Flagstar Bank, National Association: Form 10-Q for the period ended Sep 30, 2025

GENERAL

Background

Prior to the completion of the Reorganization (as defined below) on October 17, 2025, Flagstar Financial, Inc. was the parent company (on a standalone basis, the "Parent Company") of Flagstar Bank, N.A., one of the largest regional banks in the country. We are headquartered in Hicksville, New York. At September 30, 2025, we had $91.7 billion of assets, $63.2 billion of loans, $69.2 billion of deposits, and total stockholders’ equity of $8.1 billion.

We operate approximately 340 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. We 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.

Overview

As part of our commitment to delivering long-term shareholder value and sustained value creation, we are executing a strategic transformation plan designed to evolve into a fully diversified bank with a strong balance sheet, a robust capital position and consistent earnings power.

Our plan is guided by six strategic pillars: driving transformation and financial resilience, growing our core operations, executing a disciplined commercial banking and lending strategy, enhancing operational efficiency, developing talent and leadership and aligning regulatory and risk management.

To support these pillars, we have established strategic priorities focused on transforming Flagstar into a top-tier relationship-driven regional bank, creating a customer-centric culture that prioritizes valuable relationships, and building an effective risk management mindset that supports safe and sound operations.

Since initiating this plan in 2024, we have made measurable progress, including key leadership additions, reduction of non-core assets, and improved funding mix. We believe that successful execution of this plan will enhance our financial resilience, drive sustainable earnings and position us to deliver greater long-term value to shareholders.

Completion of Internal Corporate Reorganization

Effective October 17, 2025, the Bank became the successor reporting company to Flagstar Financial, Inc. pursuant to an internal corporate reorganization to eliminate the Bank’s holding company structure (the “Reorganization”). In connection with the completion of the transaction, Flagstar Financial, Inc. was merged with and into the Bank (the “Merger”), with the Bank continuing as the surviving entity.

At the effective time of the Merger, the outstanding shares of Flagstar Financial, Inc.’s common stock and Series A preferred stock were cancelled and automatically converted into an equivalent number of shares of the Bank’s common stock and Series A preferred stock. Flagstar Financial’s Series B and Series D preferred stock were also converted into common stock of the Bank, except that such conversion was instead into non-voting equity securities that are substantially identical to the Series B and Series D preferred stock to the extent that ownership of the additional common stock would otherwise be prohibited by law or require approval by a government entity. As a result, subject to the foregoing limitations, the shares of capital stock of the Bank are now owned directly by shareholders in the same proportion as their ownership of Flagstar Financial, Inc. capital stock immediately prior to the Merger. Further, each warrant to purchase either Series D preferred stock or common stock of Flagstar Financial, Inc. was converted automatically into a warrant to purchase the Bank’s common stock or, as applicable, the Bank’s Series D preferred stock. In addition, each of Flagstar Financial's outstanding warrants to purchase shares of Flagstar Financial common stock forming a part of a unit of Flagstar Financial's outstanding Bifurcated Option Note Unit SecuritiESSM (the “BONUSES Units”) was converted automatically into a warrant to purchase Bank common stock upon the same terms applicable to the outstanding warrants immediately prior to the Reorganization. Immediately following the Merger, the Bank had substantially the same outstanding capital stock with substantially the same rights and privileges as the outstanding capital stock of Flagstar Financial, Inc. immediately prior to the Merger. Immediately after the Merger, the Bank had substantially the same consolidated assets, liabilities and shareholders’ equity as Flagstar Financial. Inc. immediately prior to the Merger. The Bank assumed Flagstar Financial, Inc.’s debt obligations, equity incentive plans, equity compensation plans, and other compensation plans as a result of the Merger.

Following the Merger, we continue to be publicly traded on the New York Stock Exchange (NYSE) under the ticker symbol “FLG.” The Bank’s common stock, as well as depositary shares representing interests in the Bank's Series A preferred stock and the BONUSES Units, is registered with the Bank’s primary banking regulator, the OCC, under the Securities Exchange Act of 1934, as amended.

RESULTS OF OPERATIONS

Net Loss

For the three months ended September 30, 2025, we reported a net loss of $36 million compared to a net loss of $70 million for the three months ended June 30, 2025. The net loss attributable to common stockholders, which includes the impact from preferred dividends, for the three months ended September 30, 2025 was $45 million, or $0.11 per diluted share compared to a net loss attributable to common stockholders of $78 million, or $0.19 per diluted share for the three months ended June 30, 2025.

