FLAGSTAR BANK, NATIONAL ASSOCIATION Q1 FY2025 earnings call

Key Points

• Executed on critical cost takeouts, credit management, C&I growth, and risk governance during the quarter. Adjusted net loss available to common shareholders was better than previous periods.
• Hired Mark Fitzgibbon to lead private bank and wealth management business. Rounded out key product offerings in C&I, including an interest - only jumbo ARM mortgage and a subscription loan product.
• In 2024, built capital, improved liquidity, and enhanced credit quality of commercial real estate and multifamily portfolios. In 2025, focus on margin expansion, credit cost and cost reductions, C&I and private bank growth, and CRE portfolio management.
• First quarter net charge - offs and loan loss provision each declined by almost 50% q - o - q. Added 15 bankers in C&I business and plans to hire another 80 - 90 during the year.
• CET1 capital ratio remains around 12%, one of the strongest in the industry. Liquidity improved with reduction in brokered deposits and FHLB advances. Noninterest expenses excluding certain items declined $71 million q - o - q.
• Commercial real estate portfolio had par payoffs, and non - accrual loan sales were closed with a small gain. Actively managing deposit costs and deleverage the balance sheet in 2025.

In 2024, Flagstar successfully built capital, improved liquidity, and enhanced the credit quality of its commercial real estate and multifamily portfolios. In 2025, the focus is on improving the earnings profile through margin expansion as the cost of funds decreases, moderating credit cost and cost reductions, executing on C&I and private bank growth initiatives, and proactively managing the CRE portfolio including reducing its concentration. In the first quarter, adjusted net loss available to common shareholders was $0.23 per diluted share, better than the fourth quarter and consensus. The C&I business added 15 bankers during the first quarter and has a pipeline of $870 million with $769 million in originations in the quarter, up over 40% vs the fourth quarter. Commercial real estate and multifamily portfolios saw par payoffs in the first quarter, with CRE balances down $5.7 billion and the concentration ratio down 62 percentage points from year - end 2023.

Guidance

• Slightly lowered 2025 net interest income forecast and increased fee income forecast, largely offsetting each other with no change to 2025 earnings per share. Fiscal years 2026 and 2027 remain unchanged.
• Expect net interest margin to be 1.95 - 2.05 in 2025, driven by lower cost of funds, growth in higher - yielding C&I loans, multifamily loans resetting higher or paying off at par, and reduction in non - accrual loan balances.
• Plan to reduce broker deposits by an additional $3 billion and FHLB advances by another $1 billion over the next three quarters. Anticipate returning to profitability in the fourth quarter of 2025.

Risks

• Forward - looking statements are subject to risks and uncertainties as per the Private Securities Litigation Reform Act of 1995. For example, economic slowdown may impact credit quality. Single large borrower moving to non - accrual status poses risk. Tariffs and regulatory changes may affect certain loan portfolios. Fluctuations in market rates and deposit costs can also impact the business.

Q: What's the mix of deposits and how does it look for the future?

A: We'll continue to pay down broker deposits and increase retail and private bank deposits. As we leg into new C&I relationships, we can bring in core deposits. Broker deposits have been decreasing year - to - date, and we're using excess liquidity to pay them down, which also helps with FDIC expenses.

Q: How many large relationships are similar to the non - accrual borrower and are they a risk?

A: We probably have somewhere between a dozen to twenty or so large relationships similar to the non - accrual borrower. We've screened and scrubbed these and not seen similar issues. We see this as a unique idiosyncratic situation.