Flagstar Delays Transformation Target to 2028

The Tip Desk · October 27, 2026 · 4 min read

Net interest income rose 5% to $460 million as the net interest margin reached 2.17%.

Flagstar Bank, N.A. (FLG), one of the largest regional banks in the country, said a higher-for-longer interest-rate environment has shifted the full realization of its long-term strategic objectives to 2028 from 2027, even as net interest income rose 5% to $460 million and the net interest margin expanded 4 basis points to 2.17%.

Executive Chairman and Chief Executive Officer Joseph M. Otting said the quarter reflected improving core fundamentals despite headwinds including deposit competition, persistent inflation, and rent-regulation pressure on the New York City multi-family book.

The 4-basis-point increase followed a second quarter in which NIM was relatively unchanged at 2.13%. Average yield rose 6 basis points, more than offsetting a 2 basis point rise in average cost of funds. Deposit costs increased 1 basis point after a 5 basis point decline in the second quarter.

Total loans and leases held for investment were $61.9 billion, up $958 million or 2%, or 6% annualized, a second consecutive quarter of growth after a 4% annualized pace in the second quarter. C&I loans increased $2.0 billion or 11% to $20.6 billion, with Specialized Industries up $1,417 million or 21%, Public Finance up $359 million or 18%, and Corporate & Regional Commercial Banking up $195 million or 8%. C&I improved to 24% of total assets from 21%.

The combined multi-family and CRE portfolio declined $1.1 billion or 3% to $34.1 billion. New York City multi-family loans fell $531 million or 4%. CRE par payoffs totaled $1.2 billion, of which 35% were substandard, and the CRE concentration ratio improved to 346% from 350%. The bank originated about $375 million of new CRE loans. CRE including multi-family declined to 39% of assets from 40%.

Total deposits were $67.8 billion, up $0.3 billion or 0.4%. Commercial Bank deposits grew $575 million or 7%. Non-interest-bearing checking rose 6% and CDs rose 4%, while interest-bearing and money market accounts decreased 6%.

The provision for credit losses increased $58 million to $76 million from $18 million. The bank said the increase was impacted by net charge-offs and by higher interest rates, including on the NYC rent-regulated multi-family portfolio, while the allowance for credit losses was unchanged. Net charge-offs totaled $74 million, down $26 million or 26%, and net charge-offs on an annualized basis were 0.49% of average loans outstanding, versus 0.66% on the same basis in the second quarter. Substandard loans increased $248 million or 4% and criticized/classified loans increased $670 million or 6%, reversing second-quarter declines. Non-accrual loans HFI were $2,817 million, or 4.55% of loans HFI. Total ACL including unfunded commitments was $927 million, or 1.50% of loans HFI.

Pre-provision net revenue was $66 million, unchanged. Adjusted PPNR was $66 million, up $4 million or 6% excluding the second quarter’s Figure Investment gain. Operating expenses were $441 million, up 3%, driven by an $8 million or 4% increase in compensation and a $4 million or 21% increase in professional services. Non-interest income was $70 million, down $6 million or 8%; fee income rose $3 million or 12% to $29 million.

The bank reported net income of $12 million versus $34 million in the second quarter. Net income attributable to common stockholders was $3 million, or $0.01 per diluted share, versus $26 million, or $0.06 per diluted share. The bank recorded a $22 million income-tax benefit from the settlement of a 2019–2021 federal tax audit.

The CET1 capital ratio was 12.38% at September 30, down from 13.16% at June 30. The bank completed a $250 million buyback in early October. Excess capital was $1.2 billion using the low end of the 10.5% target CET1 range. Book value per share was $17.82.

Otting said the bank remains focused on transforming Flagstar into a high-performing regional bank and that the commitment to that plan is unchanged.