Flagstar Financial Q1 Loss Narrower Than Expected, Revenues Dip Y/Y

Flagstar Financial, Inc. FLG reported a first-quarter 2025 loss per share of 23 cents, narrower than the Zacks Consensus Estimate of a loss of 26 cents. It had incurred a loss of 75 cents in the year-ago quarter.

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

The results excluded certain non-recurring items. After considering these, the net loss available to common shareholders (GAAP basis) was $108 million compared with the net loss to common shareholders of $335 million reported in the prior-year quarter.

FLG’s Quarterly Revenues & Expenses Decline

Quarterly revenues were $490 million, which declined 22.6% from the prior-year quarter. Nonetheless, the top line missed the Zacks Consensus Estimate by 5.6%.

NII was $410 million, down 34% from the prior-year quarter. The net interest margin of 1.74% moved down 54 basis points from the previous-year quarter.

Non-interest income was $80 million, which increased significantly from the year-ago quarter’s $9 million. Adjusted non-interest income was $8 million, down 38% year over year.

Non-interest expenses of $532 million decreased 24% year over year. Adjusted non-interest expenses (excluding intangible asset amortization and merger and restructuring expenses) were $485 million, down 22% from the first quarter of 2024. 

The efficiency ratio was 101.3%, which increased from 82.5% 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 2% sequentially to $66.6 billion as of March 31, 2025. Nonetheless, as of the same date, total deposits declined 3% sequentially to $73.9 billion.

FLG’s Credit Quality: Mixed Bag

Non-performing assets were $3.3 billion, which increased significantly from $798 million as of March 31, 2024. Net charge-offs were $115 million, which rose 42% from the prior-year quarter.

The provision for credit losses was $79 million, which decreased from $315 million in the prior-year quarter.

Flagstar Financial’s Capital Ratios Improve

As of March 31, 2025, the common equity tier 1 ratio was 11.90%, which increased from 9.45% as of March 31, 2024. The total risk-based capital ratio was 15.25%, which grew from 13.09% in the prior-year quarter.

The leverage capital ratio rose year over year to 8.45% from 7.90%.

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 in the first quarter, is likely to affect its balance sheet position. However, the increase in fee income 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 first-quarter 2025 adjusted earnings per share of 18 cents missed the Zacks Consensus Estimate by a penny. Also, the bottom line declined 5.3% on a year-over-year basis. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

VLY’s rise in provisions, lower non-interest income, higher adjusted expenses and a sequential decline in loans and deposit balances hurt the results. Nonetheless, the company’s efforts to bring down funding costs drove NII, which acted as a tailwind. 

Zions Bancorporation’s ZION first-quarter 2025 adjusted earnings per share of $1.24 beat the Zacks Consensus Estimate of $1.20. Moreover, the bottom line rose 29.2% from the year-ago quarter.

Results were primarily aided by higher NII and non-interest income. Higher loans were other positives. However, higher provisions and a rise in adjusted non-interest expenses were major headwinds for ZION.

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

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