Flagstar Financial Reports $1.1 Billion Net Loss for 2024, Significant Strategic Changes Implemented

Flagstar Financial, Inc. reported a net loss of $1.1 billion for the year ended December 31, 2024, compared to a net loss of $79 million in 2023. The net loss attributable to common stockholders was $1.2 billion, or $3.49 per diluted share in 2024, versus a $112 million loss, or $0.49 per diluted share, in 2023. The 2024 figures include a $37 million increase in the provision for credit losses due to adjustments related to the commercial and industrial portfolio. Significant items impacting 2024 results included a $121 million reduction in bargain purchase gain from the Signature Transaction and $103 million in merger-related and restructuring expenses. Conversely, 2023 results included a $2.1 billion bargain purchase gain and $245 million in merger-related expenses.

Net interest income, the company's primary revenue source, decreased due to a higher cost of funds resulting from increased reliance on borrowed funds to offset deposit attrition and a promotional deposit campaign. Net interest income for 2024 was $2.152 billion, a decrease of $925 million compared to 2023. This decrease was partially offset by a $11.1 billion increase in average cash and investment securities and an increase in average loan yield. Non-interest income totaled $400 million in 2024, down $2.3 billion from 2023, primarily due to the sale of the mortgage servicing, subservicing, and third-party origination businesses and a reduction in the bargain purchase gain.

Significant strategic developments in 2024 included a 1-for-3 reverse stock split, a name change to Flagstar Financial, Inc., and the sale of non-core businesses (mortgage servicing, subservicing, and third-party origination businesses, and the mortgage warehouse business). These actions simplified the business model and improved capital ratios by approximately 150 basis points. The company also strengthened its management team with several new hires in risk management and executive leadership positions, and expanded its commercial banking team by over 54 employees. The company currently operates over 400 locations across ten states and anticipates closing approximately 60 retail bank branches and 17 private banking locations in 2025.

The company's financial condition showed a decrease in total assets to $100.2 billion at the end of 2024 from $114.1 billion at the end of 2023, primarily due to the sale of assets and strategic loan portfolio reductions. Total deposits decreased by $5.7 billion to $75.9 billion, reflecting deposit attrition in early 2024 followed by stabilization and subsequent growth. The company's loan portfolio decreased to $68.3 billion, primarily due to the sale of the warehouse lending portfolio and strategic reductions in commercial and industrial loans. The securities portfolio increased to $10.4 billion, primarily consisting of U.S. government agency bonds.

The company identified several risk factors, including interest rate risk, credit risk (particularly related to concentrations in multi-family and commercial real estate loans), financial statement risk (due to reliance on models), liquidity and dividend risks, legal and regulatory risks (including heightened prudential standards as a Category IV institution), financial and market risks, strategic risks related to acquisitions, operational risks (including cybersecurity), and reputational risks. The company also discussed its internal control over financial reporting, noting material weaknesses related to risk assessment, monitoring, and control activities, particularly concerning independent credit review processes. The company is actively working to remediate these weaknesses.