FLAGSTAR BANK, NATIONAL ASSOCIATION

Note 1 -Organization and Basis of Presentation

Organization

Flagstar Financial, Inc. (on a stand-alone basis, the “Parent Company” or, collectively with its subsidiaries, the “Company”, "our" or "we") was organized under Delaware law on July 20, 1993, and is the holding company for Flagstar Bank N.A. (hereinafter referred to as the “Bank”). The Company is headquartered in Hicksville, New York with regional headquarters in Troy, Michigan. Effective October 25, 2024, our Board of Directors approved and adopted an amendment to our Amended and Restated Certificate of Incorporation, changing our name to Flagstar Financial, Inc. Additionally, our common stock which is traded on the New York Stock Exchange ceased trading under the ticker symbol "NYCB" and commenced trading under the ticker symbol "FLG."

The Company is subject to regulation, examination and supervision by the Federal Reserve. The Bank is a National Association, subject to federal regulation and oversight by the Office of the Comptroller of the Currency.

Flagstar Bank, N.A. operates approximately 400 locations across nine states, with strong footholds in the greater New York/New Jersey metropolitan region and in the upper Midwest, along with a significant presence in fast-growing markets in Florida and the West Coast.

Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts of the Company and other entities in which the Company has a controlling financial interest. The accompanying financial statements of the Company conform to U.S. generally accepted accounting principles and to general practices within the banking industry. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires the Company to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Estimates are used primarily in connection with the determination of the allowance for credit losses.

The condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included on our Form 10-K for the year ended December 31, 2024. Except for per share or otherwise specified amounts, all amounts presented within the tables below are stated in millions.

All inter-company accounts and transactions are eliminated in consolidation. The Company currently has certain unconsolidated subsidiaries in the form of wholly-owned statutory business trusts, which were formed to issue guaranteed capital securities. See Note 9 - Borrowed Funds,” for additional information regarding these trusts.

When necessary, certain reclassifications have been made to prior-year amounts to conform to the current-year presentation. On July 11, 2024, a previously announced reverse stock split of the Company's issued and outstanding shares of common stock at a ratio of 1-for-3 took effect. In accordance with ASC 260-10-55-12, the Company has adjusted the number of shares, per-share computations and the computations of basic and diluted earnings per share retroactively for all periods presented in the financial statements and related notes.

Note 2 -Computation of Earnings per Common Share

Earnings per Common Share (Basic and Diluted)

Earnings per Common Share is calculated under the two-class method as the unvested restricted stock awards granted by the Company are considered participating securities due to the awards non-forfeitable rights to dividends paid on our common stock. Under the two-class method all earnings, distributed and undistributed, are allocated to common stock and participating securities based on their respective rights to receive dividends on our common stock.

Basic and diluted earnings per share are computed by dividing Net income attributable to common stockholders by the weighted-average common shares outstanding in the period. Diluted earnings per share is computed by giving effect to all potentially dilutive securities that are outstanding. The potential dilutive effect of our warrants and convertible preferred stock is determined using the if-converted method and the potential dilutive effect of our stock options and stock-based awards is determined using the treasury stock method. Potentially dilutive common shares are excluded from the computation of diluted earnings per share in periods where the effect would be antidilutive.

The following table reflects basic and diluted weighted average shares and net income (loss) per share:

(1)On June 27, 2024, the Company announced a 1 for 3 reverse stock split, effective July 11, 2024. This reverse stock split is reflected retroactively in all periods presented. See Note 1 - Organization and Basis of Presentation.

Note 3 -Accumulated Other Comprehensive Loss

The table below summarizes the changes in Accumulated other comprehensive loss, net of tax:

The following table summarizes the amounts reclassified from Accumulated other comprehensive loss, net of tax:

(1)Amounts in parentheses indicate expense items.

Note 4 -Investment Securities

The following tables summarize the Company’s portfolio of debt securities available for sale and equity investments with readily determinable fair values:

(1)As of March 31, 2025, the allowance for credit losses was $3 million.

(2)At March 31, 2025, substantially all of our debt securities available-for-sale are comprised of securities issued by government sponsored entities or are explicitly guaranteed by the U.S. government.

(3)Excludes accrued interest receivable of $40 million included in Other assets in the Condensed Consolidated Statements of Condition.

(1)As of December 31, 2024, the allowance for credit losses was $3 million.

(2)At December 31, 2024, substantially all of our debt securities available-for-sale are comprised of securities issued by government sponsored entities or are explicitly guaranteed by the U.S. government.

(3)Excludes accrued interest receivable of $35 million included in Other assets in the Condensed Consolidated Statements of Condition.

At March 31, 2025, the Company had $587 million of FHLB-NY stock, at cost and $255 million of FHLB-Indianapolis stock, at cost. At December 31, 2024, the Company had $598 million of FHLB-NY stock, at cost and $329 million of FHLB-Indianapolis stock, at cost. The Company maintains an investment in FHLB stock partly in conjunction with its membership in the FHLB and partly related to its access to the FHLB funding it utilizes. In addition, at March 31, 2025, the Company had $219 million of Federal Reserve Bank stock, at cost. The Company had $219 million of Federal Reserve Bank stock, at December 31, 2024.

There wereno realized gains and losses on sales of available-for-sale securities during the three months ended March 31, 2025 and 2024. No available-for-sale securities were sold during the three month periods ended March 31, 2025 and 2024.

