Flagstar Bank NA

11/06/2026 | Press release | Distributed by Public on 11/06/2026 15:15

Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Background
Flagstar Bank, National Association, is a national banking association headquartered in Hicksville, New York. At September 30, 2026, we had $87.4 billion of assets, $62.1 billion of loans, $67.8 billion of deposits, and total stockholders' equity of $7.6 billion.
We operate approximately 320 locations across nine states, with strong footholds in the greater New York/New Jersey metropolitan region and in the upper Midwest, along with a significant presence in fast-growing markets in Florida and the West Coast. In addition, the Bank has approximately 20 private bank branches located primarily in the metropolitan New York City region and on the West Coast, which serve the needs of high-net worth individuals and their businesses.
We operate in a single reportable segment and have identified one reporting unit which is the same as our operating segment. We continue to assess our reportable segments and reporting units, which may result in a change to either or both in future reporting periods. Please refer to Note 18 - Segment Reporting.
Overview
As part of our commitment to delivering long-term shareholder value and sustained value creation, we are executing a strategic transformation plan designed to evolve into a fully diversified bank with a strong balance sheet, a robust capital position, and consistent earnings power.
Our plan is anchored in enterprise strategic priorities that drive our approach to transformation and growth. These priorities focus on transforming Flagstar into a top-tier, relationship-driven regional bank, creating a customer-centric culture that prioritizes valuable relationships, and building an effective risk management mindset that supports safe and sound operations. From these priorities, we have established key strategies that guide execution: driving transformation and financial resilience, growing our core operations, executing a disciplined commercial banking and lending strategy, enhancing operational efficiency, developing talent and leadership, and aligning regulatory and risk management.
Since initiating this plan in 2024, we have made measurable progress, including making key leadership additions, diversifying our balance sheet and revenue streams, reducing non-core assets, improving our funding mix, enhancing our financial resilience, and improving our liquidity. We believe that the continued successful execution of this plan will drive sustainable earnings and position us to deliver long-term value to shareholders.
RESULTS OF OPERATIONS
Net Income (loss)
For the three months ended September 30, 2026, we reported net income of $12 million compared to net income of $34 million for the three months ended June 30, 2026. The net income attributable to common stockholders for the three months ended September 30, 2026 was $3 million, or $0.01 per diluted share compared to net income attributable to common stockholders of $26 million, or $0.06 per diluted share for the three months ended June 30, 2026.
For the nine months ended September 30, 2026, we reported net income of $67 million compared to net loss of $206 million for the nine months ended September 30, 2025. The net income attributable to common stockholders for the nine months ended September 30, 2026 was $42 million, or $0.09 per diluted share compared to net loss attributable to common stockholders of $231 million, or $0.56 per diluted share for the nine months ended September 30, 2025.
Net Interest Income
Net interest income is a function of the amount of interest-earning assets we hold, the manner in which we fund these assets, including interest-bearing liabilities, and the spread between the interest rates we earn on assets and the interest rates we pay on liabilities. These factors are influenced by both the pricing and mix of our interest-earning assets and our interest-bearing liabilities which, in turn, are impacted by various external factors, including the local economy, competition for loans and deposits, the monetary policy of the FOMC and market interest rates.
Our interest-bearing liabilities are comprised of customer deposits and funds we borrow. The cost of our deposits and most of our borrowed funds is largely based on short-term rates of interest, the level of which is partially impacted by the actions of the FOMC. The yields on our held for investment loans and investment securities are generally more sensitive to intermediate-term market interest rates. However, a significant portion of our held for investment loans have fixed rates and generally reset to intermediate-term market rates when they reach repricing dates.
The following table sets forth certain information regarding our NII and average balance sheet for the periods indicated. Average yields are calculated by dividing the interest income produced by the average balance of interest-earning assets. Average costs are calculated by dividing the interest expense produced by the average balance of interest-bearing liabilities. The average balances for the periods are derived from average balances that are calculated daily.
Three Months Ended,
September 30, 2026 June 30, 2026
(in millions)
Average Balance Interest Average Yield/Cost Average Balance Interest Average Yield/Cost
ASSETS:
Interest-earning assets:
Total loans and leases (1)
$ 61,559 $ 780 5.03 % $ 60,971 $ 751 4.91 %
Securities (2)
18,002 189 4.20 % 17,037 180 4.22 %
Interest-earning cash and cash equivalents 4,693 43 3.67 % 5,042 45 3.63 %
Total interest-earning assets $ 84,254 $ 1,012 4.77 % $ 83,050 $ 976 4.71 %
Non-interest-earning assets 3,539 3,644
Total assets $ 87,793 $ 86,694
LIABILITIES AND STOCKHOLDERS' EQUITY:
Interest-bearing deposits:
Interest-bearing checking and money market accounts $ 20,453 $ 140 2.73 % $ 19,617 $ 126 2.55 %
Savings accounts 14,827 94 2.53 % 14,857 97 2.63 %
Certificates of deposit 20,631 201 3.86 % 20,694 201 3.90 %
Total interest-bearing deposits $ 55,911 $ 435 3.09 % $ 55,168 $ 424 3.08 %
Total borrowed funds 10,477 117 4.41 % 10,276 112 4.37 %
Total interest-bearing liabilities $ 66,388 $ 552 3.30 % $ 65,444 $ 536 3.28 %
Non-interest-bearing deposits 12,234 11,970
Other liabilities 1,084 1,106
Total liabilities $ 79,706 $ 78,520
Stockholders' and mezzanine equity 8,087 8,174
Total liabilities and stockholders' equity $ 87,793 $ 86,694
Net interest income/interest rate spread $ 460 1.47 % $ 440 1.43 %
Net interest margin 2.17 % 2.13 %
Ratio of interest-earning assets to interest-bearing liabilities 1.27 x 1.27 x
(1)Comprised of Loans and leases held for investment (net of deferred loan fees and costs) and Loans held for sale.
(2)Comprised of Debt securities available-for-sale at amortized cost, Equity investments with readily determinable fair values, at fair value and FHLB stock and FRB-NY stock, at cost.
Nine Months Ended,
September 30, 2026 September 30, 2025
(in millions)
Average Balance Interest Average Yield/Cost Average Balance Interest Average Yield/Cost
ASSETS:
Interest-earning assets:
Total loans and leases (1)
$ 61,126 $ 2,285 5.00 % $ 65,842 $ 2,519 5.13 %
Securities (2)
17,297 548 4.22 % 14,962 510 4.54 %
Interest-earning cash and cash equivalents 5,119 139 3.65 % 11,515 379 4.41 %
Total interest-earning assets $ 83,542 $ 2,972 4.76 % $ 92,319 $ 3,408 4.94 %
Non-interest-earning assets 3,642 3,588
Total assets $ 87,184 $ 95,907
LIABILITIES AND STOCKHOLDERS' EQUITY:
Interest-bearing deposits:
Interest-bearing checking and money market accounts $ 19,597 $ 380 2.59 % $ 20,355 $ 480 3.15 %
Savings accounts 14,863 292 2.63 % 14,426 334 3.10 %
Certificates of deposit 20,630 605 3.92 % 24,893 850 4.57 %
Total interest-bearing deposits $ 55,090 $ 1,277 3.10 % $ 59,674 $ 1,664 3.73 %
Total borrowed funds
10,715 352 4.33 % 13,887 490 4.72 %
Total interest-bearing liabilities $ 65,805 $ 1,629 3.31 % $ 73,561 $ 2,154 3.91 %
Non-interest-bearing deposits 12,054 12,622
Other liabilities 1,172 1,616
Total liabilities $ 79,031 $ 87,799
Stockholders' and mezzanine equity
8,153 8,108
Total liabilities and stockholders' equity $ 87,184 $ 95,907
Net interest income/interest rate spread $ 1,343 1.45 % $ 1,254 1.03 %
Net interest margin 2.15 % 1.82 %
Ratio of interest-earning assets to interest-bearing liabilities 1.27 x 1.25 x
(1)Comprised of Loans and leases held for investment (net of deferred loan fees and costs) and Loans held for sale.
