# Flagstar Bank, National Association: Form 10-Q for the period ended Mar 31, 2025

- Company: [Flagstar Bank, National Association](/companies/flg.md) (CIK 910073)
- Form: 10-Q
- Filed: 2025-05-09
- Accepted by EDGAR: May 9, 2025, 16:05 ET
- Period: 2025-03-31
- Accession: 0000910073-25-000076
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/910073/000091007325000076/fbc-20250331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/910073/000091007325000076/

## Management's discussion and analysis

As filed, 75,033 characters.

### RESULTS OF OPERATIONS

### Background

Flagstar Financial, Inc. is the parent company of Flagstar Bank, N.A., one of the largest regional banks in the country. The Company is headquartered in Hicksville, New York. At March 31, 2025, the Company had $97.6 billion of assets, $67.1 billion of loans, deposits of $73.9 billion, and total stockholders’ equity of $8.2 billion.

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.

We operate in a single reportable segment and have identified one reporting unit which is the same as our operating segment. In the future we plan to continue to assess our reportable segments and reporting units, which may result in a change to either or both in future reporting periods. Please refer to Note 18 - Segment Reporting.

On June 27, 2024, we announced a 1 for 3 reverse stock split, effective July 11, 2024. This reverse stock split is reflected retroactively in all periods presented in this report.

### Net Loss

For the three months ended March 31, 2025, we reported a net loss of $100 million compared to a net loss of $188 million for the three months ended December 31, 2024. The net loss attributable to common stockholders, which includes the impact from preferred dividends, for the three months ended March 31, 2025 was $108 million, or $0.26 per diluted share compared to a net loss attributable to common stockholders of $196 million, or $0.47 per diluted share for the three months ended December 31, 2024 and a net loss attributable to common stockholders of $335 million, or $1.36 per diluted share for the three months ended March 31, 2024. The net loss for the three months ended December 31, 2024 included a gain on the sale of our mortgage third party origination business, and mortgage servicing business ("Mortgage Operations") of $89 million, long term asset impairment of $77 million, and severance cost of $31 million. The net loss for the three months ended March 31, 2024 included the reduction in the Signature Transaction bargain purchase gain of $121 million.

### Net Interest Income

Net interest income is our primary source of income. The amount of our net interest income is a function of the amount of interest-earning assets we hold, the manner in which we fund these assets, including interest-bearing liabilities, and the spread between the interest rates we earn on assets and the interest rates we pay on liabilities. These factors are influenced by both the pricing and mix of our interest-earning assets and our interest-bearing liabilities which, in turn, are impacted by various external factors, including the local economy, competition for loans and deposits, the monetary policy of the Federal Open Market Committee, and prevailing interest rates.

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 interest rates, 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 interest rates. However, a sizable portion of our held for investment loans have fixed rates and generally reset to the then current intermediate-term interest rates when they reach repricing dates.

The following table sets forth information regarding our net interest income and average balance sheet for the periods indicated. The average balance is derived from daily calculations of average balances.

*(in millions)*

| ASSETS: Interest-earning assets: | Three Months Ended, March 31, 2025 Average Balance | Interest | Average Yield/Cost | December 31, 2024 Average Balance | Interest | Average Yield/Cost | March 31, 2024 Average Balance | Interest | Average Yield/Cost |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Mortgage and other loans, net (1) | $68,212 | $860 | 5.06% | $71,727 | $948 | 5.28% | $84,123 | $1,193 | 5.68% |
| Securities (2) | 13,067 | 148 | 4.59% | 12,347 | 144 | 4.77% | 11,576 | 123 | 4.30% |
| Interest-earning cash and cash equivalents | 14,344 | 156 | 4.42% | 22,048 | 266 | 4.79% | 14,345 | 197 | 5.52% |
| Total interest-earning assets | $95,623 | $1,164 | 4.90% | $106,122 | $1,358 | 5.11% | $110,044 | $1,513 | 5.51% |
| Non-interest-earning assets | 3,484 |  |  | 4,367 |  |  | 5,682 |  |  |
| Total assets | $99,107 |  |  | $110,489 |  |  | $115,726 |  |  |
| **LIABILITIES AND STOCKHOLDERS' EQUITY:** |  |  |  |  |  |  |  |  |  |
| Interest-bearing deposits: |  |  |  |  |  |  |  |  |  |
| Interest-bearing checking and money market accounts | $21,023 | $167 | 3.23% | $23,007 | $205 | 3.54% | $26,428 | $232 | 3.54% |
| Savings accounts | 14,349 | 111 | 3.14% | 13,996 | 124 | 3.51% | 8,400 | 47 | 2.24% |
| Certificates of deposit | 26,355 | 308 | 4.74% | 28,573 | 362 | 5.04% | 24,711 | 291 | 4.74% |
| Total interest-bearing deposits | $61,727 | $586 | 3.85% | $65,576 | $691 | 4.19% | $59,539 | $570 | 3.85% |
| Total borrowed funds | $14,377 | $168 | 4.71% | $17,940 | $206 | 4.56% | $25,728 | $319 | 4.99% |
| Total interest-bearing liabilities | $76,104 | $754 | 4.02% | $83,516 | $897 | 4.27% | $85,267 | $889 | 4.19% |
| Non-interest-bearing deposits | 13,068 |  |  | 15,959 |  |  | 19,355 |  |  |
| Other liabilities | 1,732 |  |  | 2,440 |  |  | 2,563 |  |  |
| Total liabilities | $90,904 |  |  | $101,915 |  |  | $107,185 |  |  |
| Stockholders’ and mezzanine equity | 8,203 |  |  | 8,574 |  |  | 8,541 |  |  |
| Total liabilities and stockholders’ equity | $99,107 |  |  | $110,489 |  |  | $115,726 |  |  |
| Net interest income/interest rate spread |  | $410 | 0.88% |  | $461 | 0.84% |  | $624 | 1.32% |
| Net interest margin |  |  | 1.74% |  |  | 1.73% |  |  | 2.28% |
| Ratio of interest-earning assets to interest-bearing liabilities |  |  | 1.26 x |  |  | 1.27 x |  |  | 1.29 x |

(1) Comprised of Loans and leases held for investment, net and Loans held for sale.

(2) Comprised of Debt securities available-for-sale at amortized cost, Equity investments with readily determinable fair values, at fair value and Federal Home Loan Bank stock and Federal Reserve Bank stock, at cost.

The following table summarizes the change in net interest income attributable to changes in rate and volume:

*(in millions)*

| INTEREST-EARNING ASSETS: | Three Months Ended, March 31, 2025 compared to December 31, 2024 Increase/(Decrease) Due to: Volume | Rate | Net | March 31, 2025 compared to March 31, 2024 Increase/(Decrease) Due to: Volume | Rate | Net |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Mortgage and other loans, net | $(46) | $(42) | $(88) | $(214) | $(119) | $(333) |
| Securities | 8 | (4) | 4 | 17 | 8 | 25 |
| Interest earning cash & cash equivalent | (91) | (19) | (110) | — | (41) | (41) |
| Total interest-earnings assets | $(129) | $(65) | $(194) | $(197) | $(152) | $(349) |
| **INTEREST-BEARING LIABILITIES:** |  |  |  |  |  |  |
| Interest-bearing checking and money market accounts | $(17) | $(21) | $(38) | $(46) | $(19) | $(65) |
| Savings accounts | 2 | (15) | (13) | 40 | 24 | 64 |
| Certificates of deposit | (27) | (27) | (54) | 20 | (3) | 17 |
| Total borrowed funds | $(41) | $3 | $(38) | $(136) | $(15) | $(151) |
| Total interest-bearing liabilities | $(83) | $(60) | $(143) | $(122) | $(13) | $(135) |
| Change in net interest income | $(46) | $(5) | $(51) | $(75) | $(139) | $(214) |

#### Comparison to Prior Quarter

During the three months ended March 31, 2025, Net Interest Margin (“NIM”) stabilized compared to the three months ended December 31, 2024. Additionally, net interest income decreased $51 million compared to the three months ended December 31, 2024, primarily as a result of lower average mortgage and other loans due to the strategic reduction of our Multi-Family (“MF”), Commercial Real Estate (“CRE”) and non-core Commercial and Industrial ("C&I") loans that began in early 2024, lower overall market interest rates, and lower average interest earning cash and cash equivalents primarily due to the pay down of wholesale borrowings. The decrease in net interest income was partially offset by the payoff of brokered certificates of deposit reflecting our strategy to reduce higher cost funding, a reduction in custodial deposits associated with the sale of our Mortgage Operations during the three months ended December 31, 2024, and lower overall market interest rates.

