New York munity Bancorp(NYCB) - 2024 Q4 - Annual Report

Cautionary Statement Regarding Forward-Looking Language This section highlights that the report contains forward-looking statements, which are subject to various risks and uncertainties that could cause actual results to differ materially from projections Overview of Forward-Looking Statements This section highlights that the report contains forward-looking statements, which are subject to various risks and uncertainties that could cause actual results to differ materially from projections - The report contains forward-looking statements covered by safe harbor provisions, but actual results may differ materially due to inherent uncertainties[16][17][18] - Key risk factors include general economic conditions (inflation, interest rates), securities and real estate market conditions, changes in real estate values, and changes in interest rates affecting net income and asset values[19] - Other significant factors are regulatory focus, competitive pressures, liquidity and funding challenges, ability to integrate acquisitions (Flagstar Bancorp, Signature), cybersecurity incidents, and geopolitical instability[19][20] Part I Item 1. Business Flagstar Financial, Inc.'s business overview encompasses its operational structure, strategic developments, market dynamics, and the comprehensive regulatory environment it navigates - Flagstar Financial, Inc. (formerly NYCB) is the bank holding company for Flagstar Bank, N.A., headquartered in Hicksville, New York. As of December 31, 2024, the Company had $100.2 billion in assets, $69.2 billion in loans, $75.9 billion in deposits, and $8.2 billion in total stockholders' equity[26][27] - In 2024, the Company underwent significant strategic initiatives including becoming a Category IV large bank (assets over $100 billion), raising $1.05 billion in equity capital, and selling non-core mortgage businesses to simplify its model and deleverage the balance sheet[29][30][31] - The Company changed its name to Flagstar Financial, Inc. and ticker symbol to 'FLG' in October 2024, and significantly bolstered its management team and Board of Directors throughout the year[32][33] General Business Overview Flagstar Financial, Inc. operates as the bank holding company for Flagstar Bank, N.A., serving a broad customer base across ten states, including high-net-worth individuals - Flagstar Financial, Inc. is the bank holding company for Flagstar Bank, N.A., which operates over 400 locations across ten states and serves high-net-worth individuals through 80 private banking teams[26][27] - The Company completed a 1-for-3 reverse stock split effective July 11, 2024, retroactively applied to all periods presented[28] 2024 Strategic Initiatives In 2024, the Company became a Category IV banking organization, raised significant equity capital, divested non-core mortgage businesses, rebranded, and strengthened its leadership team - The Company became a Category IV banking organization in 2023, subjecting it to enhanced prudential standards due to exceeding $100 billion in total assets after the Signature acquisition[29] - In March 2024, the Company raised $1.05 billion in equity capital and increased liquidity through brokered deposits and wholesale funding in response to loan portfolio stress and deposit withdrawals[30] - Non-core mortgage businesses (servicing rights, warehouse, third-party origination) were sold to simplify the business model, focus on fee generation and deposit gathering, and deleverage the balance sheet, improving capital ratios by 150 basis points[31] - The Company changed its name to Flagstar Financial, Inc. and ticker symbol to 'FLG' in October 2024, signifying a strategic evolution into a full-service regional banking franchise[32] - Throughout 2024, the management team and Board of Directors were significantly strengthened with new hires in risk management and executive leadership roles[33] Online Information about the Company and the Bank The Company's website provides comprehensive access to account information, product details, and extensive investor relations content, including SEC filings - The Company's website (www.flagstar.com) provides 24-hour access to accounts, product information, and extensive investor relations content, including SEC filings, earnings releases, and corporate governance documents[34][35] Our Market Flagstar Bank operates over 400 locations across ten states, with plans to consolidate branches in 2025, and diverse loan market concentrations - Flagstar Bank, N.A. operates over 400 locations across ten states, with strong presence in the Northeast and Midwest, and plans to close approximately 60 retail branches and 17 private banking locations in 2025 to reduce costs[36] - Loan markets vary: multi-family loans are concentrated in New York City, commercial real estate in the Northeast and Midwest, and commercial and industrial loans are originated nationally[37] Competition The Company faces intense competition for deposits and loans from diverse financial institutions and fintech companies across various channels - The Company competes for deposits and customers through various channels, including branches, private banking, mortgage offerings, and digital platforms, facing competition from traditional banks, credit unions, online banks, and fintech companies[39] - Lending success is tied to economic health, impacting loan demand, collateral value, and repayment ability, with competition in commercial lending from capital markets and larger financial institutions[40] Monetary Policy Federal fiscal and monetary policies, particularly from the Federal Reserve, significantly influence the Company's interest rates, loan growth, and investments - The Company is significantly affected by federal fiscal and monetary policies, particularly those of the Federal Reserve Board, which