147M | $252M | $186M | | **Total Non-Interest Expense** | **$532M** | **$718M** | **$699M** | - Expenses decreased by **$186 million** quarter-over-quarter, driven by the non-recurrence of a **$77 million** asset impairment charge, lower compensation costs from optimization actions, and lower FDIC insurance costs[39](index=39&type=chunk) - Year-over-year expenses decreased by **$167 million** due to lower compensation and benefits, reduced general and administrative costs following the sale of the Mortgage Business, and lower merger-related expenses[40](index=40&type=chunk) [Financial Condition](index=11&type=section&id=Financial%20Condition) The balance sheet contracted with reduced assets, loans, and deposits, reflecting strategic portfolio reductions, while asset quality metrics showed some stress despite strong liquidity [Loans and Leases](index=11&type=section&id=Loans%20and%20Leases) Total loans held for investment decreased due to strategic reductions in Multi-Family, CRE, and C&I portfolios, with a significant portion of MF loans in New York State Loan Portfolio Composition and Changes | Loan Portfolio | Amount (Mar 31, 2025, $ billions) | % of Total HFI | Change from Dec 31, 2024 ($ millions) | | :--- | :--- | :--- | :--- | | Multi-family (MF) | $33.4B | 50.2% | ($656M) | | Commercial Real Estate (CRE) | $11.5B | 17.3% | ($326M) | | Commercial & Industrial (C&I) | $14.7B | 22.1% | ($634M) | | **Total Loans Held for Investment (HFI)** | **$66.6B** | **100.0%** | **($1.7B)** | - The reduction in loan portfolios is part of a continued strategy to diversify the loan portfolio by reducing exposure to MF, CRE, and non-core C&I loans[46](index=46&type=chunk)[49](index=49&type=chunk)[55](index=55&type=chunk) - Within the Multi-Family portfolio, **$18.6 billion (56%)** is secured by properties in New York State, many subject to rent regulation, with **$11.5 billion** having interest-only payments as of March 31, 2025[50](index=50&type=chunk)[52](index=52&type=chunk) [Asset Quality](index=15&type=section&id=Asset%20Quality) Asset quality metrics showed an increase in non-accrual loans, primarily due to a single large Multi-Family borrower, while the Allowance for Credit Losses decreased Key Asset Quality Ratios | Asset Quality Metric | Mar 31, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Non-accrual loans to total HFI loans | 4.93% | 3.83% | | Non-performing assets to total assets | 3.37% | 2.62% | | ACL on loans to non-accrual loans | 35.61% | 45.93% | | ACL on loans to total HFI loans | 1.75% | 1.76% | - Total non-accrual loans increased by **$665 million** to **$3.28 billion** quarter-over-quarter, primarily due to a single large Multi-Family borrower relationship being classified as non-accrual[71](index=71&type=chunk)[72](index=72&type=chunk) - The Allowance for Credit Losses (ACL) on loans decreased by **$33 million** to **$1.17 billion**, mainly due to lower net charge-offs and strategic loan portfolio reductions, partially offset by a negatively trending macroeconomic environment[79](index=79&type=chunk) - Net charge-offs for Q1 2025 were **$115 million**, up from **$81 million** in Q1 2024, with Multi-Family charge-offs increasing to **$80 million**[82](index=82&type=chunk) [Deposits and Borrowed Funds](index=19&type=section&id=Deposits%20and%20Borrowed%20Funds) Total deposits and borrowed funds decreased, primarily due to the runoff of higher-cost brokered CDs and repayment of FHLB advances Deposits and Borrowed Funds Overview | Liability | Amount (Mar 31, 2025, $ billions) | Change from Dec 31, 2024 ($ billions) | | :--- | :--- | :--- | | **Total Deposits** | **$73.9B** | **($2.0B)** | | - Brokered Deposits | $8.3B | ($1.9B) | | - Uninsured Deposits | $13.0B | N/A | | **Total Borrowed Funds** | **$14.2B** | **($0.2B)** | - The decrease in total deposits was primarily due to the payoff of brokered certificates of deposit and a reduction in custodial deposits following the sale of the Mortgage Operations[87](index=87&type=chunk) - Total borrowed funds decreased mainly due to the repayment of **$250 million** of FHLB