#### Comparison to Prior Year to Date

During the three months ended March 31, 2025, NIM decreased by 54 basis points compared to the three months ended March 31, 2024. Additionally, net interest income decreased $214 million compared to the prior year, primarily as a result of lower average mortgage and other loans due to the sale of our Mortgage Operations during the three months ended December 31, 2024, and our warehouse lending portfolio during the three months ended September 30, 2024, the strategic reduction in MF, CRE, and C&I loans and lower interest rates. The decrease was partially offset by lower average borrowed funds driven by the pay down of wholesale borrowings during 2024.

### Provision for Credit Losses

The following table summarizes our Provision for credit losses for the respective periods:

*(in millions)*

|  | Three Months Ended, March 31, 2025 | December 31, 2024 | March 31, 2024 | March 31, 2025 compared to (%): December 31, 2024 | March 31, 2024 |
| --- | ---: | ---: | ---: | ---: | ---: |
| Provision for credit losses | $79 | $145 | $315 | (46)% | (75)% |

#### Comparison to Prior Quarter

For the three months ended March 31, 2025, the provision for credit losses decreased $66 million compared to the three months ended December 31, 2024. This decrease is primarily due to lower net charge-offs, our continued focus on credit reviews and the receipt of recent appraisals. Additionally, our Allowance for Credit Losses ("ACL") balance decreased since December 31, 2024, as result of the on-going strategic reduction of our MF, CRE and non-core C&I portfolios. The reduction in our ACL balance was partially offset by the negatively trending macro-economic environment.

#### Comparison to Prior Year to Date

For the three months ended March 31, 2025, the provision for credit losses decreased $236 million compared to the three months ended March 31, 2024. This decrease is primarily due to lower net charge-offs, our continued focus on credit reviews and the receipt of recent appraisals. Additionally, our ACL balance decreased since March 31, 2024, as result of the on-going strategic reduction of our MF, CRE and non-core C&I portfolios. The reduction in our ACL balance was partially offset by the negatively trending macro-economic environment.

### Non-Interest Income

The following table summarizes our non-interest income for the respective periods:

*(in millions)*

|  | Three Months Ended, March 31, 2025 | December 31, 2024 | March 31, 2024 | March 31, 2025 compared to (%): December 31, 2024 | March 31, 2024 |
| --- | ---: | ---: | ---: | ---: | ---: |
| Fee income | $22 | $33 | $34 | (33)% | (35)% |
| Net gain on mortgage/servicing sale | — | 89 | — | NM | NM |
| Net return on mortgage servicing rights | — | (1) | 21 | NM | NM |
| Bank-owned life insurance | 10 | 10 | 10 | —% | —% |
| Net gain on loan sales and securitizations | 13 | 5 | 20 | 160% | (35)% |
| Net loan administration income (loss) | 4 | (1) | 16 | NM | (75)% |
| Other | 31 | 29 | 29 | 7% | 7% |
| Bargain purchase gain | — | — | (121) | NM | NM |
| Total non-interest income | $80 | $164 | $9 |  |  |

#### Comparison to Prior Quarter

For the three months ended March 31, 2025, non-interest income decreased by $84 million compared to the three months ended December 31, 2024. The decline in non-interest income was primarily due to the non-recurrence of an $89 million gain and lower fee income as a result of the sale of our Mortgage Operations during the three months ended December 31, 2024, partially offset by net gains on MF and CRE loan sales.

#### Comparison to Prior Year to Date

For the three months ended March 31, 2025, non-interest income increased $71 million compared to the three months ended March 31, 2024. The increase in non-interest income was primarily due to the non-recurrence of the $121 million reduction in the Signature Transaction bargain purchase gain, partially offset by lower mortgage servicing rights fees, lower fee income, and lower net loan administration income as a result of the sale of our Mortgage Operations during the three months ended December 31, 2024.

### Non-Interest Expense

The following table summarizes our non-interest expense for the respective periods:

*(in millions)*

| Operating expenses: | Three Months Ended, March 31, 2025 | December 31, 2024 | March 31, 2024 | March 31, 2025 compared to (%): December 31, 2024 | March 31, 2024 |
| --- | ---: | ---: | ---: | ---: | ---: |
| Compensation and benefits | $244 | $302 | $333 | (19)% | (27)% |
| FDIC insurance | 50 | 74 | 50 | (32)% | —% |
| Occupancy and equipment | 55 | 48 | 52 | 15% | 6% |
| General and administrative | 147 | 252 | 186 | (42)% | (21)% |
| Total operating expense | $496 | $676 | $621 |  |  |
| Intangible asset amortization | 28 | 31 | 35 | (10)% | (20)% |
| Merger-related and restructuring expenses | 8 | 11 | 43 | (27)% | (81)% |
| Total non-interest expense | $532 | $718 | $699 | (26)% | (24)% |

#### Comparison to Prior Quarter

Total non-interest expenses decreased $186 million compared to the three months ended December 31, 2024, primarily due to a decrease in general and administrative expenses primarily due to the non-recurrence of the asset impairment charges of $77 million, lower compensation and benefits costs stemming from the actions taken to optimize costs which continued in the three months ended March 31, 2025, lower FDIC insurance costs as a result of a lower asset base and lower brokered deposits due to the sale of our Mortgage Operations during the three months ended December 31, 2024, and the continued execution of our cost savings initiatives.

#### Comparison to Prior Year to Date

Total non-interest expenses decreased $167 million compared to the three months ended March 31, 2024, primarily due to lower compensation and benefits costs stemming from the actions taken to optimize costs which continued in the three months ended March 31, 2025, a $39 million decrease in general and administrative expenses primarily due to the sale of our Mortgage Business, the continued execution of our cost saving initiatives, and lower merger-related expenses.

### Income Tax Benefit

The following table summarizes our income tax benefit and effective tax rate for the respective periods:

*(in millions)*

|  | Three Months Ended, March 31, 2025 | December 31, 2024 | March 31, 2024 | March 31, 2025 compared to (%): December 31, 2024 | March 31, 2024 |
| --- | ---: | ---: | ---: | ---: | ---: |
| Income tax (benefit) | $(21) | $(50) | $(54) | (58)% | (61)% |
| Effective tax rate | 17.8% | 21.3% | 14.3% |  |  |

We compute our tax benefit for interim periods by applying the estimated annual effective tax to year-to-date (Loss) before income taxes and adjust for discrete items that occur in the quarter. For the three months ended March 31, 2025, we were unable to make a reliable estimate of our estimated annual effective tax rate as a result of our expected break-even results for 2025; therefore we used our actual effective tax rate to compute our income tax benefit for the three months ended March 31, 2025.

#### Comparison to Prior Quarter

Income tax benefit decreased $29 million compared to the three months ended December 31, 2024 primarily as a result of the reduction in our pre-tax loss.

#### Comparison to Prior Year to Date

Income tax benefit decreased $33 million compared to the three months ended March 31, 2024 primarily as a result of the reduction in our pre-tax loss, partially offset by the tax effect of the adjustment to the bargain purchase gain recorded net of tax during the three months ended March 31, 2024.

### FINANCIAL CONDITION

### Loans and Leases

The following table summarizes the composition of our loan portfolio:

*(in millions)*

|  | March 31, 2025 Amount | Percent of Loans Held for Investment | December 31, 2024 Amount | Percent of Loans Held for Investment |
| --- | ---: | ---: | ---: | ---: |
| Multi-family | $33,437 | 50.2% | $34,093 | 49.9% |
| Commercial real estate(1) | 11,510 | 17.3 | 11,836 | 17.4 |
| One-to-four family first mortgage | 5,187 | 7.8 | 5,201 | 7.6 |
| Commercial and industrial(2) | 14,742 | 22.1 | 15,376 | 22.5 |
| Other loans | 1,716 | 2.6 | 1,766 | 2.6 |
| Total loans and leases held for investment | $66,592 | 100.0% | $68,272 | 100.0% |
| Allowance for credit losses on loans and leases | (1,168) |  | (1,201) |  |
| Total loans and leases held for investment, net | $65,424 |  | $67,071 |  |
| Loans held for sale | 531 |  | 899 |  |
| Total loans and leases, net | $65,955 |  | $67,970 |  |

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

(2) Includes Lease financing.

