Financial Performance and Net Loss - The company reported a net loss of $280 million for Q3 2024, compared to a net loss of $323 million in Q2 2024[20] - Net loss attributable to common stockholders for Q3 2024 was $289 million, or $0.79 per diluted share[20] - The company reported a net loss of $930 million for the first nine months of 2024, compared to net income of $2.6 billion for the same period in 2023[22] - Net loss for the three months ended September 30, 2024, was $280 million, compared to a net income of $207 million in the same period in 2023[174] - Net loss attributable to common stockholders for the three months ended September 30, 2024, was $289 million, compared to a net income of $199 million in the same period in 2023[174] - Basic loss per common share for the three months ended September 30, 2024, was $(0.79), compared to earnings of $0.82 per share in the same period in 2023[174] - Total comprehensive loss for the nine months ended September 30, 2024, was $752 million, compared to a comprehensive income of $2,451 million in the same period in 2023[174] - Net loss for the nine months ended September 30, 2024 was $930 million, compared to a net income of $2.626 billion for the same period in 2023[184] - The company's net loss attributable to common stockholders for the nine months ended September 30, 2024, was $957 million[200] - The company's basic loss per common share for the nine months ended September 30, 2024, was $3.16[200] - The company's diluted loss per common share for the nine months ended September 30, 2024, was $3.16[200] - The company's net income attributable to common stockholders for the nine months ended September 30, 2023, was $2.6 billion[200] Capital and Liquidity Management - The company raised $1.05 billion in equity capital in March 2024 to address customer deposit withdrawals and stock price declines[18] - The company completed the sale of its warehouse lending portfolio (approximately $6 billion in assets) in Q3 2024, increasing capital ratios by approximately 70 basis points[19] - The company expects the mortgage sale transaction to increase the common equity Tier 1 capital ratio by approximately 60 basis points in Q4 2024[19] - The company's customer deposit base stabilized and grew substantially in Q2 and Q3 2024 after the March 2024 capital raise[18] - Cash and investment securities increased by $9.4 billion due to increased on-balance sheet liquidity and the sale of the warehouse portfolio in July 2024[37] - Total liquidity increased to $41.4 billion at September 30, 2024, up from $27.9 billion at December 31, 2023, driven by a $11.6 billion increase in cash and cash equivalents[127] - Core deposits declined by $9.7 billion from December 31, 2023, to March 7, 2024, following credit rating downgrades, but stabilized after a $1.05 billion capital raise in March 2024[128] - Customer deposits increased by over $7 billion in the second and third quarters of 2024 due to targeted deposit gathering programs and customer engagement[128] - The company's total liquidity stands at $41.4 billion, exceeding uninsured deposits by $24.8 billion[132] - The company's cash and cash equivalents balance is $23.1 billion, with total liquidity of $41.4 billion, sufficient to meet obligations through 2028[139][143] - The Parent Company holds $613 million in cash and cash equivalents as of September 30, 2024[141] - The company's capital ratios increased from December 31, 2023, driven by a $1.05 billion capital investment in Q1 2024 and a $12.5 billion reduction in risk-weighted assets due to strategic exits from non-relationship-based businesses[163] - The company's common equity tier 1 ratio as of September 30, 2024, was 10.76%, exceeding the minimum requirement of 4.50%[162] - The company's total risk-based capital ratio as of September 30, 2024, was 13.92%, exceeding the minimum requirement of 8.00%[162] - The company's leverage capital ratio as of September 30, 2024, was 7.32%, exceeding the minimum requirement of 4.00%[162] - The company maintains a liquidity buffer at least equal to the 30-day stress horizon, significantly increasing its on-balance sheet liquidity during 2024[159] - Cash and cash equivalents increased significantly from $11.475 billion in December 2023 to $23.080 billion in September 2024[173] - Total securities net of allowance for credit losses rose from $9.159 billion in December 2023 to $10.525 billion in September 2024[173] - Total deposits increased slightly from $81.526 billion in December 2023 to $83.013 billion in September 2024[173] - Borrowed funds decreased from $21.267 billion in December 2023 to $20.333 billion in September 2024[173] - Total liabilities remained relatively stable at $105.690 billion in December 2023 and $105.795 billion in September 2024[173] - Total stockholders' equity increased from $8.367 billion in December 2023 to $8.571 billion in September 2024[173] - Assets held for sale were reported at $1.631 billion in September 2024, compared to none in December 2023[173] - Certificates of deposit increased from $21.554 billion in December 2023 to $29.251 billion in September 2024[173] - Savings accounts grew from $8.773 billion in December 2023 to $13.510 billion in September 