Fourth Quarter 2024 Summary
Asset Quality
Loans, Deposits, and Funding
Capital
Liquidity
HICKSVILLE, N.Y., Jan. 30, 2025 /PRNewswire/ — Flagstar Financial, Inc. (NYSE: FLG) (“the Company”), today reported results for the fourth quarter and full-year 2024. Fourth quarter 2024 net loss was $160 million compared to a net loss of $280 million for third quarter 2024, and a net loss of $2,705 million for fourth quarter 2023. The net loss attributable to common stockholders for fourth quarter 2024 was $168 million, or $0.41 per diluted share, compared to a net loss attributable to common stockholders of $289 million, or $0.79 per diluted share for third quarter 2024, and a net loss attributable to common stockholders of $2,713 million, or $11.27 per diluted share for fourth quarter 2023.
For the year ended 2024, the Company reported a net loss of $1,090 million compared to a net loss of $79 million for the year ended 2023. Net loss attributable to common stockholders for the year ended 2024 was $1,125 million or $3.40 per diluted share compared to a net loss attributable to common stockholders of $112 million or $0.49 per diluted share for the year ended 2023.
CEO COMMENTARY
Commenting on the Company’s fourth quarter and full-year 2024 performance, Chairman, President, and Chief Executive Officer, Joseph M. Otting stated, “2024 was a transitional year for Flagstar. Despite this, the Company made tremendous progress on each of its strategic priorities and set the stage from which to grow going forward. During the year, the Company significantly bolstered its capital position through a combination of actions including a $1.05 billion capital infusion and the sale of several non-core businesses; enhanced its liquidity through deposit growth and cash proceeds from the sale of our mortgage warehouse and mortgage servicing and third-party origination businesses; completed a review of the entire commercial real estate portfolio, including the multi-family portfolio, taking significant charge-offs in an effort to reduce risk within the portfolio; assembled a strong management team, supported by a high-quality Board of Directors; improved our regulatory relationships; and continued to invest in key areas such as commercial banking and risk management.
“Our fourth quarter net loss per diluted share narrowed this quarter compared to the previous quarter and significantly exceeded expectations due largely to an improving credit quality profile. Our non-accrual loans were relatively unchanged this quarter after increasing by over $2 billion year-to-date while net charge-offs declined compared to the third quarter, driving a 55% quarter-over-quarter decrease in the provision for credit losses. Our full-year results were also better than expected with virtually all of our metrics in-line or better than the guidance we provided earlier in the year.
“We continued to make inroads on reducing our commercial real estate exposure and diversifying our loan portfolio. Multi-family loans declined $3.2 billion or 9% over the course of the year, while CRE loans declined $1.8 billion or 17%. We managed down our exposures through run-off of non-relationship CRE loans, par payoffs, and strategic loan sales.
“We had another good deposit growth quarter in both our retail channel and in the private bank, despite the fact that we lowered deposit rates throughout the quarter. We also garnered some early successes in our commercial lending business, with $620 million in new commitments and a robust pipeline heading into the first quarter, as our recent hires are already making a positive impact.
“Perhaps our most important accomplishment this year is the improvement in our capital position, as measured by our CET1 ratio, which increased over 280 basis points during the year to 11.9%.
“All of these trends are positive and point to the significant momentum underpinning our growth initiatives, especially in our commercial banking business. I am confident in management’s ability to execute on its 2025 strategic initiatives to transform Flagstar into a top-tier regional bank with a solid balance sheet and strong earnings power.
“Finally, I would like to thank each of our teammates for their support and commitment to each other and our customers over the course of the past year.”
BALANCE SHEET SUMMARY AS OF DECEMBER 31, 2024
At December 31, 2024, total assets were $100.2 billion, down $13.9 billion or 12% compared to December 31, 2023 and down $14.2 billion or also 12% versus September 30, 2024. The year-over-year decline was driven by a decrease in total loans and leases held for investment (HFI), partially offset by an increase in cash and cash equivalents, while the linked-quarter decrease was the result of a decrease in total loans and leases HFI and a decline in cash balances. This was part of the Company’s strategy to reduce our commercial real estate exposure and strengthen our funding profile. During the first three quarters of 2024, the Company took various actions to increase liquidity, while in the fourth quarter, we utilized a portion of our liquidity to pay off higher cost wholesale borrowings and brokered CDs.