(2)Comprised of Debt securities available-for-sale at amortized cost, Equity investments with readily determinable fair values, at fair value and FHLB stock and FRB-NY stock, at cost.
The following table summarizes the change in NII attributable to changes in rate and volume:
Three Months Ended, Nine Months Ended,
September 30, 2026 compared to June 30, 2026
Increase/(Decrease) Due to:
September 30, 2026 compared to September 30, 2025
Increase/(Decrease) Due to:
(in millions)
Volume
Rate
Net
Volume
Rate
Net
INTEREST-EARNING ASSETS:
Total loans and leases
$ 7 $ 22 $ 29 $ (177) $ (57) $ (234)
Securities 10 (1) 9 74 (36) 38
Interest earning cash & cash equivalents (3) 1 (2) (175) (65) (240)
Total interest-earning assets $ 14 $ 22 $ 36 $ (278) $ (158) $ (436)
INTEREST-BEARING LIABILITIES:
Interest-bearing checking and money market accounts $ 5 $ 9 $ 14 $ (15) $ (85) $ (100)
Savings accounts - (3) (3) 8 (50) (42)
Certificates of deposit - - - (125) (120) (245)
Total borrowed funds
3 2 5 (103) (35) (138)
Total interest-bearing liabilities $ 8 $ 8 $ 16 $ (235) $ (290) $ (525)
Change in net interest income $ 6 $ 14 $ 20 $ (43) $ 132 $ 89
Comparison to Prior Quarter
During the three months ended September 30, 2026, NIM increased 4 basis points, and NII increased $20 million compared to the three months ended June 30, 2026. The increase in NII was primarily due to higher yields on our loan portfolio driven in part by the impact of rising interest rates. Additionally, we had continued growth in our C&I portfolio as we diversify our loan portfolio and debt securities as we reinvest capital into higher-yielding assets. These increases were partially offset by the impact of higher interest rates on our interest-bearing liabilities, and growth in commercial deposits.
Comparison to Prior Year to Date
During the nine months ended September 30, 2026, NIM increased 33 basis points and NII increased $89 million compared to the nine months ended September 30, 2025. The increase was primarily driven by the paydown of higher-cost deposits and borrowings during the year ended December 31, 2025 and the decision to reinvest cash into higher-yielding assets. These increases were partially offset by lower average loan balances as we continued our strategy of diversifying our loan portfolio.
Provision for Credit Losses
The following table summarizes our Provision for credit losses for the respective periods:
Three Months Ended, Nine Months Ended,
(in millions) September 30, 2026 June 30, 2026
Change
September 30, 2026 September 30, 2025 Change
Provision for credit losses
$ 76 $ 18 NM $ 94 $ 181 (48) %
Comparison to Prior Quarter
For the three months ended September 30, 2026, the provision for credit losses increased $58 million compared to the three months ended June 30, 2026. The provision was impacted by net charge-offs, while the allowance for credit losses was flat compared to the prior quarter. Increases in the allowance were related to growth in our C&I portfolio, and the impact of the higher interest rate environment including on the New York City rent-regulated multi-family portfolio. These increases were offset by volume reductions in our multi-family portfolio.
Comparison to Prior Year to Date
For the nine months ended September 30, 2026, the provision for credit losses decreased $87 million compared to the nine months ended September 30, 2025. The decrease was primarily due to the strategic reduction in our multi-family and CRE portfolios and lower net charge-offs. The decrease was partially offset by growth in our C&I portfolio.
Non-Interest Income
The following table summarizes our non-interest income for the respective periods:
Three Months Ended, Nine Months Ended,
(in millions) September 30, 2026 June 30, 2026
Change
September 30, 2026 September 30, 2025
Change
Fee income $ 29 $ 26 12 % $ 78 $ 67 16 %
Bank-owned life insurance 11 13 (15) % 34 32 6 %
Net gain (loss) on investment securities - 4 (100) % (5) 22 NM
Net gain on loan sales and securitizations 3 4 (25) % 12 24 (50) %
Net loan administration income
- 1 (100) % 1 5 (80) %
Other 27 28 (4) % 81 101 (20) %
Total non-interest income $ 70 $ 76 (8) % $ 201 $ 251 (20) %
Comparison to Prior Quarter
For the three months ended September 30, 2026, non-interest income decreased $6 million compared to the three months ended June 30, 2026. The decrease was primarily due to the non-recurrence of a $4 million gain related to our investment in Figure Technology Solutions, Inc. (the "Figure Investment") which we sold in the prior quarter.
Comparison to Prior Year to Date
For the nine months ended September 30, 2026, non-interest income decreased $50 million compared to the nine months ended September 30, 2025. The decrease was primarily due to the non-recurrence of the gain on the Figure Investment, lower other income driven by lower MSR adjustments, which were elevated in the prior year due to the wind down of the mortgage and servicing operations, lower gains on loan sales and securitizations resulting from the non-recurrence of prior year gains related to the wind-down of the mortgage and servicing operations. The decrease was partially offset by higher fee income driven by capital market and treasury management income.
Non-Interest Expense
The following table summarizes our non-interest expense for the respective periods:
Three Months Ended, Nine Months Ended,
(in millions) September 30, 2026 June 30, 2026
Change
September 30, 2026 September 30, 2025 Change
Operating expenses:
Compensation and benefits $ 228 $ 220 4 % $ 676 $ 723 (7) %
Occupancy and equipment 46 46 - % 142 155 (8) %
Software expense
50 49 2 % 146 127 15 %
FDIC insurance 29 30 (3) % 89 136 (35) %
Professional services
23 19 21 % 64 69 (7) %
General and administrative 65 63 3 % 192 237 (19) %
Total operating expense $ 441 $ 427 3 % $ 1,309 $ 1,447 (10) %
Intangible asset amortization 23 23 - % 71 81 (12) %
Merger-related expense
- - NM - 39 (100) %
Total non-interest expense $ 464 $ 450 3 % $ 1,380 $ 1,567 (12) %
Comparison to Prior Quarter
Total non-interest expenses for the three months ended September 30, 2026 increased $14 million compared to the three months ended June 30, 2026. The increase was primarily due to an increase in compensation and benefits expense driven by the non-recurrence of a prior quarter reduction to incentive compensation accrual assumptions, and higher professional services expense in support of ongoing business and technology initiatives.