advances[92](index=92&type=chunk) [Risk Management](index=21&type=section&id=Risk%20Management) The company maintains a robust risk management framework, with stable liquidity, manageable interest rate risk, and a recent Moody's rating upgrade, despite a slight increase in classified loans - Classified loans stood at **$11.6 billion** at March 31, 2025, a slight increase from **$11.5 billion** at year-end 2024, primarily attributed to one large relationship being placed on non-accrual status[101](index=101&type=chunk) Liquidity Position | Liquidity Source | Mar 31, 2025 ($ billions) | Dec 31, 2024 ($ billions) | | :--- | :--- | :--- | | Cash at Federal Reserve | $12.0B | $15.0B | | High-quality Liquid Assets | $10.6B | $7.9B | | **Total On-Balance Sheet Liquidity** | **$22.6B** | **$22.9B** | | FHLB Available Capacity | $5.8B | $6.6B | | Discount Window Available Capacity | $1.6B | $0.4B | | **Total Liquidity** | **$30.0B** | **$29.9B** | - During Q1 2025, Moody's upgraded the company's Long-Term Issuer rating from **B2 to B1**[112](index=112&type=chunk) Interest Rate Sensitivity Analysis | Interest Rate Shock | Estimated % Change in EVE | Estimated % Change in NII (12-mo) | | :--- | :--- | :--- | | +100 bps | (2.1)% | (1.3)% | | +200 bps | (5.1)% | (2.9)% | | -100 bps | 2.3% | 0.1% | | -200 bps | 5.9% | 0.5% | [Regulatory Capital](index=27&type=section&id=Regulatory%20Capital) The company and its bank subsidiary maintained well-capitalized status with improved CET1 ratio, exceeding all minimum regulatory requirements as a Category IV firm Company Regulatory Capital Ratios | Capital Ratio (Company) | Mar 31, 2025 | Dec 31, 2024 | Minimum Requirement | | :--- | :--- | :--- | :--- | | **Common Equity Tier 1 (CET1)** | 11.90% | 11.83% | 4.50% | | **Tier 1 Risk-Based** | 12.65% | 12.57% | 6.00% | | **Total Risk-Based** | 15.25% | 15.14% | 8.00% | | **Leverage Ratio** | 8.45% | 7.68% | 4.00% | - The Bank subsidiary also exceeded all minimum requirements to be categorized as **"Well Capitalized,"** with a CET1 ratio of **13.36%** at March 31, 2025[138](index=138&type=chunk)[139](index=139&type=chunk) - Effective October 1, 2023, the company became subject to **Category IV prudential standards**, which include heightened requirements for capital planning, stress testing, liquidity risk management, and resolution planning[134](index=134&type=chunk)[136](index=136&type=chunk) [Financial Statements (Unaudited)](index=29&type=section&id=PART%20I.%20%E2%80%93%20FINANCIAL%20INFORMATION) This section presents the unaudited condensed consolidated financial statements, including the balance sheet, income statement, and cash flow statement, for the period ended March 31, 2025 [Condensed Consolidated Financial Statements](index=29&type=section&id=Condensed%20Consolidated%20Financial%20Statements) The unaudited condensed consolidated financial statements provide a snapshot of the company's financial position, results of operations, and cash flows as of March 31, 2025 Condensed Consolidated Balance Sheet Highlights | Balance Sheet Highlights | Mar 31, 2025 ($ millions) | Dec 31, 2024 ($ millions) | | :--- | :--- | :--- | | **Total Assets** | $97,628M | $100,160M | | **Total Loans and Leases, net** | $65,955M | $67,970M | | **Total Deposits** | $73,906M | $75,870M | | **Total Borrowed Funds** | $14,178M | $14,426M | | **Total Stockholders' Equity** | $8,153M | $8,167M | Condensed Consolidated Income Statement Highlights | Income Statement Highlights (3 Months Ended) | Mar 31, 2025 ($ millions) | Mar 31, 2024 ($ millions) | | :--- | :--- | :--- | | **Net Interest Income** | $410M | $624M | | **Provision for Credit Losses** | $79M | $315M | | **Total Non-Interest Income** | $80M | $9M | | **Total Non-Interest Expense** | $532M | $699M | | **Net (Loss)** | ($100M) | ($327M) | [Notes to the Condensed Consolidated Financial Statements](index=34&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) Detailed notes provide disclosures on financial statement presentation, loan portfolio, credit quality, fair value, derivatives, regulatory capital, and