The following table summarizes, by contractual maturity, the amortized cost of securities at March 31, 2025:

The following table presents debt securities having a continuous unrealized loss position for less than twelve months and for twelve months or longer as of March 31, 2025:

The following table presents debt securities having a continuous unrealized loss position for less than twelve months and for twelve months or longer as of December 31, 2024:

The Company evaluates available-for-sale debt securities in unrealized loss positions at least quarterly to determine if an allowance for credit losses is required. We also assess whether (i) we intend to sell, or (ii) it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis. If either of these criteria is met, any previously recognized allowances are charged off and the security’s amortized cost basis is written down to fair value through income. Otherwise, we evaluate whether the decline in fair value has resulted from credit losses or other factors. If a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the amount to be collected is less than the amortized cost, an allowance for credit losses is established for the difference, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income.

Note 5 -Loans and Leases

The Company classifies loans that we have the intent and ability to hold for the foreseeable future or until maturity as loans held for investment. We report loans held for investment at their amortized cost, which includes the outstanding principal balance adjusted for any unamortized premiums, discounts, deferred fees or fair value adjustments for acquired loans:

(2)Excludes accrued interest receivable of $264 million and $277 million at March 31, 2025 and December 31, 2024, respectively, which is included in Other assets in the Condensed Consolidated Statements of Condition.

Loans with Government Guarantees

Substantially all loans with government guarantees are insured or guaranteed by the Federal Housing Administration or the U.S. Department of Veterans Affairs. Nonperforming repurchased loans in this portfolio earn interest at a rate based upon the 10-year U.S. Treasury note rate from the time the underlying loan becomes 60 days delinquent until the loan is conveyed to HUD (if foreclosure timelines are met), which is not paid by the Federal Housing Administration until claimed. Certain loans within our portfolio may be subject to indemnifications and insurance limits which expose us to limited credit risk. The Bank also has a unilateral option to repurchase loans sold and serviced for the Government National Mortgage Association if the loan is due, but unpaid, for three consecutive months (typically referred to as 90 days past due) and can recover losses through a claims process from the guarantor. These loans are recorded in loans held for investment and the liability to repurchase the loans is recorded in Other liabilities on the Condensed Consolidated Statements of Condition. As of March 31, 2025 and December 31, 2024, loans with government guarantees totaled $373 million and $360 million.

Loans Held for Sale

We classify loans as held for sale when we originate or purchase loans that we intend to sell or when we change our intent about holding for investment. Mortgage loans held for sale for which we have elected the fair value option are carried at fair value. Loans originally classified as held for investment for which we had changed our intent and are now classified as held for sale are carried at the lower of amortized cost or market. We estimate the fair value of mortgage loans based on quoted market prices for securities backed by similar types of loans, where available, or by discounting estimated cash flows using observable inputs inclusive of interest rates, prepayment speeds and loss assumptions for similar collateral.

A loan generally is classified as a non-accrual loan when it is 90 days or more past due or when it is deemed to be impaired because the Company no longer expects to collect all amounts due (principal and interest) according to the contractual terms of the loan agreement. When a loan is placed on non-accrual status, we cease recording interest income, and any previously accrued and uncollected interest is reversed against interest income. Interest received on non-accrual loans is recorded as a reduction to the the principal outstanding. A loan is only returned to accrual status when the loan is current (typically a minimum ofsix months of payment performance) and we have reasonable assurance that the loan will be fully collectible. When we have reasonable assurance that the loan will be fully collectible, then interest payments may be recognized in interest income on a cash basis. As of March 31, 2025 and December 31, 2024 there was no interest income recognized on non-accrual loans classified as held for sale. At March 31, 2025 and December 31, 2024 we hadno loans that were 90 days or more past due and still accruing interest.

The following table is a summary of non-accrual loans held for sale:

Asset Quality

Asset quality information excludes loans with repurchased government guarantees that are insured by U.S. government agencies.

The following table presents information regarding the delinquency status of the Company’s loans held for investment at March 31, 2025:

The following table presents information regarding the delinquency status of the Company’s loans held for investment at December 31, 2024:

The following table presents the credit rating by vintage for our loans held for investment as of March 31, 2025:

The following table presents the credit rating by vintage for our loans held for investment as of December 31, 2024:

The classifications in the preceding tables are the most currently available and generally have been updated within the last twelve months. In addition, they follow regulatory guidelines and can generally be described as follows: pass loans are of satisfactory quality; special mention loans have potential weaknesses that deserve management’s close attention; substandard loans are inadequately protected by the current net worth and paying capacity of the borrower or of the collateral pledged (these loans have a well-defined weakness and there is a possibility that the Company will sustain some loss); and non-accrual loans, which based on existing circumstances, have weaknesses that make collection or liquidation in full highly questionable and improbable. One-to-four family loans are classified based on the duration of the delinquency.

When management determines that foreclosure is probable for loans that are individually evaluated, the expected credit losses are based on the fair value of the collateral adjusted for selling costs. When the borrower is experiencing financial difficulty at the reporting date and repayment is expected to be provided substantially through the operation or sale of the collateral, the collateral-dependent practical expedient has been elected and expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate. For commercial real estate loans, collateral properties include office buildings, warehouse/distribution buildings, shopping centers, apartment buildings, residential and commercial tract development. The primary source of repayment on these loans is expected to come from the sale, permanent financing or lease of the real property collateral. Commercial real estate loans are impacted by fluctuations in collateral values, as well as the ability of the borrower to obtain permanent financing.

The following table summarizes the recorded investment of the Company’s collateral-dependent loans held for investment by collateral type as of March 31, 2025:

At March 31, 2025 and December 31, 2024, the Company had $53 million and $41 million of residential mortgage loans in the process of foreclosure, respectively.