Total loans and leases held for investment decreased $1.7 billion at March 31, 2025 compared to December 31, 2024, primarily as a result of our continued strategy of diversifying our loan portfolio by reducing our MF, CRE and non-core C&I loan exposure, partially offset by $769 million in originations within our C&I portfolio.

#### Loan Maturity and Repricing

The following table sets forth loans with adjustable rates ("Option Loans") by year of repricing and fixed rate loans ("Non-Option Loans") by year of contractual maturity:

*(in millions)*

| Repricing / Contractual Maturity Year | March 31, 2025 Multi-Family Option Loans by Repricing Date | Non-Option Loans by Contractual Maturity | Commercial Real Estate Option Loans by Repricing Date | Non-Option Loans by Contractual Maturity | Total(1) |
| --- | ---: | ---: | ---: | ---: | ---: |
| 2025 | $2,597 | $1,530 | $1,149 | $829 | $6,105 |
| 2026 | 4,072 | 1,079 | 804 | 626 | 6,581 |
| 2027 | 7,513 | 1,166 | 939 | 705 | 10,323 |
| 2028 | 3,775 | 2,060 | 382 | 943 | 7,160 |
| 2029 | 2,313 | 1,877 | 242 | 636 | 5,068 |
| 2030 | 75 | 1,576 | 11 | 210 | 1,872 |
| 2031+ | 88 | 3,614 | 5 | 807 | 4,514 |
| Total amounts due or repricing, gross | $20,433 | $12,902 | $3,532 | $4,756 | $41,623 |

(1) Excludes Specialty Finance commercial real estate loans and multi-family loans serviced-by-others totaling $454 million and $96 million respectively. Amounts presented reflect unpaid principal balance; total amortized cost adjustments were $64 million.

Option loans offer the borrower the ability to reprice to a fixed rate after the initial period. If not elected, the loan defaults to variable rate. Option loans in the table are shown as being due in the period the interest rate is subject to change. Non-Option loans are beyond the option date and are reflected by maturity. Risks associated with loan repricing are discussed in the Credit Risk section.

#### Multi-Family Loans

Our MF loan portfolio decreased $656 million at March 31, 2025 compared to December 31, 2024, primarily due to our strategic decision to continue to diversify our loan portfolio by reducing our exposure to MF loans.

The majority of our multi-family loans are non-recourse and are secured by rental apartment buildings. At March 31, 2025, $18.6 billion or 56 percent of the Company’s total MF 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.

To mitigate our exposure to rent regulated properties, we are curtailing future originations of such 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. Additionally, we are strategically diversifying our loan portfolio to shift from MF loans to other loan sectors.

Historically, our MF 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. 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 $11.5 billion outstanding with interest-only payments at March 31, 2025. The weighted average interest-only period remaining was 19.3 months as of March 31, 2025, with approximately 73 percent of these loans entering their amortization period by the end of 2025.

We continue to monitor our loans held for investment portfolio and the related allowance for credit losses, 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, by themselves, 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.

The following table presents a geographical analysis of the multi-family loans in our held-for-investment loan portfolio:

*(in millions)*

| New York City: | March 31, 2025 Multi-Family Loans Amount | Percent of Total | December 31, 2024 Multi-Family Loans Amount | Percent of Total |
| --- | ---: | ---: | ---: | ---: |
| Manhattan | $6,098 | 18% | $6,246 | 18% |
| Brooklyn | 5,187 | 16 | 5,375 | 16 |
| Bronx | 3,201 | 10 | 3,272 | 10 |
| Queens | 2,492 | 8 | 2,526 | 7 |
| Staten Island | 78 | — | 98 | — |
| Total New York City | $17,056 | 52% | $17,517 | 51% |
| New Jersey | $4,472 | 13% | $4,509 | 13% |
| Long Island | 461 | 1 | 484 | 1 |
| Total Metro New York | $21,989 | 66% | $22,510 | 66% |
| Other New York State | $1,117 | 3% | $1,188 | 3% |
| Pennsylvania | 3,275 | 10 | 3,375 | 10 |
| Florida | 1,549 | 5 | 1,555 | 5 |
| Ohio | 1,011 | 3 | 1,007 | 3 |
| All other states | 4,496 | 13 | 4,458 | 13 |
| Total | $33,437 | 100% | $34,093 | 100% |

#### Commercial Real Estate

At March 31, 2025, commercial real estate loans decreased $326 million compared to December 31, 2024, primarily due to our strategic decision to continue to diversify our loan portfolio by reducing our exposure to CRE loans.

Certain of our CRE loans may contain an interest-only period which typically does not exceed three years; however, these loans are underwritten on a fully amortizing basis, including calculation of the debt service coverage ratio. Whether a borrower qualifies for an interest-only period is based on the individual credit profile of the borrower, particularly the loan-to-value of the property.

Substantially all CRE loans we originate are non-recourse and are secured by income-producing properties such as office buildings, retail centers, mixed-use buildings, and multi-tenanted light industrial properties. Declines in occupancy levels for office space continue to impact borrowers’ net operating income and their ability to cover debt service.

The following table presents an analysis of the property types that collateralize the CRE loans in our held-for-investment portfolio:

*(in millions)*

|  | March 31, 2025 Commercial Real Estate Loans Amount | Percent of Total | December 31, 2024 Commercial Real Estate Loans Amount | Percent of Total |
| --- | ---: | ---: | ---: | ---: |
| Office non-owner occupied | $2,245 | 20% | $2,271 | 19% |
| Retail (includes owner and non-owner occupied) | 1,899 | 16 | 1,934 | 16 |
| Industrial | 4,655 | 40 | 4,984 | 42 |
| Other | 2,711 | 24 | 2,647 | 23 |
| Total(1) | $11,510 | 100% | $11,836 | 100% |

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

The following table presents a geographical analysis of the CRE loans in our held-for-investment loan portfolio:

*(in millions)*

|  | March 31, 2025 Commercial Real Estate Loans Amount | Percent of Total | December 31, 2024 Commercial Real Estate Loans Amount | Percent of Total |
| --- | ---: | ---: | ---: | ---: |
| New York | $4,549 | 39% | $4,634 | 39% |
| Michigan | 1,147 | 10 | 1,220 | 10 |
| New Jersey | 737 | 6 | 738 | 6 |
| California | 774 | 7 | 737 | 6 |
| Florida | 761 | 7 | 735 | 6 |
| Pennsylvania | 299 | 3 | 301 | 3 |
| All other states | 3,243 | 28 | 3,471 | 30 |
| Total(1) | $11,510 | 100% | $11,836 | 100% |

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

#### Commercial and Industrial

Our C&I loan portfolio decreased $634 million at March 31, 2025 compared to December 31, 2024, primarily due to a $1.4 billion reduction resulting from our strategic decision to continue to diversify our loan portfolio by reducing our exposure to non-core C&I loans, partially offset by new originations of $769 million.

A broad range of C&I loans, both collateralized and unsecured, are made available to businesses for working capital (including inventory and accounts receivable), business expansion, the purchase of machinery and equipment, and other general corporate needs. In determining the term and structure of C&I, several factors are considered, including the purpose, the collateral, and the anticipated sources of repayment. C&I loans are often secured by business assets and personal guarantees of the borrower and include financial covenants to monitor the borrower’s financial stability. We continue to add experienced commercial, corporate and specialized industries banking professionals and credit underwriting and portfolio management personnel which will impact our noninterest expense as we continue to strategically diversify our loan portfolio to shift from multi-family loans to other portfolios, most notably C&I.

Included in our C&I portfolio at March 31, 2025, specialty finance loans and leases totaled $3.7 billion, or 5.5 percent of total loans held for investment, reflecting a decrease of $180 million or 5 percent compared to December 31, 2024. The decrease in specialty finance loans is a result of our decision to run off certain non-core loans as part of our overall loan portfolio strategy.

These loans are generally made to large corporate obligors, many of which are publicly traded, carry investment grade or near-investment grade ratings, and participate in stable industries nationwide.

The specialty finance loans and leases we fund fall into three categories: asset-based loans, dealer floor-plan lending and equipment loan and lease financing. Each of these credits is secured with a perfected first security interest in, or outright ownership of, the underlying collateral, and structured as senior debt or as a non-cancelable lease. As of March 31, 2025, 86 percent of specialty finance loan commitments are structured as floating rate obligations.

