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FLAGSTAR FINANCIAL, INC. (FLG)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 adjusted diluted EPS loss of $0.23 beat Wall Street consensus of a $0.28 loss; GAAP diluted EPS loss was $0.26. Total revenues were $490m, below consensus of ~$510m as non-interest income normalized post mortgage sale, while NIM stabilized at 1.74% versus 1.73% in Q4 2024 . EPS estimate values from S&P Global.*
  • Credit costs improved: provision fell to $79m (vs. $145m in Q4), and net charge-offs dropped 48% to $115m; however, NPLs rose to 4.93% of loans due largely to one idiosyncratic multi‑property borrower moved to non-accrual, costing $33m ($0.07) in-quarter .
  • Balance sheet repositioning continued: loans HFI down 2% QoQ to $66.6B, AFS securities up 23% QoQ to $12.8B; deposits declined 3% QoQ to $73.9B driven by escrow runoff and brokered CD paydowns, while wholesale borrowings decreased 2% QoQ to $13.2B .
  • Cost program tracking: adjusted non-interest expense fell 13% QoQ and 22% YoY, with management reiterating the >$600m full-year cost takeout for 2025; CET1 remained ~11.9% and liquidity ~$30B (231% of uninsured deposits) .
  • Call guidance catalysts: management expects margin to improve through deposit repricing and asset mix shifts; plans to reduce brokered deposits by ~$3B and FHLB advances by ~$1B over the next three quarters, buy ~$2B of securities in 2025, and ramp C&I originations/commitments via continued banker hiring .

What Went Well and What Went Wrong

What Went Well

  • Cost discipline: adjusted non-interest expense fell to $485m (−$71m QoQ, −$136m YoY), driven by lower compensation/benefits, FDIC insurance, and G&A; on track for >$600m 2025 cost savings. CEO: “we reduced operating expenses and are on pace to meet our $600 million cost savings goal” .
  • Credit normalization: provision decreased to $79m and net charge-offs dropped to $115m (0.68% annualized), while criticized loans declined ~$885m (6%) QoQ .
  • C&I build-out momentum: new credit commitments $1.046B and funded originations $769m; 15 bankers added in Q1 with plans to add 80–90 in 2025. CEO: “originating nearly $770 million in new loans…grew C&I loans in our focus areas by over 4%” .

What Went Wrong

  • Top-line pressure: total revenues fell to $490m (−22% QoQ, −23% YoY) as net interest income declined and non-interest income normalized post mortgage sale gain .
  • Asset quality optics: NPL ratio rose to 4.93% (from 3.83% in Q4), and NPAs to assets increased to 3.37%; driven largely by one multi‑property borrower moved to non‑accrual .
  • Balance sheet shrinkage and deposit declines: loans HFI −2% QoQ, deposits −3% QoQ (escrow transfer and brokered CD reduction), and average earning assets −10% QoQ; NIM yoy remained compressed at 1.74% versus 2.28% in Q1 2024 .

Financial Results

MetricQ1 2024Q4 2024Q1 2025
Total Revenues ($USD Millions)$633 $625 $490
Net Interest Income ($USD Millions)$624 $461 $410
Non-Interest Income ($USD Millions)$9 $164 $80
Total Non-Interest Expense ($USD Millions)$699 $718 $532
Provision for Credit Losses ($USD Millions)$315 $108 $79
Net (Loss) Income ($USD Millions)$(327) $(160) $(100)
Diluted EPS (GAAP) ($USD)$(1.36) $(0.41) $(0.26)
Adjusted Diluted EPS ($USD)$(0.74) $(0.34) $(0.23)
Net Interest Margin (%)2.28% 1.73% 1.74%
Balance & MixQ1 2024Q4 2024Q1 2025
Loans & Leases HFI ($USD Billions)$82.327 $68.272 $66.592
Total Deposits ($USD Billions)$74.858 $75.870 $73.906
Wholesale Borrowings ($USD Billions)$26.727 $13.400 $13.150
AFS Securities ($USD Billions)$9.336 $10.402 $12.826
Segment/PortfolioQ1 2024Q4 2024Q1 2025
Multi-family HFI ($USD Billions)$36.859 $34.093 $33.437
CRE HFI ($USD Billions)$13.530 $11.836 $11.510
C&I HFI ($USD Billions)$24.418 $15.376 $14.742
KPIsQ1 2024Q4 2024Q1 2025
NPLs / Loans HFI (%)0.97% 3.83% 4.93%
NPAs / Assets (%)0.72% 2.62% 3.37%
Total ACL / Loans HFI (%)1.56% 1.78% 1.82%
Net Charge-offs ($USD Millions)$81 $222 $115
NCOs to Avg Loans (annualized) (%)0.39% 1.23% 0.68%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Brokered deposits reductionNext 3 quarters (2025)Reduce reliance (qualitative, Q4 call) Reduce by additional ~$3BClarified magnitude
FHLB advances reductionNext 3 quarters (2025)Deleveraging underway (Q4 call) Reduce by additional ~$1BClarified magnitude
Securities purchasesFY 2025Considering growth (Q4 call) Plan to buy ~$2BNew quantified plan
CD maturities repricingQ2 2025—~$4.9B retail CDs maturing at ~4.8%Cost of funds tailwind
NIM trajectoryFY 2025NIM stabilization; improvement expected (deck/remarks) Improvement drivers: lower deposit costs, resets/payoffs, C&I growth, fewer non-accrualsMaintained directional outlook
OpEx (cost savings)FY 2025>$600m cost reduction target On track; adjusted NIE −$71m QoQ in Q1Maintained; execution progress
Balance sheet size (assets)FY 2025 YEPrior guide ~ $98B (Q4 call) Updated to ~ $96B YE 2025Lowered
DividendsQ2 2025 payable—Common dividend $0.01; preferred dividends declaredInitiated/maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024)Q1 2025 Current PeriodTrend
Margin/NIMNIM 1.73%; deleveraging and deposit beta management to support margin; 3 rate cuts assumed in prior model NIM 1.74%; improvement expected via deposit repricing, multifamily resets/payoffs, C&I growth; model assumes two 2025 cuts Stabilizing; improving bias
C&I growthNew teams; $620m commitments; robust pipeline $1.046B commitments; $769m originations; +15 bankers; plan +80–90 in 2025 Accelerating
Credit normalizationProvision down; office/multifamily reviews completed; significant charge-offs taken in 2024 Provision −46% QoQ; NCOs −48% QoQ; criticized loans −$885m; one large idiosyncratic non‑accrual Improving with isolated noise
Deposits/fundingPaying down brokered CDs and FHLB; retail/private bank growth Additional $1.9B brokered CDs paid; plan −$3B brokered and −$1B FHLB; Q2 CD repricing Ongoing mix improvement
Tariffs/macroMonitoring rate sensitivity; asset/liability neutral Tariff exposure commitments ~$2.8B (auto/construction/consumer); underwriting filters tightened Managed exposure low
Capital/warrantsCET1 11.9% top quartile; warrants modeled to convert Q4 2025, diluted share count up CET1 ~11.9%; warrants conversion assumed Q4 2025 in EPS forecast; buybacks not prioritized vs growth Stable capital; focus on growth

