FLG 10-K & 10-Q changes, risk factors and insider trading

There are various risks and uncertainties that are inherent to our business. Primary among these are (1) interest rate risk; (2) credit risk; (3) financial statement risk; (4) liquidity and dividend risk (5) legal and regulatory risk; (6) financial and market risk, as well as other matters that may dilute the value of our securities; (7) strategic risk, including our integration risksrisk (8) operational risk; and (9) reputational risk and its potential negative impact on, among other things, our financial condition, results of operations and/or stockholder value.

The following is a discussion of the material risks and uncertainties that could have a material adverse impact on our financial condition, results of operations, and the value of our shares. The failure to properly identify, monitor, and mitigate any of the below referenced risks, could result in increased regulatory risk and could potentially have an adverse impact on the Company.Bank. Additional risks that are not currently known to us, or that we currently believe to be immaterial, also may have a material effect on our financial condition and results of operations. This Annual Report on Form 10-K is qualified in its entirety by those risk factors.

The monetary policies of the Federal Reserve Board may be affected by certain policy initiatives of the newcurrent Administration,administration, which has announcedenacted tariffs on certain U.S. trading partners (and has indicated additional tariffs and retaliatory tariffs against U.S. trading partners may be announced in the future) and has implemented stricter immigration policies. Although forecasts have varied, many economists are projecting that such policy initiatives may create inflationary pressures. Under such a scenario, the Federal Reserve Board may decide to maintain the federal funds rate at a relatively elevated level for a prolonged period of time. The extent and timing of the newcurrent Administration’sadministration’s policy changes and their impact on the policies of the Federal Reserve Board, as well as our business and financial results, are uncertain at this time. If rates were to remain elevated for a prolonged period of time, it may adversely affect our business and increase loan repricing risk, including in our multi-family and CRE portfolios.

In addition to mitigating credit risk through our underwriting processes, we attempt to recognize such risk through the establishment of an allowance for credit losses.ACL. During 2024,2025, the CompanyBank continued to take decisive actions to build capital, reinforce our balance sheet, strengthen our risk management processes, and better align the CompanyBank with relevant bank peers. WeOur significantlyACL built our reserve levels by recording aof $1.1 billion provisionas for credit losses, bringing our allowance for credit losses to $1.2 billion atof December 31, 2024,2025 reflectingrepresents our actionsestimate toof buildcurrent reservesexpected during the quarter to address weaknesslosses in theour office sector, potential repricing risk in the multi-family portfolioloan and anlease increaseportfolios, inas classifiedwell assets.as our unfunded commitments.

The process of determining whether or not the allowance is sufficient to cover potential credit losses is based on the current expected credit loss model or ("CECL"). This methodology is described in detail under “CriticalNote 2 - Summary of Significant Accounting Estimates” in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”Policies in this report. CECL may result in greater volatility in the level of the allowance for credit losses,ACL, depending on various assumptions and factors used in this model. If the judgments and assumptions we make with regard to the allowance are incorrect, our allowance for losses on such loans might not be sufficient, and an additional provision for credit losses might need to be made. Depending on the amount of such loan loss provisions, the adverse impact on our earnings could be material. In addition, growth in our loan portfolio may require us to increase the allowance for credit lossesACL on such loans by making additional provisions, which would reduce our net income.

At December 31, 2024,2025, $34.1$29.0 billion or 49.947.7 percent of our total loans and leases,leases held for investment portfolio consisted of multi-family loans and $8.7$9.3 billion or 12.715.3 percent consisted of commercial real estateCRE loans. These types of loans generally expose a lender to greater risk of non-payment and loss than one-to-four family residential mortgage loans because repayment of the loans often depends on the successful operation of the properties and the sale of such properties securing the loans. Such loans typically involve larger loan balances to single borrowers or groups of related borrowers compared to one-to-four family residential loans. Also, many of our borrowers have more than one of these types of loans outstanding. Consequently, an adverse development with respect to one loan or one credit relationship can expose us to a significantly greater risk of loss compared to an adverse development with respect to a one-to-four family residential real estate loan. In addition, if loans that are collateralized by real estate become troubled and the value of the real estate has been significantly impaired, then we may not be able to recover the full contractual amount of principal and interest that we anticipated at the time we originated the loan. Higher interest rates or operating costs for a longer period of time that are not offset by corresponding revenue increases could put further financial pressure on borrowers which could also cause us to not recover the full contractual amount of principal and interest. These factors could cause us to increase our provision for credit losses and could adversely affect our operating results and financial condition.

The commercial real estateCRE loans we make are secured by income-producing properties such as office buildings, retail centers, mixed-use buildings, and multi-tenanted light industrial properties. At December 31, 2024,2025, $2.4$2.0 billion, or 27.721.0 percent of our commercial real estateCRE loan portfolio was secured by office buildings. We may incur future losses on commercial real estateCRE loans due to declines in occupancy rates and rental rates in office buildings, which could occur as a result of lessreduced needmarket demand for office space due to more people working from home or other factors. In addition, the majority of our multi-family and commercial real estateCRE loans are non-recourse and are secured by rental apartment buildings or commercial real estate. In the event of a default by a borrower on a non-recourse loan, the Companywe will have recourse only to the real estate-related assets collateralizing the loan. If the underlying collateral value is below the loan amount, the Companywe will suffer a loss upon a default.

OnMulti-family real estate loans generally involve a greater risk than residential real estate loans because of legislation and government regulations involving rent control and rent stabilization, which are outside the control of the borrower or the Bank, and could impair the value of the security for the loan or the future cash flow of such properties. For example, on June 14, 2019, the New York State legislature passed the New York Housing Stability and Tenant Protection Act of 2019. This legislation represents the most extensive reform of New York State’s rent laws in several decades and generally limits a landlord’s ability to increase rents on rent regulated apartments and makes it more difficult to convert rent regulated apartments to market rate apartments. At December 31, 2025, $15.8 billion or 55 percent of our total multi-family loan portfolio was secured by properties in New York State, $13.9 billion of which or 88 percent are subject to rent regulation laws to varying degrees, with $9.5 billion having 50 percent or more rent regulated units. In addition, state and local governments in New York may continue to enact or expand, and New York City has announced it is considering, (i) other rent control regulations and (ii) other government actions, which could further limit landlords’ abilities to raise rents or other adverse impacts, resulting in a negative impact on property values for our collateral for multi-family loans. As a result, the value of the collateral located in New York State securing the Company’sBank’s multi-family loans or the future net operating income of such properties could potentially become impaired which, in turn, could have a material adverse effect on our financial condition and results of operations.

Economic weakness in the New York City metropolitan region, where the majority of the properties collateralizing our multi-family, and commercial real estate, and acquisition, development, and constructionestate loans, andas thewell majorityas of thecertain businesses collateralizing our other commercial and industrial loans, are located could have an adverse impact on our financial condition and results of operations.