#### One-to-Four Family Loans

One-to-four family loans decreased $14 million at March 31, 2025 compared to December 31, 2024, primarily driven by payoffs at par.

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 March 31, 2025, excluding loans with government guarantees, loans in this portfolio had an average current FICO score of 743 and an average loan-to-value ratio of 50 percent.

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 the U.S. Department of Housing and Urban Development (if foreclosure timelines are met), which is not paid by the Federal Housing Administration until claimed.

#### Other Loans

At March 31, 2025, other loans decreased $50 million compared to December 31, 2024, primarily driven by payoffs at par.

Our home equity portfolio includes home equity loans, second mortgage loans, and home equity line of credits. As of March 31, 2025, loans in this portfolio had an average current FICO score of 751.

#### Loans Held for Sale

Loans held for sale at March 31, 2025 decreased $368 million compared to December 31, 2024, primarily due to the continued run-off of held for sale loans following the sale of our Mortgage Operations and sales of commercial loans, partially offset by mortgage originations during the three months ended March 31, 2025.

We classify loans as held for sale when we originate or purchase loans that we intend to sell and when we change our intent with regard to loans originated as held for investment. Our one-to-four family mortgage loans held for sale are carried at fair value. Other loans held for sale are carried at the lower of amortized cost or market. These loans are typically recorded based on recent appraisals less estimated disposal costs. 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.

#### Assets Quality Measures

The following table presents the Company's asset quality measures at the respective dates:

|  | March 31, 2025 | December 31, 2024 |
| --- | ---: | ---: |
| Non-accrual loans to total loans held for investment | 4.93% | 3.83% |
| Non-performing assets to total assets | 3.37 | 2.62 |
| Allowance for credit losses on loans and leases to non-accrual loans | 35.61 | 45.93 |
| Allowance for credit losses on loans and leases to total loans held for investment | 1.75 | 1.76 |

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

#### Non-accrual Loans

The following table presents our non-accrual loans held for investment by loan type:

*(in millions)*

|  | March 31, 2025 | December 31, 2024 | Change |
| --- | ---: | ---: | ---: |
| Multi-family | $2,361 | $1,755 | $606 |
| Commercial real estate(1) | 589 | 564 | 25 |
| One-to-four family first mortgage | 77 | 70 | 7 |
| Commercial and industrial | 231 | 202 | 29 |
| Other Loans | 22 | 24 | (2) |
| Total non-accrual loans(2) | $3,280 | $2,615 | $665 |
| Repossessed assets | 12 | 14 | (2) |
| Total non-accrual loans and repossessed assets | $3,292 | $2,629 | $663 |

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

(2) Excludes $21 million of non-accrual held for sale loans.

Our total non-accrual loans increased $665 million at March 31, 2025 compared to December 31, 2024, primarily due to higher non-accrual MF loans as a result of one borrower relationship that was classified as non-accrual during the three months ended March 31, 2025.

Approximately 41 percent of our non-accrual loans are current on their contractual payment terms. In determining whether to place a loan on non-accrual we have considered whether a borrower will be able to service its debt under terms expected within the next 18 months based on current collateral and net operating income. Where net operating income is below the projected debt service and the collateral value is below the loan amount, we place loans on non-accrual.

The following table sets forth the changes in non-accrual loans at March 31, 2025:

*(in millions)*

|  |  |
| --- | ---: |
| Balance at December 31, 2024 | $2,615 |
| New non-accrual loans | 842 |
| Charge-offs | (43) |
| Transferred to held for sale | (25) |
| Loan payoffs, including dispositions and principal pay-downs | (102) |
| Restored to performing status | (7) |
| Balance at March 31, 2025 | $3,280 |

#### Delinquencies

The following table presents our loans 30 to 89 days past due by loan type and the changes in the respective balances.

*(in millions)*

| Loans 30 to 89 Days Past Due: | March 31, 2025 | December 31, 2024 | Change |
| --- | ---: | ---: | ---: |
| Multi-family | $806 | $749 | $57 |
| Commercial real estate(1) | 85 | 70 | 15 |
| One-to-four family first mortgage | 28 | 25 | 3 |
| Commercial and industrial | 92 | 110 | (18) |
| Other loans | 9 | 11 | (2) |
| Total loans 30-89 days past due | $1,020 | $965 | $55 |

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

#### Allowance for Credit Losses

The following table sets forth the allocation of the ACL on loans and leases at each period-end:

*(in millions)*

|  | March 31, 2025 Allowance for credit losses | Allowance as a percent of loans in each portfolio | Loans in each portfolio as a percent of total loans | December 31, 2024 Allowance for credit losses | Allowance as a percent of loans in each portfolio | Loans in each portfolio as a percent of total loans |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Multi-family loans | $609 | 1.82% | 50.2% | $639 | 1.87% | 49.9% |
| Commercial real estate loans(1) | 289 | 2.51 | 17.3 | 304 | 2.57 | 17.4 |
| One-to-four family first mortgage loans | 37 | 0.71 | 7.8 | 39 | 0.75 | 7.6 |
| Commercial and industrial | 167 | 1.13 | 22.1 | 151 | 0.98 | 22.5 |
| Other loans | 66 | 3.85 | 2.6 | 68 | 3.85 | 2.6 |
| Total loans | $1,168 | 1.75% | 100.0% | $1,201 | 1.76% | 100.0% |

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

The ACL on loans and leases decreased $33 million from December 31, 2024 to March 31, 2025. This decrease is primarily due to lower net charge-offs, our continued focus on credit reviews and the receipt of recent appraisals. Additionally, our ACL balance decreased since December 31, 2024, as result of the on-going strategic reduction of our MF, CRE and non-core C&I portfolios. The reduction in our ACL balance was partially offset by the negatively trending macro-economic environment.

The ACL on loans and leases to total loans held for investment ratio decreased to 1.75 percent at March 31, 2025, compared to 1.76 percent at December 31, 2024. 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.

Our ACL is determined based on quantitative modeling that incorporates various 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 rent-regulated multi-family loans. We have also considered our recent appraisal experience and the valuation risk present in loans with outstanding appraisals in estimating the qualitative component of our allowance for credit losses.

#### Charge-offs

The following table presents information on the Company's net charge-offs:

*(in millions)*

| Charge-offs: | Three Months Ended, March 31, 2025 | March 31, 2024 |
| --- | ---: | ---: |
| Multi-family | $80 | $11 |
| Commercial real estate(1) | 2 | 64 |
| One-to-four family residential | 1 | — |
| Commercial and industrial | 34 | 11 |
| Other | 7 | 5 |
| Total charge-offs | $124 | $91 |
| **Recoveries:** |  |  |
| Multi-family | $— | $(1) |
| Commercial real estate(1) | — | — |
| Commercial and industrial | (6) | (7) |
| Other | (3) | (2) |
| Total recoveries | $(9) | $(10) |
| Net charge-offs | $115 | $81 |

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

### Securities

#### Debt Securities Available-for-Sale

Debt securities available-for-sale increased $2.4 billion to $12.8 billion, or 13 percent of total assets, at March 31, 2025, compared to $10.4 billion, or 10 percent of total assets, at December 31, 2024. At March 31, 2025, 24 percent of our portfolio is comprised of floating rate securities.

As of March 31, 2025, the net unrealized loss on securities available for sale, net of tax, was $560 million, compared to $653 million at December 31, 2024, a decrease of $93 million, reflecting changes in market interest rates.

At March 31, 2025, debt securities available-for-sale had an estimated weighted average life of 5 years compared to 6 years at December 31, 2024. Mortgage-related securities included in debt securities available-for-sale were $10 billion and $8.6 billion at March 31, 2025 and December 31, 2024, respectively.

