Latest news with #Otting
Yahoo
2 days ago
- Business
- Yahoo
Flagstar wants to dissolve its holding company
This story was originally published on Banking Dive. To receive daily news and insights, subscribe to our free daily Banking Dive newsletter. Flagstar wants to dissolve its holding company, the bank said Thursday, marking the second major structural change to its regulatory mandate in little more than three years. By merging the holding company into its bank and making Flagstar Bank the surviving entity, the Hicksville, New York-based lender would cut the Federal Reserve out of supervision but keep the Office of the Comptroller of the Currency as its primary regulator. The move is estimated to save $15 million in annual costs, according to a slide presentation from the bank. Additionally, it would 'streamline various functions across the organization, and eliminate redundant corporate activities and duplicative supervision and regulation,' Flagstar CEO Joseph Otting said Friday in a statement accompanying the bank's second-quarter earnings report. On that front, Flagstar counted a $70 million loss for the three months between April and June. That's $30 million less than it lost in the first quarter and $253 million less than it shed in 2024's second quarter. Otting cited growth in commercial and industrial banking, where Flagstar funded $1.2 billion in new loans, a 57% quarterly jump. Flagstar added 47 bankers and credit employees during the quarter, and planned to bring on another 40 to 50 during the second half of the year, Otting said. That's in line with estimates Otting outlined in April. "We also made further headway on reducing the level of our multifamily and commercial real estate exposure, due to record par payoffs of $1.5 billion,' he said. 'This is a primary reason why our total CRE balances are down 5% compared to the first quarter and 16% since the end of 2023.' Otting said the bank reduced its 'criticized' assets by 9%, or $1.3 billion, quarter over quarter and 15% ($2.2 billion) throughout 2025's first half. As for the holding company dissolution, such a move would not require a charter change – though Flagstar, in the recent past, has shown it's not against going that far. The bank in 2022 switched to a national banking charter from a state one to gain regulatory approval for the deal that combined Flagstar and New York Community Bank. The charter change, at the time, was seen as a maneuver to avoid needing sign-off from the Federal Deposit Insurance Corp. The bank, however, justified the change as 'appropriate' because the OCC has regulated Flagstar's national mortgage banking business for years prior. Flagstar said it expects Thursday's move to be finalized by the end of the year, but it needs regulatory and shareholder approval. The bank aims to file a proxy statement with the Securities and Exchange Commission next month and to hold a shareholder meeting in October. Bank holding companies are necessary for banks that are engaged in nonbanking activities. "But if you don't want to engage in non-banking activities, if that's not your business plan, the rationale is a lot less," H. Rodgin Cohen, senior chair at law firm Sullivan & Cromwell, told American Banker. Bao Nguyen, Flagstar's general counsel, said the bank isn't interested in doing nonbanking business. "We're focused on recalibrating our regulatory relationships,' Nguyen told American Banker. 'To be simple in our structure, to have less duplication and less regulation, that's all constructive for us." Otting indicated in April that the bank's executives were targeting profitability by the fourth quarter. Flagstar is aiming to shed $600 million in operating expenses this year. That includes closing 60 retail branches, about 20 private-client retail locations, and a couple of operating centers. Flagstar is not the first major lender to dispatch with its holding company. Salt Lake City-based Zions Bank's holding company merged into its national bank subsidiary in 2017. Bank OZK did the same, also in 2017. And in a 2021 deal, Cadence Bank's holding company merged into Bancorp South but then took the Cadence name. Recommended Reading CFTC's Kristin Johnson to exit, shrinking team further
Yahoo
24-06-2025
- Business
- Yahoo
FLG Q1 Deep Dive: Commercial Lending Expansion and Cost Controls Define Turnaround Efforts
