Question · Q3 2025
Bernard Vongezeki from Deutsche Bank asked about the decline in Flagstar Bank N.A.'s rent-regulated multifamily portfolio, specifically if there were any asset sales contributing to the nearly $1 billion reduction, and how the size of this book is expected to trend over the next 12 months. He also questioned why loan yields weren't expanding more significantly, given paydowns of non-accruals, the mix shift to C&I, and C&I growth, and if higher-yielding payoffs were holding back expansion.
Answer
CFO Lee Smith stated that the decline in the rent-regulated book is mainly due to part payoffs, with an active pipeline of $400 million in non-accruals expected to close in Q4. He emphasized that payoffs are occurring across all CRE asset classes without adverse selection. Regarding loan yields, Lee Smith explained that the blended weighted average coupon of the $1.3 billion Q3 payoffs was 5.7%, indicating a mix of low-coupon and already-reset loans. CEO Joseph Otting added that some payoffs also come from legacy C&I businesses with LIBOR-plus spreads, impacting overall loan yields.