Modifications to Borrowers Experiencing Financial Difficulty

When borrowers are experiencing financial difficulty, the Company may make certain loan modifications as part of loss mitigation strategies to maximize expected payment. Modifications in the form of principal forgiveness, an interest rate reduction, or an other-than-insignificant payment delay or a term extension that have occurred in the current reporting period to a borrower experiencing financial difficulty are disclosed along with the financial impact of the modifications.

During the three months ended March 31, 2025 and 2024 there were animmaterial and $26 million of loans modified to borrowers experiencing financial difficulty.

The following table describes the financial effect of the modification made to borrowers experiencing financial difficulty:

The following table presents the amortized cost basis of the modifications for borrowers experiencing financial difficulty that subsequently defaulted in the first three months of 2025 and were within twelve months of the modification date:

The performance of loans made to borrowers experiencing financial difficulty in which modifications were made is closely monitored to understand the effectiveness of modification efforts.

The following table provides a summary of loan balances at March 31, 2025, which were modified during the prior twelve months, by class of financing receivable and delinquency status:

The following table provides a summary of loan balances at March 31, 2024, which were modified during the prior twelve months, by class of financing receivable and delinquency status:

Note 6 -Allowance for Credit Losses on Loans and Leases

The following table summarizes activity in the allowance for credit losses on loans and leases for the periods indicated:

Interest rates remain high as compared to the interest rates in our existing portfolio, which continues to put pressure on the ability of certain borrowers with interest rates resetting to cover debt service. When combined with inflationary pressure on operating costs and limits on the ability to increase rental rates, debt service levels may approach or exceed some properties' net operating income, which increases the risk of loss.

The allowance for credit losses to total loans and leases held for investment ratio at March 31, 2025 and December 31, 2024 was 1.75 percent and 1.76 percent, respectively. Excluding loans with government guarantees, the allowance for credit losses was 1.76 percent at March 31, 2025, compared to 1.77 percent at December 31, 2024. We believe that higher interest rates for a longer period of time will have a more significant impact on our loans that will reprice during the reasonable and supportable forecast period. Therefore, we have continued to incorporate a higher probability of default related to those loans as they approach their scheduled repricing date in the measurement of our allowance for credit losses.

Our allowance for credit losses is determined based on quantitative modeling that incorporates and weighs economic forecast scenarios. The key inputs to our quantitative allowance for credit losses models include borrowers' projected debt service based on the most recent financial information available and underlying collateral property values. Property values are particularly meaningful for our multi-family and commercial real estate portfolios. Our models consider the entire life of the loan, including both the interest only period of the loan, if applicable, and the amortization period, to assess the probability of default and the loss given default. For our multi-family portfolio, we obtain and utilize current and projected geography-specific market information in our forecasts. In estimating the qualitative component of our allowance for credit losses, we have adjusted key inputs used by the model on an average basis for certain loans, most notably net operating income and property values, to reflect weaknesses in the underlying data, including the recency of appraisal values, and the lack of significant loss history in available data, particularly for office and multi-family loans and, most notably, rent-regulated multi-family loans.

As of March 31, 2025 and December 31, 2024, the allowance for unfunded commitments totaled $47 million and $50 million, respectively.

The Company charges-off loans, or portions of loans, when they are deemed uncollectible. The collectability of individual loans is determined through an assessment of the financial condition and repayment capacity of the borrower and/or through an estimate of the fair value of any underlying collateral. For non-real estate-related consumer credits, the following past-due time periods determine when charge-offs are typically recorded: (1) closed-end credits are charged off in the quarter that the loan becomes 120 days past due; (2) open-end credits are charged off in the quarter that the loan becomes 180 days past due; and (3) both closed-end and open-end credits are typically charged off in the quarter that the credit is 60 days past the date the Company received notification that the borrower has filed for bankruptcy.

The following table presents additional information about the Company’s non-accrual loans at March 31, 2025:

The following table presents additional information about the Company’s non-accrual loans at December 31, 2024:

Note 7 -Leases, Premises and Equipment

Lessor Arrangements

The Company provides equipment leases through a subsidiary, mainly to large, investment-grade corporate clients. These qualify as direct financing leases which are recorded based upon the lease payments, estimated residual values and direct costs, excluding unearned income and uses the implicit interest rate to determine the value. Lease terms typically range from 24 to 120 months. The Company bases residual value estimates on asset life, market value, and lessee behavior using industry data and third-party appraisals. At the end of the lease term, the lessee can return, renew, or purchase the equipment at its fair market value. Impairment of residual values occurs if the fair value is less than the carrying amount. The Company reviews its direct financing leases for impairment annually. We utilize residual value insurance for certain of our direct finance leases. As of March 31, 2025 and December 31, 2024, we had residual value insurance in place on $259 million and $262 million of our leased assets, respectively.

Interest income on lease financing is recorded over the lease term and recorded in Loans and leases interest income on the Condensed Consolidated Statements of (Loss) Income. Interest income from direct finance leases was $24 million and $38 million for the three months ended March 31, 2025 and March 31, 2024, respectively.

Lessee Arrangements

The Company has operating leases for offices, branches, equipment and other items, generally with terms of 20 years or less. Many of our leases contain options to extend or terminate early and we consider these options when evaluating the lease term to determine if they are reasonably certain to be exercised based on all relevant economic and financial factors.