Regional banking company Flagstar Financial (NYSE:FLG) missed Wall Street's revenue expectations in Q1 CY2025, with sales falling 22.6% year on year to $490 million. Its non-GAAP loss of $0.23 per share was 17.1% above analysts' consensus estimates. Is now the time to buy FLG? Find out in our full research report (it's free). Revenue: $490 million vs analyst estimates of $510.6 million (22.6% year-on-year decline, 4% miss) Adjusted EPS: -$0.23 vs analyst estimates of -$0.28 (17.1% beat) Market Capitalization: $4.73 billion Flagstar Financial's first quarter results for 2025 were marked by a significant year-over-year revenue decline and continued operating losses. Despite this, the market reacted positively, as management highlighted progress in cost reduction, capital strength, and credit quality improvements. CEO Joseph Otting credited the narrowing loss and improved outlook to ongoing cost takeouts, effective risk governance, and the expansion of the commercial and industrial (C&I) lending business. Otting noted, 'We executed on critical cost takeouts, credit management, C&I growth, and risk governance during the quarter,' pointing to lower net charge-offs and a decline in loan loss provisions as evidence of early momentum in the turnaround strategy. Looking ahead, management's guidance centers on continued expansion of the C&I lending platform, ongoing reductions in wholesale funding costs, and a planned shift in balance sheet composition. CFO Lee Smith stated that margin expansion is expected as high-cost deposits mature and multifamily loans reset at higher rates or pay off. The company also plans to reinvest capital into its C&I and private banking operations, with the goal of returning to profitability by the end of the year. Otting emphasized, 'We feel confident on the turnaround of the company…we do forecast and believe that our fourth quarter will be a profitable quarter for us, a turning point in the organization's history.' Management attributed the quarter's results to disciplined cost reductions, targeted C&I loan growth, and efforts to de-risk the commercial real estate portfolio. C&I Lending Expansion: Flagstar added experienced bankers and launched new lending products, resulting in over $1 billion in C&I loan commitments and $769 million in originations, up more than 40% from the previous quarter. The company's focus on relationship-based lending in both regional and specialized national verticals is driving this momentum. Cost Structure Overhaul: Noninterest expenses, excluding certain one-time charges, declined by $71 million quarter over quarter. Management accelerated real estate optimization, vendor contract renegotiations, and outsourcing of non-strategic back-office functions. These reductions were achieved while still investing in risk, compliance, and technology infrastructure. Credit Quality Progress: Net charge-offs and loan loss provisions each fell by nearly 50% from the prior quarter. Although one large borrower moved to non-accrual status, management described this as a 'unique, idiosyncratic' case and emphasized that overall criticized assets and classified loans declined. CRE and Multifamily Portfolio De-risking: The company continued to reduce exposure to commercial real estate (CRE) and multifamily loans, with $840 million of CRE payoffs in the quarter—59% of which were substandard credits. Reserve coverage for multifamily loans, particularly those with rent-regulated units, remains among the highest relative to peers. Capital and Liquidity Strength: Flagstar's Common Equity Tier 1 (CET1) capital ratio held near 12%. The company paid down $1.9 billion in brokered deposits and $250 million in wholesale funding, improving both its funding mix and liquidity position—totaling $30 billion, covering more than twice its uninsured deposits. Flagstar's outlook rests on growing C&I lending, margin expansion from lower funding costs, and continued balance sheet reshaping. Ongoing C&I Loan Growth: Management plans to further grow C&I originations by hiring up to 90 additional bankers this year, targeting $1 billion in new commitments per quarter. This expansion is expected to diversify revenue sources and mitigate reliance on commercial real estate. Margin Improvement from Asset Repricing: As high-cost retail certificates of deposit (CDs) mature and multifamily loans reset to higher rates or are paid off, Flagstar expects its net interest margin (NIM) to expand. Management assumes two rate cuts in 2025 and is reallocating capital into higher-yielding C&I loans and select securities purchases. Persistent CRE Runoff and Risk Management: The company will continue to proactively reduce its CRE and multifamily exposure, aiming for a more balanced loan portfolio. Reserve coverage and asset quality metrics are expected to remain a focus, especially as credit conditions evolve with macroeconomic shifts and tariff impacts in certain sectors. In the coming quarters, the StockStory team will monitor (1) whether C&I loan growth sustains as new bankers are onboarded, (2) the pace of margin expansion as funding costs decline and asset repricing accelerates, and (3) further reductions in CRE and multifamily exposures. Execution on cost controls and risk management will also be critical to achieving the forecasted return to profitability. Flagstar Financial currently trades at $11.51, up from $11.27 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it's free). Donald Trump's victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs. While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025). Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today. 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