NET INTEREST MARGIN IMPROVES FOR A THIRD CONSECUTIVE QUARTER, UP 10 BASIS POINTS QUARTER-OVER-QUARTER TO 1.91%
OPERATING EXPENSES REMAIN WELL CONTROLLED, UP 1% ON A GAAP BASIS AND DOWN 1% ON AN ADJUSTED BASIS COMPARED TO PRIOR QUARTER AND DOWN APPROXIMATELY 28% AND 30% ON A GAAP AND ADJUSTED BASIS, RESPECTIVELY, OR $800 MILLION ANNUALIZED COMPARED TO PRIOR YEAR
CRE PAR PAYOFFS OF $1.3 BILLION INCLUDING 42% IN SUBSTANDARD LOANS FURTHER REDUCING OVERALL CRE EXPOSURE
PROVISION FOR CREDIT LOSSES DECREASED 41% COMPARED TO PRIOR QUARTER AS CREDIT QUALITY SHOWING SIGNS OF STABILIZATION AND NET CHARGE-OFFS DECREASE 38%
CAPITAL AT OR ABOVE PEER LEVELS AND LIQUIDITY POSITION REMAINS STRONG
CLOSED HOLDING COMPANY REORGANIZATION ON OCTOBER 17th WHICH WILL SIMPLIFY OUR CORPORATE STRUCTURE, REDUCE REGULATORY BURDEN, AND LOWER OPERATING EXPENSES
Third Quarter 2025 Summary
Asset Quality
Loans and Deposits
Criticized/Classified loans declined $2.8 billion or 19% since December 31, 2024
CRE par pay-offs totaled $1.3 billion, comprised of 42% substandard loans
Total ACL of $1,128 million or 1.80% of total loans HFI Multi-family ACL coverage of 1.83%
Multi-family ACL coverage for rent-regulated units equal to or greater than 50% of 3.05%
NCOs decline $44 million or 38% compared to Q2'25; NCOs to average loans improves to 0.46% from 0.72%
Non-accrual loans rose a modest $88 million or 3% compared to Q2'25
Continued momentum in C&I lending with overall portfolio growth of 3% vs. Q2'25
Strategic focus areas grew 28% compared to Q2'25
New commitments of $2.4 billion, up 26% vs. Q2'25
New originations of $1.7 billion, up 41% vs. Q2'25
CRE exposure down $1.9 billion or 5% compared to Q2'25
Multi-family loans down $1.5 billion or 5% compared to Q2'25
CRE loans declined $473 million or 4% compared to Q2'25
A $6.1 billion year-to-date run-off in brokered deposits drove the decline in total deposits
Capital
Profitability
CET1 capital ratio improved to 12.45%, at or above peer group levels
Book value per common share of $18.30
Tangible book value per share of $17.32
PPNR, as adjusted, was $15 million compared to $9 million in Q2'25
NIM increased 10 basis points to 1.91% compared to Q2'25
Total non-interest expenses were $522 million, up $9 million or 2% compared to Q2'25
Adjusted operating expenses of $457 million, down 1% compared to Q2'25 and down approximately 30% or $800 million on an annualized basis year-over-year
Effective October 17, 2025, Flagstar Bank, N.A. (the "Bank") became the successor reporting company to Flagstar Financial, Inc. (the "Company"), pursuant to an internal corporate reorganization to eliminate the Bank's holding company structure (the "Reorganization"). In connection with the completion of the Reorganization, the Company was merged with and into the Bank, with the Bank continuing as the surviving entity. Unless otherwise noted, the financial statements and supplemental financial information contained in this earnings release for all periods prior to the completion of the Reorganization refer to the Company, which was the parent holding company for the Bank prior to the completion of the Reorganization.
HICKSVILLE, N.Y., Oct. 24, 2025 /PRNewswire/ -- Flagstar Bank, N.A. (NYSE:FLG), today reported results for the three- and nine-months ended September 30, 2025. On an adjusted basis third quarter 2025 operating trends and diluted earnings per share were substantially better than both the previous quarter and the third quarter of 2024. The third quarter 2025 net loss was $36 million compared to a net loss of $70 million for the second quarter 2025 and compared to a net loss of $280 million in third quarter 2024.
