Lee M. Smith
About Lee M. Smith
Lee M. Smith is Senior Executive Vice President and Chief Financial Officer of Flagstar Financial, Inc. (FLG) and Flagstar Bank, N.A., serving in the CFO role since December 28, 2024 after leading Mortgage from December 1, 2022 to December 27, 2024; he previously served as EVP and COO since 2013, driving turnarounds, balance sheet and cost optimization, and M&A . He is age 50 and beneficially owns 574,161 shares (0.138% of class), including unvested awards, aligning his incentives with shareholders; FLG prohibits hedging/pledging and requires senior executives to meet stock ownership guidelines of 4x base salary . Smith’s 2024 compensation reflected transitional, performance-linked design—base reduced to $700,000 per the uniform SVP structure, a one-time option grant and a targeted annual incentive paid at 100% tied to operational and strategic goals amid the Company’s recapitalization and turnaround (CET1 improved to 11.83%) . Company performance context: 2024 net loss of $1,118 million and strategic actions across capital/liquidity, CRE de-risking, and cost reduction; FLG targets return to profitability in 2026 and expects Q4 2025 to be profitable .
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| Flagstar Financial/Flagstar Bank, N.A. | Senior EVP & CFO | Dec 28, 2024 – Present | Leads financial strategy, balance sheet and liquidity management, cost optimization; continued oversight of certain mortgage and corporate responsibility areas . |
| Flagstar Financial/Flagstar Bank, N.A. | Senior EVP & President of Mortgage | Dec 1, 2022 – Dec 27, 2024 | Led mortgage businesses; recognized via RSU award for significant contribution to sale of mortgage-related assets . |
| Flagstar Financial/Flagstar Bank, N.A. | EVP & Chief Operating Officer | 2013 – 2022 | Integral to Flagstar turnaround; led shared services, banking/mortgage operations/servicing, strategy, balance sheet optimization, and M&A . |
| MatlinPatterson Global Advisers LLC | Partner | — | Managed portfolio companies across industries; board roles; operational and financial improvement mandates . |
| Zolfo Cooper LLC | Senior Director | — | Advisory and interim management; turnaround/restructuring execution . |
| Ernst & Young (US/UK) | Vice President, National Restructuring Group | — | Financial restructuring expertise; cross-border experience . |
External Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| Cranbrook Schools | Trustee; Finance & Audit Committees | — | Governance and financial oversight . |
| Cranbrook Institute of Science | Chairman | — | Institutional leadership and strategic stewardship . |
| Detroit Local Initiatives Support Corporation (LISC) | Chairman | — | Revitalization of distressed neighborhoods; community impact . |
| Institute of Chartered Accountants in England and Wales | Member | — | Professional credential and technical standards . |
Fixed Compensation
| Item | 2022 | 2023 | 2024 |
|---|---|---|---|
| Base Salary ($) | $67,482 | $900,000 | $772,692 |
| Target Annual Bonus (% of Salary) | — | 100% (per employment agreement structure for SVPs) | 100% (AIP; $700,000 target) |
| Actual Annual Incentive ($) | — | — | $700,000 |
Notes: In 2024, the Compensation Committee set SVP base salaries uniformly at $700,000; Smith agreed to reduce base pay to conform to structure .
Performance Compensation
Equity Awards
| Award Type | Grant Date | Shares/Units | Exercise/Grant Price ($) | Grant Date Fair Value ($) | Vesting | Key Terms |
|---|---|---|---|---|---|---|
| Stock Options | Jun 21, 2024 | 1,000,000 | 9.18 | 4,560,000 | Equal annual installments over 3 years; 7-year expiration (to 6/21/2031) | 2024 one-time LTI aligned to turnaround; options primary LTI vehicle for 3 years . |
| RSU (time-based) | Dec 27, 2024 | 110,742 | — | 1,000,000 | Equal annual installments over 3 years | Recognition for leadership in mortgage business sale . |
As of 12/31/2024, Smith’s outstanding awards: 1,000,000 unexercisable options (9.18 strike; expire 6/21/2031) and 224,624 unvested stock awards with $2,055,310 market value at $9.33 closing price .
2024 Annual Incentive Plan (AIP) – Operational Scorecard
| Metric Category | Weighting (%) | Target | Actual | Payout | Vesting |
|---|---|---|---|---|---|
| Financial | n/a | Develop new three-year forecast; budget to strategic plan; reduce expenses; strengthen capital & liquidity | Rapid progress on forecast/budget; reduced wholesale funding; improved capital/liquidity | 100% of target (limited by actual financial results) | Cash; max 200% of target; no threshold |
| Compliance, Risk Management & Controls | n/a | Strengthen risk frameworks; enhance staffing; refine risk appetite; improve risk culture | Hired key execs; new risk governance; compliance oversight; portfolio review and repricing risk | 100% of target | Cash |
| Talent, Leadership & Culture | n/a | Address skills/talent gaps; integrate HR systems; consistent internal/external communications | Hires across risk/finance/credit/compliance/audit; integrated HR systems; extensive investor/analyst engagement | 100% of target | Cash |
| Strategy, Technology & Innovation | n/a | Execute strategic plan; divest non-core assets; build technology foundation | Mortgage asset sales; CRE de-risking; IT/cyber/BC/DR foundation; talent added | 100% of target | Cash |
Equity Ownership & Alignment
| Ownership Detail | Value |
|---|---|
| Total Beneficial Ownership (shares; % of class) | 574,161; 0.138% |
| Directly held (subset) | 495,823 |
| Unvested restricted stock awards (subset of beneficial ownership) | 78,338 |
| RSUs/Stock awards unvested at 12/31/2024 | 224,624 ($2,055,310 at $9.33) |
| Options – Unexercisable at 12/31/2024 | 1,000,000 (strike $9.18; expire 6/21/2031) |
| Ownership Guidelines | 4x base salary for senior executives; monitored by Compensation Committee |
| Hedging/Pledging | Prohibited for officers/directors |
Intrinsic value indicator: At 12/31/2024 price $9.33, Smith’s options had ~$0.15/share intrinsic value versus $9.18 strike .