Comparison to Prior Year to Date
Total non-interest expense for the nine months ended September 30, 2026 decreased $187 million compared to the nine months ended September 30, 2025. The decrease was primarily due to lower FDIC insurance expense driven by improved assessment factors and a reduced asset base, lower compensation and benefits costs from cost-optimization actions and the non-recurrence of $8 million of severance, the absence of merger-related expenses, and lower general and administrative expenses as a result of the non-recurrence of a $14 million litigation accrual and our continued operating expense discipline. These decreases were partially offset by higher software expenses attributable to ongoing infrastructure development and system enhancements.
Income Tax (Benefit) Expense
The following table summarizes our income tax (benefit) expense and effective tax rate for the respective periods:
Three Months Ended, Nine Months Ended,
(in millions) September 30, 2026 June 30, 2026
Change
September 30, 2026 September 30, 2025 Change
Income tax (benefit) expense $ (22) $ 14 NM $ 3 $ (37) (108) %
Effective tax rate
217.8 % 28.2 % 3.4 % 15.2 %
We compute our tax provision (benefit) for interim periods by applying the estimated annual effective tax rate to our year-to-date income (loss) before income taxes, adjusted for discrete items recognized during the quarter. For the nine months ended September 30, 2025, we were unable to make a reliable estimate of our estimated annual effective tax rate as a result of our expected results for 2025; therefore, we used our actual effective tax rate to compute our income tax benefit for those periods. During 2026, we resumed applying the estimated annual effective tax rate methodology.
Comparison to Prior Quarter
The income tax expense for the three months ended September 30, 2026 decreased by $36 million compared to the three months ended June 30, 2026 primarily as a result of the settlement of a 2019 - 2021 tax audit that reduced our tax provision by $22 million and lower pre-tax income.
Comparison to Prior Year to Date
The income tax expense for the nine months ended September 30, 2026 increased by $40 million compared to the nine months ended September 30, 2025, primarily as a result of the increase in our pre-tax income and the application of our estimated annual effective tax rate for the current period compared to the use of our actual effective tax rate in the prior year. The increase was partially offset by the settlement of the prior year tax audit.
FINANCIAL CONDITION
Loans and Leases
The following table summarizes the composition of our loan portfolio:
September 30, 2026 December 31, 2025
(in millions)
Amount Percent of Loans Held for Investment Amount Percent of Loans Held for Investment
Multi-family $ 25,948 41.9 % $ 28,983 47.7 %
Commercial real estate
8,102 13.1 9,314 15.3
One-to-four family 5,867 9.5 5,630 9.3
Commercial and industrial
20,579 33.2 15,217 25.1
Other loans 1,449 2.3 1,588 2.6
Total loans and leases held for investment $ 61,945 100.0 % $ 60,732 100.0 %
Allowance for credit losses on loans and leases (869) (1,030)
Total loans and leases held for investment, net $ 61,076 $ 59,702
Loans held for sale 166 265
Total loans and leases, net $ 61,242 $ 59,967
Total loans and leases held for investment increased $1.2 billion at September 30, 2026 compared to December 31, 2025, primarily as a result of growing originations within our C&I portfolio, partially offset by our continued strategy of diversifying our loan portfolio.
Loan Maturity and Repricing
The following table sets forth loans with adjustable rates ("Option Loans") by year of repricing and loans beyond their option date that may be variable or fixed rate loans ("Non-Option Loans") by year of contractual maturity:
September 30, 2026
(in millions) Multi-Family
Commercial Real Estate(2)
Repricing / Contractual Maturity Year
Option Loans by Repricing Date(1)(3)
Non-Option Loans by Contractual Maturity
Option Loans by Repricing Date(3)
Non-Option Loans by Contractual Maturity
Total(4)(5)
2026 $ 1,385 $ 461 $ 1,491 $ 127 $ 3,464
2027 6,938 1,581 797 737 10,053
2028 3,393 1,912 352 1,241 6,898
2029 2,226 1,588 233 688 4,735
2030 74 1,878 12 334 2,298
2031+ 86 4,311 5 758 5,160
Total amounts due or repricing, gross $ 14,102 $ 11,731 $ 2,890 $ 3,885 $ 32,608
(1)Includes $8.5 billion is secured by rent-regulated properties located in New York State, of which $3.0 billion is scheduled to reprice within the next twelve months.
(2)Excludes ADC loans.
(3)Includes $455 million of multi-family loans and $834 million of CRE loans with adjustable rates that do not have the option to reprice to a fixed rate.
(4)Excludes Specialty Finance CRE loans totaling $338 million. Amounts presented reflect unpaid principal balance; total amortized cost adjustments were $159 million.
(5)Excludes $119 million of loans past their contractual maturity date that are in the process of modification or foreclosure.
Option loans may offer the borrower the ability to reprice to a fixed rate after the initial fixed rate period. If not elected, the loan defaults to a variable rate. Option loans in the table are shown as being due in the period the interest rate is subject to change. Non-Option loans are beyond the option date and are reflected by maturity. Risks associated with loan repricing are discussed in the Credit Risk section.
Multi-Family Loans
(in millions) September 30, 2026 December 31, 2025
($) Change
(%) Change
Multi-family
$ 25,948 $ 28,983 $ (3,035) (10) %
Our multi-family loan portfolio decreased $3.0 billion at September 30, 2026 compared to December 31, 2025, primarily due to $2.6 billion of par payoffs since December 31, 2025, with 42 percent of the payoffs from substandard loans. The reduction in our multi-family loan portfolio is consistent with our strategic decision to continue to diversify our loan portfolio by reducing our exposure to multi-family loans.
The majority of our multi-family loan portfolio consists of non-recourse loans secured by rental apartment buildings. As of September 30, 2026 and December 31, 2025, $14.0 billion or 54 percent and $15.8 billion or 55 percent of our total multi-family loan portfolio was secured by properties in New York State, respectively. Of these amounts, $12.3 billion or 88 percent and $13.9 billion or 88 percent were subject to rent regulation laws to varying degrees at September 30, 2026 and December 31, 2025, respectively. Additionally, $8.5 billion and $9.5 billion of these loans, as of September 30, 2026 and December 31, 2025, respectively, were secured by properties in which at least 50 percent of the units were rent-regulated.
To mitigate our exposure to rent-regulated properties, we are curtailing future originations of loans secured by rent-regulated properties. We are focusing originations and renewal retention on borrowers with whom we will have broader customer relationships beyond lending. Additionally, we are strategically diversifying our loan portfolio to shift from multi-family loans to other loan sectors.
Our multi-family loan portfolio had $5.3 billion outstanding with interest-only payments at September 30, 2026. Of this, $4.6 billion consisted of term loans that may have contained an initial interest-only period but were underwritten on a fully amortizing basis, including calculation of the DSCR, with qualification based on the borrower's credit profile, particularly the property's loan-to-value. For these loans, the weighted average interest-only period remaining was 24.7 months as of September 30, 2026, with approximately 9 percent entering their amortization period by the end of 2026. The remaining $0.7 billion relates to loans originated in 2026 secured by non rent-regulated multi-family collateral that were originated on a full interest-only basis. The weighted average interest-only period remaining for these loans was 19.2 months as of September 30, 2026.