The following table summarizes the weighted average yields of debt securities available-for-sale for the maturities at March 31, 2025:

| Debt Securities Available-for-Sale: | Mortgage- Related Securities | U.S. Government and GSE Obligations | Corporate and Other Bonds | Asset-Backed Securities |
| --- | ---: | ---: | ---: | ---: |
| Due within one year | 3.52% | —% | —% | —% |
| Due from one to five years | 3.06 | 4.13 | 5.28 | — |
| Due from five to ten years | 2.46 | 1.61 | 5.48 | — |
| Due after ten years | 4.50 | — | 6.42 | 5.74 |
| Total debt securities available for sale | 4.42 | 2.62 | 5.46 | 5.74 |

18

### Deposits

We compete for deposits and customers through multiple channels, including our retail branch network, our private banking business and mobile and interest bank applications. Our ability to retain and attract deposits depends on numerous factors, including customer satisfaction, the rates of interest we pay, the types of products we offer and the attractiveness of their terms. The majority of our deposits are retail in nature (i.e., they are deposits we have gathered through our branches or retail deposits acquired through business combinations); however, we also utilize brokered deposits depending on their availability and pricing relative to other funding sources.

The following table sets forth the weighted average interest rates for each type of deposit:

*(in millions)*

|  | March 31, 2025 Amount | Percent of Total | Weighted Average Interest Rate | December 31, 2024 Amount | Percent of Total | Weighted Average Interest Rate |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Interest-bearing checking and money market accounts | $20,809 | 28% | 3.10% | $20,780 | 27% | 2.89% |
| Savings accounts | 14,465 | 20% | 3.08% | 14,282 | 19% | 3.22% |
| Certificates of deposit | 25,887 | 35% | 4.60% | 27,324 | 36% | 4.75% |
| Non-interest-bearing accounts | 12,745 | 17% | —% | 13,484 | 18% | —% |
| Total deposits | $73,906 | 100% | 3.09% | $75,870 | 100% | 3.12% |

Total deposits at March 31, 2025 decreased $2.0 billion compared to December 31, 2024, primarily due to the payoff of brokered certificates of deposit reflecting our strategy to reduce higher cost funding and custodial deposits as a result of the sale of our Mortgage Operations during the three months ended December 31, 2024, partially offset by an increase in non-service custodial deposits.

The following table presents the composition of the Company's brokered deposits for the periods presented:

*(in millions)*

|  | March 31, 2025 | December 31, 2024 |
| --- | ---: | ---: |
| Brokered interest-bearing checking and money market accounts | $244 | $714 |
| Brokered certificates of deposit | 8,072 | 9,510 |
| Total Brokered Deposits(1) | $8,316 | $10,224 |

(1) Excludes reciprocal deposits.

The following table indicates the amount of time deposits, by account, that are in excess of $250,000 per depositor by time remaining until maturity:

*(in millions)*

|  | March 31, 2025 | December 31, 2024 |
| --- | ---: | ---: |
| 3 months or less | $3,042 | $3,530 |
| Over 3 months through 6 months | 3,988 | 2,637 |
| Over 6 months through 12 months | 1,390 | 4,329 |
| Over 12 months | 2,669 | 2,099 |
| Total time deposits in excess of $250,000 per depositor(1) | $11,089 | $12,595 |

(1) Includes brokered deposit accounts. Each brokered deposit account has balances in excess of $250,000, the funds are fully insured by the FDIC as each of the ultimate owners of the funds maintain balances below FDIC insurance limits.

The following table indicates the amount of custodial deposits by source:

*(in millions)*

|  | March 31, 2025 | December 31, 2024 |
| --- | ---: | ---: |
| Custodial deposits from subservicing relationships | $1 | $947 |
| Non-servicing custodial deposits | 4,753 | 3,651 |
|  | $4,754 | $4,598 |

#### Uninsured Deposits

At March 31, 2025, our deposit base included $13.0 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 March 31, 2025 total bank liquidity represented 231 percent of our uninsured deposits.

### Borrowed Funds

The following table summarizes the Company's borrowed funds:

*(in millions)*

| Wholesale borrowings: | March 31, 2025 | December 31, 2024 |
| --- | ---: | ---: |
| FHLB advances | $13,150 | $13,400 |
| Total wholesale borrowings | $13,150 | $13,400 |
| Junior subordinated debentures | 583 | 582 |
| Subordinated notes | 445 | 444 |
| Total borrowed funds | $14,178 | $14,426 |

At March 31, 2025 total borrowed funds decreased $248 million compared to December 31, 2024 primarily due to the repayment of $250 million of FHLB advances.

At March 31, 2025, and December 31, 2024 our wholesale borrowings had $250 million of callable features.

See Note 9 - Borrowed Funds, in Item 1, “Financial Statements and Supplementary Data” for a further discussion of our wholesale borrowings, our junior subordinated debentures and subordinated debt.

### Federal Reserve and Federal Home Loan Bank Stock

*(in millions)*

| Federal Home Loan Bank stock, at cost: | March 31, 2025 | December 31, 2024 |
| --- | ---: | ---: |
| FHLB-NY stock, at cost | $587 | $598 |
| FHLB-Indianapolis stock, at cost | 255 | 329 |
| Total Federal Home Loan Bank stock, at cost: | $842 | $927 |
| Federal Reserve Bank stock, at cost | 219 | 219 |
| Federal Home Loan Bank stock and Federal Reserve Bank stock, at cost | $1,061 | $1,146 |

At March 31, 2025, the total FHLB and FRB stock, decreased $85 million, primarily due to a reduction in borrowings in the three months ended March 31, 2025. FHLB advances are secured by eligible collateral in the form of loans and securities, under blanket collateral agreements with the FHLB.

### Bank-Owned Life Insurance (BOLI)

*(in millions)*

|  | March 31, 2025 | December 31, 2024 |
| --- | ---: | ---: |
| Bank-owned life insurance | $1,615 | $1,605 |

At March 31, 2025, BOLI increased $10 million due to an increase in the cash surrender value of the underlying policies. Bank-owned life insurance is recorded at the total cash surrender value of the policies.

### Risk Governance Framework

The Risk Management Division is responsible for formalizing the Company’s Risk Appetite Statement, which reflects the Board's and Management’s tolerance for risks and is set in alignment with the budget, strategic and capital plans. Internal controls and ongoing monitoring processes capture and address heightened risks that threaten our ability to achieve the Company’s goals and objectives, including the recognition of safety and soundness concerns and consumer protection. Additionally, key risk indicators are monitored against established risk warning levels and limits, as well as elevated risks escalated to the Chief Risk Officer.

To comprehensively manage our risk exposure, we focus on several critical areas outlined below, Credit Risk, Liquidity Risk, Interest Rate Risk and Regulatory Capital.

### Credit Risk

To mitigate the potential for credit losses, we underwrite our loans in accordance with credit standards that we consider to be prudent as described more fully in our Annual Report on Form 10-K for the year ended December 31, 2024.

It is our practice to continually review the risk in our loan portfolio. We receive financial information from borrowers annually and in some cases more frequently. We most often receive updated borrower financial information in 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 debt service coverage ratio. 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 debt service coverage ratio 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 largest substandard and non-accrual loans are reported and reviewed with the Risk Assessment Committee at least quarterly.

At March 31, 2025, $3.4 billion of multi-family loans reached their repricing date. Over 75 percent of the loans that repriced from December 31, 2024 to March 31, 2025 are current on their contractual payments.

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 March 31, 2025 and December 31, 2024 were $11.6 billion and $11.5 billion, respectively. The increase in classified loans is primarily attributable to one large relationship that was placed on nonaccrual during the three months ended March 31, 2025. Excluding that relationship, the remaining classified loans decreased by $356 million.

The procedures we follow with respect to delinquent loans are generally consistent across all categories, with late charges assessed, and notices mailed to the borrower, at specified dates. We attempt to reach the borrower by telephone to ascertain the reasons for delinquency and the prospects for repayment. When contact is made with a borrower at any time prior to foreclosure or recovery against collateral property, we attempt to obtain full payment and will consider a repayment schedule to avoid taking such action. Delinquencies are addressed by our Loan Workout Unit and every effort is made to collect rather than initiate foreclosure proceedings.

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 there is significant uncertainty about whether we will be able to collect all principal and interest amounts due according to the contractual terms of the loan agreement. When a loan is in non-accrual, we cease recording interest income on the loan, previously accrued and uncollected interest is reversed against interest income, and any subsequent interest collected is recorded as a reduction in the loan carrying amount. A loan is returned to accrual status only when the loan is current (minimum of six months of payment performance), and we have reasonable assurance that all contractual principal and interest related to the loan will be fully collectible. At March 31, 2025, $1.3 billion, or approximately 41 percent, of non-accrual loans were current based on their existing payment terms.