influence interest rates, loan growth, investments, and deposits[41] Environmental Issues The Company mitigates environmental risks in lending by requiring insurance or assessments for commercial real estate and multi-family loans - The Company mitigates environmental risks in lending by requiring environmental insurance or site assessments for commercial real estate and multi-family loans, and conducts similar assessments for its own properties to avoid contaminated assets[42][43] Subsidiary Activities Business is primarily conducted through Flagstar Bank, N.A. and its non-bank subsidiaries, with the Parent Company also owning special business trusts - Business is primarily conducted through Flagstar Bank, N.A. and its direct/indirect non-bank subsidiaries. The Parent Company also owns special business trusts for issuing capital and common securities[45][46] Human Capital Management As of December 31, 2024, the Company had 6,993 employees, focusing on talent attraction and retention through competitive compensation and an inclusive environment - As of December 31, 2024, the Company had 6,993 employees, none represented by a collective bargaining agreement. The Company prioritizes attracting and retaining talent through competitive compensation, comprehensive benefits (401(k), healthcare, equity awards), and an inclusive work environment[48][49][50][51][52] - Employees are required to adhere to a code of conduct and complete annual training on preventing discrimination[53] Federal, State, and Local Taxation The Company is subject to federal, state, and local income taxes, with further details provided in Note 2 of the financial statements - The Company is subject to federal, state, and local income taxes, with further details provided in Note 2 - Summary of Significant Accounting Policies[54] Regulation and Supervision The Company and Flagstar Bank are extensively regulated by federal and state authorities, with compliance crucial to avoid significant penalties and operational restrictions - Flagstar Bank, N.A. is regulated by the OCC, FDIC, and CFPB, while the Company (as a bank holding company) is regulated by the Federal Reserve and SEC. Changes in laws or regulations could materially impact operations[56][57] - The Dodd-Frank Act significantly changed bank regulatory structure, impacting lending, investment, and operations. The Volcker Rule prohibits proprietary trading and limits hedge/private equity fund interests[58][59] - The New York Housing Stability and Tenant Protection Act of 2019 limits rent increases on regulated apartments, potentially impacting collateral values for multi-family loans[60] - Basel III rules require minimum capital ratios (Common Equity Tier 1, Tier 1, Total Capital, Tier 1 Leverage) and a capital conservation buffer. Proposed amendments could significantly increase capital requirements for Category III and IV banks[61][62][63][64][66][68] - FDICIA mandates 'prompt corrective action' for institutions not meeting minimum capital requirements, with escalating restrictions based on capital tiers. As of December 31, 2024, the Bank exceeded 'well capitalized' requirements[69][70][71][72][73][74][75] - As a Category IV banking organization (assets over $100 billion), the Company is subject to enhanced liquidity risk management, stress testing, and resolution planning requirements, incurring significant expenses for compliance[80][81][82][83][84] - The Company is subject to various consumer protection laws (e.g., CRA, fair lending, TILA, RESPA) and regulations, with non-compliance potentially leading to substantial penalties, operating restrictions, and reputational damage[119][120][136][137][138][139][140][141][142][143][144][145] - The Bank Secrecy Act (BSA) and USA PATRIOT Act require anti-money laundering programs, customer identification, and suspicious transaction reporting. Non-compliance can result in significant civil monetary penalties and reputational risk[122][123][124] - OFAC rules impose economic sanctions on transactions with designated foreign entities, with non-compliance leading to serious legal and reputational consequences[125][126] - Data privacy laws (e.g., GLBA, CCPA, GDPR) require disclosure of privacy practices, information security programs, and consumer rights, with non-compliance risking fines, litigation, and reputational harm[127][128] - Cybersecurity regulations (CISA, federal bank regulator rules) mandate information sharing, incident notification, and robust security measures. Breaches can lead to expenses, litigation, and reputational damage[129][130][131][132] Item 1A. Risk Factors This section details material risks and uncertainties that could adversely impact the Company's financial condition, operations, and stock value, covering market, credit, operational, and regulatory exposures - The Company faces primary risks including interest rate risk, credit risk, financial statement risk, liquidity and dividend risk, legal and regulatory risk, financial and market risk, strategic risk, operational risk, and reputational risk[156] - Failure to properly identify, monitor, and mitigate these risks could lead to increased regulatory scrutiny and adverse impacts on financial condition[157] Interest Rate Risk Changes in interest rates can significantly reduce net interest income and negatively impact asset values, affecting the Company's financial condition and capital - Changes in interest rates can reduce net interest income and negatively impact asset values, affecting cash flows, financial condition, and capital. A faster increase in liability rates than asset rates, or a quicker decline in asset rates, would reduce earnings[158] - An inverted or flat yield curve can contract net interest income and margin. Prolonged elevated interest rates, potentially due to inflationary pressures, could adversely affect the business and increase loan