Flagstar Back to Profitability After Slashing CRE Exposure

2 February 2026

Flagstar Bank eked out its first profitable quarter since narrowly avoiding collapse in 2024, a milestone driven by aggressive cuts to its multifamily and commercial real estate loan book.

The lender reported $21 million in net income in the fourth quarter, swinging from a $45 million loss the prior quarter, according to an earnings report posted Friday. For all of last year, Flagstar still lost $177 million, but that was a sharp improvement from its roughly $1 billion loss the year before, Bisnow reported.

Wall Street wasn’t expecting the comeback quite so soon; Flagstar posted $557 million in quarterly revenue, beating consensus estimates by about 4 percent, while earnings per share came in at 5 cents, ahead of projections. The stock nonetheless slipped about 1 percent midday Friday, a sign investors remain wary of what’s left on the balance sheet.

That caution isn’t unfounded. Flagstar still has about $3 billion in troubled loans and remains deeply entangled in New York City’s rent-stabilized housing market, long a core business line for New York Community Bancorp and Signature Bank before both ran aground.

At the end of 2023, Flagstar — built on the husk of NYCB — held $50.6 billion in commercial real estate loans. By the end of last year, that figure had fallen to $38.3 billion. In the fourth quarter, Flagstar shed $2.3 billion of CRE exposure, including $1.5 billion tied to multifamily.

Since early 2024, the bank has reviewed 97 percent of its New York City rent-regulated loan book, which totals $14.6 billion today. More than $9 billion is backed by buildings where at least half the units are regulated. Nonaccrual loans in that portfolio stand at $2 billion.

Flagstar has logged $1.7 billion in payoffs and $375 million in charge-offs tied to those loans, while boosting its allowance for credit losses to 5.6 percent.

One particularly painful example of the rent-stabilized market’s impact was a $564 million loan tied to more than 5,000 rent-stabilized apartments formerly owned by Pinnacle Group. The properties were sold in a bankruptcy auction, costing the bank a roughly $113 million write-down.

The political backdrop remains a wild card. Mayor Zohran Mamdani pledged to freeze rents for stabilized units, a move that would further strain landlords’ ability to service debt. Flagstar executives said they’re modeling scenarios with flat rents and rising expenses and closely scrutinizing borrowers with outstanding violations.

Still, management signaled it isn’t abandoning commercial real estate altogether. As it works through legacy New York exposure, Flagstar plans to selectively ramp up originations in markets like Michigan, California and Florida.

— Holden Walter-Warner