For the nine months ended September 30, 2025, we reported a net loss of $206 million compared to a net loss of $930 million for the nine months ended September 30, 2024. The net loss attributable to common stockholders, which includes the impact from preferred dividends, for the nine months ended September 30, 2025 was $231 million, or $0.56 per diluted share compared to a net loss attributable to common stockholders of $957 million, or $3.16 per diluted share for the nine months ended September 30, 2024. The net loss for the nine months ended September 30, 2024 included the reduction in the Signature Transaction bargain purchase gain of $121 million.

Net Interest Income

NII is our primary source of income. The amount of our NII 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 FOMC, 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 FOMC. 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 that generally reset to the then current intermediate-term interest rates when they reach repricing dates.

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

(in millions)

(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 FHLB stock and FRB-NY stock, at cost.

(in millions)

(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 FHLB stock and FRB-NY stock, at cost.

The following table summarizes the change in NII attributable to changes in rate and volume:

(in millions)

(1) May not foot due to rounding.

Comparison to Prior Quarter

During the three months ended September 30, 2025, NIM increased 10 basis points and NII increased $6 million compared to the three months ended June 30, 2025. This was primarily as a result of lower-interest bearing deposits primarily due to the payoff of brokered certificates of deposit reflecting our actions to reduce higher cost funding, the pay down of wholesale borrowings and improved yields on loans and leases on One-to-four family and C&I originations, partially offset by lower average total loans and leases due to the strategic reduction in our multi-family, CRE and non-core C&I loans that began in early 2024.

Comparison to Prior Year to Date

During the nine months ended September 30, 2025, NIM decreased by 19 basis points and NII decreased $437 million compared to the nine months ended September 30, 2024. This was primarily as a result of lower average total loans and leases due to the strategic reduction in multi-family and CRE loans, the sale of our mortgage third party origination business and mortgage servicing business ("Mortgage Operations") during the three months ended December 31, 2024 and the sale of our warehouse lending portfolio during the three months ended September 30, 2024. The decrease was partially offset by lower average borrowed funds driven by the pay down of wholesale borrowings and lower interest-bearing deposits driven by the pay down of brokered deposits during 2024 and the nine months ended September 30, 2025.

Provision for Credit Losses

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

(in millions)

Comparison to Prior Quarter

For the three months ended September 30, 2025, the provision for credit losses decreased $26 million compared to the three months ended June 30, 2025. This decrease is primarily due to volume declines from the strategic reduction in our multi-family, CRE and non-core C&I loan portfolios, lower charge-offs, a decrease in criticized assets and the receipt of recent appraisals including appraisals on our individually evaluated loans. These declines were partially offset by declining trends in macro-economic conditions. Additionally, our ACL balance decreased since June 30, 2025 as a result of a reduction in the allowance associated with individually evaluated loans based upon updated appraisals received during the three months ended September 30, 2025, partially offset by declining trends in macro-economic conditions.

Comparison to Prior Year to Date

For the nine months ended September 30, 2025, the provision for credit losses decreased $766 million compared to the nine months ended September 30, 2024. This decrease is primarily due to improving credit trends as property values and borrower financials normalize which has resulted in a stabilization in our ACL and lower net charge-offs in our CRE portfolio. Additionally, our ACL balance decreased since September 30, 2024 as a result of the on-going volume declines from the strategic reduction in our multi-family, CRE and non-core C&I portfolios. The reduction in our ACL balance was partially offset by declining trends in macro-economic conditions.

Non-Interest Income

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

(in millions)

Comparison to Prior Quarter

For the three months ended September 30, 2025, non-interest income increased $17 million compared to the three months ended June 30, 2025. The increase is primarily attributed to a $21 million gain on our investment in Figure Technology Solutions, Inc., partially offset by several insignificant items.

Comparison to Prior Year to Date

For the nine months ended September 30, 2025, non-interest income increased $15 million compared to the nine months ended September 30, 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, a $21 million gain on our investment in Figure Technology Solutions, Inc., and increased commission income. The increase was partially offset by lower MSRs fees, fee income, net gain on loan sales and securitizations and 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)

Comparison to Prior Quarter

Total non-interest expenses for the three months ended September 30, 2025 increased $9 million compared to the three months ended June 30, 2025, primarily due to an increase in general and administrative expenses as a result of a $14 million increase in litigation accruals related to a recent settlement agreement for claims that originated at Flagstar Bancorp in 2021 and 2022 prior to the Flagstar Bancorp merger with New York Community Bancorp, Inc. ("NYCB"), and increased compensation and benefits as a result of $8 million of severance costs partially offset by a decline in our FDIC insurance expense as a result of a lower asset base and lower brokered deposits.