repricing risk, especially in multi-family and CRE portfolios[158][159] Credit Risk The Company faces significant credit risk, particularly from concentrations in multi-family and commercial real estate loans, which could lead to insufficient allowance for credit losses - The allowance for credit losses (ACL) may be insufficient, requiring additional provisions that would reduce net income. In 2024, a $1.1 billion provision was recorded, bringing the ACL to $1.2 billion, addressing weaknesses in the office sector and multi-family repricing risk[160][161] - Bank regulators can mandate increased provisions or charge-offs, materially affecting financial condition. Concentrations in multi-family ($34.1 billion, 49.9% of loans) and commercial real estate ($8.7 billion, 12.7% of loans) expose the Company to higher non-payment and loss risks, especially for non-recourse loans[162][163] - Declines in office occupancy rates and rental rates, and the impact of New York's Housing Stability and Tenant Protection Act of 2019 on rent-regulated properties, could impair collateral values and borrowers' repayment ability[164][165] - Economic weakness in the New York City metropolitan region, where a majority of loans are concentrated, could significantly affect borrower repayment and collateral values, leading to increased loan losses[166][167][168] Financial Statements Risk Inaccurate accounting estimates, model failures, or ineffective internal controls could impair financial reporting accuracy and lead to increased losses - Accounting estimates and risk management rely on analytical and forecasting models that may be inaccurate, especially during market stress, potentially leading to increased losses or insufficient allowances for loan losses[169] - Impairment in finite-lived intangible assets, such as core deposit intangibles ($488 million at Dec 31, 2024), could negatively impact financial condition and results of operations if deposits decline significantly[170] - Failure to maintain effective internal controls over financial reporting, including human error, misconduct, or inadequate processes, could impair accurate and timely financial reporting, increase expenses, and lead to regulatory actions[171][172] Liquidity and Dividend Risks Failure to maintain adequate liquidity, potential deposit outflows, or dividend restrictions could severely impact the Company's financial stability and stock price - Failure to maintain adequate liquidity could prevent the Company from fulfilling financial obligations, leading to reputational and compliance risks, and potential financial failure. Primary liquidity sources include deposits, borrowed funds, and loan/security sales[173] - Deposit outflows, especially uninsured deposits (21.2% of total deposits at Dec 31, 2024), could necessitate more expensive wholesale funding or asset sales, increasing costs and reducing net interest income. Credit rating downgrades could accelerate deposit outflows[173][174] - The elimination of quarterly cash dividends could adversely impact common stock market price. The Parent Company's ability to pay dividends depends on dividends from the Bank, which are subject to regulatory approval and restrictions[175][176] - Deferring payments on trust preferred capital debt securities or being in default would prohibit common stock dividends. Dividends on Series A and B Preferred Stock are discretionary and noncumulative, and non-payment could result from non-compliance with laws or agreements[177][178] - Preferred stock holders have preferential rights in liquidation, which could limit additional financing and create divergent interests with common stockholders[179] Legal and Regulatory Risks Extensive regulation, potential non-compliance, and ongoing legal actions pose significant risks of financial penalties, operational restrictions, and reputational damage - Inability to meet minimum capital requirements could limit business expansion, dividend payments, or lead to FDIC deposit insurance termination, impacting financial condition and stock value[180] - The Company is subject to extensive regulation by OCC, FDIC, FRB, and CFPB. Non-compliance can result in enforcement actions, significant fines, and restrictions on operations, mergers, and dividends[181] - As a Category IV banking organization, enhanced prudential standards for capital, liquidity, and risk management apply. Non-compliance could lead to regulatory risks and restrictions[182][183] - Noncompliance with BSA and anti-money laundering statutes could result in material financial loss, reputational risk, and regulatory actions. Failure to comply with OFAC regulations also carries legal and reputational risks[184][185] - The Risk Governance Framework may not effectively mitigate all risks, especially unforeseen ones, potentially leading to losses and increased FDIC insurance premiums[186] - The Company is involved in various legal and regulatory investigations, including shareholder class and derivative actions, which could result in significant financial liability, reputational damage, and adverse impacts on business[187][188] - Failure to adequately provide for taxes could increase income tax expense. Non-compliance with consumer protection laws (CRA, fair lending) could lead to sanctions, including damages, civil money penalties, and restrictions on business activities[189][190][191][192] - High commercial real estate loan concentrations may lead to additional regulatory scrutiny, potentially requiring new policies or restrictions on lending[193][194] - New data privacy legislation (e.g., CCPA) increases compliance and operational risks, potentially leading to litigation, regulatory enforcement, and reputational damage[195] Financial and Market Risks Adverse economic conditions, declining real estate values, and future stock issuances could negatively impact loan repayments, increase