Flagstar Cuts 2026 Net Interest Income Forecast to $1.815–$1.830 Billion
Key Facts
Flagstar Bank, N.A. cut its 2026 net interest income forecast to $1.815–$1.830 billion, from a previous range of $1.860–$1.960 billion, according to a forecast update published on October 23. It also lowered its 2027 estimate to $2.200–$2.300 billion, compared with prior guidance of $2.500–$2.650 billion. The company deferred to 2028 financial targets it had aimed to reach in 2027, including net interest income of $2.600–$2.700 billion and adjusted earnings per share of $1.60–$1.70. The revision reflects pressure on credit costs, pricing and growth expectations in a high-interest-rate environment with competition for deposits. Chief Executive Joseph Otting said, "Full achievement of these targets has shifted to 2028 from 2027."
The cuts included adjusted diluted earnings per share, with the expected range for 2026 now at $0.10–$0.15, versus a previous estimate of $0.40–$0.50. For 2027, the company expects adjusted earnings of $0.85–$0.95, down from $1.60–$1.70. In contrast, it raised its loan-loss provision estimates to $160–$170 million in 2026, from $90–$140 million, and to $175–$225 million in 2027, compared with prior guidance of $100–$150 million. Management linked the forecast revision to higher interest rates and their effect on credit costs, as well as competition for deposits that is weighing on pricing and growth expectations. Otting also said persistent inflation and the continued impact of rent-regulation policies on the New York City multifamily real estate portfolio pressured credit costs.
Third-quarter indicators show a sharp increase in the credit-loss provision to $76 million, from $18 million in the second quarter. The company attributed the increase to the impact of net charge-offs and higher interest rates, including their effect on its rent-regulated multifamily real estate portfolio in New York. Net charge-offs were $74 million, down $26 million and 17 basis points from the previous quarter, while the ratio to average loans was 49 basis points. However, nonperforming loans increased $16 million to $2.8 billion, with 42% paying. Loans classified as "criticized or classified" also rose $670 million, or 6%, from the second quarter.
On the income side, third-quarter net interest income rose 5% sequentially to $460 million, and net interest margin widened 4 basis points to 2.17%. In the second quarter, the company reported net interest income of $440 million, down $3 million, or 1%, from the first quarter, while the margin declined 2 basis points to 2.13%. The bank reported net income of $12 million in the third quarter, compared with $34 million in the second quarter, after a loss of $36 million in the third quarter of 2025. Net income attributable to common shareholders was $3 million, or $0.01 per diluted share. Meanwhile, commercial and industrial loans grew $2.0 billion, or 11%, to $20.6 billion, and commercial banking deposits increased $575 million, or 7%.
The recovery outlook depends on loan repricing, commercial business growth and an improved funding mix, according to the investor presentation. Management estimated that about $12 billion of low-coupon multifamily real estate loans, below 3.9%, will mature or reprice between October 1, 2026, and December 31, 2027. It said this could allow the bank to raise rates on those loans or deploy repayment proceeds into market-rate loans. Other drivers include repricing multifamily and commercial real estate loans, originating higher-yielding commercial loans, a decline in nonperforming loans and balance-sheet expansion. Flagstar expects net interest margin of 2.50%–2.60% in 2027, followed by 2.85%–2.95% in 2028.