Comparison to Prior Year to Date

Total non-interest expenses for the nine months ended September 30, 2025 decreased $553 million compared to the nine months ended September 30, 2024, primarily due to lower compensation and benefits costs stemming from the actions taken to optimize costs which continued in the nine months ended September 30, 2025, a decrease in general and administrative expenses primarily due to the sale of our Mortgage Operations during the three months ended December 31, 2024 and our continued focus on operating expense management. Additionally, we had lower FDIC insurance costs as a result of a lower asset base and lower brokered deposits due to the sale of our Mortgage Operations, 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)

We compute our tax benefit for interim periods by applying the estimated annual effective tax to our year-to-date (Loss) before income taxes and adjust for discrete items that occur in the quarter. For the three and nine September 30, 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 and nine September 30, 2025.

Comparison to Prior Quarter

The income tax benefit for the three months ended September 30, 2025 decreased $6 million compared to the three months ended June 30, 2025 primarily as a result of the reduction in our pre-tax loss.

Comparison to Prior Year to Date

The income tax benefit for the nine months ended September 30, 2025 decreased $173 million compared to the nine months ended September 30, 2024, primarily as a result of the reduction in our pre-tax loss, partially offset by the tax impact 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)

(1) Includes ADC loans.

Total loans and leases held for investment decreased $5.6 billion at September 30, 2025 compared to December 31, 2024, primarily as a result of our continued strategy of diversifying our loan portfolio by reducing our multi-family, CRE and non-core C&I loan exposure, partially offset by $3.7 billion 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)

(1) Excludes Specialty Finance CRE loans and multi-family loans serviced-by-others totaling $458 million and $96 million respectively. Amounts presented reflect unpaid principal balance; total amortized cost adjustments were $104 million.

(2) Excludes ADC loans.

Option loans offer the borrower the ability to reprice to a fixed rate after the initial period. If not elected, the loan defaults to a 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 multi-family loan portfolio decreased $3.6 billion at September 30, 2025 compared to December 31, 2024, primarily due to $2.8 billion of par payoffs since December 31, 2024, with 51 percent of the payoffs from substandard loans, the classification of $254 million of loans related to a single borrower relationship to Loans held for sale and loan sales of $102 million. 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 loans are non-recourse and are secured by rental apartment buildings. At September 30, 2025, $16.9 billion or 55 percent of our total multi-family loan portfolio was secured by properties in New York State, $14.7 billion or 87 percent of which are subject to rent regulation laws to varying degrees, with $10.2 billion having 50 percent or more rent regulated units. 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 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 multi-family loans to other loan 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 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 $7.7 billion outstanding with interest-only payments at September 30, 2025. The weighted average interest-only period remaining was 21.8 months as of September 30, 2025, with approximately 17 percent of these loans entering their amortization period by the end of 2025 and 59 percent by the end of 2026.

We continue to monitor our loans held for investment portfolio and the related ACL, particularly, given the economic pressures facing the CRE 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)

15

Commercial Real Estate

At September 30, 2025, CRE loans decreased $1.7 billion compared to December 31, 2024, primarily due to par payoffs. The reduction in our CRE portfolio is consistent with 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 DSCR. 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.

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

(in millions)

(1) Includes ADC loans.

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

(in millions)

(1) Includes ADC loans.

Commercial and Industrial

Our C&I loan portfolio decreased $502 million at September 30, 2025 compared to December 31, 2024, primarily due to a $4.2 billion reduction resulting from our strategic decision to continue to diversify our loan portfolio by reducing our exposure to non-core C&I loans. This decrease was partially offset by $3.7 billion of new originations that resulted from new and increased loan commitments of $5.3 billion during the nine months ended September 30, 2025.

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 loans, 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 loans.

Specialty finance loans and leases included within our C&I loan portfolio were $3.2 billion, or 5.1 percent of total loans held for investment at September 30, 2025, reflecting a decrease of $672 million or 17 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.

Specialty finance loans and leases 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. These loans 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 September 30, 2025, 84 percent of specialty finance loan commitments are structured as floating rate obligations.