Management Commentary

  • Strategic focus: “path to profitability by fourth quarter 2025…transforming the Company into a top-25 performing regional bank” .
  • Cost program: “we reduced operating expenses and are on pace to meet our $600 million cost savings goal” .
  • C&I build-out: “added 15 talented bankers…plan to add another 80 to 90 bankers during the remainder of 2025” .
  • Credit: “criticized loans declined 6%…pick-up in non-accrual loans largely due to one credit relationship” .
  • Margin drivers: CFO outlined NIM improvement via lower deposit costs, $2B securities purchases, multifamily resets to ≥7.5% coupons or payoffs, C&I SOFR-based growth, and reduction in non-accruals; forecast assumed two rate cuts in 2025 .

Q&A Highlights

  • NIM framework: Guidance built on two 2025 rate cuts; biggest contributors are deposit repricing, securities redeployment, multifamily resets/payoffs, and C&I growth; non‑accrual reduction also additive .
  • Idiosyncratic non‑accrual: One large multi‑property borrower moved to non‑accrual; incremental reserves/charge-offs and NIM reversal totaled $33m ($0.07) in Q1; management views situation as unique with adequate collateral and reserves .
  • Funding actions: Plan to reduce brokered deposits by ~$3B and FHLB by ~$1B over next three quarters; ~$4.9B retail CDs with ~4.8% cost mature in Q2; deposit costs managed lower weekly .
  • Balance sheet outlook: YE 2025 assets targeted ~ $96B, rising to ~$102B in 2026 and ~$111B in 2027 .
  • Capital & dilution: Warrants assumed to convert in Q4 2025 for EPS modeling; buybacks not prioritized—excess capital to be redeployed into C&I/private bank growth .

Estimates Context

MetricQ1 2024Q4 2024Q1 2025
EPS Consensus Mean ($)−0.394*−0.550*−0.277*
Adjusted Diluted EPS Actual ($)−0.74 −0.34 −0.23
Revenue Consensus Mean ($USD Millions)794.567*559.712*509.581*
Total Revenues Actual ($USD Millions)633 625 490
  • Q1 2025: EPS beat by $0.05; revenue missed by $$19.6m. Q4 2024: EPS beat ($0.21); revenue beat ($65m). Q1 2024: EPS missed ($0.35) and revenue missed ($161m). EPS and revenue estimate values from S&P Global.*

Implications: Near-term EPS estimate revisions likely move up modestly given expense traction and idiosyncratic nature of the non‑accrual; revenue modeling for banks may vary by definition—investors should anchor on company “Total revenues” alongside NII/NIM trajectories .

Key Takeaways for Investors

  • Cost execution is the central driver: adjusted NIE trending below plan and on track for >$600m FY25 reduction—supports EPS normalization even with a smaller balance sheet .
  • Margin inflection set up: deposit repricing, brokered/FHLB runoff, securities redeployment, and multifamily resets/payoffs should lift NIM sequentially; watch Q2/Q3 CD maturities and brokered reductions as catalysts .
  • Credit risk normalizing despite headline NPLs: provision/NCOs down sharply; NPL rise tied to one unique borrower; criticized loans −6% QoQ—monitor progress on non‑accrual resolution and charge-off cadence .
  • Balance sheet mix pivot continues: multifamily/CRE exposure down, C&I pipeline growing; tangible book and CET1 strong to support growth without buybacks near term .
  • Liquidity and funding profile improving: liquidity ~$30B (231% of uninsured deposits); additional brokered/FHLB reductions should lower funding costs and FDIC expense .
  • Dividend policy: token common dividend maintained ($0.01), preferred dividends declared—signals capital stability while prioritizing transformation over capital returns .
  • Trading stance: Focus on sequential NIM and adjusted PPNR improvement, C&I origination ramp, and visible credit de-risking; beats/misses versus consensus are likely driven by expense execution and idiosyncratic credit developments .

Notes on non-GAAP and adjustments: Q1 2025 adjusted results exclude $6m lease cost acceleration (branch closures), $5m trailing mortgage sale costs, and $8m merger-related expenses; adjusted net loss attributable to common stockholders was $94m versus GAAP $108m .

Values retrieved from S&P Global.*