The net loss attributable to common stockholders for the third quarter 2025 was $45 million, or $0.11 per diluted share, compared to a net loss attributable to common stockholders of $78 million, or $0.19 per diluted share for the second quarter 2025, a 44% improvement and compared to a net loss attributable to common stockholders of $289 million, or $0.79 per diluted share for the third quarter 2024, an 86% improvement.
For the nine months ended September 30, 2025, the Company reported a net loss of $206 million compared to a net loss of $930 million for the nine months ended September 30, 2024. The net loss attributable to common stockholders for the nine months ended September 30, 2025 was $231 million or $0.56 per diluted share compared to a net loss attributable to common stockholders for the nine months ended September 30, 2024 of $957 million or $3.16 per diluted share.
CEO COMMENTARY
Commenting on the Company's third quarter 2025 performance, Chairman, President, and Chief Executive Officer, Joseph M. Otting stated, "Our third-quarter 2025 performance provides further evidence that we are successfully executing on each of our strategic priorities, which we first outlined during the first quarter of last year. Our operating results improved significantly during the quarter as key balance sheet and income statement metrics continue to trend positively.
"From an earnings perspective, our adjusted net loss in the third quarter narrowed substantially compared to the prior quarter, while our pre-provision net revenue continues to trend higher, which we expect will put the Bank on the path to profitability.
"In addition to the earnings improvement, we exhibited other positive trends during the quarter highlighted by strong growth in C&I lending, a higher net interest margin, and well controlled operating expenses, while our problem loans continued to decrease, and we further reduced our commercial real estate exposure.
"We made tremendous progress over the past year in building our C&I business and are extremely pleased with the results to date. During the third quarter, the momentum in C&I lending accelerated, driven by our two primary growth areas - Specialized Industries and Corporate and Regional Commercial Banking. These two areas delivered double-digit loan growth of 28% compared to the second quarter which led to positive overall growth in the C&I portfolio of $448 million or 3%, the first quarter of growth in over a year.
"Our net interest margin increased 10 basis points during the current quarter and has now improved for three consecutive quarters, as we proactively managed retail deposit costs lower and paid off higher cost brokered deposits.
"We also experienced strong par payoffs in the multi-family and commercial real estate portfolios, which contributed to a further decline in criticized and classified loans. On a year-to-date basis, total criticized and classified loans are down $2.8 billion or 19%.
"We also completed our holding company reorganization on October 17th, after receiving all necessary regulatory and shareholder approvals. As a result of this reorganization, Flagstar Financial Inc. was ultimately merged with and into Flagstar Bank, N.A., with Flagstar Bank, N.A. as the surviving entity. This reorganization simplifies our corporate structure, reduces our regulatory burden, and lowers operating expenses. As always, we remain focused on executing our strategic plan, including transforming Flagstar into a top-performing regional bank, creating a customer-centric culture firmly grounded in relationships, and effectively managing risk to drive long-term value."
BALANCE SHEET SUMMARY AS OF SEPTEMBER 30, 2025
At September 30, 2025, total assets were $91.7 billion, down $0.6 billion or 1% versus June 30, 2025 and down $8.5 billion or 8% versus December 31, 2024. The linked-quarter decrease was the result of lower total loans and leases, Held-for-Investment ("HFI") balances, offset by slightly higher levels of cash and cash equivalents and Available-for-Sale ("AFS") securities, while deposits declined modestly and borrowed funds were unchanged. Compared to year-end 2024, the decrease was driven by lower total loans and leases HFI balances and cash and cash equivalent balances, offset by higher AFS securities balances, while both deposits and borrowed funds declined. The decrease in total loans and leases HFI for both periods is due to the Bank's strategy to reduce its exposure to multi-family and commercial real estate ("CRE") loans, while the increase in AFS securities is due to the redeployment of excess cash into higher yielding assets. Total loans Held-for-Sale increased $216 million or 68% to $535 million compared to June 30, 2025, but declined $364 million or 40% compared to December 31, 2024. AFS securities rose $0.2 billion or 2% to $15.1 billion on a linked-quarter basis and are up $4.7 billion or 45% since year-end 2024.
