Flagstar Financial (NYSE:FLG) released first-quarter financial results and hosted an earnings call on Friday. Read the complete transcript below.
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Summary
Flagstar Financial reported strong first-quarter 2026 results, with significant progress in core banking operations, including net interest margin expansion and increased core deposits.
The company highlighted a strategic focus on diversifying its loan portfolio, specifically through CNI loan growth, and reduced its CRE exposure by $1.6 billion.
Management noted continued improvement in credit quality, with a 11% decrease in non-accrual loans and a 3% reduction in criticized and classified loans.
Flagstar Financial achieved a CET1 capital ratio of 13.2%, with plans for potential capital distributions in the second half of the year following sustained profitability.
The company completed the consolidation of six legacy data centers into two, setting the stage for a core conversion in 2027, and received upgrades from Fitch and Moody's to investment grade.
Future guidance suggests a slight downgrade in interest income expectations due to increased CRE payoffs, but the company remains optimistic about continued CNI growth.
Full Transcript
Regina (Operator)
Hello and thank you for standing by. My name is Regina and I will be your conference operator today. At this time I would like to welcome everyone to Flagstar Financial first quarter 2026 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press Star then the number one on your telephone keypad. To withdraw your question, press star one again. I would now like to turn the conference over to Sal DiMartino, Director of Investor Relations, director of investor Relations. Please go ahead.
Sal DiMartino (Director of Investor Relations)
Thank you, Regina and good morning everyone. Welcome to Flagstar Financial's first quarter 2026 earnings call. This morning our Chairman, President and CEO Joseph Otting along with the company's Senior Executive Vice President and Chief Financial Officer Lee Smith will discuss our results for the quarter. During the call we will be referring to a presentation which provides additional detail on our quarterly results and operating performance. Both the earnings presentation and the press release can be found on the Investor Relations section of our company website, ir.flagstarfinancial.com Also, before we begin, I'd like to remind everyone that certain comments made today by the management team of Flagstar Financial may include forward looking statements within the meanings of the Private Securities Litigation Reform act of 1995. Such forward looking statements we make are subject to the safe harbor rules. Please review the forward looking disclaimer and safe harbor language in today's press release and presentation for more information about risks and uncertainties which may affect us. Additionally, when discussing our results, we will reference certain non GAAP measures which exclude certain items from reported results. Please refer to today's earnings release for reconciliation of these non GAAP measures and with that I would now like to turn the call over to Mr. Otting. Joseph
Joseph Otting (Chairman, President and CEO)
thank you Sal. Good morning everyone and welcome to our first quarter 2026 earnings conference call. We are pleased to report another quarter of solid progress and continued momentum across our core banking franchise. Our first quarter performance reflects continued improving fundamentals, strong C&I growth, a high level in growth of core deposits, further progress in reducing the level of non accrual and criticized classified loans, continued margin expansion and industry leading capital levels. Just as importantly, our first quarter results demonstrate we are exceeding and executing on the strategy we laid out two years ago. In delivering against our priorities, we are doing exactly what we set out to do. Strengthening our earnings profile, improving the quality of our balance sheet and building a top performing regional bank. The progress we are making is intentional and driven by a clear focus on disciplined execution. Now turning to the slides, slide number 3 of the investor presentation, I'd like to highlight some of the key performance factors and drivers during the quarter. First, disciplined expense management has been a hallmark of our return to profitability over the past two years and in the first quarter operating expenses continued to decrease and we expect them to decrease in 2026 and 2027. We also had another quarter of net interest margin expansion driven primarily by lower funding costs. Second, one of our key growth strategy is to diversify our loan portfolio by increasing our CNI lending platform. This quarter marked the third consecutive quarter of CNI loan growth after us reducing our exposure to certain industries, lowering our single transactions exposure exposures and exiting certain relationships that did not meet our return hurdles and we've done this throughout 2024 and part of 20. Third, we experience a further reduction in our overall Commercial Real Estate (CRE) exposure mostly through PAR payoffs, resulting in the multifamily and Commercial Real Estate (CRE) portfolios declining by 1.6 billion or 4% relative to the fourth quarter and further improvement in our Commercial Real Estate (CRE) concentration. Fourth, we