At lease inception, lease liabilities are recognized in other liabilities based on the present value of remaining lease payments, discounted using the Company's incremental borrowing rate if no implicit rate in the lease is available. Right-of-use assets, recognized in other assets, represent the Company’s right to use an underlying asset for the lease term and are initially equal to the lease liability, adjusted for any payments made prior to lease commencement and any lease incentives.

Variable costs such as the proportionate share of actual costs for utilities, common area maintenance, property taxes and insurance are not included in the lease liability and are recognized in the period in which they are incurred. Operating lease costs were $23 million and $18 million for the three months ended March 31, 2025 and March 31, 2024, respectively.

Supplemental balance sheet information related to the Company’s operating lease arrangements is presented below:

Supplemental cash flow information related to the leases:

Premises and Equipment

The table below presents the Company’s Premises and equipment:

Depreciation is included in Occupancy and equipment in the Condensed Consolidated Statements of (Loss) Income and amounted to $11 million and $11 million in the three months ended March 31, 2025 and March 31, 2024 respectively.

Note 8 -Variable Interest Entities

An entity that has a controlling financial interest in a VIE is referred to as the primary beneficiary and consolidates the VIE. An entity is deemed to have a controlling financial interest and is the primary beneficiary of a VIE if it has both the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and an obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.

We haveno consolidated VIEs as of March 31, 2025 and December 31, 2024.

In connection with non-qualified mortgage securitization activities, we have retained a 5% percent interest in the investment securities of certain trusts. Although we have a variable interest in these securitization trusts, we are not their primary beneficiary. As a result, we have not consolidated the assets and liabilities of the VIE in our Condensed Consolidated Statements of Condition. The Bank’s maximum exposure to loss is limited to our 5% percent retained interest in the investment securities that had a fair value of $162 million as of March 31, 2025 as well as the standard representations and warranties made in conjunction with the loan transfers.

Note 9 -Borrowed Funds

The following table summarizes the Company’s borrowed funds:

Our FHLB available capacity has been expanded from overnight funding to 6-month tenor on new and rollover of existing advances. Our FHLB available capacity was $5.8 billion and $6.6 billion at March 31, 2025 and December 31, 2024, respectively. On April 15th, 2025, our borrowing tender limit changed from a 6-month tenor on new and rollover of existing advances to a 12-month tenor.

Accrued interest on borrowed funds is included in Other liabilities in the Condensed Consolidated Statements of Condition and amounted to $49 million and $51 million, respectively, at March 31, 2025 and December 31, 2024.

FHLB Advances

The contractual maturities and the next call dates of FHLB advances outstanding at March 31, 2025 were as follows:

Our FHLB advances include fixed-rate advances, floating rate advances and advances under the FHLB convertible advance program, which gives the FHLB the option of either calling the advance after an initial lock-out period of up tofive years and quarterly thereafter until maturity, or a one-time call at the initial call date.

Junior Subordinated Debentures

The Company had $610 million at March 31, 2025 and December 31, 2024, of outstanding junior subordinated deferrable interest debentures (“junior subordinated debentures”) held by statutory business trusts (the “Trusts”) that issued guaranteed capital securities, excluding purchase accounting adjustments.

The following table presents contractual terms of the junior subordinated debentures outstanding at March 31, 2025:

(1)Callable subject to certain conditions as described in the prospectus filed with the SEC on November 4, 2002.

(2)Callable at any time.

(3)Excludes acquisition fair value adjustments of $27 million.

Subordinated Notes

At March 31, 2025 and December 31, 2024, the Company had a total of $445 million and $444 million subordinated notes outstanding, respectively, of fixed-to-floating rate subordinated notes outstanding:

(1)From and including the date of original issuance to, but excluding November 6, 2023, the Notes bore interest at an initial rate of 5.90 percent per annum payable semi-annually. From and including November 6, 2023 to, but excluding, the maturity date, the interest rate will reset quarterly to an annual interest rate equal to the then-current three-month Secured Overnight Financing Rate plus 304.16 basis points payable quarterly.

(2)From and including the date of original issuance, the Notes will bear interest at a fixed rate of 4.125 percent through October 31, 2025, and a variable rate tied to Secured Overnight Financing Rate thereafter until maturity. The Company has the option to redeem all or a part of the Notes beginning on November 1, 2025, and on any subsequent interest payment date.

Note 10 -Pension Benefits

The following table sets forth certain disclosures for the Company’s pension plan for the periods indicated:

(1)Amounts are included in General and administrative expense on the Condensed Consolidated Statements of (Loss) Income

Note 11 -Federal, State, and Local Taxes

The applicable income tax benefit was $21 million and $54 million for the three months ended March 31, 2025 and 2024, respectively. The effective tax rate for the three months ended March 31, 2025 and 2024 were 17.8 percent and 14.3 percent, respectively.

While it is reasonably possible that the amount of the unrecognized tax benefits with respect to certain of the Company's uncertain tax positions could increase or decrease during the next twelve months, the Company believes it is unlikely that its recognized tax benefits will change by a material amount during the next twelve months.

Note 12 -Stock-Based Compensation

We issue stock-based compensation in the form of restricted stock units, performance-based stock units, and stock options through the New York Community Bancorp, Inc. 2020 Omnibus Incentive Plan. As of March 31, 2025, we have authorized 7,000,659 shares available for grant. Restricted stock units and performance-based stock units are granted at the closing market price on the date of the grant. The Company generally utilizes the Black-Scholes option pricing model to measure the fair value of stock options at the grant date. Forfeitures of restricted stock units, performance-based stock units, and stock options are accounted for as they occur.