Total loans and leases held for investment at December 31, 2024 were $68.3 billion, down $16.3 billion or 19% on a year-over-year basis and down $2.8 billion or 4% on a linked-quarter basis. The multi-family portfolio declined $3.2 billion or 9% to $34.1 billion at December 31, 2024 compared to $37.3 billion at December 31, 2023, and it decreased $1 billion or 3% compared to September 30, 2024. CRE loans decreased $1.8 billion or 17% compared to December 31, 2023 to $8.7 billion and they decreased $532 or 6% compared to September 30, 2024. The decline in these two portfolios is part of the Company’s overall strategy to reduce its commercial real estate exposure. Both the linked-quarter and year-to-date declines were the result of existing non-relationship borrowers, par payoffs, and through opportunistic loan sales.
Commercial and industrial loans also declined on both a linked-quarter and year-to-date basis. At December 31, 2024, commercial and industrial loans totaled $15.4 billion, down $1.1 billion or 7% compared to the previous quarter and $9.9 billion or 39% year-to-date. The year-to-date decline largely resulted from the sale of our mortgage warehouse business, which at closing, had approximately $6 billion in loans, along with our decision to run off certain non-core loans within our specialty finance business totaling $2.4 billion. The linked-quarter decrease was due to additional run-off in the specialty finance portfolio and a decrease in MSR lending.
Total deposits at December 31, 2024 were $75.9 billion, a decrease of $5.7 billion or 7% on a year-to-date basis and a decrease of $7.1 billion or 9% on a linked-quarter basis. The year-to-date and linked-quarter decrease was driven by deposit outflows during the first quarter, driven by credit rating agency downgrades and the sale of our mortgage servicing and third-party origination business during the fourth quarter. This transaction included the transfer of mortgage escrow deposits to the buyer. Non-interest-bearing deposits decreased $7.0 billion or 34% on a year-to-date basis and $5.1 billion or 27% on a linked-quarter basis to $13.5 billion. Both the year-to-date and linked-quarter decline was due to a $4.5 billion decline in escrow deposits resulting from the sale of the mortgage servicing business and by the aforementioned deposit outflows during the first quarter of 2024.
Certificates of deposit increased $5.8 billion or 27% to $27.3 billion, on a year-to-date basis, but declined $1.9 billion or 7% on a linked-quarter basis. The year-to-date increase is primarily due to our promotional CD campaign during the year, while the linked-quarter decline is due to us paying off $2.5 billion of brokered CDs, reflecting our strategy to reduce higher cost funding. Savings accounts rose $5.5 billion or 63% to $14.3 billion year-to-date and $772 million or 6% on a linked-quarter basis. The increase was due to growth in our promotional rate high-yield savings product.
Fourth quarter 2024 represented the third consecutive quarter of solid deposit growth in our retail channel and in the Private Bank. Retail deposits increased $0.9 billion or 3% to $35.9 billion on a linked-quarter basis and they rose $7.3 billion or 17% on a year-to-date basis. Deposits in the Private Bank increased $0.5 billion or 3% to $18.2 billion and $2.4 billion or 15% since March 31, 2024.
At December 31, 2024, wholesale borrowings totaled $13.4 billion, down $6.9 billion or 34% on a year-over-year basis and down $5.9 billion or 31% on a linked-quarter basis. During the first quarter of the year, we utilized wholesale borrowings, primarily Federal Home Loan Bank advances to offset the deposit attrition resulting from the credit rating agency downgrades. Once we rebuilt our liquidity position through asset sales and deposit growth, we paid down wholesale borrowings, including $8.6 billion in the third quarter and an additional almost $6 billion in the fourth quarter.
NET INCOME (LOSS) | NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS – AS ADJUSTED
Fourth quarter and full-year 2024 results include several notable items related to certain actions the Company took during the quarter. These items include a net gain on the sale of our mortgage servicing and third-party origination business, which closed in October, severance costs, and long-term asset impairment charges related to various Company-owned or leased properties. As adjusted for these items and for merger-related expenses, the net loss for fourth quarter was $130 million and the net loss attributable to common stockholders was $138 million or $0.34 per diluted share. This compares to a third quarter net loss, as adjusted for merger-related expenses and for certain items related to the sale of the mortgage warehouse business, of $243 million and a net loss attributable to common stockholders of $252 million or $0.69 per diluted share. Fourth quarter 2023, net loss and net loss attributable to common stockholders, as adjusted for merger-related and restructuring expenses, bargain purchase gain, the goodwill impairment, and the FDIC special assessment was $185 million and $193 million or $0.80 per diluted share, respectively.