2024[173] - Net cash used in operating activities was $537 million in 2024, compared to $516 million in 2023[184] - Net cash provided by investing activities was $10.999 billion in 2024, down from $22.407 billion in 2023[184] - Net cash provided by financing activities was $1.080 billion in 2024, compared to a net cash used of $16.844 billion in 2023[184] - Cash, cash equivalents, and restricted cash increased to $23.151 billion at the end of September 2024 from $7.129 billion at the end of September 2023[184] Loan Portfolio and Credit Quality - The company's loan portfolio experienced stress in late 2023 due to vacancy-driven declines in the office sector and inflation in the multi-family sector[18] - Nonaccrual loans increased by $2.3 billion in the first nine months of 2024, reversing previously accrued interest income[36] - Provision for credit losses in Q3 2024 totaled $242 million, down from $390 million in Q2 2024, reflecting lower charge-offs due to fewer large-balance office property downgrades[39] - Net charge-offs in Q3 2024 were $240 million, or 0.31% of average loans outstanding, compared to $349 million (0.42%) in Q2 2024[40] - For the first nine months of 2024, provision for credit losses totaled $947 million, up from $281 million in the same period of 2023, driven by risk rating downgrades on commercial real estate and multi-family loans[41] - Classified loans increased by $1.2 billion to $11.4 billion in Q3 2024[102] - Non-accrual loans increased by $2.086 billion to $2.514 billion at September 30, 2024, compared to December 31, 2023[111] - Charge-offs of $599 million were recorded on commercial real estate and multi-family loans during the nine months ended September 30, 2024[106] - Non-accrual loans to total loans held for investment increased to 3.54% at September 30, 2024, from 0.51% at December 31, 2023[109] - The allowance for credit losses on loans and leases to non-accrual loans decreased to 50.28% at September 30, 2024, from 231.51% at December 31, 2023[109] - Total loans 30-89 days past due increased to $261 million at September 30, 2024, up $11 million from $250 million at December 31, 2023[115] - The allowance for credit losses on loans and leases increased to $1.3 billion at September 30, 2024, up $272 million from $1.0 billion at December 31, 2023[118] - The allowance for credit losses to total loans ratio increased to 1.78% at September 30, 2024, compared to 1.17% at December 31, 2023[120] - Net charge-offs for the nine months ended September 30, 2024, were $670 million, compared to $23 million for the same period in 2023[122] - Multi-family loans accounted for 49.4% of total loans at September 30, 2024, with an allowance for credit losses of $624 million, representing 1.78% of the portfolio[116] - Commercial real estate loans had a net charge-off rate of 4.13% for the nine months ended September 30, 2024, compared to 0.14% for the same period in 2023[122] - Provision for credit losses for the nine months ended September 30, 2024, was $947 million, significantly higher than $281 million in the same period in 2023[174] - Transfers of loans from held for investment to held for sale amounted to $7.486 billion in 2024[186] Interest Income and Expenses - Net interest income is the primary source of income, influenced by interest-earning assets, funding costs, and external factors such as market interest rates[23] - Net interest margin for Q3 2024 was 1.79%, down 19 basis points from Q2 2024 and 148 basis points from Q3 2023[33] - Average cost of interest-bearing deposits increased by 22 basis points to 4.37% in Q3 2024[33] - Average interest-bearing deposits grew by $4.0 billion (7%) to $63.6 billion in Q3 2024[33] - Net interest margin for the first nine months of 2024 was 2.01%, down 104 basis points from the same period in 2023[35] - Average loan yield increased due to multi-family loans repricing to higher rates at the end of their initial fixed rate periods[37] - Average yield on investment securities increased by 48 basis points due to lower rate securities maturing and being replaced with higher rate securities[38] - Net interest income for the three months ended September 30, 2024, was $510 million, a decrease from $882 million in the same period in 2023[174] - Total interest income for the nine months ended September 30, 2024, was $4,595 million, compared to $4,044 million in the same period in 2023[174] - Total interest expense for the nine months ended September 30, 2024, increased to $2,904 million from $1,707 million in the same period in 2023[174] - Interest rate sensitivity analysis shows a 3.1% increase in Economic Value of Equity (EVE) under a -200 basis points shock scenario[152] - The estimated change in net interest income over the next twelve months for a 100 basis point reduction in short-term interest rates is -0.20%, and for a 100 basis point increase, it is -0.6%[156] Non-Interest Income and Expenses - Non-interest income in Q3 2024 was $113 million, slightly down from $114 million in Q2 2024, with a $13 million decline in net gain on loan sales offset by a $15 million increase in mortgage servicing rights[45] - Total non-interest expenses in Q3 2024 were $716 million, up $11 million (2%) from Q2 2024, primarily