Flagstar Bank, National Association (FLG): A Bull Case Theory

We came across a bullish thesis on Flagstar Bank, National Association on Value & Error’s Substack. In this article, we will summarize the bulls’ thesis on FLG. Flagstar Bank, National Association's share was trading at $13.50 as of February 2nd. FLG’s forward P/E was 7.75 according to Yahoo Finance.

Flagstar Financial (NYSE: FLG), formerly New York Community Bancorp, is a U.S. community bank that has undergone a dramatic transformation following a period of severe balance sheet stress. The bank’s challenges stemmed primarily from outsized exposure to rent-controlled multifamily properties and office loans, which deteriorated rapidly amid higher interest rates and weakening commercial real estate fundamentals.

In response, Flagstar raised over $1 billion in new capital last year to shore up its balance sheet and address investor concerns around solvency and asset quality. This recapitalization marked a turning point, as it was accompanied by a comprehensive management overhaul, with former Comptroller of the Currency Joseph Otting stepping in as CEO to lead the turnaround.

Since then, the new management team has moved aggressively to stabilize the franchise. Non-core assets have been sold to simplify the business and improve capital ratios, while the loan portfolio has been fully remarked to reflect impairments in the office and multifamily book.

These actions have largely reset expectations, removed lingering uncertainty around hidden losses, and restored credibility with regulators and the market. With the legacy issues now recognized and largely addressed, Flagstar’s earnings profile is beginning to inflect upward, supported by a cleaner balance sheet and a more conservative risk posture.

Despite this progress, the stock continues to trade at approximately 0.7x tangible book value, a significant discount for a bank that has already absorbed its credit pain and recapitalized. As earnings normalize and confidence continues to rebuild, Flagstar appears well positioned for a valuation rerating toward peer banks that trade at or above book value.

With a stabilized balance sheet, refreshed leadership, and de-risked loan book, the market’s current pricing suggests an overly pessimistic view, creating an attractive risk-reward setup for investors willing to underwrite the turnaround.

Previously, we covered a bullish thesis on BlackRock, Inc. (BLK) by Kroker Equity Research in February 2025, which highlighted its diversified asset management business, record net inflows, and high-margin Aladdin® platform. BLK’s stock has appreciated by 12.86% since our coverage due to strong earnings. Value & Error shares a similar but emphasizes Flagstar Financial’s (FLG) turnaround, recapitalization, and management overhaul, highlighting rerating potential.

Flagstar Bank, National Association is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 36 hedge fund portfolios held FLG at the end of the third quarter which was 36 in the previous quarter. While we acknowledge the potential of FLG as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.