In addition to the aforementioned notable items impacting our fourth quarter 2024 results, full-year 2024 results also include notable items related to the sale of our mortgage warehouse business and a reduction of the bargain purchase gain related to the Signature transaction. As adjusted for these items and for merger-related expenses, the net loss was $845 million for full-year 2024 and the net loss attributable to common stockholders was $880 million or $2.66 per diluted share.
Full-year 2023 also included several notable items, most of which were related to the Signature transaction, including the bargain purchase gain, the goodwill impairment, and the FDIC special assessment. As adjusted for these items and for merger-related expenses, net income for the year ended 2023 was $497 million and net income attributable to common stockholders was $464 million or $1.92 per diluted share.
EARNINGS SUMMARY FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2024
Net Interest Income, Net Interest Margin, and Average Balance Sheet
Net Interest Income
Net interest income for the fourth quarter 2024 totaled $461 million, down $49 million, or 10%, compared to third quarter 2024, and down $279 million or 38%, compared to the fourth quarter 2023. The decrease compared to third quarter 2024 was primarily driven by lower average loan balances due to the sales of our mortgage warehouse and mortgage servicing and third-party origination businesses, continued payoffs in the multi-family and commercial real estate portfolios, and lower C&I loan balances as we continue to reduce certain non-core, non-strategic relationships, along with an increase in interest-bearing deposits and lower average cash balances. This was partially offset by a lower level of average borrowed funds, as the Company paid off a significant amount of wholesale borrowings during the fourth quarter.
The decrease relative to fourth quarter 2023 was due to several factors, including lower average loan balances, higher average interest-bearing deposits and average borrowed funds. This was offset in part by a significant increase in average interest-earning cash balances.
For the year ended 2024, net interest income decreased $925 million or 30% to $2.2 billion compared to $3.1 billion for the year ended 2023. The year-over-year decline is due to a significant increase in average borrowed funds and higher levels of average interest-bearing deposits, along with a decline in average loan balances. The increase in average borrowed funds was to replace deposit attrition in the first quarter of the year, resulting from credit rating agency downgrades. This was offset somewhat by a substantial increase in average interest-earning cash balances.
Net Interest Income and Net Interest Margin Summary
December 31, 2024
For the Three Months Ended
compared to (%):
(dollars in millions)
December 31,
2024
September 30,
2024
December 31,
2023
September 30,
2024
December 31,
2023
Net interest income
$ 461
$ 510
$ 740
-10 %
-38 %
Net Interest Margin
The net interest margin (“NIM”) for the fourth quarter 2024 was 1.73%, down 6 basis points compared to third quarter 2024 and down 109 basis points compared to fourth quarter 2023. On a linked-quarter basis, the cost of average total interest-bearing liabilities declined 35 basis points to 4.27% driven by a 72 basis point decline in the cost of average borrowed funds to 4.56%, along with a $6.5 billion or 25% decline in average borrowed funds to $17.9 billion, and an 18 basis point decrease to 4.19% in the cost of average interest-bearing deposits, while average interest-bearing deposit balances increased $1.9 billion or 3.24% to $65.6 billion.
The decline in the cost of funding reflects a decline in market rates as the Federal Reserve Board reduced the Federal Funds rate by 100 basis points during the fourth quarter, which resulted in the Company reducing deposit rates as well as the repayment of approximately $6 billion of wholesale borrowings. This was partially offset by a 31 basis point decline in the yield on average interest-earning assets to 5.11%. This was the result of a 61 basis point decline in the yield on average cash balances to 4.79%, driven by the reduction in the Federal Funds rate during the quarter as well as a 25 basis point decrease in the yield on average loans to 5.28%.
On a year-over-year basis, the cost of average interest-bearing liabilities rose 54 basis points driven by a 57 basis point increase in the cost of average interest-bearing deposits to 4.19% along with a $6.1 billion or 10% increase in average interest-bearing deposit balances. The majority of the increase in both the cost of deposits and in average interest-bearing deposit balances was due to our promotional deposit campaign throughout most of the year, which centered on a high-yield savings product and promotional rate certificates of deposits, both of which we have been managing lower during the fourth quarter.
Also, the cost of average borrowed funds increased 42 basis points to 4.56% while the average balance of borrowed funds increased $2.2 billion or 14% to $17.9 billion. Additionally, on a year-over-year basis, the yield on average interest-earning assets declined 44 basis points to 5.11%, driven by a 44 basis point reduction in the yield on average loans to 5.28%, along with a $13.9 billion or 16% decrease in average loan balances and a 49 basis point decline in the yield on average cash balances to 4.79%, offset by a $15.3 billion or 226% increase in average cash balances.