continue to see positive credit migration as non accrual loans declined by 11% and criticized and classified loans decreased by 3%. Additionally, we ended the quarter with a robust Common Equity Tier 1 (CET1) capital ratio of 13.2%. In terms of future capital distributions, our focus first is on demonstrating several quarters of sustainable profitability and continued improvement in our non accrual loans and flexibility to support our anticipated loan growth. We expect the board taking action on capital distributions in the second half of the year. Finally, I would like to highlight 2 other milestones during the first quarter. We were very pleased with Fitch and Moody, upgraded the bank's long term and short term deposit ratings to investment grade with a positive outlook and when we filed our 10k in late February we disclosed that the previously material weakness in internal controls have been remediated. Both of these milestones reflect the tremendous effort, dedication and hard work of our entire team. On the next couple of slides we spotlight the significant progress we continue to make in our C&I lending businesses during the quarter. C&I loans grew by 1.4 billion or 9% on a linked quarter basis, significantly higher than in prior quarters. On slide four we go into detail on the trends in our CNI portfolio. While the first quarter is typically a seasonally slow quarter for originations, you can see on the left side of the slide that our originations were essentially flat compared to the fourth quarter. We also will note that the pipeline remains strong and we expect second quarter funding from CNI to be similar to Q1. On the right side is the five quarter trend in the CNI portfolio. After bottoming in the second quarter of last year, we've had steady growth in the first quarter. CNI loans grew by the 1.4 billion, up 9% compared to the fourth quarter and year over year 12%. The next slide provides quarter over quarter growth by loan category. While the majority of the growth was driven by our two main strategic focus areas, specialized industries lending and corporate and regional commercial banking, this quarter gross was broad based with gross also occurring in the mortgage finance and asset based lending verticals. Now turning to Slide 6, you can see the trend in our adjusted diluted EPS whereby we have now reported two consecutive quarters of EPS growth By executing on all our strategic initiatives on an adjusted basis, we went from $0.03 in the fourth quarter to $0.04 during Q1. One other positive note I'd like to make is that during the first quarter we completed the consolidation of our six legacy data centers into two colocation centers with no disruptions neither to the organization or any of our customers. And this positions us well in 2027 to have the baseline and platform for our core conversion with Ultimately the goal in 2027 is to get onto one core. So with that I'll now turn it over to Lee to review our financials and credit quality.
Lee Smith (Senior Executive Vice President and Chief Financial Officer)
Thank you Joseph and good morning everyone. We're very pleased with another quarter where we continue to execute our strategic vision to make Flagstar one of the best performing regional banks in the country. We were profitable for the second consecutive quarter following the bank's return to profitability in the fourth quarter. More importantly, we made real progress against key initiatives that drive our financial forecast. We achieved net C&I loan growth during the quarter of 1.4 billion, significantly higher than previous quarters following the origination of 2.6 billion in new CNI loans of which 2 billion was funded. As we've discussed, net CNI growth in previous quarters was muted as we right sized legacy CNI positions within the portfolio. Most of this is behind us and you're now seeing the growth from new originations materialise into net loan growth. Net Interest Margin (NIM) expanded 10 basis points after adjusting for the one time hedge gain of approximately 21 million in Q4. Furthermore, much of the new CNI growth occurred towards the end of Q1, meaning the full benefit of these newly originated loans will be felt in Q2 and beyond. Core deposits excluding brokered grew 1.1 billion and we reduced deposit costs by 21 basis points. We paid off another 1 billion of flub advances and 300 million of brokered deposits as we further reduced our reliance on high cost wholesale funding. Despite this deleveraging of 1.3 billion, our balance sheet only decreased 400 million quarter over quarter. Commercial Real Estate (CRE) and multifamily payoffs were again elevated at 1.6 billion, 1.1 billion of which were par payoffs and 42% of these par payoffs were rated as substandard loans. We resolved the situation with the one borrower that was in bankruptcy and reduced our non accrual loans by 323 million while substandard loans decreased almost 700 million, meaning we reduced non accrual and substandard loans over 1 billion quarter over quarter. Our ACL reserve decreased 78 million, primarily driven by lower Commercial Real Estate (CRE) and multi family loan balances. Operating expenses were again well contained at 441 million, a decrease of 5% quarter over quarter and we ended the quarter with 13.24% Common Equity Tier 1 (CET1) capital at or near the top of our regional bank peers. We were also thrilled