Total loans and leases HFI at September 30, 2025 were $62.7 billion, down $1.5 billion or 2% on a linked-quarter basis and down $5.6 billion or 8% versus December 31, 2024. The multi-family loan portfolio declined $1.5 billion or 5% to $30.5 billion on a linked-quarter basis and declined $3.6 billion or 11% versus December 31, 2024. The CRE portfolio decreased $473 million or 4% on a linked-quarter basis to $10.2 billion and declined $1.7 billion or 14% versus December 31, 2024. Both the linked-quarter and year-to date declines were mainly driven by par payoffs. During the third quarter, par payoffs totaled $1.3 billion compared to par payoffs of $1.5 billion in the previous quarter, while on a year-to-date basis, par payoffs totaled $3.6 billion.
Third-quarter 2025 marked another strong quarter of production from the Bank's new C&I lending teams within our two primary growth areas - Specialized Industries Lending and Corporate and Regional Commercial Banking, which grew $1.1 billion or 28% compared to the prior quarter. Overall, C&I loans grew $448 million or 3% on a linked-quarter basis to $14.9 billion while they declined $502 million or 3% versus December 31, 2024.
During the third quarter, new credit commitments increased to $2.4 billion, up 26% compared to $1.9 billion in the second quarter and up 201% compared to $789 million in the fourth quarter of 2024. Of this amount, we funded $1.7 billion during the third quarter, up 41% compared to $1.2 billion in the second quarter and up 214% compared to $542 million in the fourth quarter of 2024. Our primary growth areas on a combined basis had total commitments of $2.1 billion up $748 million or 57% compared to the second quarter; total fundings from these two areas during the third quarter were $1.4 billion, up $595 million or 73% compared to the second quarter.
Total deposits at September 30, 2025 were $69.2 billion, a $0.6 billion or 1% linked-quarter decrease and $6.7 billion or 9% decrease versus December 31, 2024. Both the quarter-over-quarter and year-to-date decreases were mainly due to a decline in certificates of deposits ("CDs").
During the third quarter, CDs decreased $1.8 billion or 8% to $22.4 billion on a linked-quarter basis and decreased $5.0 billion or 18% versus December 31, 2024. Both the linked-quarter and year-to-date declines in CDs were primarily driven by a decline in brokered CDs, as part of the Company's strategy to reduce higher cost funding. During the third quarter, the Company paid off $2.0 billion in brokered CDs at a weighted average cost of 5.08%. On a year-to-date basis, the Company reduced brokered deposits by $6.1 billion with a weighted average cost of 4.91%. This led to a 13 basis point quarter-over-quarter improvement in the cost of deposits.
NET INCOME (LOSS) | NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS - AS ADJUSTED
On an as adjusted basis, which excludes the impact of certain notable items during the quarter, including a $21 million fair value gain related to our equity investment in Figure Technology Solutions, Inc., $8 million in severance, a $14 million litigation settlement, and $17 million of merger-related expenses, the third quarter 2025 net loss attributable to common stockholders was $31 million or $0.07 per diluted share compared to a second quarter 2025 net loss attributable to common stockholders of $60 million or $0.14 per diluted share, a 50% quarter-over-quarter improvement and compared to a third quarter 2024 net loss attributable to common stockholders of $252 million or $0.69 per diluted share, a 89% year-over-year improvement.
For the first nine months of 2025, the Company also had several notable items, including a $21 million fair value gain related to the investment in Figure Technologies, a $14 million litigation settlement, $39 million in merger-related expenses, $12 million in lease cost acceleration related to branch closures, $8 million in trailing costs related to the sale of our mortgage servicing/sub-servicing business, and $10 million in severance costs related to branch closures and employee reduction actions. As adjusted for these items, the Company reported a net loss attributable to common stockholders of $185 million or $0.45 per diluted share an 82% improvement compared to the first nine months of 2024.
For the first nine months of 2024, on an adjusted basis, the Company reported a net loss of $715 million and a net loss attributable to common stockholders of $742 million or $2.45 per diluted share. Included in the adjusted nine month 2024 results were $95 million of merger-related expenses, $32 million in certain items related to the sale of the mortgage warehouse business, and a $121 million reduction in the bargain purchase gain arising from the Signature transaction.
