Flagstar Financial, lnc.(FLG) - 2025 Q2 - Quarterly Results

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