to be upgraded by both Moody's and Fitch, particularly given that both agencies returned our long and short term deposit ratings to investment grade. We continue to execute on our strategic plan exactly as we said we would. Now turning to Slide 7. We reported net income attributable to common stockholders of $0.03 per diluted share. On an adjusted basis, we reported net income attributable to common stockholders of $0.04 per diluted share. First quarter was a relatively clean quarter with only one adjustment, our investment in figure technologies which decreased in value during the first quarter by 9 million based on its closing stock price as of March 31. Subsequent to the end of the quarter we have sold out of approximately 75% of our figure position at a gain of 1.8 million compared to our March 31 mark on Slide 8. We provide our updated forecast for 2026 and 2027. We have adjusted our interest income guidance downward for both years as a result of increased Commercial Real Estate (CRE) and multifamily payoffs, pay downs and amortization. This is both good news and bad news as it accelerates our diversification strategy and reduces our Commercial Real Estate (CRE) exposure but also reduces interest income and Net Interest Margin (NIM) in the short term. Also, we are seeing fewer resetting loans staying on our balance sheet. We're currently retaining 35 to 40% of resetting loans versus 50% previously. Again, while this accelerates our overall diversification strategy, it reduces short term net interest income and Net Interest Margin (NIM) temporarily and until we replace it with new CNI Commercial Real Estate (CRE) or consumer growth in order to retain some of the higher quality relationship Commercial Real Estate (CRE) runoff in the future. We have assumed spreads off of sofa in the 175 to 225 basis point range versus our contractual option of 275 to 300 basis points off a 5 year flub lower non interest bearing DDA growth in Q1 deposit growth in Q1 was all interest bearing which was positive particularly as we also reduced interest bearing deposit costs. 21 basis points quarter over quarter. We believe the current rate in agency upgrades will help us garner more non interest bearing DDAs going forward, but as it's been pushed out it impacts net interest income and nimble. We expect total assets to be approximately 94 billion at the end of 26 and 102 billion at the end of 27 as a result of net loan growth. The reduction in interest income has been partially offset by reducing provision and operating expense guidance. Adjusted EPS is now forecast to be in the 60 to 65 cent range in 26 and in the $1.80 to $1.90 range in 2017. Slide 9 depicts the trends in our net interest margin over the past five quarters. We continue to post steady quarterly improvements in Net Interest Margin (NIM) driven largely by lower funding costs. First quarter Net Interest Margin (NIM) increased 10 basis points quarter over quarter to 2.15% after adjusting for the recognition of a one time hedge gain of 21 million in the fourth quarter. Turning to slide 10, our operating expenses continue to decline reflecting our focus on cost containment. Quarter over quarter operating expenses declined 21 million or 5%. Slide 11 shows the growth in our capital over the last few quarters at 13.24%. Our CT1 ratio ranks among the top relative to other regional banks and we have about 1.6 billion in excess capital after tax relative to the low end of our target Common Equity Tier 1 (CET1) operating range of 10.5%. The next slide provides an overview of our deposits. Core deposits excluding brokered increased 1.1 billion on a linked quarter basis or about 2%. This growth was primarily driven by growth in commercial and private bank deposits of 461 million and retail deposits which were up 142 million. As in past quarters, during the current quarter we paid down 300 million of broker deposits with a weighted average cost of 4.76%. In addition, approximately 5.3 billion of retail CDs matured during the quarter with a weighted average cost of 4.13% and we retained 86% of these CDs as they moved into other CD products with rates approximately 35 to 40 basis points lower than the maturing products. In the second quarter we have 4.8 billion of retail CDs maturing with an average cost of 3.98%. Also during the quarter we further deleveraged the balance sheet by paying down 1 billion of flub advances with a weighted average cost of 3.85%. The deleveraging CD maturities and other deposit management actions led to a 21 basis point reduction in the cost of interest bearing deposits quarter over quarter. Slide 13 shows our multifamily and Commercial Real Estate (CRE)PA payoffs which were again elevated this quarter at 1.1 billion of which 42% were rated substandard. These payoffs are resulting in a significant reduction in in overall Commercial Real Estate (CRE) balances and in our Commercial Real Estate (CRE) concentration ratio. Total Commercial Real Estate (CRE) balances have decreased 13.4 billion or 28% since year end 2023 to approximately 34 billion, aiding in our strategy to diversify the loan portfolio to a mix of 1/3 Commercial Real Estate (CRE), 1/3 CNI and 1/3 consumer. Additionally, the PAR payoffs have helped lower our Cre concentration ratio by 134% basis points to 3.67%. The next slide provides an overview of the multifamily portfolio which declined 5.5 billion or 17% on