In accordance with our charge-off policy, collateral-dependent loans are written down to their current appraised values less costs to sell. Workout specialists from our Loan Workout Unit 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. Charge-offs of $82 million were recorded on MF and CRE loans at March 31, 2025, primarily driven by appraisals received on those loans.

It is our policy to order updated appraisals for all substandard and non-accrual loans that are collateralized by multi-family buildings, commercial real estate properties, or land, if the most recent appraisal on file for the property is more than one year old. Appraisals are ordered at least annually until such time as the loan becomes pass rated. It is not our policy to obtain updated appraisals for performing loans that are not showing signs of credit weakness. However, appraisals may be ordered for performing loans when a borrower requests an increase in the loan amount, a modification in loan terms, an extension of a maturing loan, or when we determine an updated appraisal is needed as a result of our ongoing credit analysis. We evaluate loans that were previously placed on non-accrual at least quarterly to determine if additional charge-offs may be needed.

Properties and other assets that are acquired through foreclosure are classified as repossessed assets and are recorded at fair value at the date of acquisition, less the estimated cost of selling the property. Subsequent declines in the fair value of the assets are charged to earnings and are included in non-interest expense. It is our policy to require an appraisal, and an environmental assessment of properties classified as other real estate owned before foreclosure and to re-appraise the properties at least annually until they are sold. We dispose of such properties as quickly and prudently as possible, given current market conditions and the property’s condition.

### Liquidity Risk

We have established a liquidity risk management framework designed to ensure that the Company can meet its funding obligations in daily, business-as-usual and liquidity stress periods. We maintain a Liquidity Risk Policy that has been approved by the Board of Directors and is subject to review at least annually or if there are significant changes to our business activity. The Liquidity Risk Policy establishes the Company’s Risk Appetite and provides guidance for the roles and responsibilities of management and various oversight committees to oversee the liquidity risk management framework. The Company also maintains a Contingency Funding Plan (“CFP”) which has been approved by the Board of Directors. The CFP provides guidance to plan for potential periods of stress and to navigate actual periods of stress. The CFP specifies a series of Early Warning Indicators ("EWI") which we use to monitor funding or market conditions that may indicate a trend toward a period of stress and to provide guiding principles for the Company during a period of stress including identifying the operational steps needed to access available and contingent sources of liquidity.

Our funding primarily stems from a diverse combination of business activities. The primary source of funding is the Company’s 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 $13.0 billion of deposits that are uninsured or not collateralized by securities or letters of credit, representing 18 percent of our overall deposit base. We also obtain funding through various wholesale funding channels, including $13.2 billion of secured borrowings from the FHLB and an active brokered certificates of deposit issuance program with $8.1 billion outstanding as of March 31, 2025.

Our Liquidity Policy defines a limit framework which ensures the Company maintains liquidity and funding within our risk appetite. The limits require, among other elements, the Company to maintain a diverse funding profile while limiting concentration of funding by source, counterparty and maturity tenor. The policy also requires us to maintain sufficient on-balance sheet liquidity to support funding obligations under a severe, but plausible 30-day liquidity stress scenario. The Company monitors and reports its overall funding and liquidity risk appetite metrics on a daily basis and its cash position on an intraday basis.

We maintain a liquidity buffer of on-balance sheet cash reserves and High-Quality Liquid Assets (“HQLA”). We also maintain access to secured borrowings from the FHLB and FRB Discount Window. The investment securities the Company considers HQLA are all unencumbered, held as available-for-sale, and are either issued by government sponsored entities or are explicitly guaranteed by the U.S. government. We pledge eligible loan collateral with the FRB Discount Window and FHLB New York to support borrowing capacity. The available borrowing capacity with the FRB Discount Window and the FHLB, net of credit utilization primarily in the form of advances and letters of credit, is included in our Total Liquidity.

*(in billions)*

|  | March 31, 2025 | December 31, 2024 |
| --- | ---: | ---: |
| Cash at Federal Reserve | $12.0 | $15.0 |
| High-quality Liquid Assets | 10.6 | 7.9 |
| Total On-Balance Sheet Liquidity | $22.6 | $22.9 |
| FHLB Available Capacity | 5.8 | 6.6 |
| Discount Window Available Capacity | 1.6 | 0.4 |
| Total Liquidity | $30.0 | $29.9 |

### Credit Ratings

We maintain credit ratings from three rating agencies: Moody’s, Fitch and Morningstar DBRS. Our credit ratings were as follows:

|  |  |  |
| --- | --- | --- |
|  | March 31, 2025 | December 31, 2024 |
| Long-Term Issuer Rating: |  |  |
| Moody's | B1 | B2 |
| Fitch | BB | BB |
| Morningstar DBRS | BBB (low) | BBB (low) |
| Short-Term Deposits Rating: |  |  |
| Moody's | NP | NP |

During the three months ended March 31, 2025, Moody's upgraded our Long-Term Issuer rating from B2 to B1.

The primary mortgage loan agencies maintain standards that define the criteria that must be met for an institution to qualify as an eligible custodial depository for the deposits related to loans owned by those entities, including have an investment grade short-term issuer/deposit rating from Moody’s or S&P. We are currently not in compliance with that criteria. We have received a waiver of these criteria for all of our custodial deposits which could be revoked at any of the agencies' discretion. We have no other direct contractual relationships tied to further downgrades in our credit ratings, but may suffer reputational risk that could have an adverse effect on our business should that occur.

### Parent Company Liquidity

The Parent Company is a separate legal entity from the Bank and must provide for its own liquidity. At March 31, 2025, the Parent Company held cash and cash equivalents of $535 million. In addition to operating expenses, debt interest expense, and tax expense/credits, the Parent Company is responsible for paying any dividends declared to our common and preferred stockholders. As a Delaware corporation, the Parent Company is able to pay dividends either from surplus or, in case there is no surplus, from net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year.

The Parent Company has two primary funding sources for the payment of dividends, share repurchases, and other corporate uses: dividends paid to the Parent Company by the Bank; and capital raised through the issuance of equity.

Various legal restrictions limit the extent to which the Company’s subsidiary bank can supply funds to the Parent Company and its non-bank subsidiaries without receiving a prior written determination of no supervisory objection from the OCC. In the three months ended March 31, 2025, there were no dividends paid by the Bank to the Parent Company.

At March 31, 2025, we believe the Parent Company has sufficient liquidity and capital resources to meet its cash flow obligations through 2028.

### Contractual Obligations and Commitments

In the normal course of business, we enter into a variety of contractual obligations in order to manage our assets and liabilities, fund loan growth, operate our branch network, and address our capital needs.

For example, we offer certificates of deposit 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 March 31, 2025, we had certificates of deposit of $25.9 billion and long-term debt (defined as borrowed funds with an original maturity one year or more) of $11.7 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 $465 million at March 31, 2025 and $463 million at December 31, 2024.

At March 31, 2025, 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 (Loss) Income.

At March 31, 2025, our total liquidity position was $30 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 March 31, 2025, 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.

### Interest Rate Risk

We manage our assets and liabilities to reduce our exposure to changes in market interest rates. The asset and liability management process has three primary objectives: to evaluate the interest rate risk inherent in certain balance sheet accounts; to determine the appropriate level of risk, given our business strategy, operating environment, capital and liquidity requirements, and performance objectives; and to manage that risk in a manner consistent with guidelines approved by the Boards of Directors of the Company and the Bank.

As a financial institution, we are focused on reducing our exposure to interest rate volatility, which represents our primary market risk. Changes in market interest rates represent the greatest challenge to our financial performance, as such changes can have a significant impact on the level of income and expense recorded on a large portion of our interest-earning assets and interest-bearing liabilities, and on the market value of all interest-earning assets, other than those possessing a short term to maturity. To reduce our exposure to changing rates, the Board of Directors and management monitor interest rate sensitivity on a regular or as needed basis so that adjustments to the asset and liability mix can be made when deemed appropriate.

The actual duration of held for investment mortgage loans and mortgage-related securities can be significantly impacted by changes in prepayment levels and market interest rates. The level of prepayments may, in turn, be impacted by a variety of factors, including the economy in the region where the underlying mortgages were originated; seasonal factors; demographic variables; and the assumability of the underlying mortgages. However, the factors with the most significant impact on prepayments are market interest rates and the availability of refinancing opportunities.