commitments, including legal proceedings - A **1-for-3 reverse stock split** effective July 11, 2024, has been retroactively applied to all share and per-share amounts presented[164](index=164&type=chunk) - The allowance for credit losses on loans and leases decreased from **$1,201 million** at year-end 2024 to **$1,168 million** at March 31, 2025, with a provision of **$82 million** offset by net charge-offs of **$115 million** for the quarter[217](index=217&type=chunk) - The company has various off-balance sheet commitments, including **$12.5 billion** in loan commitments and **$776 million** in letters of credit as of March 31, 2025[324](index=324&type=chunk) - The company is involved in various legal proceedings, including shareholder class actions related to recent disclosures and stock performance, and class actions related to three separate cyber breach incidents[329](index=329&type=chunk)[359](index=359&type=chunk)[363](index=363&type=chunk) [Controls and Other Information](index=67&type=section&id=Controls%20and%20Other%20Information) This section addresses the effectiveness of internal controls and procedures, ongoing remediation efforts, and other pertinent information including legal proceedings and share repurchases [Controls and Procedures](index=67&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were ineffective due to material weaknesses in internal control over financial reporting, with ongoing remediation efforts - Management concluded that disclosure controls and procedures were **not effective** as of March 31, 2025[340](index=340&type=chunk) - The ineffectiveness is due to **material weaknesses** in internal control over financial reporting related to risk assessment, monitoring, and control activities, specifically independent Credit Review[342](index=342&type=chunk)[343](index=343&type=chunk)[345](index=345&type=chunk)[346](index=346&type=chunk) - Remediation efforts are ongoing and include appointing a new Chief Risk Officer and Chief Credit Officer, enhancing the Independent Credit Review program, and increasing reporting frequency to the Board's committees[349](index=349&type=chunk)[350](index=350&type=chunk)[351](index=351&type=chunk) [Other Information](index=72&type=section&id=PART%20II.%20%E2%80%93%20OTHER%20INFORMATION) This section details ongoing legal proceedings, including shareholder and cyber breach class actions, and reports share repurchases for tax obligations on employee stock awards - The company is a defendant in a consolidated shareholder class action and multiple derivative actions alleging violations of federal securities laws related to disclosures made between March 2023 and February 2024 concerning the Flagstar and Signature transactions and the CRE loan portfolio[359](index=359&type=chunk)[360](index=360&type=chunk)[361](index=361&type=chunk) - The company is also defending three separate sets of class actions related to cyber breach incidents that occurred in January 2021, December 2021, and the MOVEit breach in 2023[363](index=363&type=chunk)[364](index=364&type=chunk)[365](index=365&type=chunk) - During Q1 2025, the company repurchased **376,569 shares** at an average price of **$10.53 per share**, withheld to cover tax obligations for vesting stock awards and not part of the publicly announced repurchase program[368](index=368&type=chunk)[371](index=371&type=chunk)

Core Viewpoint - Flagstar Financial, Inc. reported a narrower loss per share of 23 cents in Q1 2025, compared to a loss of 75 cents in the same quarter last year, primarily due to a decline in net interest income and lower loan and deposit balances, although increased fee income and reduced expenses provided some support [1][2]. Financial Performance - The company’s quarterly revenues were $490 million, a decline of 22.6% year-over-year, missing the Zacks Consensus Estimate by 5.6% [3]. - Net interest income (NII) was $410 million, down 34% from the prior-year quarter, with a net interest margin of 1.74%, decreasing by 54 basis points year-over-year [3]. - Non-interest income rose significantly to $80 million from $9 