Our business dependsis significantly onby general economic conditions in the New York City metropolitan region, where the majority of the buildings and properties securing the multi-family, and commercial real estate, and acquisition, development, and constructionestate loans we originate for investment and the businesses of the customers to whom we make our other commercial and industrial loans are located. Accordingly, the ability of our borrowers to repay their loans, and the value of the collateral securing such loans, may be significantly affected by economic conditions in this region, including changes in the local real estate market. A significant decline in general economic conditions caused by inflation, recession, unemployment, acts of terrorism, extreme weather, or other factors beyond our control, could therefore have an adverse effect on our financial condition and results of operations. In addition, because multi-family and commercial real estate loans represent the majority of the loans in our portfolio, a decline in tenant occupancy or rents, due to such factors, or for other reasons, such as new legislation, could adversely impact the ability of our borrowers to repay their loans on a timely basis, which could have a negative impact on our net income. Furthermore, economic or market turmoil could occur in the near or long term. This could negatively affect our business, our financial condition, and our results of operations, as well as our ability to maintain the level of cash dividends we currently pay to our stockholders.

The processes we use to estimate expected losses and to measure the fair value of financial instruments, as well as the processes used to estimate the effects of changing interest rates and other market measures on our financial condition and results of operations, depends upon the use of analytical and forecasting models. These models reflect assumptions that may not be accurate, particularly in times of market stress or other unforeseen circumstances. Even if these assumptions are adequate, the models may prove to be inadequate or inaccurate because of other flaws in their design or their implementation. If the models that we use for interest rate risk and asset-liability management are inadequate, we may incur increased or unexpected losses upon changes in market interest rates or other market measures. If the models that we use for determining our expected losses are inadequate, the allowance for loan losses may not be sufficient to support future charge-offs. If the models that we use to measure the fair value of financial instruments are inadequate, the fair value of such financial instruments may fluctuate unexpectedly or may not accurately reflect what we could realize upon sale or settlement of such financial instruments. Any such failure in our analytical or forecasting models could have a material adverse effect on our business, financial condition andcondition, results of operations.operations and cash flows.

Impairment in the carrying value in finite livedfinite-lived intangible assets could negatively impact our financial condition and results of operations.

At December 31, 2024,2025, finite livedfinite-lived intangible assets, primarily core deposit intangibles, totaled $488$381 million. We review our intangible assets for impairment if events or changes in circumstances indicate that the carrying value may not be recoverable. A significant decline in deposits may necessitate taking additional charges in the future related to the impairment of other intangible assets. The amount of any impairment charge could be significant and could have a material adverse impact on our financial condition and results of operations.

Failure to maintain an adequate level of liquidity could result in an inability to fulfill our financial obligations could subject us to material reputational and compliance risk and could lead to the financial failure of the Company.Bank.

Our funding primary sourcesstems from a diverse combination of liquiditybusiness activities. The primary source of funding are the(i) our retail and institutional depositsdeposit webase, gather(ii) orvarious acquirewholesale infunding connectionchannels, withincluding acquisitions,$11.2 and the brokered deposits we accept; borrowed funds, primarily in the formbillion of wholesalesecured borrowings from the FHLB-NYFHLB and variousan Wallactive Streetbrokered brokerageCDs firms;issuance program with $2.3 billion outstanding at December 31, 2025 (iii) cash flowsreserves generatedand throughHQLAs and (iv) access to secured borrowings from the repaymentFHLB and saleFRB-NY ofDiscount loans; and cash flows generated through the repayment and sale of securities.window. In addition, and depending on current market conditions, we may have the ability to access the capital markets from time to time to generate additional liquidity. Deposit flows, calls of investment securities and wholesale borrowings, and the prepayment of loans and mortgage-related securities are strongly influenced by such external factors as the direction of interest rates, whether actual or perceived; local and national economic conditions; and competition for deposits and loans in the markets we serve. Deposit outflows can occur for a number of reasons, including clients seeking higher yields, clients with uninsured deposits may seek greater financial security or clients may simply prefer to do business with our competitors, or for other reasons. The withdrawal of more deposits than we anticipate could have an adverse impact on our profitability as this source of funding, if not replaced by similar deposit funding, would need to be replaced with more expensive wholesale funding, the sale of interest-earning assets, other sources of funding, or a combination of them all. In extreme situations, withdrawals could exceed our capacity to fund the withdrawals and lead to the financial failure of the Company.Bank. The replacement of deposit funding with wholesale funding could cause our overall cost of funds to increase, which would reduce our net interest income and results of operations. A decline in interest-earning assets would also lower our net interest income and results of operations. As of December 31, 2024,2025, approximately 21.220 percent of our total deposits of $75.9 billion were not FDIC-insured.FDIC-insured or collateralized by securities or letters of credit.

In addition, large-scale withdrawals of brokered or institutional deposits could require and has required us to pay significantly higher interest rates on our retail deposits or on other wholesale funding sources, which has an adverse impact on our net interest income and net income. Furthermore, changes to the FHLB-NY’s underwriting guidelines for wholesale borrowings or lending policies may limit or restrict our ability to borrow and therefore could have a significant adverse impact on our liquidity. A decline in available funding could adversely impact our ability to originate loans, invest in securities, and meet our expenses, or to fulfill such obligations as repaying our borrowings or meeting deposit withdrawal demands. Downgrades of the credit ratings of the Company and the Bank, such as those announced by certain credit rating agencies in February, March and May 2024, could result in an acceleration in deposit outflows and additional collateral needs. We have experienced situations which could occur again in the future that could adversely affect our access to liquidity and capital, and could significantly increase our cost of funds, trigger additional collateral or funding requirements, and decrease the number of investors and counterparties willing to lend to us or to purchase our securities. This could affect our growth, profitability, and financial condition, including our liquidity.

The holders of our common stock are only entitled to receive such dividends as ourthe Board of Directors may declare out of funds available for such payments under applicable law and regulatory guidance, and, although we have historically declared cash dividends on our common stock, we are not required to do so. Furthermore, the payment of dividends falls under federal regulations that have grown more stringent in recent years. While we pay our quarterly cash dividend in compliance with current regulations, such regulations could change in the future. We are currently paying quarterly cash dividends on shares of the Company'sBank's common stock at $0.01 per share. An elimination of our common stock dividend in the future could adversely affect the market price of our common stock.

