Flagstar Bank reports profit decline amid New York multifamily loan risks

Flagstar Bank reported a third-quarter net income of $12 million for the period ending September 30, 2026, a decrease from the $34 million earned in the previous quarter. The bank’s earnings were impacted by rising credit costs, which increased by $58 million compared to the preceding quarter.

Management attributed the rise in credit expenses to higher interest rates and challenges associated with rent-regulated multifamily properties in New York City. While the bank’s New York City multifamily loan balance decreased by $531 million, or 4%, during the quarter, these specific assets remain a significant source of cost.

In an effort to manage risk, the bank is working to reduce its exposure to these properties while simultaneously expanding its commercial and industrial lending operations. Overall, the combined multifamily and commercial real estate portfolio declined by $1.1 billion, or 3%.