The following table presents total stock-based compensation expense and the related tax benefit:

Restricted Stock

The Company granted 3,854,284 shares of restricted stock, with an average fair value of $11.78 per share on the date of grant, during the three months ended March 31, 2025. The shares of restricted stock that were granted during the first three months of 2025 vest over aone tothree year period.

The following table provides a summary of activity with regard to restricted stock units (RSUs):

As of March 31, 2025, unrecognized compensation cost relating to unvested restricted stock totaled $119 million. This amount will be recognized over a remaining weighted average period of 2.5 years.

Stock Options

The following table summarizes stock options activity for the period indicated:

As of March 31, 2025, the remaining amount of unamortized compensation expense relating to stock options totaled $41 million. This amount will be recognized over a remaining weighted average period of 2.1 years.

Note 13 -Derivative and Hedging Activities and Restricted Cash

Derivative financial instruments are recorded at fair value in Other assets and Other liabilities on the Condensed Consolidated Statements of Condition. The Company's policy is to present our derivative assets and derivative liabilities on the Condensed Consolidated Statements of Condition on a gross basis, even when provisions allowing for set-off are in place. However, for derivative contracts cleared through certain central clearing parties, variation margin payments are recognized as settlements. We are exposed to non-performance risk by the counterparties to our various derivative financial instruments. A majority of our derivatives are centrally cleared through a Central Counterparty Clearing House or consist of residential mortgage interest rate lock commitments further limiting our exposure to non-performance risk. We believe that the non-performance risk inherent in our remaining derivative contracts is minimal based on credit standards and the collateral provisions of the derivative agreements.

Derivatives not designated as hedging instruments. The Company maintained a derivative portfolio of interest rate swaps, foreign currency swaps, futures, swaptions and forward commitments used to manage exposure to changes in interest rates and mortgage servicing right asset values and to meet the needs of customers. The Company also enters into interest rate lock commitments, which are commitments to originate mortgage loans whereby the interest rate on the loan is determined prior to funding and the customers have locked into that interest rate. Market risk on interest rate lock commitments and mortgage loans held for sale is managed using corresponding forward sale commitments and U.S. Treasury futures. Changes in the fair value of derivatives not designated as hedging instruments are recognized on the Condensed Consolidated Statements of (Loss) Income.

Derivatives designated as hedging instruments. The Company has historically designated certain interest rate swaps as cash flow hedges on overnight Secured Overnight Financing Rates-based variable interest payments on federal home loan bank advances. Changes in the fair value of derivatives designated as cash flow hedges are recorded in Accumulated other comprehensive loss on the Condensed Consolidated Statements of Condition and reclassified into interest expense in the same period in which the hedged transaction is recognized in earnings. At March 31, 2025, the Company had $40 million (net-of-tax) of unrealized gains related to terminated derivatives that had been in cash flow hedge relationships of forecasted interest payments classified as cash flow hedges recorded in Accumulated other comprehensive loss. The Company had $47 million (net-of-tax) of unrealized gains on derivatives previously classified as cash flow hedges recorded in Accumulated other comprehensive loss at December 31, 2024. There wereno designated cash flow hedging relationships as of March 31, 2025.

Fair Value Hedges of Interest Rate Risk

The Company is exposed to changes in the fair value of certain of its fixed-rate assets due to changes in interest rates. The Company previously used interest rate swaps to manage its exposure to changes in fair value on these instruments attributable to changes in the designated benchmark interest rate. Interest rate swaps designated as fair value hedges involved the payment of fixed-rate amounts to a counterparty in exchange for the Company receiving variable-rate payments over the life of the agreements without the exchange of the underlying notional amount.

Interest rate swaps were previously used to hedge the changes in fair value of certain of our pools of prepayable fixed rate assets and beginning in the three months ended March 31, 2025, we began to use interest rate swaps to hedge the changes in fair value of certain debt securities available for sale.

For derivatives designated and that qualified as fair value hedges, the gain or loss on the derivative as well as the offsetting gain or loss on the hedged item attributable to the hedged risk are recognized in interest income within loans and leases or securities and money market investments. The fair value basis adjustments remaining from discontinued hedges are recognized in interest income over the remaining life of the hedged items.

The fair value basis adjustment on our hedged real estate loans is included in Loans and leases held for investment on our Condensed Consolidated Statements of Condition. The following table sets forth information regarding the Company's carrying amounts on our hedged loans:

(1)During the three months ended March 31, 2025, the amount recorded in Interest Income - Securities and money market investments was immaterial.

(2)Relates to discontinued hedges on multi-family loans. During the three months ended March 31, 2025 and 2024, the amount recorded to Interest Income - Loans and leases was immaterial.

The following tables set forth information regarding the Company’s derivative financial instruments:

(1)During the three months ended March 31, 2025 and 2024, the amount recorded in Net gain on loan sales and securitizations in the Condensed Consolidated Statement of Income was immaterial.

(2)During the three months ended March 31, 2025 and 2024, the amount recorded in Non-interest income - Other was immaterial.

The tables below present the gross derivative assets and liabilities, and the related cash pledged as collateral at March 31, 2025 and December 31, 2024. No amounts were netted in the Statement of Condition.

(1)Variation margin pledged to, or received from, a Central Counterparty Clearing House to cover the prior day's fair value of open positions is considered settlement of the derivative position for accounting purposes.

(1)Variation margin pledged to, or received from, a Central Counterparty Clearing House to cover the prior day's fair value of open positions is considered settlement of the derivative position for accounting purposes.