Dividends on our Series A Preferred Stock and Series B Preferred Stock are discretionary and noncumulative. If ourthe Board of Directors (or any duly authorized committee of the Board) does not authorize and declare a dividend on (a) the Series A Preferred Stock for any dividend period, holders of the depository shares will not be entitled to receive any dividend for that dividend period, and the unpaid dividend will cease to accrue and be payable, or (b) Series B Preferred Stock, the holders thereof will not be entitled to receive any dividend for that dividend period. For our Series A Preferred Stock, we have no obligation to pay dividends accrued for a dividend period after the dividend payment date for that period if ourthe Board of Directors (or any duly authorized committee thereof) has not declared a dividend before the related dividend payment date, whether or not dividends on the Series A Preferred Stock or any other series of our preferred stock or our common stock are declared for any future dividend period. Dividends on our Series B Preferred Stock are payable at a rate of 13 percent per annum, payable quarterly and in arrears. Additionally, under the FRB’sOCC’s capital rules, dividends on the Series A Preferred Stock and Series B Preferred Stock may only be paid out of our net income, retained earnings, or surplus related to other additional tier 1 capital instruments. If the non-payment of dividends on Series A Preferred Stock,Stock or Series B Preferred Stock and Series C Preferred Stock for any dividend period would cause the CompanyBank to fail to comply with any applicable law or regulation, or any agreement we may enter into with our regulators from time to time, then we would not be able to declare or pay a dividend for such dividend period.

The holders of our Series A Preferred Stock and Series B Preferred Stock initially have the right to receive a payment on account of the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of our business before any payment may be made to holders of our common stock. Following the satisfaction of the liquidation preference, the Series B Preferred Stock participates with our common stock on an as-converted basis in a liquidation, dissolution or winding up of the Company.Bank. Our obligations to the holders of our Series A Preferred Stock and Series B Preferred Stock could limit our ability to obtain additional financing, which could have an adverse effect on our financial condition. The preferential rights could also result in divergent interests between the holders of our common stock, Series A Preferred Stock and Series B Preferred Stock and other classes of securities.

We are subject to the comprehensive, consolidated supervision and regulation set forth by the FRB and the OCC. Such regulation includes, among other matters, the level of leverage and risk-based capital ratios we are required to maintain. Depending on general economic conditions, changes in our capital position could have a materially adverse impact on our financial condition and risk profile and also could limit our ability to grow through acquisitions or otherwise. Compliance with regulatory capital requirements may limit our ability to engage in operations that require the intensive use of capital and therefore could adversely affect our ability to maintain our current level of business or expand. Furthermore, it is possible that future regulatory changes could result in more stringent capital or liquidity requirements, including increases in the levels of regulatory capital we are required to maintain and changes in the way capital or liquidity is measured for regulatory purposes, either of which could adversely affect our business and our ability to expand. For example, federal banking regulations adopted under Basel III standards require bank holding companies and banks to undertake significant activities to demonstrate compliance with higher capital requirements. Any additional requirements to increase our capital ratios or liquidity could necessitate our liquidating certain assets, perhaps on terms that are unfavorable to us or that are contrary to our business plans. In addition, such requirements could also compel us to issue additional securities, thus diluting the value of our common stock. In addition, failure to meet established capital requirements could result in the FRB and/or OCC placing limitations or conditions on our activities and further restricting the commencement of new activities. The failure to meet applicable capital guidelines could subject us to a variety of enforcement remedies available to the federal regulatory authorities, including limiting our ability to pay dividends; issuing a directive to increase our capital; and terminating our FDIC deposit insurance. Such enforcement activity by regulatory authorities could have a material effect on our financial statements or operations.

We and our subsidiaries are subject to regulation, supervision, and examination by the following entities: (1) the OCC; (2) the FDIC; (3) the FRB; and (43) the CFPB, as well as FINRA regulations and state licensing restrictions and limitations regarding certain financial services, investment management and other consumer finance products. Such regulation and supervision govern the activities in which a bank holding company and its banking subsidiaries may engage and are intended primarily for the protection of the Deposit Insurance Fund, the banking system in general, and bank customers, rather than for the benefit of a company’sbank's stockholders. These regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including with respect to the imposition of restrictions on the operation of a bank or a bank holding company and its subsidiaries, the imposition of significant fines, the ability to delay or deny merger or other regulatory applications, the payment of dividends, the classification of assets by a bank, and the adequacy of a bank’s allowance for loan losses, among other matters. Failure to comply (or to ensure that our agents and third-party service providers comply) with laws, regulations, or policies, including our failure to obtain and maintain any necessary state or local licenses, could result in enforcement actions or sanctions by regulatory agencies, civil money penalties, and/or reputational damage, which could have a material adverse effect on our business, financial condition, or results of operations. Penalties for such violations may also include: revocation of licenses; fines and other monetary penalties; civil and criminal liability; substantially reduced payments by borrowers; modification of the original terms of loans, permanent forgiveness of debt, or inability to, directly or indirectly, collect all or a part of the principal of or interest on loans provided by the Bank. Changes in such regulation and supervision, or changes inthe regulationinterpretation or enforcement of applicable law by such authorities, whether in the form of policy, regulations, legislation, rules, orders, enforcement actions, ratings, or decisions, could have a material impact on the Company, our subsidiary bank and other affiliates, and our operations,Bank, including restrictions on the operation of athe bankBank, orincreased acosts bankof holdingregulatory companycompliance, and changes in FDIC deposit insurance premium assessments. In addition, failure of the Company or the Bank to comply with such regulations could have a material adverse effect on our earnings and capital. See “Regulation and Supervision” in Part I, Item 1, “Business” earlier in this filing for a detailed description of the federal, state, and local regulations to which the Company and the Bank are subject.

The United States has imposed economic sanctions that affect transactions with designated foreign countries, foreign nationals, and other potentially exposed persons. These are typically referred to as the "OFAC" rules, given their administration by the United States Treasury DepartmentDepartment's Office of Foreign Assets Control. Failure to comply with these sanctions could havenegatively seriousimpact legalour business, financial condition, and results of operations as well as cause reputational consequences.harm.

Our Risk Governance Framework may not be effective in mitigating the risks to which we are subject, based upon the size, scope, and complexity of the Company.Bank.

As a financial institution, we are subject to a number of risks, including interest rate, credit, liquidity, legal/compliance, market, strategic, operational, and reputational. OurFlagstar's Risk Governance Framework (the "RGF") is designed to manage the risks to which we are subject, as well as any losses stemming from such risks. Although we seek to identify, measure, monitor, report, and control our exposure to such risks, and employ a broad and diverse set of risk monitoring and mitigation techniques in the process, those techniques are inherently limited because they cannot anticipate the existence or development of risks that are currently unknown and unanticipated. For example, economic and market conditions, heightened legislative and regulatory scrutiny of the financial services industry, and increases in the overall complexity of our operations, among other developments, have resulted in the creation of a variety of risks that were previously unknown and unanticipated, highlighting the intrinsic limitations of our risk monitoring and mitigation techniques. As a result, the further development of previously unknown or unanticipated risks may result in our incurring losses in the future that could adversely impact our financial condition and results of operations. Furthermore, an ineffective Risk Governance Framework, as well as other risk factors, could result in a material increase in our FDIC deposit insurance premium assessments.

