Flagstar Posts $12 Million Net Income in Third Quarter

Key Facts

Flagstar Bank reported on October 23 that net income was $12 million in the third quarter of 2026, while net income attributable to common shareholders was $3 million, or $0.01 per diluted share. The figure put earnings per share at a low level despite revenue growth from the previous quarter. Revenue was $530 million, up 3% from $516 million in the second quarter. But growth in the total did not extend to all income sources: noninterest income fell to $70 million from $76 million, a decline of 8%. The results therefore showed a divergence between improved interest income and declines in some other revenue, alongside a higher provision for credit losses.

Revenue growth was driven by a 5% rise in net interest income to $460 million and a four-basis-point expansion in net interest margin to 2.17% compared with the second quarter. These figures reflect a quarterly improvement in lending income and yield at a time when the bank faced deposit competition and a high interest-rate environment. By contrast, noninterest income fell by $6 million to $70 million. As a result, the improvement in net interest income did not translate into a comparable increase in earnings attributable to common shareholders. Net income attributable to them was $3 million, while total net income was $12 million, according to the bank’s statement.

The most notable change on the credit side was an increase in the provision for loan losses to $76 million, compared with $18 million in the second quarter. The bank said the $58 million increase was mainly related to net charge-offs and the impact of higher interest rates, including on its New York rent-regulated multifamily real estate portfolio. Loans in that portfolio declined by $531 million, or 4%, during the quarter. At the same time, the bank said nonaccrual loans remained relatively stable, while substandard loans increased by $248 million, or 4%. Classified or criticized loans also rose by $670 million, or 6%.

At the balance-sheet level, total loans increased by $958 million to $61.9 billion on September 30, up 2% during the quarter and 6% year over year, marking a second consecutive quarterly increase. Total loan growth came despite a decline in New York multifamily real estate loans, pointing to differing trends across the bank’s portfolios. Deposits were $67.820 billion on September 30, compared with $67.521 billion on June 30, a quarterly increase of 0.4%. Chief Executive Joseph Otting said the bank’s core fundamentals continued to improve despite higher interest rates, deposit competition and persistent inflation. He also cited the impact of rent-regulation policies on the New York multifamily real estate portfolio.

The results come as part of a plan to improve the bank’s business mix, while it continues to expand commercial and industrial lending and reduce its exposure to commercial and multifamily real estate, according to themes in the earnings announcement. But pressures in the New York portfolio were reflected in provisions and declining loans, alongside an increase in classified or criticized loans. The Common Equity Tier 1 capital ratio was 12.38% in the third quarter. The company also completed a $250 million share repurchase in early October. Together, these indicators show a reported capital level, a completed buyback and higher credit costs in the same period.

The bank pushed back its expected timeline for completing its long-term strategic goals to 2028 from 2027, and Otting said the higher-for-longer interest-rate environment prompted the schedule change. On October 9, the bank had announced that results for the period ended September 30 would be released around 6:00 a.m. Eastern time on October 23, with a call to discuss them at 8:00 a.m. that day. Available share-price data before the announcement show that Flagstar shares closed at $11.44 on October 22, the day before the results were released. An Investing.com report published on October 23 said the stock had reached a new 52-week low of $10.49 and was trading at $10.61 at the time of the report, down 20% over six months. These later prices put the stock’s performance in the context of the report’s publication date, while the October 22 close does not represent a reaction to results that had not yet been announced.