Flagstar Financial (FLG)

Regional banking company Flagstar Financial (NYSE:FLG) reported revenue ahead of Wall Street’s expectations in Q3 CY2025, but sales fell by 16.7% year on year to $519 million. Its non-GAAP loss of $0.07 per share was in line with analysts’ consensus estimates.

Company Overview

Tracing its roots back to 1859 and rebranded from New York Community Bancorp in 2024, Flagstar Financial (NYSE:FLG) is a bank holding company that offers commercial and consumer banking services, with specialties in multi-family lending, mortgage originations, and warehouse lending.

Thrifts & Mortgage Finance institutions operate by accepting deposits and extending loans primarily for residential mortgages, earning revenue through interest rate spreads (difference between lending rates and borrowing costs) and origination fees. The industry benefits from demographic tailwinds as millennials enter prime homebuying age, technological advancements streamlining the loan approval process, and potential interest rate stabilization improving affordability. However, significant headwinds include net interest margin compression during rate volatility, increased competition from fintech disruptors offering digital-first experiences, mounting regulatory compliance costs, and potential housing market corrections that could impact loan portfolios and default rates.

Flagstar Financial competes with regional banks like KeyCorp (NYSE:KEY), Fifth Third Bancorp (NASDAQ:FITB), and Huntington Bancshares (NASDAQ:HBAN), as well as larger national institutions such as JPMorgan Chase (NYSE:JPM) and Bank of America (NYSE:BAC) in its banking operations, and with specialized mortgage lenders like Rocket Companies (NYSE:RKT) in its mortgage business.

In general, banks make money from two primary sources. The first is net interest income, which is interest earned on loans, mortgages, and investments in securities minus interest paid out on deposits. The second source is non-interest income, which can come from bank account, credit card, wealth management, investing banking, and trading fees. Luckily, Flagstar Financial’s revenue grew at an exceptional 14.2% compounded annual growth rate over the last five years. Its growth beat the average banking company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within financials, a half-decade historical view may miss recent interest rate changes, market returns, and industry trends. Flagstar Financial’s recent performance marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 23.8% over the last two years. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, Flagstar Financial’s revenue fell by 16.7% year on year to $519 million but beat Wall Street’s estimates by 0.5%.

Net interest income made up 84.1% of the company’s total revenue during the last five years, meaning Flagstar Financial barely relies on non-interest income to drive its overall growth.

Net interest income commands greater market attention due to its reliability and consistency, whereas non-interest income is often seen as lower-quality revenue that lacks the same dependable characteristics.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Sadly for Flagstar Financial, its EPS declined by 18.3% annually over the last five years while its revenue grew by 14.2%. This tells us the company became less profitable on a per-share basis as it expanded.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Flagstar Financial, its two-year annual EPS declines of 48.3% show it’s continued to underperform. These results were bad no matter how you slice the data.

In Q3, Flagstar Financial reported adjusted EPS of negative $0.07, up from negative $0.69 in the same quarter last year. Despite growing year on year, this print missed analysts’ estimates. Over the next 12 months, Wall Street is optimistic. Analysts forecast Flagstar Financial’s full-year EPS of negative $0.78 will flip to positive $0.42.

The balance sheet drives banking profitability since earnings flow from the spread between borrowing and lending rates. As such, valuations for these companies concentrate on capital strength and sustainable equity accumulation potential.

This is why we consider tangible book value per share (TBVPS) the most important metric to track for banks. TBVPS represents the real, liquid net worth per share of a bank, excluding intangible assets that have debatable value upon liquidation. Other (and more commonly known) per-share metrics like EPS can sometimes be murky due to M&A or accounting rules allowing for loan losses to be spread out.

Flagstar Financial’s TBVPS declined at a 6.8% annual clip over the last five years. A turnaround doesn’t seem to be in sight as its TBVPS also dropped by 24.9% annually over the last two years ($30.74 to $17.32 per share).

Over the next 12 months, Consensus estimates call for Flagstar Financial’s TBVPS to remain flat at roughly $17.21, a disappointing projection.

Leverage is core to a financial firm’s business model (loans funded by deposits). To ensure economic stability and avoid a repeat of the 2008 GFC, regulators require certain levels of capital and liquidity, focusing on the Tier 1 capital ratio.

Tier 1 capital is the highest-quality capital that a firm holds, consisting primarily of common stock and retained earnings, but also physical gold. It serves as the primary cushion against losses and is the first line of defense in times of financial distress.

This capital is divided by risk-weighted assets to derive the Tier 1 capital ratio. Risk-weighted means that cash and US treasury securities are assigned little risk while unsecured consumer loans and equity investments get much higher risk weights, for example.

New regulation after the 2008 financial crisis requires that all firms must maintain a Tier 1 capital ratio greater than 4.5%. On top of this, there are additional buffers based on scale, risk profile, and other regulatory classifications, so that at the end of the day, firms generally must maintain a 7-10% ratio at minimum.

Over the last two years, Flagstar Financial has averaged a Tier 1 capital ratio of 10.9%, which is considered safe and well capitalized in the event that macro or market conditions suddenly deteriorate.

Return on equity (ROE) measures how effectively banks generate profit from each dollar of shareholder equity - a critical funding source. High-ROE institutions typically compound shareholder wealth faster over time through retained earnings, share repurchases, and dividend payments.

Over the last five years, Flagstar Financial has averaged an ROE of 0.7%, uninspiring for a company operating in a sector where the average shakes out around 7.5%.

It was good to see Flagstar Financial narrowly top analysts’ tangible book value per share expectations this quarter. We were also happy its revenue narrowly outperformed Wall Street’s estimates. On the other hand, its EPS was in line and its net interest income fell slightly short of Wall Street’s estimates. Overall, this was a mixed quarter. The stock remained flat at $11.65 immediately after reporting.

Updated: December 4, 2025 at 11:34 PM EST

Before deciding whether to buy Flagstar Financial or pass, we urge investors to consider business quality, valuation, and the latest quarterly results.

We cheer for all companies supporting the economy, but in the case of Flagstar Financial, we’ll be cheering from the sidelines. Although its revenue growth was impressive over the last five years, it’s expected to deteriorate over the next 12 months and its relatively low ROE suggests management has struggled to find compelling investment opportunities. And while the company’s estimated net interest income growth for the next 12 months is great, the downside is its estimated sales for the next 12 months are weak.

Flagstar Financial’s P/B ratio based on the next 12 months is 0.7x. While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $13.78 on the company (compared to the current share price of $12.71).