We continue to monitor our loans held for investment portfolio and the related ACL particularly given the economic pressures facing the commercial real estate and multi-family markets. Although occupancy levels have historically tended to be stable due to below market rents, the rising interest rate environment has increased borrowing costs such that rent-regulated loans that are repricing are incurring debt service levels that, when combined with inflationary pressure on operating costs and limits on the ability to increase rental rates, approach or exceed some properties' net operating income and may require the borrower to support the loan from sources unrelated to the collateral until elevated interest rates subside and/or over time as rents are able to be increased.
The following table presents a geographical stratification of the multi-family loans in our held for investment loan portfolio:
September 30, 2026 December 31, 2025
(in millions)
Amount Percent of Total Amount Percent of Total
New York City:
Manhattan $ 4,354 17 % $ 4,901 17 %
Brooklyn 4,006 16 4,559 16
Bronx 2,465 9 2,723 9
Queens 1,964 8 2,206 8
Staten Island 68 - 69 -
Total New York City $ 12,857 50 % $ 14,458 50 %
New Jersey 3,200 12 % 3,715 13 %
Long Island 322 1 426 1
Total Metro New York $ 16,379 63 % $ 18,599 64 %
Other New York State 817 3 % 930 3 %
Pennsylvania 2,623 10 2,831 10
Florida 1,225 5 1,483 5
Ohio 868 4 968 3
All other states 4,036 15 4,172 15
Total $ 25,948 100 % $ 28,983 100 %
Commercial Real Estate
(in millions) September 30, 2026 December 31, 2025
($) Change
(%) Change
Commercial real estate $ 8,102 $ 9,314 $ (1,212) (13) %
At September 30, 2026, CRE loans decreased $1.2 billion compared to December 31, 2025, primarily due to par payoffs, and paydowns, partially offset by originations since December 31, 2025.
Certain of our CRE loans may contain an interest-only period which typically does not exceed three years; however, these loans are underwritten on a fully amortizing basis, including calculation of the DSCR. Whether a borrower qualifies for an interest-only period is based on the individual credit profile of the borrower, particularly the loan-to-value of the property.
Substantially all CRE loans we originate are non-recourse and are secured by income-producing properties such as office buildings, retail centers, mixed-use buildings, and multi-tenanted light industrial properties.
The following table presents an analysis of the property types that collateralize the CRE loans in our held for investment portfolio:
September 30, 2026 December 31, 2025
(in millions) Amount Percent of Total Amount Percent of Total
Office (includes owner and non-owner occupied) $ 1,653 20 % $ 1,954 21 %
Retail (includes owner and non-owner occupied) 1,298 16 1,560 17
Industrial 3,100 38 3,928 42
Other 2,051 26 1,872 20
Total $ 8,102 100 % $ 9,314 100 %
The following table presents a geographical stratification of the CRE loans in our held for investment loan portfolio:
September 30, 2026 December 31, 2025
(in millions) Amount Percent of Total Amount Percent of Total
New York $ 3,275 40 % $ 3,626 39 %
California 796 10 703 8
Michigan 764 9 929 10
Florida 642 8 626 7
New Jersey 512 6 640 7
Texas 154 2 318 3
All other states 1,959 25 2,472 26
Total $ 8,102 100 % $ 9,314 100 %
Commercial and Industrial
(in millions) September 30, 2026 December 31, 2025
($) Change
(%) Change
Commercial and industrial
$ 20,579 $ 15,217 $ 5,362 35 %
Our C&I loan portfolio increased $5.4 billion at September 30, 2026 compared to December 31, 2025, primarily due to $7.7 billion of new originations driven by $11.5 billion of new and increased loan commitments during the nine months ended September 30, 2026, partially offset by paydowns in the existing portfolio. The increase in our C&I loan portfolio was primarily due to continued growth in Specialized Industries and Regional Commercial Banking.
We originate a broad range of C&I loans, both collateralized and unsecured, which are made available to businesses for working capital (including inventory and accounts receivable), business expansion, the purchase of machinery and equipment, and other general corporate needs. In determining the term and structure of C&I loans, many factors are considered, including the purpose, the collateral, and the anticipated sources of repayment. C&I loans are often secured by business assets of the borrower and often include financial covenants to monitor the borrower's financial stability.
The majority of the C&I loan portfolio is structured as floating rate obligations, through a variety of teams dedicated to various markets, products and sectors, including corporate and regional commercial banking, specialized industries, equipment finance and private banking. We continue to add experienced commercial, corporate and specialized industries banking professionals and credit underwriting and portfolio management personnel to support our growth.
One-to-Four Family Loans
(in millions) September 30, 2026 December 31, 2025
($) Change
(%) Change
One-to-four family $ 5,867 $ 5,630 $ 237 4 %
One-to-four family loans increased $237 million at September 30, 2026 compared to December 31, 2025, primarily driven by new originations.
One-to-four family loans include various types of conforming and non-conforming fixed and adjustable-rate loans underwritten using Fannie Mae and Freddie Mac guidelines for the purpose of purchasing or refinancing owner occupied and second home properties. The loan-to-value requirements on our residential first mortgage loans vary depending on occupancy, property type, loan amount, and FICO scores. Loans with loan-to-value ratios exceeding 80 percent are required to obtain mortgage insurance. As of September 30, 2026, excluding LGG, loans in this portfolio had an average current FICO score of 743 and an average loan-to-value ratio of 51 percent.
Other Loans
(in millions) September 30, 2026 December 31, 2025
($) Change
(%) Change
Other loans $ 1,449 $ 1,588 $ (139) (9) %
At September 30, 2026, other loans decreased $139 million compared to December 31, 2025, primarily driven by payoffs at par.
Other loans primarily consist of HELOANs, second mortgage loans, and HELOCs. As of September 30, 2026, loans in this portfolio had an average current FICO score of 760.
Loans Held for Sale
(in millions) September 30, 2026 December 31, 2025
($) Change
(%) Change
Loans held for sale $ 166 $ 265 $ (99) (37) %
Loans held for sale at September 30, 2026 decreased $99 million compared to December 31, 2025, primarily due to the completion of loan sales during the nine months ended September 30, 2026.
Allowance for Credit Losses
The following table sets forth the allocation of the ACL on loans and leases as of:
September 30, 2026 December 31, 2025
(in millions)
Allowance for credit losses
Allowance as a percent of loans in each portfolio
Loans in each portfolio as a percent of total loans
Allowance for credit losses
Allowance as a percent of loans in each portfolio
Loans in each portfolio as a percent of total loans
Multi-family loans $ 424 1.63 % 41.9 % $ 549 1.89 % 47.7 %
Commercial real estate loans
144 1.78 13.1 229 2.46 15.3
One-to-four family 42 0.72 9.5 35 0.62 9.3
Commercial and industrial
197 0.96 33.2 150 0.99 25.1
Other loans 62 4.28 2.3 67 4.22 2.6
Total loans $ 869 1.40 % 100.0 % $ 1,030 1.70 % 100.0 %
The ACL on loans and leases as of September 30, 2026 decreased $161 million from December 31, 2025. The decrease was primarily driven by charged-off loans which had specific reserves and declines in our higher-risk multi-family and CRE portfolios, primarily from payoffs. The decrease was partially offset by the growth of our C&I portfolio.
