Flagstar Bank (NYSE:FLG) posted its second consecutive quarter of profitability, buoyed by a significant expansion in its commercial loan portfolio and a disciplined reduction in operating expenses that helped the regional lender navigate a shifting interest rate environment.
The Hicksville, New York-based bank reported first-quarter 2026 net income of $21 million, with net income attributable to common stockholders totaling $13 million, or $0.03 per diluted share.
On an adjusted basis, earnings reached $20 million, or $0.04 per share.
The results represent a stark turnaround from the $100 million net loss reported in the same period last year, signaling that the bank's strategic "reset" under CEO Joseph Otting is gaining structural traction.
A primary driver of the quarter’s performance was the robust growth in Commercial and Industrial (C&I) lending.
Flagstar’s C&I loans surged by $1.4 billion, a 9% increase over the previous quarter, bringing the total to $16.6 billion.
This growth was led by the bank’s specialized private client teams and a focus on middle-market lending.
Simultaneously, the bank continued to de-risk its balance sheet by reducing its exposure to multi-family and commercial real estate (CRE) loans, which declined by a combined $1.6 billion.
The bank’s net interest margin (NIM) showed signs of stabilization, finishing the quarter at 2.15%.
When adjusting for specific hedge gain recognitions in the prior quarter, the NIM expanded by 10 basis points, reflecting better pricing on new loan originations and a steadying cost of funds.
Core deposits, which exclude more volatile brokered deposits, grew by $1.1 billion, or 2%, as Flagstar deepened its relationships within its ten-state footprint.
Meanwhile, operational efficiency was a highlight of the report, as adjusted operating expenses fell 5% quarter-over-quarter to $441 million.
Capital levels also strengthened, with the Common Equity Tier 1 (CET1) ratio rising 40 basis points to 13.24%, positioning Flagstar well above regulatory requirements and its peer group average.
While net charge-offs saw a slight uptick to 0.52% due to a specific borrower bankruptcy, the bank noted that excluding that single relationship, the charge-off rate would have remained stable at 0.29%.