Flagstar Reports Smallest Loss Since 2023

Flagstar Financial reported a first-quarter glow-up.

After a hellish 2024, the rebrand of New York Community Bank posted a net loss of 24 cents per diluted common share — the least the lender has bled since the end of 2023.

It’s a sign that the bank is tracking toward profitability, executives said.

“We couldn’t be more pleased with the journey we’re on,” CEO Joseph Otting said.

The bank is getting there, in part, by cutting loads of sour multifamily loans and some sales, turning a small profit.

Flagstar reported a 9 percent drop in its multifamily loan volume year over year. In the first quarter alone, borrowers paid off $673 million in apartment-backed debt at par, over 60 percent of which the bank had flagged as risky.

It also unloaded two loan books valued at $290 million on which borrowers had stopped making payments and pocketed a small profit of $9 million, CFO Lee Smith said.

Cantor Fitzgerald snapped up $142 million in rent-stabilized debt this year and Lone Star Funds picked up a separate $343 million portfolio at a small discount to par, Bloomberg reported.

It’s unclear if those deals represent the transactions Flagstar reported; it’s possible the $290 million represents the write-down value of the debt and the purchase value represents the principal.

The bank launched a Herculean review of its multifamily portfolio last year after its exposure to the asset’s rent-stabilized segment nearly killed it.

In early 2024, the lender — still NYCB, at the time — disclosed internal controls issues linked to loan review and hiked loss reserves on the expectation that more distress would hit multifamily. A sell-off ensued and it took a $1 billion equity injection to yank NYCB from the brink of collapse.

The bank is the city’s top lender to rent-stabilized landlords — a seat it assumed after Signature Bank bit the dust. As such, its loan book has suffered the effects of the 2019 rent law.

Increasingly more borrowers whose revenues were capped by the legislation have been unable to keep pace with expenses. Deferred maintenance has turned to unpaid property taxes and in the past couple of years, past-due debt payments.

Defaults have pockmarked Flagstar’s loanbook. This time last year, the bank had marked $103 million in multifamily loans 30 to 89 days past due. By the end of the second quarter, the figure had surged 767 percent to $893 million.

Net charge-offs in its multifamily portfolio or debt market unrecoverable peaked at $120 million at the end of 2024.

Slowly, Flagstar has made inroads.

It reported a one-third reduction in bad debts in the first three months of 2025 compared to the last three of 2024 and cut its loss reserves nearly in half in the same period.

Multifamily delinquencies remain an issue. The bank reported $806 million of them in the most recent reporting period — an increase of 8 percent from year-end 2024.

But the CFO tied the uptick to “one borrower who pays subsequent to month’s end and has done so again.”

Lee said about $414 million in debt reported delinquent at the end of the quarter came current in April. The bank reported $1 billion in delinquencies across its entire portfolio in the period.

All told, executives sounded optimistic on the spring earnings call. Losses had lightened, investors had an appetite for Flagstar’s bad debt and by the bank’s projections, profitability was in sight in 2025.

“We’re going to look like a completely different company when we end the year,” Otting said.