Non-accrual Loans
The following table presents our non-accrual loans held for investment by loan type:
(in millions)
September 30, 2026 December 31, 2025 ($) Change (%) Change
Multi-family $ 2,125 $ 2,261 $ (136) (6) %
Commercial real estate 462 489 (27) (6) %
One-to-four family 61 64 (3) (5) %
Commercial and industrial 144 130 14 11 %
Other non-accrual loans 25 31 (6) (19) %
Total non-accrual loans(1)
$ 2,817 $ 2,975 $ (158) (5) %
Repossessed assets 8 11 (3) (27) %
Total non-performing assets $ 2,825 $ 2,986 $ (161) (5) %
Non-accrual loans to total loans held for investment
4.55 % 4.90 %
Non-performing assets to total assets
3.23 % 3.41 %
Allowance for credit losses on loans and leases to non-accrual loans
30.85 % 34.62 %
(1)Excludes $4 million and $30 million of non-accrual held for sale loans at September 30, 2026 and December 31, 2025, respectively.
The following table sets forth the changes in non-accrual loans for the nine months ended September 30, 2026:
(in millions)
Balance at December 31, 2025
$ 2,975
New non-accrual loans
1,053
Charge-offs (135)
Transferred to Other assets
(5)
Loan payoffs, including dispositions and principal pay-downs (912)
Restored to performing status (159)
Balance at September 30, 2026
$ 2,817
During the nine months ended September 30, 2026 non-accrual loans decreased $158 million primarily due to the resolution of a single borrower relationship undergoing bankruptcy proceedings. Approximately 42 percent of our non-accrual loans are current on their contractual payment terms.
Delinquencies
The following table presents our loans held for investment 30 to 89 days past due by loan type and the changes in the respective balances.
(in millions)
September 30, 2026 December 31, 2025
($) Change
(%) Change
Loans 30 to 89 Days Past Due:
Multi-family $ 392 $ 588 $ (196) (33) %
Commercial real estate
79 155 (76) (49) %
One-to-four family 13 78 (65) (83) %
Commercial and industrial 34 126 (92) (73) %
Other loans 12 39 (27) (69) %
Total loans 30-89 days past due $ 530 $ 986 $ (456) (46) %
As of September 30, 2026, we had $107 million of loans 90 days or more past due that were still accruing interest compared to none as of December 31, 2025. Based on our evaluation of these loans and ongoing engagement with the borrowers, we have determined that they should remain on accrual status. As of October 27, 2026, $44 million of these loans had been resolved.
Charge-offs
The following table summarizes net charge-offs as a percentage of average loans held for investment, excluding LGG:
Three Months Ended,
September 30, 2026 June 30, 2026
(in millions) Net Charge-offs (Recoveries) Average Balance
%(1)
Net Charge-offs (Recoveries) Average Balance
%(1)
Multi-family $ 50 $ 26,388 0.76 % $ 80 $ 27,331 1.17 %
Commercial real estate
13 8,212 0.63 1 8,723 0.05
One-to-four family 1 5,467 0.07 1 5,353 0.07
Commercial and industrial 7 19,485 0.14 13 17,446 0.30
Other 3 1,466 0.82 5 1,514 1.32
Total $ 74 $ 61,018 0.49 % $ 100 $ 60,367 0.66 %
(1)Three months ended presented on an annualized basis.
Nine Months Ended,
September 30, 2026 September 30, 2025
(in millions) Net Charge-offs (Recoveries) Average Balance
%(1)
Net Charge-offs (Recoveries) Average Balance
%(1)
Multi-family $ 202 $ 27,416 0.98 % $ 222 $ 32,672 0.91 %
Commercial real estate
22 8,710 0.34 33 10,975 0.40
One-to-four family 3 5,369 0.07 3 5,026 0.08
Commercial and industrial 12 17,533 0.09 32 14,599 0.29
Other 13 1,512 1.15 15 1,705 1.17
Total $ 252 $ 60,540 0.56 % $ 305 $ 64,977 0.63 %
(1)Nine months ended presented on an annualized basis.
Securities
Debt Securities Available-for-Sale
(in millions)
September 30, 2026 December 31, 2025
($) Change
(%) Change
Debt Securities Available-for-Sale
$ 16,395 $ 15,701 $ 694 4 %
At September 30, 2026, debt securities available-for-sale increased $694 million compared to December 31, 2025. The increase was primarily due to our decision to reinvest capital into higher-yielding securities, partially offset by a decline in the fair value of the securities reflecting the impact of higher interest rates. At September 30, 2026, 20 percent of our portfolio is comprised of floating rate securities.
At September 30, 2026 and December 31, 2025, debt securities available-for-sale had an estimated weighted average life of 5 years. Mortgage-related securities included in debt securities available-for-sale were $13.8 billion and $13.0 billion at September 30, 2026 and December 31, 2025, respectively.
The following table summarizes the weighted average yields of debt securities available-for-sale for the maturities at September 30, 2026:
Mortgage-
Related
Securities 		U.S.
Government
and GSE
Obligations
Corporate and Other Bonds
Asset-Backed Securities
Debt Securities Available-for-Sale: (1)
Due within one year 3.76 % - % - % - %
Due from one to five years 2.57 3.52 5.02 -
Due from five to ten years 2.31 1.61 5.46 -
Due after ten years 4.38 - 5.80 5.30
Total debt securities available-for-sale
4.33 2.62 5.24 5.30
(1)The weighted average yields are calculated by multiplying each carrying value by its yield and dividing the sum of these results by the total carrying values and are not presented on a tax-equivalent basis.
Deposits
We compete for deposits and customers through multiple channels, including our retail branch network, our private banking business and mobile and internet banking applications. Our ability to retain and attract deposits depends on numerous factors, including customer satisfaction, the rates of interest we pay, the types of products we offer, and the attractiveness of their terms.
The following table summarizes the change in our deposits:
(in millions)
September 30, 2026 December 31, 2025
($) Change
(%) Change
Interest-bearing checking and money market accounts
$ 19,330 $ 18,233 $ 1,097 6 %
Savings accounts
14,741 14,864 (123) (1) %
Certificates of deposit
21,359 20,843 516 2 %
Non-interest-bearing accounts
12,390 12,060 330 3 %
Total deposits (1)
$ 67,820 $ 66,000 $ 1,820 3 %
(1) Includes $2.9 billion and $2.1 billion of non-servicing custodial deposits as of September 30, 2026 and December 31, 2025, respectively.
Total deposits at September 30, 2026 increased $1.8 billion compared to December 31, 2025, primarily driven by growth in commercial and mortgage-related deposits, partially offset by lower retail deposits.
The following table presents the composition of our brokered deposits for the periods presented:
(in millions) September 30, 2026 December 31, 2025
Brokered interest-bearing checking and money market accounts $ - $ 76
Brokered certificates of deposit
2,633 2,326
Total Brokered Deposits(1)
$ 2,633 $ 2,402
(1) Excludes reciprocal deposits.