a year over year basis and 1.1 billion or 4% on a linked quarter basis. The reserve coverage on the total multi family portfolio was 1.83% and remains the highest relative to other multifamily focused lenders in the Northeast. Additionally, the reserve coverage on these multi family loans where 50% or more of the units are rent regulated is 3.20%. Currently there are $11.9 billion of multi family loans that are either resetting or maturing through year end 2027 with a weighted average coupon of approximately 3.75%. Moving to slides 15 and 16, we have again provided detailed additional information on the New York City multifamily portfolio where 50% or more of the units are rent regulated. At March 31st this tranche of the portfolio totaled 8.8 billion down 4% compared to the previous quarter and has an occupancy rate of 97% and a current LTV of 70%. Approximately 52% or 4.6 billion of the 8.8 billion are pass rated loans and the remaining 48% or 4.3 billion are criticised for classified meaning they are either special mention substandard or non accrual. Of the 4.3 billion, 1.9 billion are non accrual and have already been charged off to at least 90% of appraised value, meaning 287 million or 15% has been charged off against these non accrual loans. Furthermore, we also have an additional 73 million or 5% of ACL reserves against this non accrual population, meaning we have taken 20% of either charge offs or reserves against this population. Of the remaining 2.7 billion that are special mention substandard loans between reserves and charge offs we have 5.8% or 154 million pounds of loan loss coverage. We believe we're adequately reserved or have charged these loans off to the appropriate levels and with excess capital of 2.2 billion before tax we think we're more than covered were there to be any further degradation in this portion of the portfolio. Slide 17 details our ACL coverage by category. The 78 million reduction in the ACL was largely driven by lower CERE and multifamily health reinvestment balances. Our coverage ratio included unfunded commitments was at 1.67% at quarter end. On slide 18 we provide additional details around credit quality which trended positively during the quarter. Non accrual loans totaled $2.7 billion down $323 million or 11% compared to the prior quarter. Criticised and classified loans also declined decreasing $385 million or 3% compared to the prior quarter. During the quarter we did see an increase in special mention loans as a result of our comprehensive and prudent process that analyses in detail all loans with a reset or maturity date 18 months out 18 months from March 31, 2026 is September 27 and 27 is our largest reset year where nearly 9 billion Commercial Real Estate (CRE) loans either reset or mature. This amount includes approximately 2.9 billion of multifamily where 50% or more of these units are rent regulated. As part of this internal forward looking process we've applied the relevant pro forma contractual interest rate calculations and adjusted risk ratings accordingly. Three items I would note we are now 75% through analysing the entire 2027 cohort. The results of this analysis is reflected in our ACL and we continue to see significant substandard PAR payoffs each quarter. At the end of the quarter 30 to 89 day delinquencies were approximately 967 million, a decrease of 19 million from the previous quarter. As mentioned last quarter, the biggest driver of this delinquency Number is the additional day or 31st day of March when calculating delinquencies. At precisely 30 days as of April 21, approximately 493 million of these delinquent loans had been brought current. We continue to deliver on our strategic plan and are excited about the journey we're on and the value we will create for our shareholders over the next two years. With that, I will now turn the call back to Joseph.
Joseph Otting (Chairman, President and CEO)
Thank you very much Lee. Before moving to Q and A, I wanted to add that we are encouraged by our continued progress made in the first quarter and remain focused on driving sustainable profitability, improving returns and delivering long term value for our shareholders. With continued improvement in credit trends, solid loan and deposit growth and strong capital levels, we believe that Flagstar is well positioned in 2026. In addition, I'd like to thank our board of directors, our executive leadership team and all the teammates at Flagstar for their dedication and commitment to the organization and our customers and operator. With that, I would be happy to turn it over to you to open the line for questions.
REGINA
We will now begin the question and answer session. To ask a question, press star, then the number one on your telephone keypad. We ask that you please limit your initial question to one and return to the queue for any additional follow up questions that you might have. Our first question will come from the line of Chris McGrady with KBW. Please go ahead.
Chris McGrady (Equity Analyst)
Great morning. Lee, maybe a question for you to start the margin adjustment for next year. I hear you on the being a little bit more competitive on the payoffs. Could you unpack just the differences in your assumptions for the margin for next year Specifically, is it a, you know, balance sheet size and you know, the Net Interest Income (NII) conversation size versus margin. Thanks.
