Financial Data and Key Metrics Changes - The company reported an adjusted net loss of $0.07 per diluted share, a significant narrowing compared to the previous quarter [4][16] - The net interest margin (NIM) expanded by 10 basis points to 1.91%, marking the third consecutive quarter of growth [5][18] - Operating expenses decreased by $800 million on an annualized basis compared to the previous year [5][19] - Criticized and classified assets declined by $600 million or 5% quarter-over-quarter and by $2.8 billion or 20% year-to-date [5][25] Business Line Data and Key Metrics Changes - The Commercial and Industrial (C&I) business originated $1.7 billion in new loan outstandings, with net loan growth of $448 million in the C&I portfolio [5][15] - Multifamily and Community Reinvestment Act (CRA) payoffs totaled $1.3 billion, continuing a trend of exceeding forecasts [6][22] - The provision for loan losses decreased by 41%, while net charge-offs declined by 38% [6][25] Market Data and Key Metrics Changes - The company has seen a significant reduction in overall Commercial Real Estate (CRE) balances, down $9.5 billion or 20% since year-end 2023 [22] - The CRE concentration ratio declined by 95 basis points to 407% since year-end 2023 [22] Company Strategy and Development Direction - The company is focused on transforming into a top-performing regional bank, emphasizing a customer-centric relationship-based culture [28] - Plans to originate new high-quality CRE loans in diverse geographic areas are set to begin in the fourth quarter [15][37] - The company aims to diversify its loan portfolio to a mix of one-third CRE, one-third C&I, and one-third consumer [22] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the trajectory of profitability, citing a consistent narrowing of net losses and improved credit quality [4][6] - The company anticipates continued growth in C&I loans, projecting a run rate of $1.7 billion to $2.2 billion in originations per quarter [40][57] - Management noted that the balance sheet is expected to stabilize and begin growing in 2026 [53][81] Other Important Information - The company completed a holding company reorganization, which simplifies its corporate structure and is expected to lower operating expenses by approximately $15 million [28] - The CET1 capital ratio improved by nearly 350 basis points, ranking among the highest among regional banks [12][20] Q&A Session Summary Question: NII guidance for the year - Management indicated that the balance sheet would likely stabilize in Q4 and begin to grow in 2026, with continued NIM expansion expected [33][35] Question: C&I production expectations - Management expects C&I originations to continue growing, with a run rate of $1.7 billion to $2.2 billion per quarter anticipated [40][46] Question: Regulatory relief from holding company elimination - The elimination of the holding company is expected to reduce regulatory burdens and streamline operations, leading to cost savings [58][59] Question: Expense outlook and cost-saving opportunities - Management highlighted significant reductions in non-interest expenses and identified further opportunities for cost savings in FDIC expenses and vendor costs [68][70] Question: Non-interest-bearing deposit growth - Management expects non-interest-bearing deposits to grow as new C&I relationships are established and private banking efforts are enhanced [72][74] Question: Credit quality and non-performing loans - Management noted a strong reduction in non-performing loans and indicated a focus on managing credit quality moving forward [78][80]
Flagstar Financial, lnc.(FLG) - 2025 Q3 - Earnings Call Transcript