Cash Flow Hedges of Interest Rate Risk

The following table presents the effect of the Company’s cash flow derivative instruments on Accumulated other comprehensive loss:

Amounts reported in Accumulated other comprehensive loss related to derivatives will be reclassified to interest expense as interest payments are made on our variable-rate borrowings. We will recognize $28 million of lower interest expense over the next rolling twelve month period related to the reclassification.

Derivatives not Designated as Hedging Instruments

The following table presents the net gain (loss) recognized on derivatives not designated as hedging instruments, net of the impact of offsetting positions:

(1) Includes customer-initiated commercial interest rate swaps.

The following table provides a reconciliation of cash, cash equivalents and restricted cash within the Condensed Consolidated Statements of Condition that sum to the total of the same amounts shown in the Condensed Consolidated Statements of Cash Flows:

Note 14 -Intangible Assets

Finite-lived Intangible Assets

At March 31, 2025, intangible assets consisted of the following:

Amortization expense for the three months ended March 31, 2025 and the three months ended March 31, 2024 were $28 million and $35 million, respectively.

Note 15 -Fair Value Measures

Fair value is an “exit” price, representing the amount that would be received when selling an asset, or paid when transferring a liability, in an orderly transaction between market participants. Fair value is determined based on assumptions that market participants would use in pricing an asset or liability.

Valuation Hierarchy: U.S. generally accepted accounting principles establishes a three-tier fair value hierarchy, which prioritizes the significant inputs used in measuring fair value as follows:

•Level 1 – Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

•Level 2 – Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

•Level 3 – Inputs to the valuation methodology are significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants use in pricing an asset or liability.

A financial instrument’s categorization within this valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The following tables present assets and liabilities that were measured at fair value on a recurring basis as of March 31, 2025 and December 31, 2024, and that were included in the Company’s Condensed Consolidated Statements of Condition at those dates:

(1)The change in the fair value due to significant unobservable inputs was immaterial.

(2)Includes Acquisition, Development, and Construction loans.

A description of the methods and significant assumptions utilized in estimating the fair values of securities are as follows:

Where quoted prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities include highly liquid government securities and exchange-traded securities.

If quoted market prices are not available for a specific security, then fair values are estimated by using pricing models. These pricing models primarily use market-based or independently sourced market parameters as inputs, including, but not limited to, yield curves, interest rates, equity or debt prices, and credit spreads. In addition to observable market information, models incorporate transaction details such as maturity and cash flow assumptions. Securities valued in this manner would generally be classified within Level 2 of the valuation hierarchy, and primarily include such instruments as mortgage-related and corporate debt securities.

Assets Measured at Fair Value on a Non-Recurring Basis

The following tables present assets that were measured at fair value on a non-recurring basis as of March 31, 2025 and December 31, 2024:

(1)Represents the fair value of impaired loans, based primarily on the value of the collateral less costs to sell.

(2)Primarily comprised of equity securities without readily determinable fair values.

(1)Represents the fair value of impaired loans, based primarily on the value of the collateral less costs to sell.

(2)Represents the fair value of repossessed assets, based on the appraised value of the collateral subsequent to its initial classification as repossessed assets and equity securities without readily determinable fair values. These equity securities are classified as Level 3 due to the infrequency of the observable prices and/or the restrictions on the shares.

The fair values of collateral-dependent impaired loans are determined using various valuation techniques, including consideration of appraised values and other pertinent real estate and market data.

Other Fair Value Disclosures

For the disclosure of fair value information about the Company’s on- and off-balance sheet financial instruments, when available, quoted market prices are used as the measure of fair value. In cases where quoted market prices are not available, fair values are based on present-value estimates or other valuation techniques. Such fair values are significantly affected by the assumptions used, the timing of future cash flows, and the discount rate.

Because assumptions are inherently subjective in nature, estimated fair values cannot be substantiated by comparison to independent market quotes. Furthermore, in many cases, the estimated fair values provided would not necessarily be realized in an immediate sale or settlement of such instruments.

The following tables summarize the carrying values, estimated fair values, and fair value measurement levels of financial instruments that were not carried at fair value on the Company’s Condensed Consolidated Statements of Condition at March 31, 2025 and December 31, 2024:

(1)Carrying value and estimated fair value are at cost.

(2)Interest-bearing checking and money market accounts, savings accounts, and non-interest-bearing accounts.

(3)Certificates of deposit.

(4)Carrying value and estimated fair value include the impaired loans held forinvestment.

(1)Carrying value and estimated fair value are at cost.

(2)Interest-bearing checking and money market accounts, savings accounts, and non-interest-bearing accounts.

(3)Certificates of deposit.

(4)Carrying value and estimated fair value include the impaired loans held for investment.

The methods and significant assumptions used to estimate fair values for the Company’s financial instruments follow:

Cash and Cash Equivalents

Cash and cash equivalents include cash and due from banks and federal funds sold. The estimated fair values of cash and cash equivalents are assumed to equal their carrying values, as these financial instruments are either due on demand or have short-term maturities.

Securities

If quoted market prices are not available for a specific security, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flows. These pricing models primarily use market-based or independently sourced market parameters as inputs, including, but not limited to, yield curves, interest rates, equity or debt prices, and credit spreads. In addition to observable market information, pricing models also incorporate transaction details such as maturities and cash flow assumptions.

Federal Home Loan Bank Stock

Ownership in equity securities of the FHLB is generally restricted and there is no established liquid market for their resale. The carrying amount approximates the fair value.