Lee Smith (Senior Executive Vice President and Chief Financial Officer)
Yeah, so it's a little bit balance sheet and then a little bit of the additional payoffs of the CRE and multifamily book. So as I mentioned, the balance sheet at the end of 26 will be about 94 billion, 102 billion at the end of 27. So we have, we are assuming a slight reduction versus what we previously guided to sort of in that 500 million to 750 million range. But if you look at Q1, we did see 1.6 billion of pay downs and amortization in that cream multifamily book. And as I mentioned in the prepared remarks, it's both good news and bad news. The good news is it's allowing us to get to our diversified strategy more quickly of a third, a third, a third. But it does impact short Term interest income and nim, and that's what you're seeing. So we think that we'll be able to use the funds from those payoffs to just further grow the C&I the consumer and originate new CRE loans. But it sort of pushes everything out. So that's one of the items that is impacting the name. I think some of the better quality CRE loans that we would look to retain, we'll be pricing those off a spread to sofa in the 175 to 225 range. And that's obviously a lower rate than the contractual reset, which is five year flood plus 300. And we've deliberately left that contractual rate in place because as you know, Chris, we've been trying to reduce our exposure to those CRE multifamily assets where we have overweight and there's higher risk. So that's obviously working. And then we're seeing as a result of that, fewer loans that are resetting are staying with us. We were sort of originally in the 50% range, it's now in the 35 to 40% range. And then the final piece that I mentioned was we saw very strong deposit growth in the quarter, 1.1 billion. Very pleased with that. It was all interest bearing. We would like to see more non interest bearing growth. We think that will come with the rating agency upgrades. But that sort of pushes, it affects Net Interest Margin (NIM) in the short term and it sort of pushes everything out. So it's a combination of those items that you're seeing, just bring the Net Interest Margin (NIM) down, you know, 10 or 12 basis points. That's great, thanks. Thanks for that.
Chris McGrady (Equity Analyst)
And then Joseph, for you, I mean the consequence of this is you have more capital. And then I heard you on the Basel 3, it feels like everything's lining up for the back half of the capital distribution that you alluded to in your prepared remarks. Can you just talk through, you know, the mile markers that from here you might need to see before you pull that lever? Yeah.
Joseph Otting (Chairman, President and CEO)
So Chris, what we've been fairly consistent saying is we wanted the company to demonstrate consistent quarterly earnings. And you know, our goal is, you know, obviously we feel that will occur now as we've turned the quarter in the fourth quarter and then the first quarter. So that that's one of the legs of the stool. The second would be, you know, our goal is to get the non performing assets down to $2 billion by the end of the year. And so that was kind of the second leg of that and to continue to make progress from roughly the 2.6 billion level that we are at today. And then the third is just understanding, you know, how much growth we can have in the CNI portfolio and balancing that against the Commercial Real Estate (CRE) payoffs. You know, I'd say the way we look at that is the Commercial Real Estate (CRE) payoffs have been greater than we expected, but the CNI originations have also been more. And we do see some acceleration in the CNI occurring not only in our pipelines, but as we add more people into the various industry specializations and geographic strategy that we actually think, you know, that will continue to grow. And so when you take those kind of three factors into account, it was always management's intention to have a good insight to that through the second quarter and then have dialogue with the board on capital actions going forward. Okay, thank you. You're welcome.
Regina (Operator)
Our next question will come from the line of Jared Shaw with Barclays. Please go ahead.
Jared Shaw (Equity Analyst)
Hey, good morning. Maybe sticking with margin, but for this year, when we look at loan yields this quarter, I guess that was a little bit weaker than we were expecting. Anything that you're seeing there that we should call out and then just sort of, as we look at the pace of, of margin expansion for the next few quarters, how is the loan yield playing into that?
Lee Smith (Senior Executive Vice President and Chief Financial Officer)
Yeah, well, if you look at the actual asset yield, it wasn't down that much quarter over quarter. When you consider the 2 rate reductions in the fourth quarter, that's what I would say. The reduction was twofold. So in terms of the interest income, you've got what I just mentioned, we had more payoffs and pay downs as it relates to that Syrian multifamily book, which, which we think is sort of a, it's a good news story, but it does impact that short term interest income. A name and remember, you do need to adjust in Q4, you do need to adjust for that hedge gain of 21 million which was included in interest income and Net Interest Margin (NIM). So when you adjust for that, the Net Interest Margin (NIM) was 2.05 in Q4, increasing 10 basis points to 2.15 in Q1. The other thing that I would point out, and I alluded to some of this in my prepared remarks, Jared, when you think of the 1.4 billion of net C&I growth in the quarter, I would say 600 million of that came right at the end of the quarter in the last week or 10 days. So you're not seeing any pickup in Net Interest Margin (NIM) and interest income in Q1 as a result of that, but you will see that flow through in Q2 and beyond. The other part of it is the borrower that was in bankruptcy that got resolved on March 31, the last day of the quarter. So you've got, you know, a significant amount of loans coming off of non accrual and then a new accruing loan that is coming on. You didn't see any benefit of that in the first quarter because it occurred on the last day of the of the month and the quarter. You will see that flow through in Q2 and beyond. And I would just point out the net C&I growth of 1.4 billion in the quarter. We feel that we can continue at least at that run rate throughout this year. And we've been talking about growing CNI and people have been asking what do we think we can do? And I think this is the first quarter where we're really showing the power of everything that Joseph and Rich have built and what those bankers are doing on the CNI side.
