Flagstar Bank has reported its first profitable quarter since narrowly avoiding collapse in 2024, following significant reductions in its multifamily and commercial real estate (CRE) loan portfolio. The bank posted $21 million in net income for the fourth quarter, a turnaround from a $45 million loss in the previous quarter, according to its latest earnings report. Despite this improvement, Flagstar ended last year with a $177 million loss, though this was considerably less than the approximately $1 billion loss recorded the year before.
Wall Street analysts had not anticipated such a swift recovery. Flagstar’s quarterly revenue reached $557 million, surpassing consensus estimates by about 4 percent. Earnings per share were 5 cents, ahead of projections. However, shares slipped about 1 percent midday Friday as investors remained cautious about the bank’s remaining troubled assets.
The bank still holds roughly $3 billion in problematic loans and is heavily involved in New York City’s rent-stabilized housing market—a sector that previously contributed to difficulties for both New York Community Bancorp and Signature Bank.
At the end of 2023, Flagstar’s commercial real estate loans totaled $50.6 billion but dropped to $38.3 billion by year-end. In the fourth quarter alone, CRE exposure decreased by $2.3 billion, including a reduction of $1.5 billion tied to multifamily properties.
Since early 2024, Flagstar has reviewed nearly all (97 percent) of its New York City rent-regulated loan book, which now totals $14.6 billion; more than half is backed by buildings where at least half of units are regulated. Nonaccrual loans within this portfolio amount to $2 billion.
The bank has processed $1.7 billion in payoffs and recorded $375 million in charge-offs related to these loans while increasing its allowance for credit losses to 5.6 percent.
A notable example highlighting challenges within the rent-stabilized market was a $564 million loan connected to over 5,000 apartments formerly owned by Pinnacle Group; after those properties were sold at bankruptcy auction, Flagstar incurred an approximately $113 million write-down.
Political developments may add further uncertainty: Mayor Zohran Mamdani has pledged to freeze rents for stabilized units—a move that could make it harder for landlords to service their debts. According to Flagstar executives: “They’re modeling scenarios with flat rents and rising expenses and closely scrutinizing borrowers with outstanding violations.”
Despite ongoing risks tied to legacy New York exposures, management indicated that it does not plan to exit commercial real estate lending entirely and will look for selective growth opportunities in markets such as Michigan, California and Florida.