Loans and leases

The Company discloses the fair value of loans measured at amortized cost using an exit price notion. The Company determined the fair value on substantially all of its loans for disclosure purposes, on an individual loan basis. The discount rates reflect current market rates for loans with similar terms to borrowers having similar credit quality on an exit price basis. For those loans where a discounted cash flow technique was not considered reliable, the Company used a quoted market price for each individual loan.

Rate lock commitments

The significant unobservable input used in the fair value measurement of the rate lock commitments is the pull through rate. The pull through rate is a statistical analysis of our actual rate lock fallout history to determine the sensitivity of the residential mortgage loan pipeline compared to interest rate changes and other deterministic values. New market prices are applied based on updated loan characteristics and new fallout ratios (i.e. the inverse of the pull through rate) are applied accordingly. Significant increases (decreases) in the pull through rate in isolation result in a significantly higher (lower) fair value measurement.

Deposits

The fair values of deposit liabilities with no stated maturity (i.e., interest-bearing checking and money market accounts, savings accounts, and non-interest-bearing accounts) are equal to the carrying amounts payable on demand. The fair values of certificates of deposit represent contractual cash flows, discounted using interest rates currently offered on deposits with similar characteristics and remaining maturities. These estimated fair values do not include the intangible value of core deposit relationships, which comprise a portion of the Company’s deposit base.

Borrowed Funds

The estimated fair value of borrowed funds is based either on bid quotations received from securities dealers or the discounted value of contractual cash flows with interest rates currently in effect for borrowed funds with similar maturities and structures.

Off-Balance Sheet Financial Instruments

The fair values of commitments to extend credit and unadvanced lines of credit are estimated based on an analysis of the interest rates and fees currently charged to enter into similar transactions, considering the remaining terms of the commitments and the creditworthiness of the potential borrowers. The estimated fair values of such off-balance sheet financial instruments were insignificant at March 31, 2025 and December 31, 2024.

Fair Value Option

We elected the fair value option for certain items as discussed throughout the Notes to the Condensed Consolidated Financial Statements to more closely align the accounting method with the underlying economic exposure.

The following table reflects the change in fair value included in earnings of financial instruments for which the fair value option has been elected:

The following table reflects the difference between the aggregate fair value and aggregate remaining contractual principal balance outstanding for assets and liabilities for which the fair value option has been elected:

Note 16 -Mezzanine and Stockholders' Equity

The following table and paragraphs summarize the Company's preferred stock as of March 31, 2025:

Series A Preferred stock

Each Series A preferred depositary share represents 1/40th interest in a share of the Company’s Fixed-to-Floating Rate Series A Noncumulative Perpetual Preferred Stock, with a liquidation preference of $1,000 per share (equivalent to $25 per depositary share). Dividends accrue on the shares at a fixed rate equal to 6.375 percent per annum until March 17, 2027, and a floating rate equal to three-month Secured Overnight Financing Rate plus 408.26 basis points per annum beginning on March 17, 2027. Dividends are payable in arrears on March 17, June 17, September 17, and December 17 of each year, which commenced on June 17, 2017. For the three months ended March 31, 2025, we paid animmaterial amount of dividends on our Series A preferred stock

Series B Preferred Stock

As of March 31, 2025, Series B Noncumulative Convertible Preferred Stock (the "Series B Preferred Stock") represented the right (on an as converted basis) to receive approximately 250,000 shares of our common stock. Series B Preferred Stock shareholders do not have voting rights, except in limited circumstances.

The Series B Preferred Stock is classified in mezzanine equity as it is contingently convertible into shares of preferred stock that are redeemable for cash, contingent on events that are not solely in the control of the Company. The Series B Preferred Stock is not remeasured because it is currently not probable that it will become redeemable. For the three months ended March 31, 2025, we paid animmaterial amount of dividends on our Series B preferred stock.

Warrants

Warrants to purchase shares of Series D NVCE Stock, par value $0.01 per share, for an initial exercise price of $2,500 per share (collectively, the "Warrants"), were issued in conjunction with the March 2024 capital raise. The Warrants were not exercisable until September 10, 2024 and expire 7 years after issuance. Pursuant to the terms of the Warrants, as a result of the dividend paid on shares of our common stock, the exercise price of the Warrants were reduced to $2,486 as of March 31, 2025. At the time of issuance, the Warrants entitled the holders thereof to receive an aggregate of 315,000 shares of Series D NVCE Stock (subject to net settlement of shares) upon exercise of the Warrants. The 315,000 shares of Series D NVCE Stock are convertible into 105,000,000 shares of common stock at a strike price of $7.46 per share, as adjusted for dividends, as of March 31, 2025.

Note 17 -Commitments and Contingencies

Pledged Assets

The Company pledges securities to serve as collateral for its repurchase agreements and Federal Reserve Bank borrowings, among other purposes. We had pledged investment securities of $12.5 billion and $10.2 billion at March 31, 2025 and December 31, 2024, respectively. In addition, the Company had $38 billion of loans pledged between the FHLB-NY and the Federal Reserve Bank to serve as collateral for its wholesale borrowings as of March 31, 2025, compared to $44.6 billion of loans pledged at December 31, 2024.

Loan Commitments and Letters of Credit

In the normal course of business, we have various commitments outstanding to extend credit in the form of mortgage and other loan originations, as well as commercial, performance stand-by and financial stand-by letters of credit, which are not included on our Condensed Consolidated Statements of Financial Condition.