One-to-Four Family Loans

One-to-four family loans increased $312 million at September 30, 2025 compared to December 31, 2024, 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 September 30, 2025, excluding LGG, loans in this portfolio had an average current FICO score of 744 and an average loan-to-value ratio of 50 percent.

Substantially all LGG are insured or guaranteed by the FHA or the U.S. Department of Veterans Affairs. As of September 30, 2025 and December 31, 2024, LGG totaled $354 million and $360 million, respectively. 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 FHA until claimed.

Other Loans

At September 30, 2025, other loans decreased $121 million compared to December 31, 2024, primarily driven by payoffs at par.

Other loans primarily consist of HELOANs, second mortgage loans, and HELOCs. As of September 30, 2025, loans in this portfolio had an average current FICO score of 757.

Loans Held for Sale

Loans held for sale at September 30, 2025 decreased $364 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 during the three months ended December 31, 2024.

During the three months ended September 30, 2025, we transferred $284 million of commercial loans (primarily multi-family loans) from Loans and leases held for investment to Loans held for sale. During October 2025, we completed a sale of $254 million in loans from one borrower with a history of delinquency at its carrying value, reducing our exposure to that borrower by 48 percent.

Refer to Note 5 - Loans and Leases for our policy relating to classifying loans as held for sale.

Allowance for Credit Losses

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

(in millions)

(1) Includes ADC loans.

The ACL on loans and leases decreased $130 million from December 31, 2024 to September 30, 2025. This decrease is primarily due to improving credit trends as property values and borrower financials normalize, and volume declines from the on-going strategic reduction in our multi-family, CRE and non-core C&I portfolios. The reduction in our ACL balance was partially offset by declining trends in macro-economic conditions.

Refer to Note 6 - Allowance for Credit Losses on Loans and Leases for our policy relating to the ACL.

Assets Quality Measures

The following table presents our asset quality measures at the respective dates:

18

Non-accrual Loans

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

(in millions)

(1) Includes ADC loans.

(2) Excludes $31 million and $323 million of non-accrual held for sale loans at September 30, 2025 and December 31, 2024, respectively.

Refer to Note 5 - Loans and Leases for our policy relating to non-accrual loans.

The following table sets forth the changes in non-accrual loans at September 30, 2025:

(in millions)

During the nine months ended September 30, 2025 non-accrual loans increased $626 million primarily due to the classification of $566 million in loans, primarily within our multi-family portfolio, as non-accrual during the three months ended March 31, 2025. This increase was driven by a single borrower relationship currently undergoing bankruptcy proceedings. Approximately 41 percent of our non-accrual loans are current on their contractual payment terms.

Delinquencies

The following table presents our loans held for investment 30 to 89 days past due by loan type and the changes in the respective balances. As of September 30, 2025 approximately 80 percent of our multi-family 30-89 days past due loans were attributable to a single borrower relationship that continues to make payments in arrears subsequent to September 30, 2025.

(in millions)

(1) Includes ADC loans.

Charge-offs

The following table summarizes net charge-offs as an annualized percentage of average loans:

(in millions)

(1) Includes ADC loans.

(2) Three months ended presented on an annualized basis.

(in millions)

(1) Includes ADC loans.

(2) Nine months ended presented on an annualized basis.

Securities

Debt Securities Available-for-Sale

(in millions)

Debt securities available-for-sale increased $4.7 billion compared to December 31, 2024. The increase was primarily a result of our decision to reinvest our cash into higher earning assets. At September 30, 2025, 29 percent of our portfolio is comprised of floating rate securities.

At September 30, 2025, debt securities available-for-sale had an estimated weighted average life of 4 years compared to 6 years at December 31, 2024. Mortgage-related securities included in debt securities available-for-sale were $12.3 billion and $8.6 billion at September 30, 2025 and December 31, 2024, respectively.

The following table summarizes the weighted average yields of debt securities available-for-sale for the maturities at September 30, 2025:

Deposits

We compete for deposits and customers through multiple channels, including our retail branch network, our private banking business and mobile and internet 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, however, we also utilize brokered deposits depending on their availability and pricing relative to other funding sources.

The following table summarizes the change in our deposits:

(in millions)

Total deposits at September 30, 2025 decreased $6.7 billion compared to December 31, 2024, primarily due to the payoff of brokered CDs 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.

The following table presents the composition of our brokered deposits for the periods presented:

(in millions)

(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)

(1) Includes brokered certificates of deposit of $4.0 billion and $9.5 billion at September 30, 2025 and December 31, 2024, 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.