Jared Shaw (Equity Analyst)
Okay, all right, thanks. And then I could just ask quickly one more. You'd in the past talked about adding cash and securities. I think it was about 2 to 4 billion. Is that still what's sort of the path forward on cash and securities balances with the broader backdrop?
Lee Smith (Senior Executive Vice President and Chief Financial Officer)
Yeah, I think as you look forward in 26, you will probably see our cash position come down a couple of billion. We, we will be buying more securities. I think you can expect us in Q2 to be buying at least a billion, a billion and a half of securities. And we would look to get that securities balance back up to probably, you know, 16 billion or so as we move into the second half of 2026. The securities we're buying, as I've said before, pre vanilla short duration, rmbs, cmos. But it gives us an additional lever should we need to create more cash to let some of those securities run off, but a lot of it as well. Remember, Jared is governed by what are the PAR payoffs? Because as we're seeing those Commercial Real Estate (CRE) and multifamily loans pay off, that is generating cash. And you know, we've got the option to grow the securities or pay down wholesale borrowings. And you saw us pay down another 1.3 billion of expensive wholesale borrowings in the quarter between flood and broker deposits.
Regina (Operator)
Our next question comes from the line of Manon Gosalia with Morgan Stanley. Please go ahead.
Manon Gosalia
Hi, good morning. Maybe staying on the topic of the Moody's and FISH upgrades. I think Moody's upgrade also came with a deposit rating upgrade. So can you talk about the Implications for both funding costs. I think you mentioned, you know, more Demand Deposit Accounts (DDA) growth, but also for expenses. You know, is there any benefit on the Federal Deposit Insurance Corporation (FDIC) expense side? So would love to get the full set of benefits from the upgrades beyond just the capital side.
Joseph Otting (Chairman, President and CEO)
Sure. Let me, let me take that Moody's upgrade on the deposit. You know, as we obviously look to bring on new relationships and roughly, you know, there were approximately 75 new relationships that came in in the first quarter. Is part of our strategy, obviously is to make those both depository and fee income relationships in addition to loans, and not so much in the middle market, but in the lower end of the corporate market. Where we are focused on a lot of those companies have in their kind of their bank or their investment policy is that the bank had to have a investment grade rating generally from Moody's or an S and P rating to be able to exceed the Federal Deposit Insurance Corporation (FDIC) insurance levels. And so that rating is very important to that strategy as we look to penetrate in and gain operating accounts that often exceed those dollar amounts. And so we think that is a turning point, so to speak, for us of our ability to gain sizable new deposits with the relationships that we're bringing into the institution. And so we think that'll be significant for us as we move forward in that strategy. And I'll turn over to expense. Question to Lee. Let him answer that.
Lee Smith (Senior Executive Vice President and Chief Financial Officer)
Yeah, the upgrades have no direct impact on FDIC expenses, but as Joseph mentioned, I think it's a huge advantage in terms of being able to raise deposits going forward. And both Moody's and Fitch took our short and long term deposit ratings back to investment grade. So we're very pleased with that. And Moody's still has us on a positive outlook as well.
Manon Gosalia
Got it. And then maybe to stay on the expense side, Joseph, you spoke about the consolidation of the legacy data centers and the setup for the core conversion in 2027. I guess. How big of a lift is that? Is that multiple years? And how are you thinking about the expense number there? And I'm guessing it's baked into your guidance, but if you can just speak to that.
Joseph Otting (Chairman, President and CEO)
Yeah. So, you know, obviously closing six data centers and getting into two colocation centers was really positive for us. It was reflected in our expense forecast for this year. Next year, you know, we do today run two cores where we have two of the legacy organizations on one core provider and one on a third. It is our intent by July of next year to be on one core and on a run rate basis. We believe when that gets completed, it's roughly a $40 million decrease in expenses for the.
Manon Gosalia
Got it. Thank you.
Regina (Operator)
Our next question will come from the line of David Schevarini with Jefferies. Please go ahead.
David Schevarini (Equity Analyst)
Hi. Thanks for taking the question. So, wanted to drill into credit quality a little bit. Trends continue in the right direction with criticized and classified loans trending lower. Can you talk about your expectations going forward with these loans? Do you expect a continued downward trend and any surprises you've observed, either good or bad, as these loans have matured or reset?
