Flagstar Bank posted a second straight quarterly profit in the first quarter of 2026, but earnings slipped from the prior period as revenue softened and credit costs remained mixed.
Net income attributable to common stockholders was $13 million, or $0.03 per diluted share, down from $21 million, or $0.05 per diluted share, in the fourth quarter of 2025. On an adjusted basis, net income attributable to common stockholders was $20 million, or $0.04 per diluted share, compared with $30 million, or $0.06 per diluted share, in the prior quarter.
Revenue moved lower quarter over quarter. Net interest income fell to $443 million from $467 million, while total revenue declined to $498 million from $557 million. Non-interest income dropped to $55 million from $90 million. Pre-provision net revenue came in at $32 million, down from $48 million in the fourth quarter, while adjusted pre-provision net revenue was $41 million versus $60 million.
The bank’s net interest margin edged up to 2.15% from 2.14%, and rose 10 basis points on an adjusted basis versus the prior quarter’s hedge benefit. Operating expenses fell to $466 million from $509 million, a 5% decline, while adjusted operating expenses were $441 million, also down 5%.
Loan growth was led by commercial and industrial lending. Total C&I loans increased $1.4 billion, or 9%, to $16.6 billion. Within that portfolio, specialized industries lending rose $595 million, corporate and regional commercial banking increased $243 million, asset-based lending added $136 million, mortgage finance climbed $395 million, and public finance/other rose $169 million. Equipment finance was the only major C&I category to fall, dropping $184 million.
At the same time, Flagstar continued shrinking its real estate exposure. Combined multi-family and commercial real estate exposure fell $1.6 billion, or 4%, from the prior quarter. Multi-family loans declined $1.1 billion, or 4%, and CRE loans fell $481 million, or 5%. CRE par payoffs totaled $1.1 billion, down from $1.8 billion in the previous quarter.
Deposits rose modestly. Core deposits, excluding brokered balances, increased $1.1 billion, or 2%, while total deposits rose $832 million, or 1%, to $66.8 billion. Interest-bearing checking and money market balances drove the gain. Brokered deposits fell $298 million, or 12%, and wholesale borrowings declined $1 billion, or 9%, to $10.2 billion.
Asset quality improved in several areas. Non-accrual loans fell $323 million, or 11%, and criticized/classified loans dropped $323 million, or 3%. The CRE concentration ratio improved to 367% from 381% in the prior quarter. The allowance for credit losses stood at $1.0 billion, or 1.67% of total loans held for investment.
Credit costs were lower on the provision line. Provision for credit losses was zero, compared with $3 million in the fourth quarter. Net charge-offs were $78 million, up from $46 million in the prior quarter, and equaled 0.52% of average loans versus 0.30% in the fourth quarter. Excluding one bankruptcy-related borrower relationship, net charge-offs were 0.29% of average loans.
Capital strengthened further. The CET1 ratio rose 40 basis points to 13.24%, and tangible book value per share was $17.42. Adjusted tangible book value per share, after warrant exercise, was $15.70. As a result of these announcements, the company's shares have moved -0.3% on the market, and are now trading at a price of $13.23. If you want to know more, read the company's complete 8-K report here.
