Flagstar Bank Shares Down on Q2 Earnings Miss, Fee Income Falls Y/Y

Results excluded certain non-recurring items. After considering this item, net income available to common shareholders on a GAAP basis was $26 million against a net loss of $78 million in the prior-year quarter.

FLG’s Quarterly Revenues Rise & Expenses Decline

Quarterly revenues of $516 million missed the Zacks Consensus Estimate of $545 million by 5.3%. The metric rose 4% from the prior-year quarter.

NII was $440 million, up 5% year over year. The net interest margin of 2.13% expanded 32 basis points from the year-ago quarter, driven by lower deposit and borrowing costs, partially offset by lower earning-asset yields.

Non-interest income was $76 million, down 1% from the year-ago quarter. The decrease was mainly due to lower gains on loan sales and securitizations and reduced other income, partly offset by higher fee income and bank-owned life insurance income.

Non-interest expenses of $450 million decreased 12% year over year. Adjusted operating expenses were $427 million, down 7% from the second quarter of 2025, reflecting lower FDIC insurance, compensation and benefits, professional services, and general and administrative costs.

Flagstar Financial’s Loans & Deposits Increase

Total loans and leases held for investment increased 1% sequentially to $60.9 billion as of June 30, 2026. The increase was due to solid commercial and industrial loan growth, partly offset by continued reductions in multi-family and commercial real estate portfolios.

As of June 30, 2026, total deposits increased 1% sequentially to $67.5 billion. Growth was driven by higher Commercial and Private Bank deposits, along with core deposits.

FLG’s Credit Quality Improves

Non-accrual loans held for investment were $2.8 billion, down 12% from $3.2 billion as of June 30, 2025.

Net charge-offs were $100 million, down 15% year over year.

The company recorded a provision for credit losses of $18 million, down 72% from $64 million in the year-ago quarter.

Flagstar Financial’s Capital Ratios Strengthen

As of June 30, 2026, the common equity tier 1 ratio was 13.16% compared with 12.33% as of June 30, 2025. The total risk-based capital ratio increased to 16.58% from 15.77% in the year-ago quarter.

The leverage capital ratio rose to 9.70% from 8.61% a year ago, reflecting improved capital strength.

The company also announced a $250-million share repurchase program, citing progress in executing its strategic plan, a strong capital position and a positive long-term outlook.

Our View on FLG

Flagstar Financial’s solid C&I loan and deposit growth, lower funding costs, expense discipline and reduced commercial real estate exposure remain encouraging. The company delivered positive operating leverage, supported by higher NII and substantially lower credit provisions and expenses from the year-ago period.

However, lower non-interest income remains a concern. Continued execution on commercial banking expansion, operating efficiency initiatives and revenue diversification will be key to sustaining earnings improvement.

Performance of Other Banks

Zions Bancorporation’s ZION second-quarter 2026 adjusted earnings of $1.74 per share surpassed the Zacks Consensus Estimate of $1.57. Moreover, the bottom line increased 10.1% from the year-ago quarter.

ZION’s results were primarily aided by higher net interest income and growth in non-interest income. Higher sequential loan balance was another positive. However, a rise in non-interest expenses hurt the results to some extent.

Commerce Bancshares Inc.’s CBSH second-quarter 2026 earnings of $1.10 per share surpassed the Zacks Consensus Estimate of $1.04. The bottom line reflected a rise of 1% from the prior-year quarter.

CBSH’s results primarily benefited from higher NII and a rise in non-interest income. The sequential rise in loan balances acted as a tailwind. However, higher expenses and provisions hurt CBSH’s results to some extent.

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