Flagstar Bank Reports Q3 2026 Net Income of $12 Million

Flagstar Bank, N.A. (NYSE: FLG) reported third quarter 2026 net income of $12 million, a decrease from the $34 million recorded in the second quarter of 2026. The bank’s net income attributable to common stockholders was $3 million, or $0.01 per diluted share, compared to $26 million, or $0.06 per diluted share, in the prior quarter.

Net interest income rose by $20 million, or 5%, to reach $460 million. This increase was accompanied by a net interest margin expansion of four basis points to 2.17%. Operating expenses climbed 3% to $441 million, while adjusted pre-provision net revenue increased by $4 million, or 6%, to $66 million.

The balance sheet showed total loans and leases held for investment increasing by $958 million, or 2%, to $61.9 billion, representing a 6% annualized growth rate. This expansion was driven primarily by the commercial and industrial (C&I) portfolio, which grew by $2.0 billion, or 11%, to $20.6 billion. Specific segments within C&I contributed to this momentum, with Specialized Industries Banking loans rising $1,417 million, or 21%, and Public Finance loans increasing $359 million, or 18%. Corporate and Regional Commercial Banking loans grew by $195 million, or 8%.

Concurrently, the bank continued its strategic reduction in the multi-family and commercial real estate (CRE) sectors. Total multi-family and CRE loans declined by $1.1 billion, or 3%, to $34.1 billion. Total CRE par payoffs totaled $1.2 billion during the quarter, of which 35% were classified as substandard. To partially offset these reductions, the bank originated approximately $375 million in new CRE loans. As a result, the CRE concentration ratio improved to 346% from 350% in the previous quarter.

Total deposits increased by $0.3 billion, or 0.4%, to $67.8 billion. This growth was fueled by a 6% rise in non-interest-bearing checking accounts and a 4% increase in certificates of deposit (CDs). In contrast, interest-bearing and money market accounts decreased by 6%, while savings accounts fell by 1%. Commercial banking deposits specifically grew by $575 million, or 7%.

Asset quality metrics showed total non-performing loans remaining relatively stable. However, substandard loans increased by $248 million, or 4%, while overall criticized and classified loans rose by $670 million, or 6%. The provision for credit losses increased by $58 million, primarily due to higher interest rates affecting the New York City rent-regulated multi-family portfolio. The allowance for credit losses stood at $0.9 billion, unchanged from the prior period and representing 1.50% of total loans.

The bank’s Common Equity Tier 1 (CET1) capital ratio was 12.38%, which management noted is at or above peer group levels. Flagstar reported excess capital of $1.2 billion based on the low end of its target CET1 range of 10.5%. Book value per share stood at $17.82, while tangible book value per share was $17.05.

Joseph M. Otting, Executive Chairman and Chief Executive Officer, stated that core fundamentals continued to improve despite headwinds including a higher interest rate environment and persistent inflation. He noted that the full realization of long-term strategic objectives has shifted to 2028 from 2027 due to the "higher for longer" interest rate environment.