losses, and dilute shareholder value - Economic conditions, including declines in real estate values and increased borrower financial stress, could negatively affect loan repayments, increase loan losses, and reduce demand for products and services[196][197] - Future sales or issuances of common stock or other securities (including warrants) could dilute existing holders and decrease stock value. The Company completed a $1.05 billion equity investment in March 2024, issuing common and convertible preferred stock, and warrants[198][199][200] Strategic Risks Intense competition and challenges in integrating recent acquisitions could hinder business expansion and adversely affect financial performance and profitability - Extensive competition for loans and deposits from various financial institutions and fintech companies could adversely affect business expansion and financial performance[201] - Challenges in integrating recent acquisitions (Flagstar Bancorp, Signature) could prevent achieving expected benefits, leading to customer/personnel loss, increased compliance risks, higher expenses, and adverse impacts on profitability[202][203] Operational Risks Inaccurate stress testing models, cybersecurity breaches, reliance on third parties, and inability to retain key personnel pose significant operational challenges and potential losses - Stress testing models, which rely on analytical and forecasting assumptions, may be inadequate or inaccurate, potentially leading to unexpected losses and affecting strategic planning and corporate goals[204] - Information technology security breaches (cyber-attacks, unauthorized access) have occurred and may recur, leading to expenses, civil litigation, regulatory scrutiny, losses, and customer attrition. The Company and its service providers are vulnerable to increasingly sophisticated attacks[205][206][207][208] - Reliance on third parties for key business functions (e.g., data processing) exposes the Company to operational risks from service disruptions, failures, or security breaches, potentially leading to claims, regulatory scrutiny, and litigation[209] - Failure to keep pace with technological changes could adversely impact competitiveness for loans and deposits, especially against competitors with greater resources[210] - Inability to attract and retain key personnel, particularly skilled leaders, could adversely impact operations due to specialized knowledge and difficulty in finding replacements[211][212] - Significant changes in the Board of Directors and executive management team in 2024, and the new 2025-2027 Strategic Plan, create uncertainties and could harm business execution and profitability[213][214][215][216][217] - Diversifying the loan portfolio away from commercial real estate may be difficult, costly, and time-consuming, potentially disrupting business and failing to realize anticipated benefits[219][220][221] - Exposure to fraud risks, including internal and external fraud, could result in financial loss, litigation, and reputational damage. Misrepresentations by clients or third parties also pose risks[223] - Natural disasters, terrorist activities, international hostilities, or civil unrest could adversely affect business operations and financial condition due to disruptions to systems and infrastructure[225] Reputational Risk Damage to the Company's reputation from misconduct, litigation, service failures, or evolving ESG expectations could significantly harm its business and competitive position - Damage to reputation from employee misconduct, litigation, regulatory outcomes, service failures, or unethical behavior could significantly harm business, competitive position, and growth prospects[226] - Increasing scrutiny and evolving expectations regarding ESG practices may impose additional costs, expose new risks, and negatively impact reputation, partnerships, and stock price[227] Item 1B. Unresolved Staff Comments There are no unresolved staff comments to report Item 1C. Cybersecurity This section outlines the Company's cybersecurity risk management and governance framework, emphasizing protection of customer data and operations through a formalized Information/Cybersecurity Program (ICP) - The Company maintains a formalized Information/Cybersecurity Program (ICP) to protect confidential information and prevent operational disruptions, approved annually by the Board or a Committee thereof[230] - The ICP aligns with industry best practices (Secure Control, NIST Cybersecurity frameworks) and regulatory guidelines, incorporating policies for threat identification, risk assessment, third-party oversight, and employee training[230][231] - A layered security model is used, integrated into the broader Risk Governance Framework, with a formal incident response plan in place. No material cybersecurity risks or incidents were experienced in 2024[232][233][234] - The Board of Directors, through its Risk Assessment and Technology Committees, provides direction and oversight of the cybersecurity programs, with direct reporting from the Chief Information Security Officer (CISO)[235][236][237] Item 2. Properties The Company owns and leases various properties for its branch offices, headquarters, and back-office operations across several states, with current facilities deemed adequate - The Company owns branch offices, its Long Island headquarters, and other back-office buildings in New York, Ohio, Florida, and Michigan[238] - Additional locations in New York, Ohio, Florida, Michigan, New Jersey, Arizona, California, Indiana, and Wisconsin are utilized under various lease and license agreements[238] Item 3. Legal Proceedings The Company is involved in various legal actions, including shareholder class and derivative actions, with uncertain outcomes that could result in significant financial liability - The Company is a defendant in