The following table summarizes the Company’s off-balance sheet commitments to originate loans and letters of credit:

These commitments consist of agreements to extend credit as long as there is no violation of any condition established in the contract under which the loan is made. Commitments generally have fixed expiration dates or other termination clauses and may require the payment of a fee. The fees we collect in connection with the issuance of letters of credit are included in Fee income in the Condensed Consolidated Statements of (Loss) Income.

These instruments involve, to varying degrees, elements of credit and interest rate risk beyond the amount recognized on the Condensed Consolidated Statements of Condition. Our exposure to credit losses in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The contractual amount of standby letters of credit represents the maximum potential amount of future payments the Company could be required to make and represents the Company’s maximum credit risk. We utilize the same credit policies in making commitments and conditional obligations as we do for balance sheet instruments.

Legal Proceedings

The Company is involved in various legal actions arising in the ordinary course of its business, including stockholder class and derivative actions. The outcome of pending or threatened litigation, or of investigations or any other matters before regulatory agencies is uncertain, whether currently existing or commencing in the future, including with respect to any litigation, investigation or other regulatory actions related to (i) the business and disclosure practices of acquired companies, including our acquisition of Flagstar Bancorp and the purchase and assumption of certain assets and liabilities of Signature, (ii) the capital raise transaction we completed in March of 2024, (iii) the material weaknesses in internal control over financial reporting disclosed in our most recent Annual Report on Form 10-K, (iv) past cyber security breaches, and (v) recent events and circumstances involving the Company, including our full year 2023 earnings announcement, disclosures regarding credit losses, provisioning and goodwill impairment, and negative news and expectations about the prospects of the Company (and associated stock price volatility and changes).

We have established an accrual related to the legal actions where we believe that a loss is probable, and the amount can be reasonably estimated. When we can do so, we also determine estimates of reasonably possible losses or ranges of reasonably possible losses, whether in excess of any related accrued liability or where there is no accrued liability. We currently estimate the range of reasonably possible losses in excess of amounts accrued at March 31, 2025 is immaterial.

There can be no assurance (i) that we will not incur material losses due to damages, penalties, costs and/or expenses as a result of such litigation, investigations or regulatory proceedings, (ii) that the reserves we have established will be sufficient to cover such losses, or (iii) that such losses will not materially exceed such reserves and have a material impact on our financial condition or results of operations. The Company may incur significant legal expenses in defending such litigation, or as a result of its involvement in such investigations or regulatory proceedings, during the pendency of these matters, and in connection with any other potential cases, including expenses for the potential reimbursement of legal fees of officers and directors under indemnification obligations.

Signature Bridge Bank

On March 20, 2023, the Company’s wholly owned bank subsidiary, Flagstar Bank, entered into a Purchase and Assumption Agreement (the “Agreement”) with the Federal Deposit Insurance Corporation (“FDIC”), as receiver of Signature Bridge Bank, N.A. (“Signature”) to acquire certain assets and assume certain liabilities of Signature (the “Signature Transaction”). In connection with the Signature Transaction, Flagstar Bank assumed all of Signature’s branches. Flagstar Bank acquired only certain parts of Signature it believed to be financially and strategically complementary that were intended to enhance the Company’s future growth.

Pursuant to the terms of the Agreement, Flagstar Bank was not required to make a cash payment to the FDIC on March 20, 2023, as consideration for the acquired assets and assumed liabilities. Any items identified that affected the bargain gain were recorded in the period they were identified as a result of ongoing discussion that impacted the assets and liabilities acquired or assumed through the three months end March 31, 2024. Due to the complexity of the transaction that included only certain assets and liabilities of Signature and the servicing agreement, which ceased on March 20, 2024, Flagstar Bank remains engaged with the FDIC regarding the net settlement of historical activity. This is expected to take time to resolve and may result in net settlement payments to or from the FDIC which could impact other income or expense which, although not expected, could be material to the financial statements in future periods.

Note 18 -Segment Reporting

The Company’s chief operating decision maker is the Chief Executive Officer. The Company has evaluated its operating structure and determined that it operates inone reportable segment, which constitutes its only operating segment. The Company’s chief operating decision maker regularly evaluates the performance of the business as a whole, with financial results reviewed on a consolidated basis.

Given the current focus on the Company’s operations, products, and services, the chief operating decision maker does not assess performance or make operating decisions based on distinct geographic or product line divisions as the focus has been on consolidated cost measures and realigning business operations to ensure long-term profitability. A current focus of the chief operating decision maker is on the primary revenue sources and the costs of the organization. Therefore, the chief operating decision maker considers each element of noninterest expense in decision making about how to allocate the resources of the company. Additionally, the chief operating decision maker is focused on the key consolidated revenue sources, most notably net interest income, which led to the decision to sell certain portions of our business and certain loan portfolios. The Company's significant revenues and expenses are reported on the face of the Condensed Consolidated Statements of (Loss) Income. As a result, the Company’s financial performance is reviewed as a single operating segment.

Critical Accounting Estimates

Various elements of our accounting policies, by their nature, are subject to estimation techniques, valuation assumptions and other subjective assessments. Certain accounting policies that, due to the judgment, estimates and assumptions are critical to an understanding of our Condensed Consolidated Financial Statements and the Notes, are described in detail in Note 2 of our Form 10-K for the year ended December 31, 2024. These policies relate to: (a) the determination of our allowance for credit losses and (b) fair value measurements. We believe the judgment, estimates and assumptions used in the preparation of our Condensed Consolidated Financial Statements and the Notes are reasonable; however, due to the inherent uncertainties in developing estimates, actual results could differ from the original estimates, requiring adjustments to these balances in future periods.