Flagstar Financial Q2 Loss Wider Than Expected, Revenues Fall Y/Y

Flagstar Financial, Inc. FLG reported a second-quarter 2025 loss per share of 14 cents, wider than the Zacks Consensus Estimate of a loss of 12 cents. It had incurred a loss of $1.05 in the year-ago quarter.

Results were primarily affected by a decline in net interest income (NII) and fee income, along with lower loan and deposit balances. However, lower expenses acted as a tailwind.

Results excluded certain non-recurring items. After considering these, the net loss available to common shareholders (GAAP basis) was $78 million compared with the net loss to common shareholders of $333 million reported in the prior-year quarter.

FLG’s Quarterly Revenues & Expenses Decline

Quarterly revenues were $496 million, which declined 26% from the prior-year quarter. Nonetheless, the top line missed the Zacks Consensus Estimate by 5.6%.

NII was $419 million, down 24.8% from the prior-year quarter. The net interest margin of 1.81% moved down 17 basis points from the previous-year quarter.

Non-interest income was $77 million, which decreased 32.4% from the year-ago quarter. The decline is mainly due to the absence of net return on mortgage servicing rights and lower fee income.

Non-interest expenses of $513 million decreased 27% year over year. Adjusted operating expenses (excluding intangible asset amortization and merger and restructuring expenses) were $460 million, down 27.8% from the second quarter of 2024.

The efficiency ratio was 95.3%, which slightly increased from 95.1% in the year-ago quarter. A rise in the efficiency ratio indicates deteriorating profitability.

Flagstar Financial’s Loans & Deposits Decline

Total loans and leases held for investment declined 3.7% sequentially to $64.1 billion as of June 30, 2025. Nonetheless, as of the same date, total deposits declined 5.6% sequentially to $69.7 billion.

FLG’s Credit Quality: Mixed Bag

Non-performing assets were $3.2 billion, which increased from $2.6 billion as of June 30, 2024. Net charge-offs were $117 million, which declined 66.4% from the prior-year quarter.

Flagstar Financial’s Capital Ratios Improve

As of June 30, 2025, the common equity tier 1 ratio was 12.33%, which increased from 9.54% as of June 30, 2024. The total risk-based capital ratio was 15.77%, which grew from 12.78% in the prior-year quarter.

The leverage capital ratio rose to 8.61% from 7.53% in the year-ago quarter.

Our View on FLG

Flagstar Financial’s deteriorating asset quality and geographic concentration might act as headwinds. The decline in loan and deposit balances, along with lower NII and fee income in the second quarter, is likely to affect its balance sheet position. However, the decrease in non-interest expenses served as a positive factor.

Flagstar Financial, Inc. Price, Consensus and EPS Surprise

Flagstar Financial, Inc. price-consensus-eps-surprise-chart | Flagstar Financial, Inc. Quote

Currently, FLG carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Banks

Valley National Bancorp’s VLY second-quarter 2025 adjusted earnings per share of 23 cents surpassed the Zacks Consensus Estimate by a penny. Also, the bottom line increased 76.9% on a year-over-year basis.

VLY’s results were primarily aided by increased NII and non-interest income. A decline in provisions was another tailwind. However, higher expenses hurt results to some extent.

Zions Bancorporation’s ZION second-quarter 2025 adjusted earnings per share of $1.58 beat the Zacks Consensus Estimate of $1.31. Moreover, the bottom line surged 30.6% from the year-ago quarter.

Results were primarily aided by higher NII and non-interest income alongside a provision benefit. Additionally, higher loan amounts were another positive. However, a rise in adjusted non-interest expenses was a major headwind for ZION.

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This article originally published on Zacks Investment Research (zacks.com).

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