### Interest Rate Sensitivity Analysis

Interest rate sensitivity is monitored through the use of a model that generates estimates of the change in our Economic Value of Equity ("EVE") over a range of interest rate scenarios. EVE is defined as the net present value of expected cash flows from assets, liabilities, and off-balance sheet contracts. The EVE ratio, under any interest rate scenario, is defined as the EVE in that scenario divided by the market value of assets in the same scenario. The model assumes estimated loan and mortgage-backed securities prepayment rates, current market value spreads, and deposit decay rates and betas.

Based on the information and assumptions in effect at March 31, 2025, the following table sets forth our EVE, assuming the changes in interest rates noted:

| Change in Interest Rates (in basis points) | Estimated Percentage Change in Economic Value of Equity |
| --- | ---: |
| -200 shock | 5.9% |
| -100 shock | 2.3% |
| +100 shock | (2.1)% |
| +200 shock | (5.1)% |

The net changes in EVE presented in the preceding table are within the parameters approved by the Boards of Directors of the Company and the Bank.

Accordingly, while the EVE analysis provides an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to, and do not, provide a precise forecast of the effect of changes in market interest rates on our net interest income, and may very well differ from actual results.

Interest Rate Risk is also monitored through the use of a model that generates Net Interest Income ("NII") simulations over a range of interest rate scenarios. Modeling changes in NII requires that certain assumptions be made which may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. In this regard, the NII analysis presented below assumes that the composition of our interest rate sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured, and also assumes that a particular change in interest rates is reflected uniformly across the yield curve, regardless of the duration to maturity or repricing of specific assets and liabilities. Furthermore, the model does not take into account the benefit of any strategic actions we may take to further reduce our exposure to interest rate risk. The assumptions used in the net interest income simulation are inherently uncertain. Actual results may differ significantly from those presented in the following table, due to the frequency, timing, and magnitude of changes in interest rates; changes in spreads between maturity and repricing categories; and prepayments, among other factors, coupled with any actions taken to counter the effects of any such changes.

Based on the information and assumptions in effect at March 31, 2025, the following table reflects the estimated percentage change in future net interest income for the next twelve months, assuming the changes in interest rates noted:

| Change in Interest Rates (in basis points) (1) | Estimated Percentage Change in Future Net Interest Income |
| --- | ---: |
| -200 shock | 0.5% |
| -100 shock | 0.1% |
| +100 shock | (1.3)% |
| +200 shock | (2.9)% |

(1) *In general, short- and long-term rates are assumed to increase in parallel instantaneously and then remain unchanged.*

The net changes in NII presented in the preceding table are within the parameters approved by the Boards of Directors of the Company and the Bank.

Future changes in our mix of assets and liabilities may result in greater changes to our EVE, and/or NII simulations.

In the event that our EVE and net interest income sensitivities were to breach our internal policy limits, we would undertake the following actions to ensure that appropriate remedial measures were put in place:

- In formulating appropriate strategies, the Asset and Liability Management Committee would ascertain the primary causes of the variance from policy tolerances, the expected term of such conditions, and the projected effect on capital and earnings.
- Our Asset and Liability Management Committee would inform the Board of Directors of the variance, and present recommendations to the Board regarding proposed courses of action to restore conditions to within-policy tolerances.

Where temporary changes in market conditions or volume levels result in significant increases in risk, strategies may involve reducing open positions or employing other balance sheet management activities including the potential use of derivatives to reduce the risk exposure. Where variance from policy tolerances is triggered by more fundamental imbalances in the risk profiles of core loan and deposit products, a remedial strategy may involve restoring balance through natural hedges to the extent possible before employing synthetic hedging techniques. Other strategies might include:

- Asset restructuring, involving sales of assets having higher risk profiles, or a gradual restructuring of the asset mix over time to affect the maturity or repricing schedule of assets;
- Liability restructuring, whereby product offerings and pricing are altered or wholesale borrowings are employed to affect the maturity structure or repricing of liabilities;
- Expansion or shrinkage of the balance sheet to correct imbalances in the repricing or maturity periods between assets and liabilities; and/or
- Use or alteration of off-balance sheet positions, including interest rate swaps, caps, floors, options, and forward purchase or sales commitments.

At March 31, 2025, the estimated change in net interest income over the next twelve months for a 100 basis point reduction in short term interest rates with no change in long term interest rates is an increase of 1.4 percent and the estimated change for a 100 basis point increase in short term rates is a decrease of 2.4 percent.

### Regulatory Capital

The Company is a bank holding company subject to regulation, examination and supervision by the Federal Reserve while the Bank is a national bank subject to regulation, examination, and supervision by the Office of the Comptroller of the Currency. Effective October 1, 2023, we became subject to Category IV prudential standards which included heightened requirements related to capital, liquidity and risk management, as follows:

- As a Category IV firm we maintain a capital plan approved by the Board of Directors which includes analysis under various company-derived stress scenarios. The Company submitted its 2024 capital plan to the Federal Reserve as required by regulation and received written feedback on the plan and associated governance which it has begun to address as part of the capital planning activities for 2025 and subsequent periods. Category IV institutions are subject to a supervisory stress test every other year. The supervisory stress test will first be applicable to the Company in 2026.
- Category IV institutions are required to perform liquidity stress tests that consider the potential impact of market and idiosyncratic stresses over various time horizons, and to maintain an on-balance sheet liquidity buffer at least equal to the 30-day stress horizon. The Company maintains the required liquidity buffer and has developed and continues to enhance its liquidity stress capabilities.
- Category IV firms are required to prepare and maintain formal resolution plans for actions to be undertaken in the event of firm failure. The FDIC issued a final rule revising the resolution plan requirements effective October 1, 2024. The Company will submit its first resolution plan under the final rule in mid-2025. The Company has a program underway to develop the resolution plan and does not expect any material impact to the Company in developing the plan.
- Under regulatory heightened standards, a risk governance framework (the "Risk Governance Framework") is required to be developed and maintained to manage and control the risk-taking activities of the firm. Management has developed a written framework and is implementing the various components in an integrated fashion as underlying business processes mature. Heightened standards also require risk limits, metrics, and analytics which monitor the size and direction of key risks in the organization. The Company has established risk limits which are monitored by the Board of Directors and continues to enhance related metrics and analytics.

The Bank is subject to the Prompt Corrective Action regulatory capital framework that establishes five categories of capital adequacy ranging from “well capitalized” to “critically undercapitalized.” An institution’s capital category affects various matters, including legal requirements for regulators to take prompt corrective action and the level of a bank’s Federal Deposit Insurance Corporation deposit insurance premium assessments. Capital amounts and classifications are also subject to the regulators’ qualitative judgments about the components of capital and risk weighting assets, among other factors, and the regulators have discretion to require that institutions maintain capital in excess of minimum levels.

The quantitative measures established to ensure capital adequacy require that banks and bank holding companies maintain minimum amounts and ratios of leverage capital to average assets and of common equity tier 1 capital, tier 1 capital, and total capital to risk-weighted assets (as such measures are defined in the regulations). As of March 31, 2025, our capital measures continued to exceed the minimum federal requirements for a bank holding company and for a bank. The following tables set forth the common equity tier 1, tier 1 risk-based, total risk-based, and leverage capital amounts and ratios for the Company on a consolidated basis and for the Bank on a stand-alone basis, as well as the respective minimum regulatory capital requirements, as of the dates shown:

The following table presents the Company's regulatory capital position:

*(in millions)*

| March 31, 2025 | Risk-Based Capital Common Equity Tier 1 Amount | Ratio | Tier 1 Amount | Ratio | Total Amount | Ratio | Leverage Capital Amount | Ratio |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Total capital | $7,904 | 11.90% | $8,408 | 12.65% | $10,132 | 15.25% | $8,408 | 8.45% |
| Minimum for capital adequacy purposes | 2,990 | 4.50 | 3,987 | 6.00 | 5,316 | 8.00 | 3,979 | 4.00 |
| Excess | $4,914 | 7.40% | $4,421 | 6.65% | $4,816 | 7.25% | $4,429 | 4.45% |
| **December 31, 2024** |  |  |  |  |  |  |  |  |
| Total capital | $7,997 | 11.83% | $8,501 | 12.57% | $10,238 | 15.14% | $8,501 | 7.68% |
| Minimum for capital adequacy purposes | 3,043 | 4.50 | 4,057 | 6.00 | 5,409 | 8.00 | 4,428 | 4.00 |
| Excess | $4,954 | 7.33% | $4,444 | 6.57% | $4,829 | 7.14% | $4,073 | 3.68% |

27

The increase in our capital ratios from December 31, 2024 was primarily a result of lower risk-weighted assets due to a reduction in Loans and leases held for investment.