At any given time, we and our subsidiaries are involved with a number of legal proceedings and regulatory investigations and examinations as a part of reviews conducted by regulators and other parties, which may involve banking, securities, consumer protection, employment, tort, and numerous other laws and regulations. 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) theour past material weaknesses in internal control over financial reporting disclosed in our Annual Report on Form 10-K/A for the fiscal year ended December 31, 2023,reporting, (iv) past cyber security breaches, and (v) recent events and circumstances involving the Company,Flagstar, including disclosures regarding credit losses, provisioning and goodwill impairment, and negative news and expectations about theour prospects of the Company (and associated stock price volatility and changes). Proceedings or actions brought against us or our subsidiaries may result in judgments, settlements, fines, penalties, injunctions, business improvement orders, consent orders, supervisory agreements, ratings downgrades, restrictions on our business activities, revocations or non-renewals of required licenses, changes in FDIC deposit insurance premium assessments or other results adverse to us, which could materially and negatively affect our business. If such claims and other matters are not resolved in a manner favorable to us, they may result in significant financial liability and/or adversely affect the market perception of us and our products and services as well as impact customer demand for those products and services. Some of the laws and regulations to which we are subject may provide a private right of action that a consumer or class of consumers may pursue to enforce these laws and regulations. We are currently subject to stockholder class and derivative actions which seek significant damages and other relief and may be subject to similar actions in the future. Any financial liability or reputational damage could have a materially adverse effect on our business and, in turn, on our financial condition and results of operations. Claims asserted against us can be highly complicated and slow to develop, making the outcome of such proceedings difficult to predict or estimate early in the process. As a participant in the financial services industry, it is likely that we will be exposed to a high level of litigation and regulatory scrutiny relating to our business and operations. Although we establish accruals for legal or regulatory proceedings when information related to the loss contingencies represented by those matters indicates both that a loss is probable and that the amount of loss can be reasonably estimated, we do not have accruals for all legal or regulatory proceedings where we face a risk of loss. Due to the inherent subjectivity of the assessments and unpredictability of the outcome of legal and regulatory proceedings, amounts accrued may not represent the ultimate loss to us from the legal and regulatory proceedings in question. As a result, our ultimate losses may be significantly higher than the amounts accrued for legal loss contingencies. For further information, see Note 20 - Commitments and Contingencies and Item 3 - Legal Proceedings.Contingencies.

The Community Reinvestment Act requires the Federal Reserve and OCC to assess our performance in meeting the credit needs of the communities we serve, including low- and moderate-income neighborhoods. If the Federal Reserve or OCC determines that we need to improve our performance or are in substantial non-compliance with Community Reinvestment Act requirements, various adverse regulatory consequences may ensue. In addition, the Equal Credit Opportunity Act, the Fair Housing Act and other fair lending laws and regulations impose nondiscriminatory lending requirements on financial institutions. In addition, the Bank is subject to other federal and state laws designed to protect consumers, including the Home Ownership Protection Act, Fair Credit Reporting Act, as amended by the Fair and Accurate Credit Transactions Act of 2003, the Gramm-Leach Bliley Act, the Truth in Lending Act, the Home Mortgage Disclosure Act, the Real Estate Settlement Procedures Act, the National Flood Insurance Act and various state law counterparts. These laws and regulations mandate certain disclosure requirements and regulate the manner in which financial institutions must interact with clients when taking deposits, making loans, collecting and servicing loans and providing other services.

The FDIC,OCC thehas Federal Reserve and the Office of the Comptroller of the Currency have promulgated jointissued guidance on sound risk management practices for financial institutions with concentrations in commercial real estate lending. Under this guidance, a financial institution that, like us, is actively involved in commercial real estate lending should perform a risk assessment to identify concentrations. A financial institution may have a “concentration” in commercial real estate lending if, among other factorsfactors, either (i) total reported loans for construction, land development and other land represent 100% or more of total capital, or (ii) total reported loans secured by multi-family and non-farm non-residential properties, loans for construction, land development and other land, and loans otherwise sensitive to the general commercial real estate market, including loans to commercial real estate related entities, represent 300% or more of total capital. The purpose of the guidance is to guide banks in developing risk management practices and capital levels commensurate with the level and nature of real estate concentrations. TheWhile guidancewe statesbelieve that management should employ heightened riskour management practiceshas includingimplemented boardpolicies and managementprocedures oversightwith respect to our commercial real estate loan portfolio consistent with the joint guidance, if the OCC were to require us to implement additional policies and strategicprocedures planning,consistent developmentwith their interpretation of underwritingthe standards,joint riskguidance, assessmentor impose restrictions on the amount of commercial real estate loans we can hold in our portfolio, our financial condition and monitoringoperating throughresults marketcould analysisbe andadversely stress testing.affected.

New legislationLegislation and regulations focused on data privacy could increase our compliance and operational risks, among others, leading to litigation or regulatory enforcement and reputational damage.

Data privacy and cybersecurity risks have become a subject of heightened legislative and regulatory focus in recent years. Federal bank regulatory agencies have proposed regulations to enhance cyber risk management standards, which would apply to us and our third-party service providers. These regulations focus on areas such as cyber risk governance, management of dependencies, incident response, cyber resilience, and situational awareness. State-level legislation and regulations have also been proposed or adopted, requiring notification to individuals in the event of a security breach of their personal data.data, in addition to other requirements. Examples include the CCPA and other state-level privacy, data protection, and data security laws and regulations. We collect, maintain, and use non-public personal information of our customers, clients, employees, and others. The sharing, use, disclosure, and protection of this information are governed by federal and state laws. Compliance with these laws is essential to protect the privacy of personal information and avoid potential liability and reputational damage. Failure to comply with privacy laws and regulations may expose us to fines, litigation, or regulatory enforcement actions. It may also require changes to our systems, business practices, or privacy policies, which could adversely impact our financial condition and operating results. Privacy initiatives have imposed and will continue to impose additional operational burdens on us. These initiatives may limit our ability to pursue desirable business initiatives and increase the risks associated with any future use of personal data. New privacy and data protection initiatives, such as the CCPA,initiatives may require changes to policies, procedures, and technology for information security and data segregation. Non-compliance with these initiatives may make us more vulnerable to operational failures and subject to monetary penalties, litigation, or regulatory enforcement actions.

Declines in real estate values and an increase in the financial stress on borrowers stemming from high unemployment or other adverse economic conditions,conditions could negatively affect our borrowers and, in turn, the repayment of the loans in our portfolio. Deterioration in economic conditions also could subject us and our industry to increased regulatory scrutiny, and could result in an increase in loan delinquencies, an increase in problem assets and foreclosures, and a decline in the value of the collateral for our loans, which could reduce our customers’ borrowing power. Deterioration in local economic conditions could drive the level of loan losses beyond the level we have provided for in our loan loss allowance; this, in turn, could necessitate an increase in our provisions for loan losses, which would reduce our earnings and capital. Furthermore, declines in the value of our investment securities could result in our having to record losses based on the other-than-temporary impairment of securities, which would reduce our earnings and also could reduce our capital. In addition, continued economic weakness could reduce the demand for our products and services, which would adversely impact our liquidityfinancial condition, the results of our operations and theour revenues we produce.liquidity.

