Flagstar Bank, National Association - 10-Q Summary (Q2 2026)
Business Context and Reporting Period
This report covers the quarterly period ended June 30, 2026. Flagstar Bank, National Association, is a national banking association headquartered in Hicksville, New York, operating approximately 340 locations across nine states. The Bank operates in a single reportable segment and is executing a strategic transformation plan to evolve into a diversified regional bank with a strong balance sheet. As of June 30, 2026, the Bank reported total assets of $87.7 billion, loans of $61.2 billion, and deposits of $67.5 billion.
Key Financial Metrics
| Metric | Q2 2026 (3 Months) | YTD 2026 (6 Months) | YTD 2025 (6 Months) |
|---|---|---|---|
| Net Income | $34 million | $55 million | ($170 million) Loss |
| Net Income Attributable to Common | $26 million ($0.06/share) | $39 million ($0.08/share) | ($186 million) Loss |
| Net Interest Income (NII) | $440 million | $883 million | $829 million |
| Net Interest Margin (NIM) | 2.13% | 2.14% | 1.77% |
| Provision for Credit Losses | $18 million | $18 million | $143 million |
| Non-Interest Income | $76 million | $131 million | $157 million |
| Non-Interest Expense | $450 million | $916 million | $1,045 million |
| Total Assets | $87.7 billion | N/A | |
| Total Deposits | $67.5 billion | ||
| Total Borrowed Funds | $10.9 billion | N/A | |
| Stockholders' Equity | $8.1 billion |
Material Changes vs. Prior Periods
- Profitability Turnaround: The Bank returned to profitability in Q2 2026, reporting net income of $34 million compared to a net loss of $70 million in Q2 2025. Year-to-date 2026 net income ($55 million) represents a significant improvement over the $170 million net loss in the same period in 2025.
- Net Interest Margin Expansion: NIM increased 37 basis points year-over-year to 2.14% (YTD), driven by the paydown of higher-cost deposits and borrowings and the reinvestment of cash into higher-earning assets. This offset lower yields on the loan portfolio due to diversification strategies.
- Expense Reduction: Total non-interest expenses decreased 12% year-over-year to $916 million (YTD), primarily due to lower FDIC insurance expenses, reduced compensation costs, and the absence of merger-related expenses.
- Loan Portfolio Diversification: The Bank continued to reduce exposure to multi-family and Commercial Real Estate (CRE) loans. Multi-family loans decreased $2.1 billion to $26.9 billion, while Commercial and Industrial (C&I) loans increased $3.3 billion to $18.6 billion.
- Asset Quality Improvement: Non-accrual loans decreased 6% to $2.8 billion. The Allowance for Credit Losses (ACL) decreased to $869 million (1.42% of loans), down from $1.03 billion (1.70%) at year-end 2025.
Guidance, Outlook, Risks, and Contingencies
- Strategic Outlook: Management continues to execute a strategic transformation plan focused on diversifying the balance sheet, growing core operations, and enhancing operational efficiency. The Bank expects to deploy excess capital through organic growth, shareholder returns (dividends and repurchases), and strategic flexibility.
- Capital Management: In July 2026, the Board authorized a new stock repurchase program of up to $250 million. Capital ratios remain well above regulatory minimums, with a Total Risk-Based Capital ratio of 16.58%.
- Key Risks:
- Regulatory & Legal: Ongoing litigation regarding securities disclosures, past cyber breaches, and the Signature Bridge Bank transaction. A significant legal matter involves an appeal regarding the preemption of California's interest-on-escrow law; the Ninth Circuit denied Flagstar's petition for rehearing in March 2026, though the Supreme Court granted certiorari in a related case (Cantero) in 2024.
- Credit Risk: Exposure to rent-regulated multi-family properties in New York City remains a concern due to recent rent freezes, which may impact debt service coverage ratios for borrowers.
- Interest Rate Risk: The Bank maintains a liability-sensitive position. A 100 basis point increase in short-term rates is estimated to decrease Net Interest Income by 0.24% over the next 12 months.
- Unusual Items: Non-interest income included a $4 million gain on the sale of an investment in Figure Technology Solutions, Inc. in Q2 2026, contrasting with a $9 million loss in the prior quarter.
Investor Verification Checklist
- Multi-Family Exposure: Verify the impact of New York City rent freezes on the $26.9 billion multi-family portfolio, specifically regarding debt service coverage ratios and potential future charge-offs.
- Legal Contingencies: Monitor the status of the securities class action litigation and the outcome of the Supreme Court review regarding interest-on-escrow preemption, which could result in material liabilities.
- C&I Growth Quality: Assess the credit quality of the rapidly growing $18.6 billion C&I portfolio to ensure diversification efforts do not introduce new concentration risks.
- Capital Deployment: Track the execution of the new $250 million stock repurchase program and dividend sustainability given the recent return to profitability.
- Deposit Stability: Review the composition of deposits, noting the reduction in brokered CDs and the reliance on commercial and private banking deposits to fund the loan portfolio.