Financial Data and Key Metrics Changes - The CET1 capital ratio increased to 12.3%, ranking among the highest relative to peer groups [15][17][30] - Adjusted pre-provision, pre-tax net revenue was a positive $9 million, an improvement of $32 million from the previous quarter [18][27] - The net loss per diluted share narrowed to $0.19, with an adjusted loss of $0.14 compared to a loss of $0.23 in the first quarter [26][27] Business Line Data and Key Metrics Changes - New commitments in the C and I business increased by 80% to $1.9 billion, while originations rose by almost 60% to $1.2 billion [12][13] - The corporate, regional, commercial banking, and specialized industries portfolios increased by $422 million, or about 12% compared to the previous quarter [15] - Record CRE par payoffs reached approximately $1.5 billion, significantly reducing CRE exposure [31][32] Market Data and Key Metrics Changes - The overall cost of deposits decreased by 11 basis points quarter over quarter, and the overall cost of funds fell by 10 basis points compared to the prior quarter [20] - The multifamily portfolio has declined nearly $4 billion or 12% year over year, with a strong reserve coverage of 1.68% [32] Company Strategy and Development Direction - The company plans to merge its holding company into the bank to enhance corporate, legal, and regulatory structure, aiming for a reduction in operating expenses [9][10] - Focus areas for 2025 include improving earnings through margin expansion, fee income, and reducing operating expenses [11] - The strategy emphasizes growth in C and I and private banking, while proactively managing the CRE portfolio [11][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in continuing to grow C and I, which will diversify the loan portfolio and generate deposits and fee income [8] - The company anticipates further progress in the second half of the year, with a focus on returning to profitability [38] - Management highlighted the potential for stock price appreciation, indicating a valuation gap compared to peers [37] Other Important Information - The company has significantly improved its reserve coverage through a rigorous credit review process [18][22] - Approximately 50% of the criticized loans have already reset to a higher rate and are paying, with 40% expected to reprice by the end of 2026 [24][70] Q&A Session Summary Question: Can you provide details on the securities purchase and its impact on margin? - The company accelerated $2 billion in securities purchases to optimize NIM, with a weighted average coupon of about 5.25% [44] Question: Is stock repurchase still expected in mid-2026? - Currently, the focus is on investing excess capital in growth rather than stock buybacks, but this may be reconsidered if profitability is achieved [48][50] Question: What is the outlook for net charge-offs? - The company expects charge-offs to decrease as it moves into Q3 and Q4, supported by a significant reduction in criticized assets [94][95] Question: What is the health of the rent-stabilized multifamily landlords? - The multifamily portfolio is largely occupied, with a significant portion of loans rated as pass, indicating a stable outlook despite potential challenges [68][70] Question: Will the merger of the holding company into the bank have any downsides? - The merger is expected to reduce costs significantly and streamline regulatory supervision, with no major downsides anticipated [59][115]
Flagstar Financial, lnc.(FLG) - 2025 Q2 - Earnings Call Transcript