million in the year-ago quarter, although adjusted non-interest income fell by 38% year-over-year to $8 million [4]. - Non-interest expenses decreased by 24% year-over-year to $532 million, with adjusted non-interest expenses down 22% to $485 million [4]. - The efficiency ratio increased to 101.3% from 82.5% in the prior-year quarter, indicating deteriorating profitability [5]. Asset Quality and Capital Ratios - Total loans and leases held for investment declined by 2% sequentially to $66.6 billion, while total deposits decreased by 3% to $73.9 billion [6]. - Non-performing assets rose significantly to $3.3 billion from $798 million a year ago, with net charge-offs increasing by 42% to $115 million [7]. - The provision for credit losses decreased to $79 million from $315 million in the prior-year quarter [7]. - Capital ratios improved, with the common equity tier 1 ratio at 11.90%, up from 9.45% a year ago, and the total risk-based capital ratio at 15.25%, increasing from 13.09% [8].

Financial Data and Key Metrics Changes - The first quarter adjusted net loss available to common shareholders was $0.23 per diluted share, compared to a consensus of $0.27 per diluted share, and improved by $0.17 from the previous quarter [7] - The net loss available to common stockholders on a GAAP basis was $0.26 per diluted share, significantly narrowing from $0.40 in the fourth quarter [20] - The CET1 capital ratio remained around 12%, one of the strongest in the regional banking industry [16] Business Line Data and Key Metrics Changes - The commercial lending business saw strong origination volumes, with over $1 billion in C&I loan commitments in the quarter, and $769 million in originations, up over 40% from the fourth quarter [12] - The C&I pipeline currently stands at $870 million, more than double compared to the fourth quarter [12] - The overall C&I loans declined, but corporate and regional commercial banking and specialized industry loans increased to $147 million, up 4.4% compared to the fourth quarter [14] Market Data and Key Metrics Changes - The company reported a significant reduction in brokered deposits, paying off approximately $1.9 billion during the quarter [18] - The weighted average cost of deposits declined by 34 basis points in Q1 versus Q4 [18] - The commercial real estate (CRE) balances decreased by $5.7 billion or 12% since year-end 2023, with the CRE concentration ratio down 62 percentage points [25] Company Strategy and Development Direction - The company is focused on improving earnings through margin expansion, moderating credit costs, and cost reductions [10] - The strategy includes diversifying the balance sheet away from CRA-driven assets towards consumer, C&I, and commercial real estate [11] - The company aims to originate over $1 billion of C&I loans per quarter, with a focus on relationship lending and specialized industry verticals [17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the turnaround strategy, forecasting a profitable fourth quarter in 2025 [32] - The company is actively managing credit risk and has seen improvements in credit metrics, with net charge-offs declining by 48% [28] - Management noted that the economic impact of tariffs on their portfolio is minimal, with only $2.8 billion in commitments across affected sectors [81] Other Important Information - The company has reduced noninterest expenses by $71 million quarter over quarter, aiming for a total reduction of over $600 million year over year [23] - The multifamily portfolio has declined by $3.3 billion or 9% year over year, with strong reserve coverage [25] - The company is investing in risk governance and technology infrastructure while executing cost-saving measures [73] Q&A Session Summary Question: Inquiry about NIM guidance and rate cuts - Management indicated that the NIM forecast incorporates two rate cuts in 2025 and is driven by several factors including the reduction of brokered CDs and the resetting of multifamily loans [36][38] Question: Details on the large non-accrual relationship - Management stated that the borrower had