due to an $7 million (8%) increase in FDIC insurance expense[50] - Total non-interest income for the nine months ended September 30, 2024, was $236 million, a sharp decline from $2,560 million in the same period in 2023[174] - Total non-interest expense for the nine months ended September 30, 2024, increased to $2,120 million from $1,849 million in the same period in 2023[174] - The company incurred $37 million in merger-related expenses and items related to the sale of the mortgage warehouse business in Q3 2024[20] Loan and Deposit Portfolio Changes - Total assets increased $0.3 billion to $114.4 billion as of September 30, 2024, with a $11.6 billion increase in cash and cash equivalents offset by a $13.5 billion decrease in loans held for investment[56] - Total deposits increased $1.5 billion to $83.0 billion at September 30, 2024, recovering from $9.7 billion in deposit attrition in February and March 2024[59] - Loans held for investment decreased to $71.1 billion at September 30, 2024, from $84.6 billion at December 31, 2023, driven by the sale of the warehouse lending portfolio and strategic reductions in commercial and industrial loans[57] - The securities portfolio increased $1.4 billion to $10.5 billion at September 30, 2024, with over 90% in low credit risk U.S. government agency bonds[58] - Loan production for investment in Q3 2024 totaled $1.9 billion, down from $2.2 billion in Q2 2024, with specialty finance and commercial & industrial loans being the largest contributors[63] - Multi-family loan portfolio decreased to $35.1 billion at September 30, 2024, down $2.1 billion from $37.3 billion at December 31, 2023[66] - $14.0 billion of multi-family loans were in their interest-only period as of September 30, 2024, with a weighted average interest-only period of approximately 20 months remaining[67] - 56% of the company's total multi-family loan portfolio ($19.8 billion) was secured by properties in New York State as of September 30, 2024[68] - Commercial real estate loans decreased to $9.2 billion at September 30, 2024, down $1.3 billion from $10.5 billion at December 31, 2023[73] - One-to-four family loans decreased to $5.2 billion at September 30, 2024, down $0.9 billion from $6.1 billion at December 31, 2023[80] - Loans held for sale increased to $1.9 billion at September 30, 2024, up $0.7 billion from $1.2 billion at December 31, 2023[83] - The company completed the sale of its warehouse lending portfolio for approximately $6 billion in Q3 2024, incurring transaction costs of $23 million[84] - Total securities increased to $10.5 billion at September 30, 2024, up $1.3 billion from $9.2 billion at December 31, 2023[86] - Net unrealized loss on securities available for sale decreased to $468 million at September 30, 2024, down from $581 million at December 31, 2023[87] - Weighted average yield of available-for-sale debt securities due after ten years is 4.55% for mortgage-related securities and 6.11% for other debt securities[90] - Total borrowed funds decreased by $8.6 billion to $20.3 billion at September 30, 2024, from $28.9 billion at June 30, 2024[91] - FHLB advances decreased to $18.3 billion at September 30, 2024, from $19.3 billion at December 31, 2023[93] - The company repaid $4 billion drawn from the FRB discount window in Q3 2024[94] - Repurchase agreements outstanding at September 30, 2024, were $60 million[95] - Total brokered deposits increased to $12.771 billion as of September 30, 2024, compared to $9.462 billion as of December 31, 2023[129] - Uninsured deposits decreased to $16.6 billion as of September 30, 2024, following credit rating downgrades in early 2024[133] - Custodial deposits increased to $9.2 billion as of September 30, 2024, up from $6.6 billion as of December 31, 2023[131] - Certificates of deposit totaled $29.3 billion, and long-term debt stood at $14.3 billion as of September 30, 2024[136] - Operating lease obligations increased to $484 million as of September 30, 2024, up from $446 million as of December 31, 2023[137] - Loans and leases held for investment, net decreased from $83.627 billion in December 2023 to $69.852 billion in September 2024[173] Regulatory and Compliance - The company is subject to Category IV prudential standards, including heightened requirements for capital, liquidity, and risk management, with a supervisory stress test first applicable in 2026[159] - The company is required to prepare and maintain formal resolution plans for firm failure, with the first plan under the final rule to be submitted in mid-2025[159] - The company is evaluating the potential impact of proposed Basel III Capital Rules amendments, which could affect regulatory capital calculations and AOCI recognition[167] - The company's credit ratings were downgraded, with Moody's rating at B2 and Fitch at BB as of September 30, 2024[134] Mergers and Acquisitions - The company recorded a bargain purchase gain of approximately $2.0 billion from the Signature Transaction, adjusted for final fair value adjustments[205] - The company issued 13,010,668 shares of common stock to the FDIC as part of the Signature Transaction consideration[202] - The company acquired
Flagstar Financial, lnc.(FLG) - 2024 Q3 - Quarterly Report