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

(in millions)

Uninsured Deposits

At September 30, 2025, our deposit base included $13.4 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 September 30, 2025, total bank liquidity exceeds the balance of our uninsured deposits by $14.2 billion.

Borrowed Funds

The following table summarizes our borrowed funds:

(in millions)

At September 30, 2025 total borrowed funds decreased $1.2 billion compared to December 31, 2024 primarily due to the repayment of $250 million and $1.0 billion of FHLB advances upon maturity in the three months ended March 31, 2025 and June 30, 2025, respectively.

FHLB advances are secured by eligible collateral in the form of loans and securities, under blanket collateral agreements with the FHLB.

At September 30, 2025, and December 31, 2024 our wholesale borrowings had $250 million of callable features.

See Note 9 - Borrowed Funds 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)

At September 30, 2025, the total FHLB and FRB-NY stock, decreased $128 million, primarily due to a reduction in borrowings in the three months ended September 30, 2025.

Risk Governance Framework

The Risk Management Division is responsible for formalizing our 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 our 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 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 largest substandard and non-accrual loans are reported and reviewed with the Risk Assessment Committee at least quarterly.

Since the beginning of 2024, $4.9 billion of multifamily loans have reached their repricing date. As of September 30, 2025, 84 percent of those loans remain current on their contractual payments or have been paid off.

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 September 30, 2025 and December 31, 2024 were $9.9 billion and $11.5 billion, respectively. The decrease in classified loans is primarily attributable to the par payoffs of multi-family substandard loans.

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.

Refer to Note 5 - Loans and Leases for further information regarding our policies surrounding non-accrual loans.

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 $279 million were recorded on multi-family and CRE loans during the nine months ended September 30, 2025, primarily driven by appraisals received on those loans.

It is our policy to order updated appraisals for all Classified Loans that are collateralized by multi-family buildings, CRE 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 OREO 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 we can meet our 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 outlines our Risk Appetite and provides guidance for the roles and responsibilities of management and various oversight committees to oversee the liquidity risk management framework. We also maintain a 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 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 us 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 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 $13.4 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 $12.2 billion of secured borrowings from the FHLB and an active brokered CDs issuance program with $4.0 billion outstanding as of September 30, 2025.

Our Liquidity Policy defines a limit framework which ensures we maintain liquidity and funding within our risk appetite. The limits require, among other elements, we 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. We monitor and report our overall funding and liquidity risk appetite metrics on a daily basis and our cash position on an intraday basis.

We maintain a liquidity buffer of on-balance sheet cash reserves and HQLAs. We also maintain access to secured borrowings from the FHLB and FRB-NY Discount Window. The investment securities we consider HQLAs 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 and securities collateral with the FRB-NY Discount Window and FHLB New York to support borrowing capacity. The available borrowing capacity with the FRB-NY 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)

24

Credit Ratings

We maintain credit ratings from three rating agencies: Moody’s, Fitch and DBRS. As of October 27, 2025, our credit ratings for Flagstar Bank, N.A. were as follows:

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 having 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

Prior to the completion of the Reorganization, the Parent Company was a separate legal entity from the Bank and was required to provide for its own liquidity in addition to the liquidity required to be held by the Bank. At September 30, 2025, the Parent Company held cash and cash equivalents of $476 million. Following the Reorganization, the Parent Company ceased to exist and this liquidity requirement no longer applies.

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 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 September 30, 2025, we had CDs of $22.4 billion and long-term debt (defined as borrowed funds with an original maturity one year or more) of $10.7 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 $438 million at September 30, 2025 and $463 million at December 31, 2024.

At September 30, 2025, we also had commitments to extend credit in the form of 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 September 30, 2025, our total liquidity position was $28 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 September 30, 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 our Board of Directors.

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 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 MBS prepayment rates, current market value spreads, and deposit decay rates and betas.

Based on the information and assumptions in effect at September 30, 2025, the following table sets forth our EVE, assuming the changes in interest rates noted:

The net changes in EVE presented in the preceding table are within the parameters approved by our Board of Directors.

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 NII, and may very well differ from actual results.

Interest Rate Risk is also monitored through the use of a model that generates 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 NII 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.

At September 30, 2025, the estimated change in NII 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 1.66 percent and the estimated change for a 100 basis point increase in short term rates is a decrease of 1.79 percent.