The following table presents the Bank's regulatory capital position:

*(in millions)*

| March 31, 2025 | Risk-Based Capital Common Equity Tier 1 Amount | Ratio | Tier 1 Amount | Ratio | Total Amount | Ratio | Leverage Capital Amount | Ratio |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Total capital | $8,857 | 13.36% | $8,857 | 13.36% | $9,691 | 14.62% | $8,857 | 8.91% |
| Minimum for capital adequacy purposes | 2,984 | 4.50 | 3,978 | 6.00 | 5,305 | 8.00 | 3,977 | 4.00 |
| Excess | $5,873 | 8.86% | $4,879 | 7.36% | $4,386 | 6.62% | $4,880 | 4.91% |
| **December 31, 2024** |  |  |  |  |  |  |  |  |
| Total capital | $8,912 | 13.21% | $8,912 | 13.21% | $9,760 | 14.47% | $8,912 | 8.05% |
| Minimum for capital adequacy purposes | 3,036 | 4.50 | 4,048 | 6.00 | 5,398 | 8.00 | 4,426 | 4.00 |
| Excess | $5,876 | 8.71% | $4,864 | 7.21% | $4,362 | 6.47% | $4,486 | 4.05% |

At March 31, 2025, our total risk-based capital ratio exceeded the minimum requirement for capital adequacy purposes by 725 basis points and the fully phased-in capital conservation buffer by 475 basis points.

At March 31, 2025, the Bank also exceeded the minimum capital requirements to be categorized as “Well Capitalized.” To be categorized as well capitalized, a bank must maintain a minimum common equity tier 1 ratio of 6.50 percent; a minimum tier 1 risk-based capital ratio of 8 percent; a minimum total risk-based capital ratio of 10 percent; and a minimum leverage capital ratio of 5 percent.

### Other Recent Developments

We identified certain material weaknesses in management's report on internal control over financial reporting included within Item 9A of our Annual Report on Form 10-K for the year ended December 31, 2024. Our progress toward remediation as of March 31, 2025 is discussed within Item 4 of this Form 10-Q. We do not expect the operational costs to remediate these material weaknesses to be material to the condensed consolidated financial statements.

## Market risk

As filed, 571 characters.

Our most significant risks include interest rate risk and market risk. For more information regarding interest rate risk please refer to the "Interest Rate Risk" section of the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of this Form 10-Q. There have been no changes with regard to our market risk disclosed in "Interest Rate Risk" in Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

## Controls and procedures

As filed, 7,740 characters.

### Evaluation of Disclosure Controls and Procedures

Under the supervision of our Chief Executive Officer and Chief Financial Officer, Management evaluated the effectiveness of design and operation of the Company’s disclosure controls and procedures pursuant to Rule 13a-15(b), as adopted by the Securities and Exchange Commission (the “SEC”) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Management concluded its disclosure controls and procedures were not effective as of March 31, 2025, due to the material weaknesses in its system of Internal Control over Financial Reporting, as described below. Notwithstanding the material weaknesses, Management evaluated its disclosure controls and procedures, and concluded the financial statements included in this report fairly present, in all material respects, the Company’s financial position, results of operations, capital position, and cash flows, for the periods presented, in conformity with U.S. generally accepted accounting principles.

Per Rules 13a-15(e) and 15d-15(e), disclosure controls and procedures are the controls and other procedures designed to ensure information required to be disclosed in the reports the Company files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include activities designed to ensure information required to be disclosed in the reports that the Company files or submits under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

### Material Weaknesses in Internal Control over Financial Reporting

A material weakness is a deficiency, or combination of deficiencies, in Internal Control over Financial Reporting, such that there exists a reasonable possibility a material misstatement in the annual or interim financial statements may not be prevented or detected on a timely basis. Management has previously identified the following material weaknesses in its system of Internal Control over Financial Reporting.

*Risk assessment*: We lacked effective periodic risk assessment processes to identify and timely respond to emerging risks in certain financial reporting processes and related internal controls, including independent Credit Review, that were responsive to changes in the business operations and regulatory and economic environments in which the Company operates.

*Monitoring*: Our recurring monitoring activities over process level control activities, including independent Credit Review, were not operating effectively.

*Control activities*: We did not sufficiently maintain effective control activities related to independent Credit Review processes and certain loan data reconciliations. Specifically, our independent Credit Review process controls were ineffective as the Company lacked the consistent application of an appropriate framework to validate that the ratings were accurate, timely, and appropriately challenged. These ineffective controls impact the Company's ability to accurately disclose loan rating classifications, identify problem loans, and ultimately recognize the allowance for credit losses on loans and leases.

As a result of these ineffective risk assessment, monitoring, and control activities, the Board of Directors were not able to exercise sufficient oversight.

These control deficiencies create a reasonable possibility that a material misstatement to the condensed consolidated financial statements may not be prevented or detected on a timely basis, and therefore we concluded that the deficiencies represent material weaknesses in our Internal Control over Financial Reporting.

### Remediation Status of Reported Material Weaknesses

The Company continues actively working to remediate the material weaknesses described above, including assessing the need for additional remediation steps and implementing additional measures to remediate the underlying causes of the material weaknesses, including governance and oversight of its system of Internal Control over Financial Reporting.

In early 2024, the Company appointed several new members to the Board of Directors with extensive experience as financial experts in our industry and backgrounds in risk management, including a new Lead Independent Director, a new Chairman of the Audit Committee and a new Chairman of the Risk Assessment Committee. The frequency of Audit Committee meetings increased substantially during 2024, with both Audit and Risk Assessment Committees dedicating sessions to evaluating credit risk in the portfolio. In addition, the Audit Committee dedicates sessions to discuss the Company’s allowance for credit losses methodology and results.

Management has identified, and is implementing, the following actions to address the material weakness in our risk assessment processes:

- Appointed a Chief Risk Officer, a Chief Credit Officer and a new Senior Director of Credit Review, all with large commercial bank credit experience.
- Enhancing the depth and breadth of our Independent Credit Review program to make the necessary changes in scoping approach, risk assessment and related processes, and elevating the overall stature of the Independent Credit Review function. We have improved the experience-level of the personnel performing credit reviews.

Management has taken the following actions to address the material weakness in our monitoring activities:

- Increased the frequency and nature of reporting from our Independent Credit Review function and First-Line Business Units to the Board’s Risk Assessment Committee in support of the Boards' risk oversight role.

Management has identified, and is implementing, the following actions to address the material weakness in our control activities:

- Expanding the use of independent credit analysis and reducing the Company's reliance on tools and analyses prepared by First-line Business Units.
- Increased the Credit Review team's ability and elevated its stature within the organization to independently challenge risk rating methodologies and results.
- Assessed the adequacy of staffing levels and expertise within the Independent Credit Review function, considering the size, complexity, and risk profile of the loan portfolios. Management has enhanced the expertise and capacity of the Independent Credit Review function.
- Providing comprehensive risk rating process training to all employees involved in the lending and credit review processes.
- Enhancing processes to identify and assess risks associated with estimating the allowance for credit losses and improving data governance processes.

While we believe our actions will be effective in remediating the material weaknesses, we continually assess the need for additional remediation actions. The material weaknesses will not be remediated until the remediation activities are in place, with applicable procedures and evidence to support sustainability, and Management concludes, based on validation testing, the remedial efforts are effective.

### Changes in Internal Control over Financial Reporting

Except for the actions noted above related to remediation of the Company's material weaknesses, there have been no changes in the Company’s system of Internal Control over Financial Reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended March 31, 2025 to which this report relates, which materially affect, or are reasonably likely to materially affect, the Company’s system of Internal Control over Financial Reporting.

## Risk factors

As filed, 439 characters.

Please see “Item 1A. Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 for information regarding risk factors that could materially affect the Company’s business, financial condition, or future results of operations. There have been no changes with regard to the risk factors disclosed in “Item 1A. Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

Filed May 9, 2025.
Source: SEC EDGAR, the filing index for accession 0000910073-25-000076. Last ingested by Listed: Nov 6, 2026, 16:58 ET. No prices; not investment advice.