For the year ended 2024, the NIM was 1.95%, down 104 basis points compared to the year ended 2023. The year-over-year decrease was largely the result of a higher cost of funds, as the Company made use of borrowed funds during the early part of the year to offset deposit attrition and bolster liquidity, as well as the launch of a promotional rate deposit campaign during the second quarter, coupled with an increase in average interest-bearing liabilities. The average cost of funds rose 115 basis points to 4.40%, driven by a 141 basis point increase in the average cost of borrowings to 5.07% and a 103 basis point increase in the average cost of deposits to 4.15%. Average interest-bearing liabilities increased $12 billion or 16% on a year-over-year basis to $86.3 billion, due to a $6.2 billion or 31% increase in average borrowed funds to $24.2 billion and a $5.8 billion or 11% increase in average interest-bearing deposits to $62.1 billion.
While the average cost of funds increased significantly, the yield on average interest-earnings assets rose only 5 basis points to 5.38%, driven by a higher yield on the investment securities portfolio and on cash balances, while the yield on the loan portfolio remained relatively unchanged. The yield on average investment securities increased 39 basis points to 4.57% on a year-over-year basis, while the yield on average cash balances increased 12 basis points to 5.26%. Average interest-earning assets increased $7.7 billion or 8% to $110.6 billion as average cash balances increased $9.5 billion or 84% to $19.5 billion and average securities increased $1.6 billion or 16% to $12.2 billion. Average loan balances declined $3.0 billion or 4% to $78.9 billion.
For the Three Months Ended
compared to (bp):
Yield/Cost
December 31,
2024
September 30,
2024
December 31,
2023
September 30,
2024
December 31,
2023
Mortgage and other loans, net
5.28 %
5.53 %
5.72 %
-25
-44
Securities
4.77 %
4.85 %
4.39 %
-8
38
Reverse repurchase agreements
— %
— %
6.91 %
0
-691
Interest-earning cash and cash equivalents
4.79 %
5.40 %
5.28 %
-61
-49
Total interest-earning assets
5.11 %
5.42 %
5.55 %
-31
-44
Total interest-bearing deposits
4.19 %
4.37 %
3.62 %
-18
57
Borrowed funds
4.56 %
5.28 %
4.14 %
-72
42
Total interest-bearing liabilities
4.27 %
4.62 %
3.73 %
-35
54
Net interest margin
1.73 %
1.79 %
2.82 %
-6
-109
Net Interest Income and Net Interest Margin Summary
For the Year Ended
(dollars in millions)
December 31,
2024
December 31,
2023
% Change
Net interest income
$ 2,152
$ 3,077
-30 %
For the Year Ended
Yield/Cost
December 31,
2024
December 31,
2023
(bp) Change
Mortgage and other loans, net
5.54 %
5.51 %
3
Securities
4.57 %
4.18 %
39
Reverse repurchase agreements
— %
5.77 %
-577
Interest-earning cash and cash equivalents
5.26 %
5.14 %
12
Total interest-earning assets
5.38 %
5.34 %
5
Total interest-bearing deposits
4.15 %
3.12 %
103
Borrowed funds
5.07 %
3.66 %
141
Total interest-bearing liabilities
4.40 %
3.25 %
115
Net interest margin
1.95 %
2.99 %
-104
Average Balance Sheet
December 31, 2024
For the Three Months Ended
compared to:
(dollars in millions)
December 31,
2024
September 30,
2024
December 31,
2023
September 30,
2024
December 31,
2023
Mortgage and other loans, net
$71,727
$76,553
$85,671
-6 %
-16 %
Securities
12,347
12,862
11,493
-4 %
7 %
Reverse repurchase agreements
—
—
46
NM
NM
Interest-earning cash and cash equivalents
22,048
23,561
6,753
-6 %
226 %
Total interest-earning assets
106,122
112,976
103,963
-6 %
2 %
Total interest-bearing deposits
65,576
63,647
59,504
3 %
10 %
Borrowed funds
17,940
24,456
15,714
-27 %
14 %
Total interest-bearing liabilities
83,516
88,103
75,218
-5 %
11 %
Non-interest-bearing deposits
$15,959
$18,631
$22,676
-14 %
-30 %
For the Year Ended
(dollars in millions)
December 31,
2024
December 31,
2023