consolidated shareholder class actions (e.g., Lemm, Jr. v. New York Community Bancorp, Inc.) alleging federal securities law violations related to disclosures on acquisitions, commercial real estate, and internal controls[240][241] - Shareholder derivative actions (e.g., Hauser v. Cangemi, et al.) have also been filed against former officers and directors, alleging breach of fiduciary duty, gross mismanagement, and Exchange Act violations[242][243] - The outcome of this litigation is uncertain, and there is no assurance that material losses, damages, penalties, or expenses will not be incurred, potentially exceeding established reserves and materially impacting financial condition[244] Item 4. Mine Safety Disclosures There are no mine safety disclosures to report Part II Item 5. Market For the Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities This section provides information on the Company's common stock market, including its trading on the NYSE, shareholder count, historical stock performance, and share repurchase activities - Flagstar Financial, Inc. common stock trades on the NYSE under the symbol 'FLG'. As of December 31, 2024, there were 414,934,628 shares outstanding and approximately 9,074 registered owners[248] Cumulative Total Stockholder Return (December 31, 2019 - December 31, 2024) | Date | Flagstar Financial, Inc. | S&P Mid-Cap 400 Index | S&P U.S. BMI Banks Index | | :--- | :--- | :--- | :--- | | 12/31/2019 | $100.00 | $100.00 | $100.00 | | 12/31/2020 | $94.13 | $113.66 | $87.24 | | 12/31/2021 | $115.43 | $141.80 | $118.61 | | 12/31/2022 | $87.06 | $123.28 | $98.38 | | 12/31/2023 | $110.35 | $143.54 | $107.32 | | 12/31/2024 | $34.08 | $163.54 | $143.68 | - Shares are repurchased to fulfill tax obligations for stock-based incentive plans and under a Board-authorized program (approximately $9 million remaining as of December 31, 2024, from a $300 million authorization)[253][254] Common Stock Repurchases for the Year Ended December 31, 2024 | Period | Total Shares of Common Stock Repurchased | Average Price Paid per Common Share | | :--- | :--- | :--- | | First Quarter 2024 | 300,713 | $29.16 | | Second Quarter 2024 | 55,619 | $9.85 | | Third Quarter 2024 | 99,470 | $10.13 | | Total Fourth Quarter 2024 | 31,656 | $11.75 | | 2024 Total | 487,458 | $21.94 | Item 6. Reserved This item is reserved and contains no information Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides a detailed analysis of Flagstar Financial, Inc.'s financial performance and condition, covering key metrics, balance sheet composition, asset quality, liquidity, capital, and risk management for the year ended December 31, 2024 - The Company reported a net loss of $1.1 billion for the year ended 2024, compared to a net loss of $79 million in 2023, primarily due to a $1.1 billion provision for credit losses and a $121 million reduction in bargain purchase gain[257][258] - Net interest income, the primary source of income, is influenced by interest-earning assets, funding methods, and the spread between asset yields and liability costs, all impacted by economic conditions and monetary policy[259] - Total assets decreased by $13.9 billion to $100.2 billion at December 31, 2024, driven by strategic reductions in loans held for investment, partially offset by a $4.0 billion increase in cash and cash equivalents[282] - Total deposits decreased by $5.7 billion (7%) to $75.9 billion at December 31, 2024, following $9.7 billion in deposit attrition in Q1 2024, which was subsequently offset by brokered CDs and targeted deposit gathering[285] - The Company's capital measures continued to exceed minimum federal requirements for both the bank holding company and the Bank at December 31, 2024, with a significant increase in capital ratios due to a $1.05 billion capital investment and non-core business sales[391][392][393][394] Results of Operations This section details the Company's financial performance for 2024, highlighting net loss, net interest margin contraction, increased credit loss provisions, and shifts in non-interest income and expenses Net Income (Loss) Attributable to Common Stockholders (2022-2024) | Year Ended December 31, | Net (Loss) Income Attributable to Common Stockholders (in millions) | Diluted (Loss) Earnings Per Common Share | | :--- | :--- | :--- | | 2024 | $(1,153) | $(3.49) | | 2023 | $(112) | $(0.49) | | 2022 | $617 | $3.77 | - 2024 results include a $37 million increase in provision for credit losses and $103 million in merger-related and restructuring expenses, totaling an after-tax loss of $245 million ($0.74 per diluted share)[257][258] - Net interest margin decreased by 104 basis points to 1.95% in 2024, primarily due to a higher cost of funds from increased wholesale borrowings and promotional deposit campaigns, coupled with an increase in average interest-bearing liabilities[267] Net Interest Income and Margin (2022-2024) | Year Ended December 31, | Net Interest Income (in millions) | Net Interest Margin | | :--- | :--- | :--- | | 2024 | $2,152 | 1.95% | | 2023 | $3,077 | 2.99% | | 2022 | $1,396 | 2.35% | - Provision for credit losses totaled $1.1 billion in 2024, up from $833 million in 2023, reflecting substantial increases in allowance for credit losses and charge-offs due to risk rating downgrades in commercial real estate and multi-family loans[268][269] Non-Interest Income (2022-2024) | (in millions) | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Fee income | $150 | $172 | $27 | | Net gain on mortgage/servicing sale | $89 | $0 | $0 | | Net return on mortgage servicing rights | $73 | $103 | $6 | | Net gain on loan sales and securitizations | $48 | $89 | $5 | | Bank-owned life insurance | $42 | $43 | $32 | | Net loan administration income | $2 | $82 | $3 | | Bargain purchase gain | $(121) | $2,131 | $159 | | Other | $117 | $67 | $15 | | Total non-interest income | $400 | $2,687 | $247 | - Total non-interest income decreased significantly to $400 million in 2024 from $2.7 billion in 2023, primarily due to a $2.1 billion bargain purchase gain in 2023 that did not recur, and the sale of mortgage servicing businesses[272][274] Non-Interest Expense (2022-2024) | (in millions) | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Compensation and benefits | $1,263 | $1,149 | $354 | | FDIC insurance | $313 | $126 | $0 | | Occupancy and equipment | $211 | $200 | $92 | | General and administrative | $809 | $624 | $158 | | Intangible asset amortization | $136 | $126 | $5 | | Merger-related and restructuring expenses | $106 | $330 | $75 | | Goodwill impairment | $0 | $2,426 | $0 | | Total non-interest expense | $2,838 | $4,981 | $684 | - Total non-interest expenses decreased by $2.1 billion (43%) to $2.8 billion in 2024, mainly due to the absence of the $2.4 billion goodwill impairment recorded in 2023. Operating expenses, excluding notable items, increased by $368 million (18%) due to the full-year impact of the Signature Transaction and higher regulatory costs[277][278] - The Company reported an income tax benefit of $260 million in 2024, compared to an expense of $29 million in 2023, with an effective tax rate of 18.90% (vs. -59.59% in 2023), impacted by non-deductible FDIC expenses[279] Results of Operations: 2023 as Compared to 2022 The comparison of 2023 to 2022 results is incorporated by reference from the Company's previously filed Annual Report on Form 10-K/A for the year ended December 31, 2023 - Results of operations comparison for 2023 versus 2022 is available in the Company's prior Annual Report on Form 10-K/A for the year-ended December 31, 2023[281] Financial Condition This section analyzes the Company's balance sheet, detailing changes in assets, loans, deposits, and asset quality measures, reflecting strategic reductions and market pressures - Total assets decreased by $13.9 billion to $100.2 billion at December 31, 2024, driven by strategic reductions in loans held for investment, partially offset by a $4.0 billion increase in cash and cash equivalents[282] - Loans and leases held for investment decreased by $16.3 billion to $68.3 billion, primarily due to the sale of the warehouse lending portfolio and strategic reductions in commercial and industrial, commercial real estate, and multi-family portfolios[283] - The securities portfolio increased to $10.4 billion, with over 90% in low credit risk U.S. government agency bonds, classified as available-for-sale[284] - Total deposits decreased by $5.7 billion (7%) to $75.9 billion, with non-interest-bearing deposits decreasing by $7.0 billion (34%). Deposit attrition in Q1 2024 was offset by brokered CDs and targeted deposit gathering[285][334] Composition of Loan Portfolio (December 31, 2024 vs. 2023) | Loan Type | 2024 Amount (in millions) | 2024 % of Total Loans | 2023 Amount (in millions) | 2023 % of Total Loans | | :--- | :--- | :--- | :--- | :--- | | Multi-family | $34,093 | 49.9% | $37,265 | 44.0% | | Commercial real estate | $8,685 | 12.7% | $10,470 | 12.4% | | One-to-four family first mortgage | $5,201 | 7.6% | $6,061 | 7.2% | | Acquisition, development, and construction | $3,151 | 4.6% | $2,912 | 3.4% | | Commercial and industrial | $15,376 | 22.5% | $25,254 | 29.9% | | Other loans | $1,766 | 2.6% | $2,657 | 3.1% | | Total loans and leases held for investment | $68,272 | 100% | $84,619 | 100% | | Allowance for credit losses | $(1,201) | | $(992) | | | Total loans and leases held for investment, net | $67,071 | | $83,627 | | - Multi-family loans decreased to $34.1 billion, with 56% secured by New York State properties, many subject to rent regulation, impacting revenue generation and refinancing ability. $12.7 billion had interest-only payments, with 52% entering amortization by end of 2025[290][291][293] - Commercial real estate loans decreased by $1.8 billion to $8.7 billion, with 27.7% secured by office buildings. Declining occupancy and rental rates have impacted net operating income and collateral values, leading to charge-offs[296][298] - Commercial and industrial loans decreased by $9.9 billion to $15.4 billion, primarily due to the sale of the mortgage warehouse business ($5.1 billion in 2023) and reduced focus on non-core client segments[301] Asset Quality Measures (December 31, 2024 vs. 2023) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Non-accrual loans to total loans held for investment | 3.83% | 0.51% | | Non-performing assets to total assets | 2.62% | 0.39% | | Allowance for credit losses on loans and leases to non-accrual loans | 45.93% | 231.51% | | Allowance for credit losses on loans and leases to total loans held for investment | 1.76% | 1.17% | - Non-accrual loans increased by $2.2 billion to $2.6 billion, driven by multi-family and commercial real estate loans, following updated financial information and appraisals. Approximately 56% of non-accrual loans are current on payments[315][317][318] - The allowance for credit losses on loans and leases increased by $209 million to $1.2 billion, reflecting persistently high interest rates and pressure on borrowers, particularly for loans repricing in the next 18 months[320][321] Net Charge-offs (Recoveries) by Loan Type (2022-2024) | (in millions) | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Multi-family | $303 | $119 | $1 | | Commercial real estate | $454 | $56 | $0 | | One-to-Four Family first mortgage | $3 | $4 | $0 | | Acquisition, Development and Construction | $4 | $0 | $0 | | Commercial and Industrial Loans | $115 | $19 | $(7) | | Other Loans | $13 | $10 | $(5) | | Total loans held for investment | $892 | $208 | $(4) | - Total borrowed funds decreased by $6.8 billion to $14.4 billion, with FHLB advances decreasing to $13.4 billion and Federal Reserve Bank term funding of $1.0 billion repaid in 2024[341][342][343] - Goodwill