OurThe Board of Directors has the authority, in many situations, to issue additional shares of authorized but unissued stock (including securities convertible or exchangeable for stock) in public or private offerings without any vote of our shareholders. If, in the future, thewe Company isare required or otherwise determinesdetermine to raise additional capital (including through the issuance of additional securities), any such capital raise or issuance may dilute the percentage of ownership interest of existing shareholders, may dilute the per share book value of our common stock and may adversely affect the market price of our common stock and other securities. No assurance can be given that, in the future, the Companywe will be able to (i) raise any required capital or (ii) raise capital on terms that are beneficial to shareholders.

The processes we use to estimate the effects of changing interest rates, real estate values, and economic indicators such as unemployment on our financial condition and results of operations depend upon the use of analytical and forecasting models. These models reflect assumptions that may not be accurate, particularly in times of market stress or other unforeseen circumstances. Furthermore, even if our assumptions are accurate predictors of future performance, the models they are based on may prove to be inadequate or inaccurate because of other flaws in their design or implementation. If the models we use in the process of managing our interest rate and other risks prove to be inadequate or inaccurate, we could incur increased or unexpected losses which, in turn, could adversely affect our earnings and capital. Additionally, failure by the CompanyBank to maintain compliance with strict capital, liquidity, and other stress test requirements under banking regulations could subject us to regulatory sanctions, including limitations on our ability to pay dividends.

The Company,Bank, entities that we have acquired, and certain of our service providers have experienced information technology security breaches and may be vulnerable to future security breaches. These incidents have resulted in, and could result in, additional expenses, exposure to civil litigation, increased regulatory scrutiny, losses, and a loss of customers, any of which could adversely impact our financial condition, results of operations, and the market price of our stock.

While we diligently assess applicable regulatory and legislative developments affecting our business, laws and regulations relating to cybersecurity have been frequently changing, imposing new requirements on us. In light of these conditions, we face the potential for additional regulatory scrutiny that will lead to increasing compliance and technology expenses and, in some cases, possible limitations on the achievement of our plans for growth and other strategic objectives. We may also be required to expend significant additional resources to modify our protective measures or investigate and remediate vulnerabilities or other exposures arising from operational and security risks, including expenses for third-party expert consultants or outside counsel. We are currently subject to litigation regarding cyber incidents, and we also may be subject to future litigation and financial losses that either are not insured against or not fully covered through any insurance we maintain or any third-party indemnification or insurance. We believe that the impact of any previously identified cyber incidents, including those subject to ongoing investigation and remediation, will not have a material financial impact.impact on our financial condition or the results of our operations.

The Company and the Bank relyrelies on third parties to perform certain key business functions, which may expose us to further operational risk.

We outsource certain key aspects of our data processing to certain third-party providers. While we have selected these third-party providers carefully, we cannot control their actions. Our ability to deliver products and services to our customers, to adequately process and account for our customers’ transactions, or otherwise conduct our business could be adversely impacted by any disruption in the services provided by these third parties; their failure to handle current or higher volumes of usage; or any difficulties we may encounter in communicating with them. Replacing these third-party providers also could entail significant delay and expense. Our third-party providers may be vulnerable to unauthorized access, computer viruses, phishing schemes, and other security breaches. Threats to information security also exist in the processing of customer information through various other third-party providers and their personnel. We may be required to expend significant additional resources to protect against the threat of such security breaches and computer viruses, or to alleviate problems caused by such security breaches or viruses. To the extent that the activities of our third-party providers or the activities of our customers involve the storage and transmission of confidential information, security breaches and viruses could expose us to claims, regulatory scrutiny, litigation, and other possible liabilities. These types of third-party relationships are subject to increasingly demanding regulatory requirements and oversight by federal bank regulators (suchthe asOCC, the Federal Reserve Board, the Office of the Comptroller of the Currency,FDIC and the Federal Deposit Insurance Corporation ("FDIC"CFPB)) and the CFPB.. As a result, if our regulators conclude that we have not exercised adequate oversight and control over vendors and subcontractors or other ongoing third-party business relationships or that such third-parties have not performed appropriately, we could be subject to enforcement actions, including civil money penalties or other administrative or judicial penalties or fines, as well as requirements for consumer remediation. In addition, the Companywe may not be adequately insured against all types of losses resulting from third-party failures, and our insurance coverage may be inadequate to cover all losses resulting from systems failures or other disruptions to our banking services.

Failure to keep pace with technological changeschanges, including developments in digital assets such as stable coins and related payment technologies, could have a material adverse impact on our ability to compete for loans and deposits, and therefore on our financial condition and results of operations.

Financial products and services have become increasingly technology driven. Our ability to meet the needs of our customers competitively, and in a cost-efficient manner, is dependent on our ability to keep pace with technological advances and invest in new technology as it becomes available. Many of our competitors have greater resources than we do and may be better equipped to invest in and market new technology-driven products and services. In addition, in cases where we rely on technology that is the product of third-party intellectual property, such technology may not be available to us on commercially reasonably terms or at all. Moreover, if another person or entity were deemed to own intellectual property rights that were infringed upon by our activities, we could be responsible for significant damages and be forced to incur significant expenses if we sought to continue to engage in these types of activities and may also be prevented from using technology important to our business for at least some period of time.

DuringFor the year ended 2024,December 31, 2025, we reported a net loss of $1.1$177 billionmillion compared to a net loss of $79$1.1 millionbillion for the yearcorresponding endedperiod 2023.in 2024. The net loss attributable to common stockholders, which includes the impact from preferred dividends, for the year ended 2024December 31, 2025 was $1.2$210 billionmillion or $3.49$0.50 per diluted share compared to the net loss attributable to common stockholders of $112$1.2 millionbillion for the yearcorresponding endedperiod 2023in 2024 or $0.49$3.49 per diluted share. The 2024 results include a $37 million increase in our provision for credit losses identified subsequent to the issuance of our press release on January 30, 2025, as a result of the completion of our control procedures. The adjustment was related to the quantitative calculation of the allowance for credit losses and a corresponding impact on the reserve for unfunded commitments related to the Company’s commercial and industrial portfolio.