The following table reflects the estimated percentage change in future NII for the next twelve months. In general, short- and long-term rates are assumed to increase in parallel instantaneously and then remain unchanged. Based on the information and assumptions in effect at September 30, 2025 the changes in interest rates are noted below:

The net changes in NII presented in the preceding table are within the parameters approved by our Board of Directors.

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 NII 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 ALCO 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 ALCO 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.

Regulatory Capital

Prior to October 17, 2025, Flagstar Financial, Inc. was a bank holding company subject to regulation, examination and supervision by the Federal Reserve while the Bank was a national bank subject to regulation, examination, and supervision by the OCC. Following the elimination of Flagstar Financial, Inc. as a result of the completion of the Reorganization, the Bank remains a national bank and our only primary federal banking regulator is the OCC. The Bank is not subject to the enhanced prudential standards established by the Federal Reserve of Category IV bank holding companies which previously applied to Flagstar Financial, Inc. The Bank continues to be subject to prudential standards applicable to national banks:

• The OCC’s capital adequacy standards that establish minimum capital requirements and overall capital adequacy standards.
• 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 FDIC deposit insurance premium assessments. Capital amounts and classifications are subject to the regulators’ qualitative

judgments about the components of capital and risk weighting assets, among other factors. Regulators have the discretion to require capital to be maintained in excess of minimum levels.

• Under regulatory heightened standards, a risk governance framework that is required to be developed and maintained to manage and control the risk-taking activities of the Bank. 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. We have established risk limits which are monitored by the Board of Directors and are continuing to enhance related metrics and analytics.

Separately, as an insured depository institution with $50 billion or more in assets, we are subject to the FDIC resolution plan rule. This requires us to have full resolution plans discussing how we could be rapidly and orderly resolved in the event of material financial distress or failure. We developed our resolution plan in alignment with the FDIC’s requirements, and, following the Board’s approval, we submitted a full resolution plan to the FDIC prior to its due date of July 1, 2025.

As of September 30, 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 consolidated regulatory capital position:

(in millions)

The increase in the Company's 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)

At September 30, 2025, the Company's total risk-based capital ratio exceeded the minimum requirement for capital adequacy purposes by 792 basis points and the fully phased-in capital conservation buffer by 542 basis points.

At September 30, 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

Internal Control over Financial Reporting Remediation

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 September 30, 2025 is discussed within Item 4 Part I 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.

Critical Accounting Estimates

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

Condensed Consolidated Statements of Condition

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.

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 our disclosure controls and procedures pursuant to Rule 13a-15(b), as adopted by 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 September 30, 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, Flagstar's financial position, results of operations, capital position, and cash flows, for the periods presented, in conformity with GAAP.

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 Flagstar 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 Flagstar 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 Flagstar 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 Flagstar 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 ACL 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

In early 2024, we 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, during 2025, we have added a combined joint session of the Risk Assessment Committee and the Audit Committee that occurs at least quarterly to discuss our ACL methodology and results.

Management has identified and has implemented, 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.
• Enhanced 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 Management has identified and has implemented the following actions to address the material weakness in our control activities:
• Expanded the use of independent credit analysis and reduced our 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 and resource 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.
• Provided comprehensive risk rating process training to all employees involved in the lending and credit review processes.
• Enhanced processes to identify and assess risks associated with estimating the ACL and improving data governance processes.
• Increased credit review coverage of the portfolio. Approximately 700 borrowers representing $21.9 billion of loan balances were tested during the nine months ended September 30, 2025.

We continue to actively work to remediate the material weaknesses described above and are primarily in the sustainability and validation testing phase of remediation. We continue to assess our progress and whether any additional remediation steps or additional measures are needed to remediate the underlying causes of the material weaknesses, including the governance and oversight of our system of Internal Control over Financial Reporting.

While we believe our actions will be effective in remediating the material weaknesses, the material weaknesses will not be remediated until the remediation efforts we have taken are deemed to be sufficient through evidence of sustainability and Management concludes the remedial efforts are effective based upon validation testing.

Changes in Internal Control over Financial Reporting

Except for the actions noted above related to remediation of our material weaknesses, there have been no changes in our 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 September 30, 2025 to which this report relates, which materially affect, or are reasonably likely to materially affect, our system of Internal Control over Financial Reporting.

Please see “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2024 and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2025 for information regarding risk factors that could materially affect our 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 our Annual Report on Form 10-K for the year ended December 31, 2024 and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2025.