FLAGSTAR FINANCIAL, INC. (FLG)·Q2 2025 Earnings Summary

Executive Summary

• Q2 2025 showed tangible operating progress: adjusted PPNR turned positive ($9M), NIM expanded 7 bps to 1.81%, and adjusted diluted EPS improved to a loss of $0.14 from $0.23 in Q1; GAAP diluted loss per share narrowed to $0.19 from $0.26 .
• Against S&P Global consensus, adjusted EPS was essentially in line (-$0.14 vs -$0.135*) while total revenues missed ($0.496B actual vs $0.518B*), reflecting lower average earning assets amid deliberate CRE de-risking .
• Management refined multi‑year guidance: FY25 net interest income (-$125M) and NIM (-10 bps) lowered, partly offset by FY25 non‑interest expense (-$75M); FY26 NII (-$100M) fully offset by opex (-$100M); return to GAAP profitability reaffirmed for Q4 2025 .
• Potential stock catalysts: holding company elimination (avoids CCAR; ~$15M annual cost saves), accelerating CRE par payoffs (record $1.5B; 45% substandard), and strong C&I origination momentum (commitments $1.9B, fundings $1.2B) .

What Went Well and What Went Wrong

What Went Well

• Positive adjusted PPNR and margin expansion: “our adjusted pre provision… net revenue was a positive $9 million… NIM improvement to 1.81%” .
• Rapid C&I build-out: “funding $1.2 billion of new loans… up nearly 57%… grew C&I loans in our two focus areas… by $422 million… added 47 bankers… plan to hire an additional 40 to 50” .
• CRE de-risking and asset quality progress: “record par payoffs of $1.5 billion… criticized assets decreased $1.3 billion or 9% QoQ and are down 15% YTD” .

What Went Wrong

• Revenues trailed consensus and YoY: total revenues $0.496B down 26% YoY (smaller balance sheet post divestitures, reduced CRE/multi‑family exposure) .
• Non-accrual levels remain elevated: NPLs to total loans HFI 4.96% (vs 4.93% in Q1 2025; 2.60% in Q2 2024), reflecting multifamily stress including a large borrower moved to non‑accrual in Q1 .
• Net charge-offs stable but still high vs last year: $117M in Q2 (0.72% annualized), albeit down 66% YoY; provision $64M (down QoQ) still reflects macro and multifamily headwinds .

Financial Results

Segment/Portfolio Exposure (Loans HFI, $USD Billions)

Key KPIs

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “We… continued to lower our operating expenses, reduced our commercial real estate exposure, and… increased our net interest margin… This bodes well for our expected return to profitability in the fourth quarter of this year.” — Joseph M. Otting, CEO .
• “Adjusted pre provision… net revenue was a positive $9 million… we paid down high‑cost brokered deposits and FHLB advances… These actions resulted in a seven basis point… NIM improvement to 1.81%.” — Lee Smith, CFO .
• “We made tremendous progress in our C&I business, funding $1.2 billion of new loans… grew C&I loans… by a combined $422 million… added 47 bankers… plan to hire an additional 40 to 50.” — Joseph M. Otting .
• “Holding company elimination will reduce costs roughly $15 million… and we will not be subject to CCAR.” — Management Q&A .

Q&A Highlights

• NIM and securities purchases: accelerated ~$2B agency CMO buys (WAC ~5.25%) to maximize NIM; June NIM 1.88%; FHLB payoff benefits included in H2 forecast .
• Capital return and buybacks: focus remains on investing excess capital in C&I growth; buybacks could be evaluated mid‑2026 if profitability is restored and valuation discounts persist .
• HoldCo elimination: avoids CCAR, consolidates supervision, reduces external vendor and internal staffing costs (~$15M) .
• Multifamily/rent stabilized outlook: recent appraisals increased charge-offs by ~$18.8M; reserves and charge-offs appropriately reflect risk; expect net charge-offs to decline into H2 .
• Deposits/relationships: leveraging new C&I relationships to bring deposits, fee income, and treasury services; building lead positions in syndicated credits .

Estimates Context

• Q2 2025: Adjusted EPS essentially in line; revenues missed versus consensus, primarily due to a smaller balance sheet and redeployment from loans to securities amid CRE de-risking .
• Trajectory suggests potential upward estimate revisions to margin and opex, offsetting lower NII from smaller assets (FY25/FY26 guidance rebased by management) .

Values retrieved from S&P Global (*).

Key Takeaways for Investors

• Adjusted PPNR positive and NIM expansion signal improving core earnings power; continued deposit repricing and liability optimization should support margin into H2 .
• C&I engine is ramping: commitments and fundings accelerated with material banker additions, positioning for C&I balance growth in Q3 and beyond .
• CRE/multifamily de-risking is progressing via record par payoffs; while NPLs remain elevated, criticized assets fell 9% QoQ and 15% YTD, and net charge-offs are normalizing .
• Guidance reset reduces FY25/26 NII/NIM but offsets with opex cuts; Q4 2025 GAAP profitability is reaffirmed, which could be a key re‑rating catalyst .
• Structural simplification (HoldCo elimination) should cut ~$15M annual costs and reduce regulatory burden (no CCAR), improving capital efficiency .
• Revenue miss vs consensus underscores ongoing balance sheet rightsizing; watch for sustained margin gains and C&I growth to bridge the top‑line gap .
• Dividend maintained ($0.01/sh), signaling capital stability while prioritizing growth and turnaround execution .

Appendix: Additional Q2 2025 Details

• Balance sheet: assets $92.2B; loans HFI $64.1B; deposits $69.7B .
• Capital: CET1 12.33%; leverage ratio 8.61% (Company) .
• Asset quality: NPLs HFI $3.180B; NPL ratio 4.96%; ACL (total) $1.162B (1.81% of total loans) .
• Operating expenses: total $513M; adjusted opex $460M (-5% QoQ) .
• Par payoffs: $1.5B (45% substandard); CRE exposure down $2.4B QoQ; multi‑family down $1.5B QoQ .
• Deposit cost: 11 bps QoQ improvement; paid off $2.2B brokered CDs (WAC 4.92%) .

All cited figures derived from the Q2 2025 8-K and press release and the Q2 2025 earnings call transcript - - -.