The following table indicates the amount of time deposits, by account, that are in excess of $250,000 per depositor by time remaining until maturity:
(in millions) September 30, 2026 December 31, 2025
3 months or less $ 1,299 $ 2,758
Over 3 months through 6 months 1,863 1,933
Over 6 months through 12 months 2,652 1,175
Over 12 months 1,136 466
Total time deposits in excess of $250,000 per depositor(1)
$ 6,950 $ 6,332
(1) Includes brokered certificates of deposit of $2.6 billion and $2.3 billion at September 30, 2026 and December 31, 2025, respectively. Brokered certificates of deposit with balances in excess of $250,000 are fully insured by the FDIC as each of the ultimate owners of the funds maintain balances below FDIC insurance limits.
Uninsured Deposits
At September 30, 2026, our deposit base included $14.7 billion of deposits that are uninsured or not collateralized by securities or letters of credit. Our uninsured deposits are the portion of deposit accounts that exceeds the FDIC insurance limit.
As of September 30, 2026, total bank liquidity exceeded the balance of our uninsured deposits by $10.4 billion.
Borrowed Funds
The following table summarizes our borrowed funds:
(in millions) September 30, 2026 December 31, 2025
($) Change
(%) Change
Short-term borrowings(1)
FHLB advances $ 5,250 $ 4,000 $ 1,250 31 %
Total short-term borrowings
$ 5,250 $ 4,000 $ 1,250 31 %
Long-term debt
FHLB advances $ 4,650 $ 7,151 $ (2,501) (35) %
Junior subordinated debentures 588 585 3 1 %
Subordinated notes 449 448 1 - %
Total long-term debt
$ 5,687 $ 8,184 $ (2,497) (31) %
Total borrowed funds $ 10,937 $ 12,184 $ (1,247) (10) %
(1)Borrowings with original maturities of one year or less are classified as short-term borrowings.
At September 30, 2026 total borrowed funds decreased $1.2 billion compared to December 31, 2025 primarily due to our continued strategy of reducing our reliance on higher-cost wholesale borrowings.
FHLB advances are secured by eligible collateral in the form of loans and securities, under blanket collateral agreements with the FHLB. As of September 30, 2026 our wholesale borrowings had no callable features. As of December 31, 2025, our wholesale borrowings had $250 million of callable features.
Risk Governance Framework
The Risk Management Division is responsible for formalizing our Risk Appetite Statement, which reflects the Board's and Management's tolerance for risks and is set in alignment with the Bank's budget, strategic and capital plans. Internal controls and ongoing monitoring processes capture and address heightened risks that threaten our ability to achieve our goals and objectives, including the recognition of safety and soundness concerns and consumer protection. Additionally, key risk indicators are monitored against established risk warning levels and limits, as well as elevated risks escalated to the Chief Risk Officer.
To comprehensively manage our risk exposure, we focus on several critical areas outlined below: Credit Risk, Liquidity Risk, Interest Rate Risk and Regulatory Capital.
Credit Risk
It is our practice to continually review the risk in our loan portfolio. For our multi-family and CRE loan portfolios, we receive financial information from borrowers annually and in some cases more frequently. Generally, updated annual borrower financial information is received during the second calendar quarter. Upon receipt of the borrower financial information, we perform an analysis to determine whether the cash flow from the underlying collateral is sufficient to meet the contractual loan payments, commonly referred to as the DSCR. We consider the ability to cover debt service based upon the current contractual rate or, when a borrower's initial fixed rate period expires in the near future, the lowest contractual rate reset option available under the loan terms using the current level for referenced indices. Loans that do not have a DSCR of 1.0 or greater are evaluated for a potential downgrade to substandard or non-accrual risk rating. All substandard loans, including non-accrual loans, are appraised at the time of downgrade and are re-appraised annually. Based upon this appraisal the loan is evaluated to determine if an adjustment to the carrying amount is required. The rent freeze applicable to rent-regulated multi-family apartment buildings in New York City, as approved by its Rent Guidelines Board in June 2026 and which became effective on October 1, 2026, could increase credit risk for loans secured by multi-family properties in New York City by limiting rental revenue growth while operating costs and interest rates rise, potentially pressuring borrowers' DSCR.
For our C&I loan portfolio, we receive financial information from borrowers quarterly and in some cases less frequently. Quarterly borrower financial information is typically received within 45 to 60 days of quarter end. Upon receipt of the borrower financial information, we perform analyses to (i) determine whether borrower cash flow is sufficient to meet the contractual loan payments, commonly using a FCCR which is often a financial covenant of our borrowers (ii) test all borrower financial covenants, (iii) review and update collateral values, and (iv) update our internal borrower risk ratings. Loans that do not have a FCCR of 1.0 or greater are evaluated for a potential downgrade to substandard or non-accrual risk rating.
The largest substandard and non-accrual loans within our portfolio are reported and reviewed with the RAC at least quarterly.
As of September 30, 2026, $2.3 billion of multifamily loans have reached their repricing date. Approximately 95 percent of the loans that repriced during 2026 are current on their contractual payments or paid off during the year.
Substandard and Non-Accrual loans ("Classified Loans") reflect the potential that a loss may occur if deficiencies in the primary source of repayment are unable to be corrected and borrowers are unwilling or unable to otherwise support the loans. Classified Loans at September 30, 2026 and December 31, 2025 were $8.7 billion and $9.7 billion, respectively. The decrease in Classified Loans is primarily attributable to the par payoffs of multi-family and CRE substandard loans and the resolution of a single borrower relationship undergoing bankruptcy proceedings.
The procedures we follow with respect to delinquent loans are generally consistent across all categories, with late charges assessed, and notices mailed to the borrower, at specified dates. We attempt to reach the borrower by telephone to ascertain the reasons for delinquency and the prospects for repayment. When contact is made with a borrower at any time prior to foreclosure or recovery against collateral property, we attempt to obtain full payment and will consider a repayment schedule to avoid taking such action. Generally, we make every effort to collect rather than initiate foreclosure or other recovery proceedings.
We actively pursue borrowers who are delinquent in repaying their loans in an effort to collect payment. In addition, outside counsel with experience in foreclosure proceedings are retained to support these efforts. Gross charge-offs of $258 million were recorded on multi-family and CRE loans during the nine months ended September 30, 2026, primarily driven by appraisals received on those loans and the resolution of a single borrower relationship undergoing bankruptcy proceedings during the three months ended March 31, 2026.
It is our policy to order updated appraisals for all substandard and non-accrual loans that are collateralized by multi-family buildings, commercial real estate properties, or land, if the most recent appraisal on file for the property is more than one year old. Appraisals are ordered at least annually until such time as the loan becomes pass rated. It is not our policy to obtain updated appraisals for performing loans that are not showing signs of credit weakness. However, appraisals may be ordered for performing loans when a borrower requests an increase in the loan amount, a modification in loan terms, or an extension of a maturing loan, or when we determine an updated appraisal is needed as a result of our ongoing credit analysis. We evaluate loans that were previously placed on non-accrual at least quarterly to determine if additional charge-offs may be needed.