EARNINGS SUMMARY FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2025
Net Interest Income, Net Interest Margin, and Average Balance Sheet
Net Interest Income
Net interest income for the third quarter 2025 totaled $425 million, up $6 million, or 1%, compared to second quarter 2025 but down $85 million or 17% on a year-over-year basis. The linked-quarter improvement was driven by a lower cost of funds along with a lower level of average interest-bearing liabilities, partially offset by lower average interest-earning assets. The year-over-year decrease was due to the Bank strategically reducing average assets significantly leading to a lower yield on interest-earning assets, partially offset by our strategic paydown of higher cost borrowings and deposits leading to a lower cost of funds.
For the first nine months of 2025, net interest income decreased $437 million or 26% to $1.3 billion compared to $1.7 billion for the first nine months of 2024. The year-over-year decline is due to the decline in average interest-earning assets along with a concurrent decline in the average yield. The decrease in average interest-earning assets was primarily driven by a decline in average loan balances due to the Company's strategy to reduce its exposure to multi-family and CRE loans and the sale of the mortgage warehouse business and the mortgage servicing/sub-servicing and third-party origination business during full-year 2024. This was partially offset by a decline in average interest-bearing liabilities, mainly the result of the Company paying off a substantial amount of wholesale borrowings and brokered deposits during 2024 and the first nine months of 2025.
Net Interest Margin
During third quarter 2025, the Company's net interest margin ("NIM") increased compared to second quarter 2025. Third quarter 2025 NIM was 1.91%, up 10 basis points compared to second quarter 2025, and up 12 basis points compared to third quarter 2024. The linked-quarter improvement resulted from a 10 basis point decrease in the cost of average interest-bearing liabilities along with a 1 basis point improvement in the average interest-earning asset yield. On a linked-quarter basis, average interest-bearing deposits declined $3.0 billion or 5% to $57 billion along with a 13 basis point improvement in the average cost of interest-bearing deposits to 3.60%.
Average loan balances declined $2.3 billion or 3% to $63.5 billion on a linked-quarter basis, while the average loan yield increased 3 basis points to 5.15% due to loan yield resets. Average cash balances decreased $3.8 billion or 32% to $8.2 billion as cash was used to purchase investment securities and reduce higher cost funding, mostly brokered CDs. Average securities balances rose $1.4 billion or 9% to $16.6 billion and the average yield improved to 4.62%, up 14 basis points compared to second quarter 2025.
The year-over-year increase in the NIM was driven by several items including lower average loan balances, due to the Company's strategic actions to reduce its CRE concentration and sell certain non-core businesses. This was partially offset by the redeployment of cash into higher-yielding investment securities and a significant reduction in average wholesale borrowings, along with a lower cost of funds, as we proactively managed retail deposit costs lower and paid off higher cost brokered deposits and wholesale borrowings.
Average loans declined $13.0 billion or 17% to $63.5 billion, while the average yield declined 38 basis points to 5.15% on a year-over-year basis. Average securities balances increased $3.7 billion or 29% to $16.6 billion, while the average yield decreased 23 basis points to 4.62% year-over-year. Average total borrowings decreased $11.3 billion or 46% to $13.2 billion while their average cost declined 54 basis points to 4.74% compared to the prior year. Average deposits declined $6.5 billion or 10% to $57.2 billion on a year-over-year basis, however, the average cost of deposits declined 77 basis points to 3.60% year-over-year.
For the first nine months of 2025, the NIM was 1.82%, down 19 basis points compared to the first nine months of 2024. The year-over-year decrease was largely the result of a smaller balance sheet driven by lower average loan balances offset partially by higher average securities balances and lower average borrowed funds. Average loan balances during the first nine months of 2025 declined $15.4 billion or 19% to $65.8 billion compared to the first nine months of 2024, while average securities balances increased $2.8 billion or 23% to $15.0 billion, while the average securities yield increased 5 basis points to 4.54%. The Company utilized a portion of its cash position to fund the securities purchases. Accordingly, average cash balances declined $7.1 billion or 38% to $11.5 billion, while the average yield decreased 103 basis points to 4.41%. Average borrowed funds declined $12.4 billion or 47% to $13.9 billion as the Company paid down FHLB-NY advances throughout 2024 and continuing into 2025. At the same time the average cost of borrowed funds decreased 59 basis points to 4.72%.