Lee Smith (Senior Executive Vice President and Chief Financial Officer)
Thanks, David. No, we do not expect any surprises. Let me address that in the first instance. And we continue to see continued reduction of criticized and classified. As Joseph mentioned, you know, we're on track to reduce non accruals by up to a billion dollars this year and we saw a nice reduction in Q1 and we believe that will continue throughout 2026. And that's obviously accretive from both an earnings and a capital point of view because those non accruals are 150% risk rated. We continue to see a lot of liquidity around the multifamily loans. And that is why of the 1.1 billion of payoffs in Q1, 42% was substandard. And that is consistent with the trend that we've seen for multiple quarters now. So we expect to continue to see a reduction in substandard loans. And then I mentioned the special mention loans increased this quarter because we're doing that very comprehensive 18 month look forward. Of all loans that are maturing or resetting in the next 18 months, 2027 is our biggest reset maturity year. There's 9 billion that is resetting and maturing. So with 3/4 of the way through that analysis and by the end of Q2 we will be all the way through 2027. And again, everything, even though there was an increase in special mention loans, given the reductions in the other categories, given the reduction in Commercial Real Estate (CRE) and multifamily HFI balances, it's all reflected within our ACL reserve. And the final point I would like to add is on the charge offs as you brought up credit, David, So charge offs were 78 million this quarter quarter versus 46 million last quarter. However, 34 million of what was charged off related to the one borrower that was in bankruptcy. And of that 34 million, 30 million was already fully reserved. So there was an incremental 4 million related to that bankruptcy. Really just sales costs that we needed to take. And if you subtract that 34 from the 78, you're basically at 44 million of net net charge offs versus 46 million last quarter, which is about 30 basis points. So we are consistent from a net charge off base on a net charge off basis and we expect that trend to continue next quarter as well.
Joseph Otting (Chairman, President and CEO)
Yeah, and hey David, the one other thing that I would add, I think Lee did a good job at describing that is when we do that look forward, 99% of those loans today are current in the special mention category. So if you called those borrowers up, they would say, well, I've never missed a payment. But what we do in that 18 month look forward is we apply the current rate that they would incur if that loan matured today. And then we analyze that cash flow and make a determination where does their cash flow sit against, you know, a fixed charge coverage or cash flow coverage on the property. And so, you know, if your property is at three and a half percent today and you take it up to six and a half, you know, for our contractual rollover, that that's what's causing those, you know, loans to look slightly impaired when actually that is really a forward look to those with pretty punitive interest rates.
David Schevarini (Equity Analyst)
Very helpful. And sticking with this theme, can you provide us with your latest views on a potential rent freeze and the impact this could have on your portfolio?
Lee Smith (Senior Executive Vice President and Chief Financial Officer)
Yeah, absolutely. So we have modeled out a rent freeze, three year rent freeze occur or starting 26-10-1. So a couple of other assumptions that I would add. We also assume as part of this analysis that operating expenses increased 2.75% per annum and think about that as being inflationary. And we also assume that the market units, so the non rent regulated units are able to increase their rent 2.1% per annum. So here's what we found when we ran that analysis. Anything that is 70% or less rent regulated, there is no impact to the nois. And the reason for that is the rent freezes on the rent regulated units are offset by increasing the rent on the market or non rent regulated units. So 70 is sort of the demarcation line. Anything that is above 70% rent regulated, there is an impact to ROI over that time horizon, the three year time horizon of about 7 or 8%. And if you look at the rent regulated slides that we have in the earnings deck, so we have, and the earnings deck shows everything that is more than 50% rent regulated. And we have 8.8 billion, but 4.6 billion is tax rated with an amortizing DSCR of 1.5. So those borrowers would be able to absorb the Rent freezes and that impact on noi. And then when you look at the criticized and classified which is 4.2 billion, we have taken significant charge offs. So between charge offs and ACL reserves we've taken over 500 million of charge offs and we have reserves against that population. So you know, we believe that we're more than covered just given when we re underwrote that book in 24 and we took over 900 million of charge offs and we increased our ACL reserves. We believe we're more than covered given what we've already done. A couple of other things I'd point out though on this, it's not just about the rent freeze. As you know, we're getting annual financial statements from these borrowers and looking at and digging into those. We're doing a deep dive on everything that is maturing in the next 18 months and we undertake a robust analysis on all of those loans. We're reviewing things like the worst landlord list and lien and violation lists and we don't have much exposure there. A lot of our borrowers, as you know, these are families where the properties have been with them for multiple years so they have a low cost basis or they benefited from the 1031 tax rollover. So we do not have any REO on our balance sheet. And if there was an issue it would be showing up in our charge offs and ACL reserve which as we've just been through you're not seeing. And the final thing I would add is there is still an incredible amount of liquidity for this asset class as we've seen from our quarterly PAR payoffs and as we saw again this quarter as well.
David Schevarini (Equity Analyst)
Very helpful, thank you.
Regina (Operator)
Our next question will come from the line of David Smith with Truist Securities. Please go ahead.