Properties and other assets that are acquired through foreclosure are classified as repossessed assets and are recorded at fair value at the date of acquisition, less the estimated cost of selling the property. Subsequent declines in the fair value of the assets are charged to earnings and are included in non-interest expense. It is our policy to require an appraisal and an
environmental assessment of properties classified as other real estate owned before foreclosure and to re-appraise the properties at least annually until they are sold. We dispose of such properties as quickly and prudently as possible, given current market conditions and the property's condition.
Liquidity Risk
We have established a liquidity risk management framework designed to ensure that we can meet our funding obligations in daily, business-as-usual and liquidity stress periods. We maintain a Liquidity Risk Policy that has been approved by the Board and is subject to review at least annually or if there are significant changes to our business activity. The Liquidity Risk Policy outlines our Risk Appetite and provides guidance for the roles and responsibilities of management and various oversight committees to oversee the liquidity risk management framework. We also maintain a CFP which has been approved by the Board. The CFP provides guidance to plan for potential periods of stress and to navigate actual periods of stress. The CFP specifies a series of EWI which we use to monitor funding or market conditions that may indicate a trend toward a period of stress and to provide guiding principles for us during a period of stress including identifying the operational steps needed to access available and contingent sources of liquidity.
Our funding primarily stems from a diverse combination of business activities. The primary source of funding is our retail and institutional deposit base. Customer deposits provide us with a relatively stable, low-cost source of funding. The majority of our customer deposits are covered by FDIC deposit insurance with $14.7 billion of deposits that are uninsured or not collateralized by securities or letters of credit as of September 30, 2026, representing 22 percent of our overall deposit base as of that date. We also obtain funding through various wholesale funding channels, including $9.9 billion of secured borrowings from the FHLB and an active brokered CDs issuance program with $2.6 billion outstanding as of September 30, 2026.
Our Liquidity Policy defines a limit framework which ensures we maintain liquidity and funding within our risk appetite. The limits require, among other elements, that we maintain a diverse funding profile while limiting concentration of funding by source, counterparty and maturity tenor. The policy also requires us to maintain sufficient on-balance sheet liquidity to support funding obligations under a severe, but plausible 30-day liquidity stress scenario. We monitor and report our overall funding and liquidity risk appetite metrics on a daily basis and our cash position on an intraday basis.
We maintain a liquidity buffer of on-balance sheet cash reserves and HQLAs. We also maintain access to secured borrowings from the FHLB and FRB-NY Discount Window. The investment securities we consider HQLAs are all unencumbered, held as available-for-sale, and are either issued by government sponsored entities or are explicitly guaranteed by the U.S. government. We pledge eligible loan and securities collateral with the FRB-NY Discount Window and FHLB New York to support borrowing capacity. The available borrowing capacity with the FRB-NY Discount Window and the FHLB, net of credit utilization primarily in the form of advances and letters of credit, is included in our Total Liquidity.
(in billions) September 30, 2026 December 31, 2025
Cash at Federal Reserve $ 3.6 $ 5.3
High-Quality Liquid Assets
14.2 13.5
Total On-Balance Sheet Liquidity $ 17.8 $ 18.8
FHLB Available Capacity 4.5 6.5
Discount Window Available Capacity 2.8 1.8
Total Liquidity $ 25.1 $ 27.1
Credit Ratings
We maintain credit ratings from three rating agencies: Moody's, Fitch and DBRS. As of October 31, 2026, our credit ratings were as follows:
Moody's Fitch
DBRS
Long-Term Issuer Rating
Ba3 BB+ BBB
Long-Term Deposits
Baa3 BBB BBB
Short-Term Deposits
Prime-3 F3
The primary mortgage loan agencies maintain standards for institutions serving as eligible custodial depositories, including the requirement to maintain an investment grade short-term issuer/deposit rating from Moody's or S&P. Following
the Moody's upgrade in April 2026, we are now in compliance with this criteria. We have no other direct contractual relationships tied to further downgrades in our credit ratings; however, any such downgrades could result in reputational risk that may adversely affect our business.
Contractual Obligations and Commitments
In the normal course of business, we enter into a variety of contractual obligations in order to manage our assets and liabilities, fund loan growth, operate our branch network, and address our capital needs.
For example, we offer CDs with contractual terms to our customers and also borrow funds under contract from the FHLB. These contractual obligations are reflected in the Condensed Consolidated Statements of Condition under "Deposits" and "Borrowed funds," respectively. At September 30, 2026, we had CDs of $21.4 billion and long-term debt (defined as borrowed funds with an original maturity of more than one year) of $5.7 billion.
We also are obligated under certain non-cancelable operating leases on the buildings and land we use in operating our branch network and in performing our back-office responsibilities. These obligations are included within Other liabilities within the Condensed Consolidated Statements of Condition and totaled $417 million at September 30, 2026.
At September 30, 2026, we also had commitments to extend credit in the form of mortgage and other loan originations, as well as commercial, performance stand-by and financial stand-by letters of credit of $14.3 billion. These commitments consist of agreements to extend credit as long as there is no violation of any condition established in the contract under which the loan is made. Commitments generally have fixed expiration dates or other termination clauses and may require the payment of a fee. The fees we collect in connection with the issuance of letters of credit are included in "Fee income" in the Condensed Consolidated Statements of Income (Loss).
At September 30, 2026, our total liquidity position was $25.1 billion and we expect that our funding will be sufficient to fulfill our cash obligations and commitments when they are due both in the short term and long term.
For September 30, 2026, we did not engage in any off-balance sheet transactions that we expect to have a material effect on our financial condition, results of operations or cash flows.
Interest Rate Risk
We manage our assets and liabilities to reduce our exposure to changes in market interest rates. The asset and liability management process has three primary objectives: (i) to evaluate the interest rate risk inherent in our balance sheet; (ii) to determine the appropriate level of risk given our business strategy, operating environment, capital and liquidity requirements, and performance objectives; and (iii) to manage that risk in a manner consistent with guidelines approved by our Board of Directors.
As a financial institution, interest rate risk represents our primary market risk. Changes in market interest rates can significantly affect the income and expense generated by our interest-earning assets and interest-bearing liabilities, as well as the market value of our interest-earning assets. Accordingly, the Board and management monitor interest rate risk on a regular basis so that changes to the balance sheet may be made when deemed appropriate.
The actual duration of held for investment mortgage loans and mortgage-related securities can be significantly affected by changes in prepayment behavior and market interest rates. Prepayment levels may also be influenced by economic conditions in the geographies where the underlying mortgages were originated, seasonal factors, demographic trends, and the assumability of the underlying mortgages. However, market interest rates and the availability of refinancing opportunities generally have the most significant influence on prepayment activity.
Interest Rate Sensitivity Analysis
Interest rate sensitivity is monitored using a model that estimates changes in EVE under a range of interest rate scenarios. EVE represents the net present value of the expected cash flows from assets, liabilities, and off-balance sheet contracts. Under each interest rate scenario, the estimated percentage change in EVE is measured relative to the base case. The model incorporates assumptions regarding loan and MBS prepayments, market value spreads, deposit decay rates and betas, and other assumptions regarding the expected behavior of assets and liabilities.