Provision for Credit Losses
For the third quarter 2025, the provision for credit losses decreased $26 million or 41% to $38 million compared to the second quarter 2025 and it decreased $204 million or 84% compared to third-quarter 2024. The decrease in the provision for credit losses is due to the strategic reduction in multi-family and CRE loan balances, coupled with decreases in the non-core C&I loan portfolio, lower charge-offs, a reduction in criticized assets, recent appraisals, and ongoing credit reviews.
Net charge-offs for the third quarter 2025 totaled $73 million, down $44 million or 38% compared to second quarter 2025 and down $167 million or 70% compared to third-quarter 2024. Third quarter 2025 net charge-offs on an annualized basis represented 0.46% of average loans outstanding, compared to 0.72% for second quarter 2025 and compared to 1.25% for third quarter 2024.
For the first nine months of 2025, the provision for credit losses totaled $181 million compared to $947 million for the first nine months of 2024, down $766 million or 81%. The year-over-year decrease was mainly the result of a significant decrease in net charge-offs primarily related to our multi-family and CRE portfolios, and stabilization in the allowance for credit losses.
For the first nine months of 2025, net charge-offs totaled $305 million compared to $670 million for the first nine months of 2024. Net charge-offs for the first nine months of 2025 represented 0.63% of average loans outstanding compared to 1.14% of average loans outstanding for the first nine months of 2024. The decrease was due to normalizing credit trends, including stabilizing property values and borrower financials.
Pre-Provision Net Revenue
The table below details the Company's PPNR and PPNR, as adjusted, which are non-GAAP measures, for the periods noted:
September 30, 2025
For the Three Months Ended
compared to:
(dollars in millions)
September 30, 2025
June 30, 2025
September 30, 2024
June 30, 2025
September 30, 2024
Net interest income
$ 425
$ 419
$ 510
1 %
-17 %
Non-interest income
94
77
113
22 %
-17 %
Total revenues
$ 519
$ 496
$ 623
5 %
-17 %
Total non-interest expense
522
513
716
2 %
-27 %
Pre - provision net loss (non-GAAP)
$ (3)
$ (17)
$ (93)
-82 %
-97 %
Merger-related expenses
17
14
18
21 %
-6 %
Certain items related to sale on mortgage warehouse business
—
—
32
NM
NM
Severance
8
2
—
300 %
NM
Lease cost acceleration related to closing branches
—
7
—
-100 %
NM
Trailing mortgage sale costs with Mr. Cooper
—
3
—
-100 %
NM
Litigation settlement
14
—
—
NM
NM
Net gain on investment security
(21)
—
—
NM
NM
Pre - provision net revenue/(loss), as adjusted (non-GAAP)
$ 15
$ 9
$ (43)
67 %
-135 %
For the third quarter 2025, pre-provision net loss totaled $3 million compared to a pre-provision net loss of $17 million for second quarter 2025 and a pre-provision net loss of $93 million for third quarter 2024. Third quarter 2025 pre-provision net loss included a $21 million fair value gain related to an equity investment, a $14 million litigation claim settlement and $8 million in severance costs. As adjusted for these items and for $17 million in merger-related expenses, third quarter 2025 results would reflect pre-provision net revenue of $15 million compared to a pre-provision net revenue of $9 million for second quarter 2025 and a pre-provision net loss of $43 million for third quarter 2024.
