Flagstar Bank Returns to Profitability in Q4, Charts Course for Sustained Growth

TROY, Mich. – January 30, 2026 – Flagstar Bancorp, Inc. (NYSE: FBC) today announced a pivotal return to profitability for the fourth quarter of 2025, marking a significant turnaround after a period of restructuring. The regional bank reported adjusted net income of $30 million, or $0.06 per diluted share, a sharp reversal from a net loss of $0.07 per share in the prior quarter.

In an earnings call Friday morning, CEO Joseph Otting framed the results as a validation of the bank's multi-year strategic overhaul. "2025 was a year of significant momentum, which accelerated in the fourth quarter," Otting stated. "We have successfully executed on our plan to transform Flagstar into one of the best-performing regional banks, building a diversified balance sheet with strong capital and liquidity."

The profit was driven by several factors, including growth in net interest income, net interest margin (NIM) expansion, and disciplined expense management. Chief Financial Officer Lee Smith detailed a 14 basis point quarter-over-quarter NIM increase (23 bps including a one-time hedge gain), alongside a substantial reduction in high-cost funding. The bank paid down $1.7 billion in brokered deposits and $1 billion in Federal Home Loan Bank advances during the quarter.

A central theme of the turnaround has been the deliberate de-risking of the bank's commercial real estate (CRE) portfolio, particularly its New York City multifamily exposure. Flagstar reported $1.8 billion in CRE loan payoffs in Q4, with 50% classified as substandard. Since the end of 2023, total CRE balances have declined by $12.1 billion, or 25%, significantly reducing concentration risk.

Concurrently, the bank is pivoting growth towards its Commercial & Industrial (C&I) lending division. Under the leadership of Rich Raffetto, the C&I business saw commitments increase 28% to $3 billion in Q4. Otting emphasized this strategic redirection: "We are diversifying the loan portfolio towards a target mix of one-third CRE, one-third C&I, and one-third consumer."

Looking ahead, management provided guidance for 2026, forecasting continued profitability and NIM expansion. They anticipate further reduction in non-performing assets and a focus on core deposit growth to fund new lending. The bank's CET1 capital ratio stood at a robust 12.83% at year-end, providing a substantial buffer above regulatory minimums and sparking analyst questions about potential capital return strategies later in the year.

Analyst & Investor Perspectives:

"This is a classic, well-executed bank turnaround story," said Michael Thorne, portfolio manager at Cedar Rock Capital. "The aggressive CRE runoff is painful in the short term but surgically removes a major overhang. Their capital position now gives them immense flexibility—either to invest in higher-returning C&I loans or, eventually, to return capital to shareholders."

David Chen, a regional bank analyst at Clearwater Research, offered a more measured view: "The Q4 profit is a welcome milestone, but the sustainability is key. Their guidance hinges on successful execution of the C&I growth engine in a competitive market. The net interest margin trajectory and their ability to attract low-cost deposits to fund that growth will be the metrics to watch every quarter."

Sarah Jenkins, a former regulator and now independent banking consultant, struck a sharper tone: "Let's not pop the champagne just yet. They've cleared the first hurdle by stemming the bleeding, but the patient is still in recovery. A large portion of their 'improved' credit quality is simply because the worst loans were sold or paid off. The real test is the $9+ billion in NYC rent-regulated loans still on the books. What happens if the economic tide turns again or if New York's housing policies become more restrictive? Their optimism feels premature."

Janet Lee, a private investor following the call, noted: "As a shareholder, the transparency on the 'how' is reassuring—the specific details on CD maturities, payoff rates, and the C&I origination targets. It shows a management team with a clear playbook, not just hoping for a better rate environment. The pivot is credible, but now they have to deliver quarter after quarter."