Flagstar Financial institution eked out its first profitable quarter since narrowly avoiding collapse in 2024, a milestone pushed by aggressive cuts to its multifamily and business actual property mortgage guide.
The lender reported $21 million in internet revenue within the fourth quarter, swinging from a $45 million loss the prior quarter, in line with an earnings report posted Friday. For all of final yr, Flagstar nonetheless misplaced $177 million, however that was a pointy enchancment from its roughly $1 billion loss the yr earlier than, Bisnow reported.
Wall Avenue wasn’t anticipating the comeback fairly so quickly; Flagstar posted $557 million in quarterly income, beating consensus estimates by about 4 %, whereas earnings per share got here in at 5 cents, forward of projections. The inventory nonetheless slipped about 1 % noon Friday, an indication buyers stay cautious of what’s left on the stability sheet.
That warning isn’t unfounded. Flagstar nonetheless has about $3 billion in troubled loans and stays deeply entangled in New York Metropolis’s rent-stabilized housing market, lengthy a core enterprise line for New York Neighborhood Bancorp and Signature Financial institution earlier than each ran aground.
On the finish of 2023, Flagstar — constructed on the husk of NYCB — held $50.6 billion in business actual property loans. By the tip of final yr, that determine had fallen to $38.3 billion. Within the fourth quarter, Flagstar shed $2.3 billion of CRE publicity, together with $1.5 billion tied to multifamily.
Since early 2024, the financial institution has reviewed 97 % of its New York Metropolis rent-regulated mortgage guide, which totals $14.6 billion right this moment. Greater than $9 billion is backed by buildings the place at the very least half the models are regulated. Nonaccrual loans in that portfolio stand at $2 billion.
Flagstar has logged $1.7 billion in payoffs and $375 million in charge-offs tied to these loans, whereas boosting its allowance for credit score losses to five.6 %.
One notably painful instance of the rent-stabilized market’s affect was a $564 million mortgage tied to greater than 5,000 rent-stabilized flats previously owned by Pinnacle Group. The properties had been offered in a chapter public sale, costing the financial institution a roughly $113 million write-down.
The political backdrop stays a wild card. Mayor Zohran Mamdani pledged to freeze rents for stabilized models, a transfer that will additional pressure landlords’ means to service debt. Flagstar executives stated they’re modeling eventualities with flat rents and rising bills and intently scrutinizing debtors with excellent violations.
Nonetheless, administration signaled it isn’t abandoning business actual property altogether. As it really works by legacy New York publicity, Flagstar plans to selectively ramp up originations in markets like Michigan, California and Florida.
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