For the Nine Months Ended
(dollars in millions)
September 30, 2025
September 30, 2024
% Change
Net interest income
$ 1,254
$ 1,691
-26 %
Non-interest income
251
236
6 %
Total revenues
$ 1,505
$ 1,927
-22 %
Total non-interest expense
1,567
2,120
-26 %
Pre - provision net revenue / (loss) (non-GAAP)
$ (62)
$ (193)
-68 %
Merger-related expenses
39
95
-59 %
Certain items related to sale on mortgage warehouse business
—
32
NM
Severance
10
—
NM
Lease cost acceleration related to closing branches
12
—
NM
Trailing mortgage sale costs with Mr. Cooper
8
—
NM
Litigation settlement
14
—
NM
Net gain on investment security
(21)
—
NM
Bargain purchase gain
—
121
NM
Pre - provision net revenue, as adjusted (non-GAAP)
$ ,
$ 55
-100 %
For the first nine months of 2025, pre-provision net loss was $62 million compared to pre-provision net loss of $193 million for the first nine months of 2024. The first nine months of 2025 pre-provision net loss included several notable items including a $21 million fair value gain related to an equity investment, a $14 million increase in litigation reserves related to a recent settlement, $10 million in severance costs, $12 million in lease cost acceleration, and $8 million in trailing mortgage sale costs. As adjusted for these items and for $39 million in merger-related expenses, the pre-provision net revenue was zero compared to PPNR of $55 million for the first nine months of 2024, which included a $121 million reduction in the bargain purchase gain arising from the Signature transaction and $32 million in certain items related to the sale of the mortgage warehouse business, along with $95 million of merger-related expenses.
Non-Interest Income
Non-interest income in third quarter 2025 was $94 million, up $17 million or 22% compared to $77 million in the second quarter 2025 but down $19 million or 17% compared to third quarter 2024. Third-quarter 2025 non-interest income includes a $21 million fair value gain on an equity investment related to the Bank's investment in Figure Technology Solutions, Inc. Excluding this item, third-quarter 2025 non-interest income was $73 million, down $4 million or 5% on a linked quarter basis and down $63 million or 46% on a year-over-year basis.
Both the linked-quarter and year-over-year declines were due to the sale of the Bank's mortgage servicing/subservicing business last year. The sale impacted various categories within non-interest income including fee income(through lower loan origination fees), the net return on mortgage servicing rights, and load administration income.
On a linked-quarter basis, net gain on loan sales and securitizations declined $1 million or 17% to $5 million due to lower origination volumes. This was offset by a $6 million or 16% increase in other income to $32 million. The net return on MSRs was zero in third quarter 2025 compared to $34 million in the year-ago third quarter, while net loan administration income in third quarter 2025 was zero compared to a $8 million loss in the year-ago third quarter, and fee income was down $19 million or 45% to $23 million, largely due to a decline in loan origination income. This was partially offset by a $2 million or 7% year-over-year increase in other income to $32 million.
September 30, 2025
For the Three Months Ended
compared to:
(dollars in millions)
September 30, 2025
June 30, 2025
September 30, 2024
June 30, 2025
September 30, 2024
Fee income
$23
$22
$42
5 %
-45 %
Bank-owned life insurance
12
10
10
20 %
20 %
Net gain on investment securities
22
—
—
NM
NM
Net return on mortgage servicing rights
—
—
34
NM
NM
Net gain on loan sales and securitizations
5
6
5
-17 %
— %
Net loan administration income (loss)
—
1
(8)
NM
NM
Other income
32
38
30
-16 %
7 %
Total non-interest income
$94
$77
$113
22 %
-17 %
Impact of Adjustments:
Net gain on investment security
(21)
—
—
NM
NM
Certain items related to sale on mortgage warehouse business
—
—
23
NM
NM
Adjusted noninterest income (non-GAAP)
$73
$77
$136
-5 %
-46 %
For the first nine months of 2025, non-interest income totaled $251 million compared to $236 million for the first nine months of 2024. Included in the first nine months of 2025 non-interest income is the aforementioned $21 million fair value gain, while the first nine months of 2024 includes a reduction of the bargain purchase gain of $121 million related to the Signature transaction. As adjusted for these items, non-interest income for the first nine months of 2025 was $230 million compared to $380 million for the first nine months of 2024, a $150 million or 39% decline.
The year-over-year decline was driven by a $74 million decrease in the net return on MSRs to zero for the first nine months of 2025, a $19 million or 44% decline in the net gain on loan sales and securitizations, a $2 million or 67% drop in net loan administration income, and a $50 million or 43% decline in fee income largely driven by the decline in loan origination income. Each of these decreases was due to the sale of our mortgage servicing/sub-servicing and third-party origination business. This was partially offset by a $13 million or 15% increase in other income.