Our interest-bearing liabilities are comprised of customer deposits and funds we borrow. The average term of our fixed rate deposits is less than twelve months, therefore the cost of our deposits and most of our borrowed funds is largely based on short-term rates of interest, the level of which is partially impacted by the actions of the Federal Open Market Committee. The yields on our held for-investment loans and investment securities are generally more sensitive to intermediate-term market interest rates. However, a sizablesignificant portion of our held for investment loans have fixed rates and generally reset to intermediate-term market rates when they reach repricing dates.

The results of operations comparison of 20232024 compared to 20222023 can be found in the Company’sour previously filed Annual Report on Form 10-K/A for the year-ended December 31, 2023,2024, under Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

The majority of our multi-family loans are non-recourse and are secured by rental apartment buildings. At December 31, 2024, $19.2 billion or 56 percent of the Company’s total multi-family loan portfolio was secured by properties in New York State, many of which are subject to rent regulation laws to varying degrees. The New York Housing Stability and Tenant Protection Act of 2019 significantly limits the ability to increase rents on regulated apartments upon vacancy. These limitations may reduce a borrower’s ability to generate additional revenues on those units to offset higher operating expenses due to inflation and the current interest rate environment. This could result in lower net operating income and could impact a borrower’s ability to satisfy repayment obligations during the term of the loan. In addition, the level of income generated by the property may be insufficient to qualify for refinancing at maturity. The impact on current and future cash flows has adversely impacted the value of properties with a high concentration of rent regulated units which has increased charge-offs in 2024.

To mitigate our exposure to rent regulatedrent-regulated properties, we are curtailing future originations of loans secured by rent-regulated properties. We are no longer utilizing mortgage brokers to refer loan origination opportunities to us. We are focusing originations and renewal retention on borrowers with whom we will have broader customer relationships beyond lending. PropertyAdditionally, valueswe inare thisstrategically diversifying our loan sector have decreased substantially since origination dueportfolio to unfavorableshift marketfrom conditions.multi-family The appraised value used in our loan-to-value ratio is determined using an income approachloans to estimateother theloan stabilized value of the collateral by applying a market driven capitalization rate to the stabilized cash flow of the property.sectors.

Historically, our multi-family loans may have contained an initial interest-only period; however, they were underwritten on a fully amortizing basis, including calculation of the debt service coverage ratio.DSCR. Whether a borrower qualified for an interest-only period was based on the individual credit profile of the borrower, particularly the loan-to-value of the property. Our multi-family loan portfolio had $12.7$6.5 billion outstanding within interest-onlythe paymentsinterest atonly period as of December 31, 2024.2025. The weighted average interest-only period remaining was 19.522.8 months as of December 31, 2024,2025, with approximately 5251 percent of these loans entering their amortization period by the end of 2025.2026.

We continue to monitor our loans held for investment portfolio and the related allowance for credit losses,ACL, particularly, given the economic pressures facing the commercial real estate and multi-family markets. Although occupancy levels have historically tended to be stable due to below market rents, rent-regulated loans that are repricing are incurring debt service levels that, when combined with inflationary pressure on operating costs and limits on the ability to increase rental rates, approach or exceed some properties’ net operating income and may require the borrower to support the loan from sources unrelated to the collateral until elevated interest rates subside.subside and/or over time as rents are able to be increased.

Flagstar Bank, National Association, is a national banking association headquartered in Hicksville, New York. At MarchJune 31,30, 2026, we had $87.1$87.7 billion of assets, $60.7$61.2 billion of loans, $66.8$67.5 billion of deposits, and total stockholders’ equity of $8.1 billion.

For the three months ended MarchJune 31,30, 2026, we reported net income of $21$34 million compared to net income of $29 million for the three months ended December 31, 2025 and a net loss of $100$21 million for the three months ended March 31, 2025.2026. The net income attributable to common stockholders for the three months ended MarchJune 31,30, 2026 was $13$26 million, or $0.03$0.06 per diluted share compared to net income attributable to common stockholders of $21$13 million, or $0.05 per diluted share for the three months ended December 31, 2025 and a net loss attributable to common stockholders of $108 million, or $0.26$0.03 per diluted share for the three months ended March 31, 2025.2026.

(1)Comprised of Loans and leases held for investment, net of deferred loan fessfees and costs, and Loans held for sale.

During the three months ended MarchJune 31,30, 2026, NIM increaseddecreased by 412 basis pointspoints, and NII increaseddecreased $33$3 million compared to the three months ended March 31, 2025.2026. The increasedecrease in NII was primarily drivendue byto thehigher paydownaverage of higher-cost depositsbalances and borrowingsrates duringpaid theon yearinterest-bearing ended December 31, 2025,checking and themoney decisionmarket accounts, reflecting deposit pricing adjustments in response to reinvestcompetitive cashmarket intoconditions, higher-earningas assets.well The increase was partially offset byas lower interest incomeyields on our multi-family and CRE loan portfoliosportfolio as awe result ofcontinued our continued strategy of diversifying our loanportfolio. portfolio.These decreases were partially offset by the continued paydown of borrowed funds.

For the three months ended MarchJune 31,30, 2026, the provision for credit losses decreasedincreased $79$18 million compared to the three months ended March 31, 2025.2026. The decreaseincrease was primarily due to credit adjustments driven by recent regulatory action in New York City to freeze rents on multifamily properties, higher net charge-offs, and growth in our C&I portfolio. These increases were partially offset by lower reserve requirements resulting from strategic reductionreductions ofin our multi-family and CRE portfolios and lower net charge-offs.portfolios.

For the three months ended MarchJune 31,30, 2026, non-interest income decreasedincreased $35$21 million compared to the three months ended DecemberMarch 31, 2025.2026. The decreaseincrease was primarily due to ana $18$4 million reductiongain inon the valuesale of our investment in Figure Technology Solutions, Inc.,Inc. andcompared lowerto a $9 million loss recognized in the prior quarter, higher income from our bank-owned life insurance duedriven to a decrease inby death benefit claims.claims, and higher fee income resulting from treasury management and capital markets income.

For the threesix months ended MarchJune 31,30, 2026, non-interest income decreased $25$26 million compared to the threesix months ended MarchJune 31,30, 2025. The decrease in non-interest income was primarily due to lower other income driven by lower MSR adjustments, which were elevated in the prior year due to the wind down of the mortgage and servicing operations, a $9$5 million loss on our investment in Figure Technology Solutions, Inc, and lower gains on loan sales and securitizations resulting from the non-recurrence of prior year gains related to the wind-down of the mortgage thirdand partyservicing originationoperations. businessThe duringdecrease thewas threepartially monthsoffset endedby Marchhigher 31,fee 2025.income driven by capital market and treasury management income, as well as higher bank-owned life insurance income driven by death benefit claims.

Total non-interest expenses for the three months ended MarchJune 31,30, 2026 decreased $43$16 million compared to the three months ended DecemberMarch 31, 2025.2026. The decrease was primarily due to lower compensation and benefits expense stemming from the actions taken to optimize costs,costs as well as lower occupancy and theequipment absencecosts as result of merger-relatedlower expenses.seasonal maintenance activities.