Based on the information and assumptions in effect at September 30, 2026, the following table sets forth our EVE, assuming the changes in interest rates noted:
Change in Interest Rates (in basis points) Estimated Percentage Change in Economic Value of Equity
-200 shock 5.5%
-100 shock 3.3%
+100 shock (4.0)%
+200 shock (8.2)%
The net changes in EVE presented in the preceding table are within the limits approved by the Board.
Accordingly, while the EVE analysis provides an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to, and do not, provide a precise forecast of the effect of changes in market interest rates on the EVE, and actual results may differ materially from those presented.
Interest rate risk is also monitored using a model that generates NII simulations under a range of interest rate scenarios. Estimating changes in NII requires a number of assumptions that may not fully reflect how actual yields and funding costs respond to changes in market interest rates. The NII analysis assumes that the composition of interest earning assets and interest-bearing liabilities existing at the beginning of the measurement period remains constant throughout the period. It also assumes that changes in interest rates are reflected uniformly across the yield curve, regardless of the maturity or repricing characteristics of individual assets and liabilities. In addition, the model does not incorporate the potential benefit of management actions that may be taken in response to changes in interest rates to mitigate interest rate risk.
Because these assumptions are inherently uncertain, actual results may differ materially from those presented, due to the timing, magnitude, and frequency of changes in market interest rates, changes in yield curve relationships and spreads, customer behavior, including prepayments and deposit repricing categories, and management actions taken in response to changing market conditions.
At September 30, 2026, the estimated change in NII over the next twelve months for a 100 basis point reduction in short term interest rates with no change in long term interest rates is a decrease of 0.26 percent and the estimated change for a 100 basis point increase in short term rates is an increase of 0.68 percent.
The following table presents the estimated percentage change in future NII over the next twelve months under various instantaneous parallel interest rate shock scenarios. Based on the information and assumptions in effect at September 30, 2026, the estimated changes are presented below:
Change in Interest Rates (in basis points)
Estimated Percentage Change in Future Net Interest Income
-200 shock (4.3)%
-100 shock (1.8)%
+100 shock 1.5%
+200 shock 2.7%
The net changes in NII presented in the preceding table are within the parameters approved by our Board.
Future changes in the composition of our assets and liabilities, customer behavior, or market conditions may result in changes to our EVE and NII sensitivity profiles.
In the event that our EVE and NII sensitivities were to breach our internal policy limits, we would undertake appropriate remedial measures:
•ALCO would evaluate the primary causes of the policy limit breach, the expected duration of the condition, and the projected impact on earnings and capital.
•ALCO would inform the Board of Directors of the variance and present recommendations regarding proposed courses of action to restore conditions within policy limits.
These potential strategies may include asset restructuring, liability restructuring, expansion or contraction of the balance sheet, and the use or modification of off-balance sheet positions, including interest rate swaps, caps, floors, options, and forward purchase or sale commitments.
Regulatory Capital
The Bank is subject to prudential standards applicable to national banks:
•The OCC's capital adequacy standards establish minimum capital requirements and overall capital adequacy standards.
•The Prompt Corrective Action regulatory capital framework establishes five categories of capital adequacy ranging from "well capitalized" to "critically undercapitalized." An institution's capital category affects various matters, including legal requirements for regulators to take prompt corrective action and the level of a bank's FDIC deposit insurance premium assessments. Capital amounts and classifications are subject to the regulators' qualitative judgments about the components of capital and risk weighted assets, among other factors. Regulators have the discretion to require capital to be maintained in excess of minimum levels.
•Under regulatory heightened standards, a risk governance framework is required to be developed and maintained to manage and control the risk-taking activities of the Bank. Management has developed a written framework and is implementing the various components in an integrated fashion as underlying business processes mature. Heightened standards also require risk limits, metrics, and analytics which monitor the size and direction of key risks in the organization. We have established risk limits which are monitored by the Board and are continuing to enhance related metrics and analytics.
As of September 30, 2026, our capital measures continued to exceed the minimum federal requirements. The following tables set forth the Bank's common equity tier 1, tier 1 risk-based, total risk-based, and leverage capital amounts and ratios as well as the respective minimum regulatory capital requirements, as of the dates shown:
Risk-Based Capital
(in millions) Common Equity Tier 1 Tier 1 Total Leverage Capital
September 30, 2026 Amount Ratio Amount Ratio Amount Ratio Amount Ratio
Actual capital
$ 7,713 12.38 % $ 8,217 13.19 % $ 9,804 15.74 % $ 8,217 9.33 %
Minimum for capital adequacy purposes 2,803 4.50 3,738 6.00 4,983 8.00 3,524 4.00
Excess $ 4,910 7.88 % $ 4,479 7.19 % $ 4,821 7.74 % $ 4,693 5.33 %
December 31, 2025
Actual capital
$ 7,845 12.83 % $ 8,348 13.66 % $ 9,921 16.23 % $ 8,348 9.22 %
Minimum for capital adequacy purposes 2,751 4.50 3,668 6.00 4,890 8.00 3,623 4.00
Excess $ 5,094 8.33 % $ 4,680 7.66 % $ 5,031 8.23 % $ 4,725 5.22 %
The decrease in our capital ratios from December 31, 2025 was primarily driven by the stock repurchase program.
With capital levels above our target operating range, we expect to deploy excess capital through the following prioritized approach (1) Organic Growth -Profitable loan growth and other business growth opportunities across the Bank. We view disciplined organic growth as our highest-return use of capital, (2) Shareholder Returns - Capital beyond what is needed to fund our near-term growth plans may be returned to shareholders through stock repurchases and dividends, and (3) Strategic Flexibility - We retain capital capacity to fund future acquisitions and other strategic opportunities as they arise. This framework guides our capital allocation decisions and is evaluated on an ongoing basis by management and the Board.
At September 30, 2026, our total risk-based capital ratio exceeded the minimum requirement for capital adequacy purposes by 774 basis points and the fully phased-in capital conservation buffer by 524 basis points.
At September 30, 2026, the Bank also exceeded the minimum capital requirements to be categorized as "Well Capitalized." To be categorized as well capitalized, a bank must maintain a minimum common equity tier 1 ratio of 6.50 percent; a minimum tier 1 risk-based capital ratio of 8 percent; a minimum total risk-based capital ratio of 10 percent; and a minimum leverage capital ratio of 5 percent.
Critical Accounting Estimates
Various elements of our accounting policies, by their nature, are subject to estimation techniques, valuation assumptions and other subjective assessments. Certain accounting policies that, due to the judgment, estimates and assumptions used, are critical to an understanding of our Condensed Consolidated Financial Statements and the Notes, are described in detail in Note 2 of our Form 10-K for the year ended December 31, 2025. These policies relate to the determination of our ACL. We believe the judgment, estimates and assumptions used in the preparation of our Condensed Consolidated Financial Statements and the Notes are reasonable; however, due to the inherent uncertainties in developing estimates, actual results could differ from the original estimates, requiring adjustments to these balances in future periods.
Flagstar Bank, National Association
Condensed Consolidated Statements of Condition (unaudited)
Flagstar Bank NA published this content on November 06, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on November 06, 2026 at 21:16 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]