For the Nine Months Ended
(dollars in millions)
September 30, 2025
September 30, 2024
% Change
Fee income
$67
$117
-43 %
Bank-owned life insurance
32
32
— %
Net gain on investment securities
22
—
NM
Net return on mortgage servicing rights
—
74
NM
Net gain on loan sales and securitizations
24
43
-44 %
Net loan administration income
5
3
67 %
Bargain purchase gain
—
(121)
NM
Other income
101
88
15 %
Total non-interest income
$251
$236
6 %
Impact of Notable Item:
Net gain on investment security
(21)
—
NM
Certain items related to sale on mortgage warehouse business
—
23
NM
Bargain purchase gain
—
121
NM
Adjusted noninterest income (non-GAAP)
$230
$380
-39 %
Non-Interest Expense
Third quarter 2025 non-interest expense totaled $522 million, up $9 million or 2% on a linked-quarter basis and down $194 million or 27% on a year-over-year basis. Third quarter 2025 included $8 million of severance costs and the impact of a $14 million litigation settlement. As adjusted, for these items and excluding intangible amortization and merger-related expenses, second quarter 2025 operating expenses totaled $457 million, down $3 million or 1% on a linked-quarter basis and down $195 million or 30% on a year-over-year basis.
The linked-quarter increase was mainly driven by a $5 million or 2% increase in compensation and benefits expense, and a $20 million or 15% increase in general and administrative expenses, partially offset by a $12 million or 24% decrease in FDIC insurance expense. The year-over-year decline was the result of a $74 million or 23% decrease in compensation and benefits expense, a $35 million or 19% decline in general and administrative expenses, and a $61 million or 62% decline in FDIC insurance expense.
September 30, 2025
For the Three Months Ended
compared to:
(dollars in millions)
September 30, 2025
June 30, 2025
September 30, 2024
June 30, 2025
September 30, 2024
Operating expenses:
Compensation and benefits
$242
$237
$316
2 %
-23 %
FDIC insurance
37
49
98
-24 %
-62 %
Occupancy and equipment
47
53
59
-11 %
-20 %
General and administrative
153
133
188
15 %
-19 %
Total operating expenses
479
472
661
1 %
-28 %
Intangible asset amortization
26
27
37
-4 %
-30 %
Merger-related expenses
17
14
18
21 %
-6 %
Total non-interest expense
$522
$513
$716
2 %
-27 %
Impact of Adjustments:
Total operating expenses
$479
$472
$661
1 %
-28 %
Certain items related to sale on mortgage warehouse business
—
—
(9)
NM
NM
Severance
(8)
(2)
—
300 %
NM
Lease cost acceleration related to closing branches
—
(7)
—
NM
NM
Trailing mortgage sale costs with Mr. Cooper
—
(3)
—
NM
NM
Litigation settlement
(14)
—
—
NM
NM
Adjusted operating expenses (non-GAAP)
$457
$460
$652
-1 %
-30 %
For the first nine months of 2025, total non-interest expense was $1.6 billion, down $553 million or 26% compared to the first nine months of 2024. The results include a number of notable items, such as $10 million in severance costs, $12 million of lease cost acceleration, $8 million in trailing mortgage sale costs, and a $14 million litigation settlement.
As adjusted for these items and excluding intangible asset amortization and merger expenses, first nine months of 2025 operating expenses were $1.4 billion compared to $1.9 billion for first nine months of 2024, down $508 million or 27%. The improvement was broad-based with declines in compensation and benefits, FDIC insurance expense, and general and administrative expense. Compensation and benefits expense decreased $238 million or 25% to $723 million; FDIC insurance expense declined $103 million or 43% to $136 million, and general and administrative expense declined $124 million or 22% to $433 million. Additionally, merger-related expenses decreased $56 million or 59% to $39 million.