Total non-interest expenses for the threesix months ended MarchJune 31,30, 2026 decreased $66$129 million compared to the threesix months ended MarchJune 31,30, 2025. The decrease was primarily due to lower FDIC insurance expense as a result of improved assessment factors and a reduced asset base, the absence of merger-related expenses, lower compensation and benefits costs stemming from the actions taken to optimize costs, the absence of merger-related expenses, and a decrease in general and administrative expenses reflecting our continued focus on operating expense management.discipline. These decreases were partially offset by higher software expenses attributable to ongoing infrastructure development and system enhancements.

We compute our tax provision (benefit) for interim periods by applying the estimated annual effective tax rate to our year-to-date income (loss) before income taxes, adjusted for discrete items recognized during the quarter. For the threesix months ended DecemberJune 31, 2025 and March 31,30, 2025, we were unable to make a reliable estimate of our estimated annual effective tax rate as a result of our expected results for 2025; therefore, we used our actual effective tax rate to compute our income tax benefit for those periods. For the three months ended March 31,During 2026, we resumed applying the estimated annual effective tax rate methodology.

The income tax expense for the three months ended MarchJune 31,30, 2026 decreasedincreased by $5$3 million compared to the three months ended DecemberMarch 31, 20252026 primarily as a result of lowerhigher pre-tax income.

The income tax expense for the threesix months ended MarchJune 31,30, 2026 increased by $32$57 million compared to the threesix months ended MarchJune 31,30, 2025, primarily as a result of the increase in our pre-tax income and the application of our estimated annual effective tax rate for the current period compared to the use of our actual effective tax rate in the prior year.

Total loans and leases held for investment decreasedincreased $307$255 million at MarchJune 31,30, 2026 compared to December 31, 2025, primarily as a result of growing originations within our C&I portfolio, partially offset by our continued strategy of diversifying our loan portfolio by reducing our concentration in our multi-family portfolio while growing originations within our C&I portfolio, as well as par payoffs within our CRE portfolio.

Our multi-family loan portfolio decreased $1.1$2.1 billion at MarchJune 31,30, 2026 compared to December 31, 2025, primarily due to $849$1.7 millionbillion of par payoffs since December 31, 2025, with 4042 percent of the payoffs from substandard loans. The reduction in our multi-family loan portfolio is consistent with our strategic decision to continue to diversify our loan portfolio by reducing our exposure to multi-family loans.

The majority of our multi-family loan portfolio consists of non-recourse loans secured by rental apartment buildings. As of MarchJune 31,30, 2026 and December 31, 2025, $15.2$14.6 billion or 5554 percent and $15.8 billion or 55 percent of our total multi-family loan portfolio was secured by properties in New York State, respectively. Of these amounts, $13.5$12.8 billion or 8987 percent and $13.9 billion or 88 percent were subject to rent regulation laws to varying degrees at MarchJune 31,30, 2026 and December 31, 2025, respectively. Additionally, $9.3$8.9 billion and $9.5 billion of these loans, as of MarchJune 31,30, 2026 and December 31, 2025, respectively, were secured by properties in which at least 50 percent of the units were rent-regulated.

Historically, our multi-family loans may have contained an initial interest-only period; however, they were underwritten on a fully amortizing basis, including calculation of the DSCR. Whether a borrower qualified for an interest-only period was based on the individual credit profile of the borrower, particularly the loan-to-value of the property. Our multi-family loan portfolio had $5.5$5.3 billion outstanding with interest-only payments at MarchJune 31,30, 2026. The weighted average interest-only period remaining was 26.325.4 months as of MarchJune 31,30, 2026, with approximately 5131 percent of these loans entering their amortization period by the end of 2026.

At MarchJune 31,30, 2026, CRE loans decreased $481$1.1 millionbillion compared to December 31, 2025, primarily due to par payoffs.payoffs, and paydowns, partially offset by originations since December 31, 2025.

Our C&I loan portfolio increased $1.4$3.3 billion at MarchJune 31,30, 2026 compared to December 31, 2025, primarily due to $2.0$4.8 billion of new originations driven by $2.6$6.8 billion of new and increased loan commitments during the threesix months ended MarchJune 31,30, 2026, partially offset by paydowns in the existing portfolio. The increase in our C&I loan portfolio was primarily due to continued growth in Specialized Industries and Regional Commercial Banking.

One-to-four family loans increased $10$137 million at MarchJune 31,30, 2026 compared to December 31, 2025, primarily driven by new originations.

One-to-four family loans include various types of conforming and non-conforming fixed and adjustable-rate loans underwritten using Fannie Mae and Freddie Mac guidelines for the purpose of purchasing or refinancing owner occupied and second home properties. The loan-to-value requirements on our residential first mortgage loans vary depending on occupancy, property type, loan amount, and FICO scores. Loans with loan-to-value ratios exceeding 80 percent are required to obtain mortgage insurance. As of MarchJune 31,30, 2026, excluding LGG, loans in this portfolio had an average current FICO score of 744 and an average loan-to-value ratio of 5250 percent.

At MarchJune 31,30, 2026, other loans decreased $67$106 million compared to December 31, 2025, primarily driven by payoffs at par.

Other loans primarily consist of HELOANs, second mortgage loans, and HELOCs. As of MarchJune 31,30, 2026, loans in this portfolio had an average current FICO score of 758.759.

Loans held for sale at MarchJune 31,30, 2026 decreased $32$57 million compared to December 31, 2025, primarily due to the completion of loan sales during the threesix months ended MarchJune 31,30, 2026.

The ACL on loans and leases as of June 30, 2026 decreased $76$161 million from December 31, 2025 to March 31, 2026.2025. The decrease was primarily driven by thecharged-off paydownloans ofwhich had specific reserves and declines in our higher-risk multi-family and CRE portfoliosportfolios, partiallyprimarily offsetfrom by growth in our lower-risk C&I portfolio.payoffs.

(1)Excludes $7$5 million and $30 million of non-accrual held for sale loans at MarchJune 31,30, 2026 and December 31, 2025, respectively.

The following table sets forth the changes in non-accrual loans for the threesix months ended MarchJune 31,30, 2026:

During the threesix months ended MarchJune 31,30, 2026 non-accrual loans decreased $300$175 million primarily due to the resolution of a single borrower relationship undergoing bankruptcy proceedings. Approximately 3340 percent of our non-accrual loans are current on their contractual payment terms.

As of MarchJune 31,30, 2026, we had $32$51 million of loans 90 days or more past due that were still accruing interest compared to no loans 90 days or more past due and still accruing interest as of December 31, 2025.