Employment Terms
| Provision | Key Terms |
|---|---|
| Agreement Term | Initial 3-year term from Dec 2022 with annual extensions; base subject to annual review; target annual bonus at 100% of base; eligible for LT equity |
| Severance (no CIC) | If terminated without cause or resigns for good reason: cash severance equal to base + target bonus; pro-rata bonus based on actual results; up to 12 months health continuation; unvested equity vests (performance awards based on actual through termination) |
| Change-in-Control (double trigger) | If within 3 months before to 12 months after CIC: cash severance equal to 2x (base + target bonus); up to 18 months health; equity vest; “best net benefits” cut if excise tax would reduce after-tax outcome |
| Non-compete / Non-solicit | 1 year post-termination non-compete and non-solicitation of employees/customers; confidentiality covenants survive termination |
| Clawback | Dodd-Frank/NYSE/SEC-compliant recoupment of excess incentive-based comp for restatements; broader policy for misconduct, risk violations, ethics breaches; no indemnification for recovered amounts |
| Anti-hedging/pledging | Formal prohibitions on hedging and pledging for directors/officers |
Post-termination value illustration (12/31/2024 basis): Death benefits include accelerated equity vesting of $2,095,743 and $1,400,000 executive life insurance; without cause/good reason severance totals $3,508,243; CIC double-trigger scenario totals $4,912,410 .
Compensation Structure Analysis
- Shift to options as primary long-term incentive over three years, replacing prior performance share-style programs; one-time grants with extended vesting enhance retention and shareholder alignment .
- Base salary reduction to uniform $700,000 SVP level aligns internal equity and market practice; increases at-risk pay mix for Smith .
- 2024 AIP paid at target despite loss year, reflecting execution against operational turnaround scorecard rather than pure financial metrics; caps and no threshold mitigate risk-taking .
- Strong governance controls: independent Compensation Committee, independent consultant (Meridian), robust recoupment and anti-hedging/pledging policies .
Company Performance Context
| Metric | FY 2022 | FY 2023 | FY 2024 |
|---|---|---|---|
| Revenues ($USD) | $88,000,000* | $556,000,000* | $521,000,000* |
| EBITDA ($USD) | —* | —* | —* |
Values retrieved from S&P Global.
Notes: Periods ordered oldest to newest; EBITDA not available via dataset.
Disclaimer: Values with asterisks are sourced from S&P Global via GetFinancials and may not include document citations.
Say-on-Pay, Peer Group, and Shareholder Feedback
- 2024 Say-on-Pay: Majority approval; program transformed to improve pay-for-performance alignment post-recapitalization; Committee will continue to adjust metrics and design based on shareholder input .
- Compensation peer group used for benchmarking included large regional banks (e.g., Citizens Financial Group, M&T, KeyCorp, Regions, Huntington, Western Alliance, Zions, etc.) .
- Stock ownership policy enforced; executives required to hold multiples of salary, with monitoring by the Compensation Committee .
Investment Implications
- Alignment: Smith’s meaningful ownership (0.138%) and prohibition of hedging/pledging, combined with ownership guidelines, support alignment with shareholders; ongoing RSU and option vesting create incremental alignment over time .
- Retention and selling pressure: Three-year option/RSU vesting schedule provides retention hooks; as tranches vest, monitor Form 4s for selling pressure, especially given options near-the-money at 12/31/2024; anti-hedging/pledging reduces misalignment risk .
- Incentive design and risk: 2024 AIP’s operational focus appropriately rewarded turnaround execution amid losses; future programs are expected to shift to specific financial goals, improving direct pay-performance linkage—watch for changes in metric weights and thresholds .
- Change-of-control economics: Double-trigger 2x salary+bonus with full vesting increases potential COC costs but aligns with market practice; “best net benefits” provision curbs tax gross-up concerns; limited non-compete/non-solicit mitigate transition risk .
- Execution risk: 2024 net loss and balance sheet de-risking underscore turnaround complexity; Smith’s structured incentives and prior operational turnaround experience reduce execution risk; monitor progress versus profitability targets and strategic milestones disclosed by management .
Citations: All facts and figures are cited inline per document references.