the ability to pay, and the impact of this relationship on the quarter was approximately $33 million [41][44] Question: Thoughts on capital deployment and buybacks - Management plans to use excess capital to expand the balance sheet rather than for buybacks, focusing on growing the C&I and private banking sectors [56] Question: Utilization of new C&I commitments - Management noted a high utilization rate of approximately 76% for the $769 million in C&I loans originated in Q1, with expectations for continued growth [78] Question: Credit metrics and economic concerns - Management expressed confidence in credit metrics improving, with no significant deterioration observed in the portfolio despite economic concerns [90][92]

Core Viewpoint - Flagstar Financial reported a significant decline in revenue and a less negative EPS for the quarter ended March 2025, indicating challenges in performance compared to the previous year and market expectations [1]. Financial Performance - Revenue for the quarter was $490 million, down 22.6% year-over-year, and below the Zacks Consensus Estimate of $518.85 million, resulting in a surprise of -5.56% [1]. - EPS was reported at -$0.23, an improvement from -$0.75 in the same quarter last year, with an EPS surprise of +11.54% against a consensus estimate of -$0.26 [1]. Key Metrics - Net Interest Margin was 1.7%, below the five-analyst average estimate of 1.9% [4]. - Book value per common share (GAAP) was $18.43, slightly lower than the average estimate of $18.65 [4]. - Average Balances-Interest earning assets were $95.62 billion, compared to the average estimate of $96.85 billion [4]. - Efficiency Ratio was reported at 108.7%, significantly higher than the average estimate of 100% [4]. - Net Interest Income was $410 million, below the average estimate of $446.35 million [4]. - Total non-interest income was $80 million, exceeding the average estimate of $70.30 million [4]. - Fee income was reported at $22 million, significantly lower than the average estimate of $37.12 million [4]. - Other non-interest income was $31 million, higher than the average estimate of $22.17 million [4]. Stock Performance - Flagstar Financial's shares returned -5.5% over the past month, compared to the Zacks S&P 500 composite's -4.8% change, indicating underperformance relative to the broader market [3]. - The stock currently holds a Zacks Rank 3 (Hold), suggesting it may perform in line with the market in the near term [3].

Commercial Banking - New credit commitments in Q1 2025 increased by 32% to $1,046 million[14] - New loan originations in Q1 2025 increased by 42% to $769 million[14] - Private Bank deposits totaled $17.9 billion, up $2.2 billion or 14% since March 31, 2024, with a WAC of 2.21%[15] - Commercial deposits totaled $4.2 billion with a WAC of 2.34%[15] - C&I loans HFI for Specialized Industries & Corporate/Regional Commercial Banking increased by $147 million, up 4.4% QoQ to $3,490 million as of March 31, 2025[21] Financial Performance - Reported net loss income attributable to common stockholders was $(108) million, or $(0.26) per diluted common share in 1Q 2025[25] - Adjusted net loss income attributable to common stockholders was $(94) million, or $(0.23) per diluted common share in 1Q 2025[25] - Adjusted operating expenses decreased by $136 million, or 22% linked year, and $71 million, or 13% linked quarter[40] Balance Sheet and Asset Quality - Wholesale borrowings to total assets decreased from 17.4% on December 31, 2023, to 13.5% on March 31, 2025[28] - Cash & Securities to Total Assets increased by 833 bps from 17.7% on December 31, 2023, to 26.1% on March 31, 2025[28] - Allowance for Credit Losses to LHFI increased by 59 bps from 1.23% on December 31, 2023, to 1.82% on March 31, 2025[28] - Criticized loans decreased by $885 million, or 6% quarter over quarter[70] - Total deposits decreased by $2.0 billion, or 2.6% quarter over quarter, primarily driven by $1.9 billion lower brokered deposits[45, 49] Forecast - The company projects net interest income between $1.825 billion and $1.875 billion for 2025[30]