At MarchJune 31,30, 2026, debt securities available-for-sale decreasedincreased $1.2$852 billionmillion compared to December 31, 2025. The decreaseincrease was primarily due to scheduledour principaldecision paydownsto andreinvest maturitiescash ininto thehigher normalearning course of business.assets. At MarchJune 31,30, 2026, 2621 percent of our portfolio is comprised of floating rate securities.

At MarchJune 31,30, 2026, debt securities available-for-sale had an estimated weighted average life of 4 years compared to 5 years at December 31, 2025. Mortgage-related securities included in debt securities available-for-sale were $11.8$13.9 billion and $13.0 billion at MarchJune 31,30, 2026 and December 31, 2025, respectively.

The following table summarizes the weighted average yields of debt securities available-for-sale for the maturities at MarchJune 31,30, 2026:

Total deposits at MarchJune 31,30, 2026 increased $832$1.5 millionbillion compared to December 31, 2025, primarily duedriven toby growth in money market accountscommercial and custodialprivate interest-bearingbank checking accounts,deposits, partially offset by a decline in non-custodial non-interest bearing deposits and the continued pay down oflower brokered CDs. The shift in deposit mix reflects our continued focus on reducing our reliance on wholesale funding sources.deposits.

(1) Includes brokered certificates of deposit of $2.1$2.2 billion and $2.3 billion at MarchJune 31,30, 2026 and December 31, 2025, respectively. Brokered certificates of deposit with balances in excess of $250,000 are fully insured by the FDIC as each of the ultimate owners of the funds maintain balances below FDIC insurance limits.

At MarchJune 31,30, 2026, our deposit base included $13.6$14.5 billion of uninsured deposits that are uninsured or not collateralized by securities or letters of credit. Our uninsured deposits are the portion of deposit accounts that exceed the FDIC insurance limit.

As of MarchJune 31,30, 2026, total bank liquidity exceeds the balance of our uninsured deposits by $13.7$12.7 billion.

At MarchJune 31,30, 2026 total borrowed funds decreased $998$1.2 millionbillion compared to December 31, 2025 primarily due to our continued strategy of reducing higher-cost wholesale borrowings.

FHLB advances are secured by eligible collateral in the form of loans and securities, under blanket collateral agreements with the FHLB. As of MarchJune 31,30, 2026 and December 31, 20252025, our wholesale borrowings had $250 million and $250 million of callable features, respectively.

It is our practice to continually review the risk in our loan portfolio. For our multi-family and CRE loan portfolios, we receive financial information from borrowers annually and in some cases more frequently. Generally, updated annual borrower financial information is received during the second calendar quarter. Upon receipt of the borrower financial information, we perform an analysis to determine whether the cash flow from the underlying collateral is sufficient to meet the contractual loan payments, commonly referred to as the DSCR. We consider the ability to cover debt service based upon the current contractual rate or, when a borrower’s initial fixed rate period expires in the near future, the lowest contractual rate reset option available under the loan terms using the current level for referenced indices. Loans that do not have a DSCR of 1.0 or greater are evaluated for a potential downgrade to substandard or non-accrual risk rating. All substandard loans, including non-accrual loans, are appraised at the time of downgrade and are re-appraised annually. Based upon this appraisal the loan is evaluated to determine if an adjustment to the carrying amount is required. The rent freeze applicable to rent-regulated multi-family apartment buildings in New York City, as approved by its Rent Guidelines Board in June 2026 and effective in October 2026, could increase credit risk for loans secured by multi-family properties in New York City by limiting rental revenue growth against rising operating costs.

As of MarchJune 31,30, 2026, $595$1.6 millionbillion of multifamily loans have reached their repricing date. Approximately, 8893 percent of the loans that repriced during 2026 are current on their contractual payments or paid off during the year.

Substandard and Non-Accrual loans ("Classified Loans") reflect the potential that a loss may occur if deficiencies in the primary source of repayment are unable to be corrected and borrowers are unwilling or unable to otherwise support the loans. Classified Loans at MarchJune 31,30, 2026 and December 31, 2025 were $8.7$8.5 billion and $9.7 billion, respectively. The decrease in Classified Loans is primarily attributable to the par payoffs of multi-family and CRE substandard loans and the resolution of a single borrower relationship undergoing bankruptcy proceedings.

In accordance with our charge-off policy, collateral-dependent loans are written down to their current appraised values less costs to sell. We actively pursue borrowers who are delinquent in repaying their loans in an effort to collect payment. In addition, outside counsel with experience in foreclosure proceedings are retained to support these efforts. Gross charge-offs of $99$193 million were recorded on multi-family and CRE loans during the threesix months ended MarchJune 31,30, 2026, primarily driven by appraisals received on those loans and the resolution of a single borrower relationship undergoing bankruptcy proceedings.proceedings during the three months ended March 31, 2026.

Our funding primarily stems from a diverse combination of business activities. The primary source of funding is our retail and institutional deposit base. Customer deposits provide us with a relatively stable, low-cost source of funding. The majority of our customer deposits are covered by FDIC deposit insurance with $13.6$14.5 billion of deposits that are uninsured or not collateralized by securities or letters of credit as of MarchJune 31,30, 2026, representing 2021 percent of our overall deposit base as of that date. We also obtain funding through various wholesale funding channels, including $10.2$9.9 billion of secured borrowings from the FHLB and an active brokered CDs issuance program with $2.1 billion outstanding as of MarchJune 31,30, 2026.

We maintain credit ratings from three rating agencies: Moody’s, Fitch and DBRS. As of AprilJuly 30,31, 2026, our credit ratings were as follows:

DuringIn the three months ended March 31,April 2026, FitchMoody’s upgraded our credit ratings. Subsequently,This inupgrade Aprilreflects 2026, Moody’s also upgraded our ratings. Both upgrades reflectthe continued improvement in our credit profile.

For example, we offer CDs with contractual terms to our customers and also borrow funds under contract from the FHLB. These contractual obligations are reflected in the Condensed Consolidated Statements of Condition under “Deposits” and “Borrowed funds,” respectively. At MarchJune 31,30, 2026, we had CDs of $20.7$20.5 billion and long-term debt (defined as borrowed funds with an original maturity one year or more) of $7.7$6.7 billion.

We also are obligated under certain non-cancelable operating leases on the buildings and land we use in operating our branch network and in performing our back-office responsibilities. These obligations are included within Other liabilities within the Condensed Consolidated Statements of Condition and totaled $415$418 million at MarchJune 31,30, 2026, a decrease of $12$9 million compared to $427 million at December 31, 2025.

At MarchJune 31,30, 2026, we also had commitments 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. 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 Income (Loss).

At MarchJune 31,30, 2026, our total liquidity position was $27.3$27.2 billion and we expect that our funding will be sufficient to fulfill our cash obligations and commitments when they are due both in the short term and long term.

For MarchJune 31,30, 2026, we did not engage in any off-balance sheet transactions that we expect to have a material effect on our financial condition, results of operations or cash flows.