was fully impaired in 2023, resulting in a $2.4 billion charge, and the Company had no goodwill at December 31, 2024[345] Risk Governance Framework The Company's Risk Management Division formalizes its Risk Appetite Statement, monitors key risk indicators, and manages credit, liquidity, and interest rate risks with Board oversight - The Risk Management Division formalizes the Company's Risk Appetite Statement, aligning it with budget, strategic, and capital plans. Key risk indicators are monitored, and heightened risks are escalated[349] - Credit risk is continually reviewed, with loans evaluated for downgrade to substandard or non-accrual status based on debt service coverage ratios and collateral values. Classified loans increased by $6.8 billion to $11.5 billion in 2024[351][353] - Liquidity is managed daily, with reporting to management and the Board, ensuring sufficient cash flows from deposits, wholesale funding, and lines of credit. Total liquidity was $29.9 billion at December 31, 2024[359][361][362] - The Company's credit ratings were downgraded by Moody's, Fitch, and Morningstar DBRS in 2024. Non-compliance with mortgage loan agency custodial depository criteria has been waived[364] - Parent Company liquidity relies on dividends from the Bank and equity issuance. The Bank requires OCC approval for dividends to the Parent Company[365][366][367] - Interest rate risk is managed through asset and liability management, monitoring interest rate sensitivity using EVE and NII models. The estimated percentage change in EVE for a +200 bps shock is (3.60)%, and for NII over 12 months is 0.5%[376][377][379][380][382][383] - As a Category IV firm, the Company is subject to heightened regulatory capital standards, including capital planning, liquidity stress testing, resolution planning, and a risk governance framework. Capital ratios exceeded minimum requirements at December 31, 2024[388][390][391][392][393] Critical Accounting Estimates This section highlights the critical accounting policies that involve significant judgment, estimates, and assumptions, which are crucial for understanding the Company's financial statements - Critical accounting policies involve significant judgment, estimates, and assumptions, particularly for the allowance for credit losses, fair value measurements, and the acquisition method of accounting[395] Reportable Segment and Reporting Unit The Company operates as a single reportable segment, with the CEO evaluating performance on a consolidated basis, focusing on overall revenue and cost measures - The Company operates in a single reportable segment, with the Chief Executive Officer evaluating performance on a consolidated basis, focusing on primary revenue sources and organizational costs[397][682][683][684] Item 7A. Quantitative and Qualitative Disclosures about Market Risk Information regarding the Company's management of market risk is included in the 'Interest Rate Risk' section of Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations - Disclosures about market risk management are provided in the 'Interest Rate Risk' section within Item 7 of this report[398] Item 8. Financial Statements and Supplementary Data This section presents the Company's audited consolidated financial statements and notes, along with the independent auditor's report, which includes an unqualified opinion on financials but an adverse opinion on internal controls - The consolidated financial statements for Flagstar Financial, Inc. and subsidiaries as of December 31, 2024 and 2023, and for the three-year period ended December 31, 2024, are presented in conformity with U.S. GAAP[691] - The independent registered public accounting firm issued an unqualified opinion on the consolidated financial statements but an adverse opinion on the effectiveness of internal control over financial reporting as of December 31, 2024, due to identified material weaknesses[691][692][703][704] Consolidated Statements of Condition (December 31, 2024 vs. 2023) | (in millions) | 2024 | 2023 | | :--- | :--- | :--- | | ASSETS: | | | | Cash and cash equivalents | $15,430 | $11,475 | | Total securities | $10,416 | $9,159 | | Loans held for sale | $899 | $1,182 | | Total loans and leases held for investment, net | $67,071 | $83,627 | | Federal Home Loan Bank stock and Federal Reserve Bank stock, at cost | $1,146 | $1,392 | | Premises and equipment, net | $562 | $652 | | Core deposit and other intangibles | $488 | $625 | | Mortgage servicing rights | $26 | $1,111 | | Bank-owned life insurance | $1,605 | $1,580 | | Other assets | $2,517 | $3,254 | | Total assets | $100,160 | $114,057 | | LIABILITIES AND STOCKHOLDERS' EQUITY: | | | | Total deposits | $75,870 | $81,526 | | Total borrowed funds | $14,426 | $21,267 | | Other liabilities | $1,696 | $2,897 | | Total liabilities | $91,992 | $105,690 | | Mezzanine equity: Preferred stock - Series B | $1 | $0 | | Total stockholders' equity | $8,167 | $8,367 | | Total liabilities, mezzanine and stockholders' equity | $100,160 | $114,057 | Consolidated Statements of (Loss) Income (2022-2024) | (in millions) | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Total interest income | $5,953 | $5,491 | $2,092 | | Total interest expense | $3,801 | $2,414 | $696 | | Net interest income | $2,152 | $3,077 | $1,396 | | Provision for credit losses | $1,092 | $833 | $133 | | Net interest income after provision for credit loan losses | $1,060 | $2,244 | $1,263 | | Total non-interest income | $400 | $2,687 | $247 | | Total non-interest expense | $2,838 | $4,981 | $684 | | (Loss) income before income taxes | $(1,378) | $(50) | $826 | | Income tax (benefit)/expense | $(260) | $29 | $176 | | Net (loss) income | $(1,118) | $(79) | $650 | | Preferred stock dividends | $35 | $33 | $33 | | Net (loss) attributable / net income available to common stockholders | $(1,153) | $(112) | $617 | | Basic (loss) earnings per common share | $(3.49) | $(0.49) | $3.78 | | Diluted (loss) earnings per common share | $(3.49) | $(0.49) | $3.77 | Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure There have been no changes in or disagreements with accountants on accounting and financial disclosure Item 9A. Controls and Procedures This section reports on the effectiveness of the Company's disclosure controls and internal control over financial reporting, noting material weaknesses despite fair financial statement presentation, with ongoing remediation efforts - The Company's disclosure controls and procedures were not effective as of December 31, 2024, due to material weaknesses in internal control over financial reporting[712] - Management concluded that the financial statements fairly present the Company's financial position, results of operations, capital position, and cash flows in conformity with GAAP, despite the material weaknesses[712] - Material weaknesses were identified in periodic risk assessment processes, recurring monitoring activities over process-level controls (including independent credit review), and control activities related to independent credit review processes and loan data reconciliations[719][720][721] - These deficiencies prevented the Board of Directors from exercising sufficient oversight and create a reasonable possibility of material misstatement in financial statements[722][723] - Remediation efforts are ongoing, including appointing new Board members with financial and risk management expertise, increasing Audit and Risk Assessment Committee meetings, and enhancing the independent Credit Review program (leadership, scoping, processes, staffing, training)[725][726][727][728] Item 9B. Other Information No directors or officers reported the adoption or termination of Rule 10b5-1 trading arrangements during the fourth quarter ended December 31, 2024 - No directors or officers reported adoption or termination of Rule 10b5-1 trading arrangements in Q4 2024[730] Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections There are no disclosures regarding foreign jurisdictions that prevent inspections Part III Item 10. Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the Company's 2025 Proxy Statement, along with its Code of Ethics and Securities Trading Policy - Information on directors, executive officers, and corporate governance is incorporated by reference from the 2025 Proxy Statement[734] - The Company's Code of Ethics for Senior Financial Officers and Securities Trading Policy are available on its Investor Relations website[735][736] Item 11. Executive Compensation Information regarding executive compensation is incorporated by reference from the Company's 2025 Proxy Statement - Executive compensation details are incorporated by reference from the 2025 Proxy Statement[737] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters This section provides information on equity compensation plans and security ownership of beneficial owners and management, incorporated by reference from the 2025 Proxy Statement Equity Compensation Plan Information (December 31, 2024) | Plan Category | Number of Securities to Be Issued Upon Exercise | Weighted Average Exercise Price | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | | | 10,211,440 | | Equity compensation plans not approved by security holders | — | | | - Information on security ownership of certain beneficial owners and management is incorporated by reference from the 2025 Proxy Statement[738] Item 13. Certain Relationships and Related Transactions, and Director Independence Information regarding certain relationships, related transactions, and director independence is incorporated by reference from the Company's 2025 Proxy Statement - Details on certain relationships, related transactions, and director independence are incorporated by reference from the 2025 Proxy Statement[739] Item 14. Principal Accounting Fees and Services KPMG LLP is the Company's independent registered public accounting firm, with information on principal accounting fees and services incorporated by reference from the 2025 Proxy Statement - KPMG LLP (Auditor Firm ID: 185) is the Company's independent registered public accounting firm[740] - Information regarding principal accounting fees and services is incorporated by reference from the 2025 Proxy Statement[741] Part IV Item 15. Exhibits and Financial Statement Schedules This section lists the documents filed as part of the report, including financial statements, schedules, and a comprehensive index of exhibits required by SEC Regulation S-K - The report includes financial statements (Statements of Condition, (Loss) Income, Comprehensive (Loss) Income, Changes in Stockholders' Equity, Cash Flows) and Notes to Consolidated Financial Statements, incorporated by reference from Item 8[743] - Management's Report on Internal Control over Financial Reporting and Changes in Internal Control over Financial Reporting are incorporated by reference from Item 9A[743] - A comprehensive list of exhibits required by SEC Regulation S-K is filed as part of this Form 10-K, including merger agreements, certificates of incorporation, preferred stock designations, warrant agreements, employment agreements, and various certifications[744][745][746] Item 16. Form 10-K Summary This item indicates that no Form 10-K Summary is provided Signatures Signatures This section contains the signatures of the registrant's principal executive officer, principal financial officer, principal accounting officer, and directors, certifying the report's submission on behalf of Flagstar Financial, Inc. on March 3, 2025 - The report is signed by Joseph M. Otting (President and CEO), Lee M. Smith (Senior EVP and CFO), Bryan L Marx (EVP and Chief Accounting Officer), and several directors, dated March 3, 2025[753][754]