Flagstar is the last of the New York mortgage banks to restate itself as a diversified regional lender, and the second quarter of 2026 is the first quarter in which that story shows up in the credit book rather than the headlines. C&I loans now account for 30 percent of the portfolio and are growing faster than the multi-family book is shrinking.
The mechanism is balance sheet rotation. C&I loans rose 12 percent in one quarter to $18.6 billion, while multi-family and commercial real estate combined fell 4 percent to $35.2 billion. Net deposits climbed $689 million, nearly all core, and the cost of deposits fell five basis points while the bank paid down $250 million of wholesale funding.
Pre-provision net revenue, the measure of earnings before loan-loss reserves, turned from a year-ago loss of $17 million to $66 million, and the bank adopted a $250 million share repurchase program with a common equity tier one ratio of 13.16 percent. The open question is whether the rent-regulated New York City multi-family book of $13.4 billion can shrink on schedule while the C&I machine keeps funding itself with relationship deposits.