Flagstar reports larger loss amid rising charge-offs
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Shares of Flagstar Financial Inc., previously known as New York Community Bancorp (NYCB), dropped sharply on Friday following its latest quarterly report. The bank posted a wider-than-expected net loss for the fourth consecutive quarter, mainly driven by its continued struggles with commercial real estate (CRE) loans. This significant loss marks a challenging period for Flagstar as it tackles ongoing issues within its real estate portfolio and adjusts its operational strategy.
Flagstar Reports Larger Loss Amid Rising Charge-Offs Flagstar reported net charge-offs of $240 million for the quarter, a significant increase from $24 million a year prior, though a slight improvement from the $349 million charge-off total in the previous quarter. The bank’s provision for credit losses surged to $242 million, up substantially from $62 million a year earlier. CEO Joseph Otting highlighted that 97% of their CRE and multifamily portfolios had undergone review, resulting in substantial write-downs. These proactive measures led to a 3% reduction in total CRE loans from the prior quarter and a year-to-date decline of 6%.
Total revenue for Flagstar fell by 40.2% to $623 million, although it did manage to exceed analyst expectations of $611.9 million. Net interest income dropped 42.2%, reaching $510 million, slightly under the FactSet forecast of $513.3 million. This decline is attributed to lower loan balances due to portfolio payoffs and the sale of the mortgage warehouse business, alongside reduced commercial and industrial lending.
Looking forward, Flagstar has tempered investor expectations. The bank forecasts a per-share loss of $3.10 to $3.00 in 2024, significantly wider than the anticipated loss of $2.71. For 2025, it expects a further loss of 35 to 30 cents per share, diverging from the FactSet consensus of a 6-cent profit. To navigate these challenges, Otting mentioned cost-cutting measures implemented across the organization, with further efficiency initiatives planned.
This latest earnings report has left a mark on Flagstar’s stock, which has declined 65.7% this year. While the SPDR S&P Bank ETF (KBE) is up 18.5% and the S&P 500 index has gained 22.5% year-to-date, Flagstar’s performance highlights the unique difficulties it faces, particularly in an environment where CRE exposure remains a key risk factor.
Flagstar Reports Larger Loss Amid Rising Charge-Offs Flagstar reported net charge-offs of $240 million for the quarter, a significant increase from $24 million a year prior, though a slight improvement from the $349 million charge-off total in the previous quarter. The bank’s provision for credit losses surged to $242 million, up substantially from $62 million a year earlier. CEO Joseph Otting highlighted that 97% of their CRE and multifamily portfolios had undergone review, resulting in substantial write-downs. These proactive measures led to a 3% reduction in total CRE loans from the prior quarter and a year-to-date decline of 6%.
Total revenue for Flagstar fell by 40.2% to $623 million, although it did manage to exceed analyst expectations of $611.9 million. Net interest income dropped 42.2%, reaching $510 million, slightly under the FactSet forecast of $513.3 million. This decline is attributed to lower loan balances due to portfolio payoffs and the sale of the mortgage warehouse business, alongside reduced commercial and industrial lending.
Looking forward, Flagstar has tempered investor expectations. The bank forecasts a per-share loss of $3.10 to $3.00 in 2024, significantly wider than the anticipated loss of $2.71. For 2025, it expects a further loss of 35 to 30 cents per share, diverging from the FactSet consensus of a 6-cent profit. To navigate these challenges, Otting mentioned cost-cutting measures implemented across the organization, with further efficiency initiatives planned.
This latest earnings report has left a mark on Flagstar’s stock, which has declined 65.7% this year. While the SPDR S&P Bank ETF (KBE) is up 18.5% and the S&P 500 index has gained 22.5% year-to-date, Flagstar’s performance highlights the unique difficulties it faces, particularly in an environment where CRE exposure remains a key risk factor.