For the Nine Months Ended
(dollars in millions)
September 30, 2025
September 30, 2024
% Change
Operating expenses:
Compensation and benefits
$723
$961
-25 %
FDIC insurance
136
239
-43 %
Occupancy and equipment
155
163
-5 %
General and administrative
433
557
-22 %
Total operating expenses
1,447
1,920
-25 %
Intangible asset amortization
81
105
-23 %
Merger-related expenses
39
95
-59 %
Total non-interest expense
$1,567
$2,120
-26 %
Impact of Notable Items:
Total operating expenses
$1,447
$1,920
-25 %
Certain items related to sale on mortgage warehouse business
—
(9)
NM
Severance
(10)
—
NM
Lease cost acceleration related to closing branches
(12)
—
NM
Trailing mortgage sale costs with Mr. Cooper
(8)
—
NM
Litigation settlement
(14)
—
NM
Adjusted operating expenses (non-GAAP)
$1,403
$1,911
-27 %
Income Taxes
For the third quarter 2025, the Company reported a benefit for income taxes of $5 million compared to a benefit for income taxes of $11 million for the second quarter 2025 and a benefit of $55 million for the third quarter 2024. The effective tax rate for the third quarter 2025 was 12.2% compared to 12.9% for the second quarter 2025, and 16.3% for the third quarter 2024.
For the first nine months of 2025, the Company reported an income tax benefit of $37 million compared to an income tax benefit of $210 million for the first nine months of 2024. The effective tax rate for the first nine months of 2025 was 15.2% compared to 18.4% for the first nine months of 2024.
ASSET QUALITY
September 30, 2025
As of
compared to:
(dollars in millions)
September 30, 2025
June 30, 2025
September 30, 2024
June 30, 2025
September 30, 2024
Total non-accrual loans held for investment
$3,241
$3,180
$2,514
2 %
29 %
Non-accrual loans held for sale
$31
$4
$189
675 %
-84 %
NPLs to total loans held for investment
5.17 %
4.96 %
3.54 %
21
164
NPAs to total assets
3.56 %
3.46 %
2.21 %
10
135
Allowance for credit losses on loans and leases
$1,071
$1,106
$1,264
-3 %
-15 %
Total ACL, including on unfunded commitments
$1,128
$1,162
$1,328
-3 %
-15 %
ACL % of total loans held for investment
1.71 %
1.72 %
1.78 %
-2 bps
-7 bps
Total ACL % of total loans held for investment
1.80 %
1.81 %
1.87 %
-1 bps
-7 bps
ACL on loans and leases % of NPLs
33 %
35 %
50 %
-2 %
-17 %
Total ACL % of NPLs
35 %
37 %
53 %
-2 %
-18 %
Non-Accrual Loans
Non-accrual loans were relatively stable on a linked-quarter basis. At September 30, 2025, total non-accrual loans, including held-for-sale, were $3,272 million, up $88 million or 3% compared to $3,184 million at June 30, 2025, and up $334 million or 10% compared to December 31, 2024. On a linked-quarter basis, a modest 2% increase in multi-family non-accrual loans was offset by declines in CRE non-accrual loans, C&I non-accrual loans, and a decline in non-accrual loans held-for-sale.
The increase compared to year-end 2024 was driven by higher multi-family non-accruals, partially offset by lower C&I non-accrual loans. The majority of the increase in multi-family non-accrual loans is related to the one previously disclosed borrower relationship that went on non-accrual status in first quarter 2025.
Total non-accrual loans HFI to total loans HFI were 5.17% at September 30, 2025 compared to 4.96% at June 30, 2025 and 3.54% at September 30, 2024.
Total Allowance for Credit Losses
The total allowance for credit losses including unfunded commitments was $1,128 million at September 30, 2025 compared to $1,162 million at June 30, 2025 and $1,328 million at September 30, 2024. The total allowance for credit losses on loans and leases at September 30, 2025 was $1,071 million compared to $1,106 million at June 30, 2025 and $1,264 million at September 30, 2024.
The total allowance for credit losses to total loans HFI at September 30, 2025 was 1.80% compared to 1.81% at June 30, 2025 and 1.87% at September 30, 2024. The total allowance for credit losses on loans and leases to total loans HFI was 1.71% at September 30, 2025 compared to 1.72% at June 30, 2025 and 1.78% at September 30, 2024.