David Smith (Equity Analyst)
Hey, good morning. Hey Dave. Hi Doug. Big picture. You obviously took your 2026 and 2027 earnings guidance a bit lower. Do you just view this as a delay and push out of your expectations by a couple of quarters or has anything changed at all about your medium and long term profitability expectations for the bank?
Lee Smith (Senior Executive Vice President and Chief Financial Officer)
David, you are spot on and that is exactly Joseph and I were having this conversation not if you look at our thesis and everything we're doing we are executing against our strategy. And all this does worst case is maybe pushes things out 1/4 or 2/4. And let me tell you what I mean by that because we're seeing increased paydowns or payoffs of that siri multifamily. Maybe we just need one more quarter of two plus Billion next CNI growth or two quarters. So everything is intact. Those reset and maturity dates, we know they're coming. We just need to sit here and be patient. It's just time and worst case scenario, maybe you're just looking at an extra quarter or two. So I think you've hit the nail right on the head there.
David Smith (Equity Analyst)
Thank you. And then the change in assumption on Multifamily loan repricing to 175 to 225 over Secured Overnight Financing Rate (SOFR) instead of 300 over the five year, does that have any impact on credit as you do the 18 month look forward on loans resetting?
Lee Smith (Senior Executive Vice President and Chief Financial Officer)
Yeah. So let me just clarify that the contractual resets, we are sticking by. So anything that is resetting or maturing, but really resetting, the contractual term is 5 year flood plus 300 or prime plus 275. We're not wavering off that and we haven't wavered off that. All we are saying is if there are better quality Commercial Real Estate (CRE) loans within our portfolio, maybe it's in the builder finance arena or maybe it's in non office Commercial Real Estate (CRE) where there's a deposit relationship, it's a strong credit, then we probably need to in order to retain them, we probably need to move to a market rate which would be sofa plus 175 to 225. So that's all we're saying that we'll be very selective in only selecting those credits that are extremely high quality. And we think that there's either an existing or the potential for a future relationship.
Joseph Otting (Chairman, President and CEO)
Yeah. Hey David, one point I think you were perhaps asking there was like when, when we're doing that forward look and we're applying our contractual rate, we, we probably are 75 basis points over the market when we do that analysis that would perhaps push, you know, some of the loans into the special mention category. That if you used a strictly market rate and that analysis you would not see as many special mention credits.
David Smith (Equity Analyst)
Okay, understood. Thank you.
Regina (Operator)
Our next question will come from the line of Dave Rochester with Kantor. Please go ahead.
Dave Rochester
Hey, good morning guys.
Lee Smith (Senior Executive Vice President and Chief Financial Officer)
Good morning. Appreciated the comments on the board meeting coming up and your thoughts on just capital deployment in general. You called out the 1.6 of excess capital above the bottom end of your target capital range. You talked about that for a quarter or two now. I was just curious how you're looking at that excess capital because we've seen some banks manage that down to their targets fairly quickly. Now that we have some clarity with the capital proposals, you've got more Loan growth that's ramping up through the end of this year. Obviously that's going to be improving profitability and whatnot, and you'll want to save capital for that. But are you in a situation now where you could easily just save half of that excess and dedicate that to the loan growth that you're expecting over the next couple years and then take the other half and pay that out of the next couple quarters? How are you thinking about getting to your targets more so in terms of timing? Yeah, well, great question. And look, I think we're in the fortunate position. What's sort of ironic is if you turn the clock back 18 months ago, you know, people were asking if we had enough capital and you sort of fast forward to where we are today. And again, because the great work that the Flagstaff team has done, you know, we're in this sort of situation where people are asking, what are you going to do with all the capital? We're in the fortunate position where we can do both. We can grow and we can obviously execute on capital actions later in the year, as Joseph alluded to. I think also what Joseph said is exactly what we're looking to do here, which is the consistent profitability. And we've now had 2/4 of profitability. So we're on the right track. We want to see those problem loans come down. We had a nice quarter in Q1, and so we want to see more of that and then. And then the organic growth, particularly on the CNI side. And you're really beginning to see that come through, as you saw in Q1, with 1.4 billion of net CNI growth. But we can do both. And you mentioned the new capital rules and the Basel III proposal. Look, we've analyzed that and we believe that that will give us an additional 60 to 80 basis points of CET1. So that's all in the risk ratings. And again, that's something that would be very helpful to us as well. But yeah, we have optionality and we're able to, I think, grow and we're able to take capital actions. We just want to prove out the consistent profitability as you've seen, and see a little bit more reduction in those problem loans.
Dave Rochester
Sounds good, Appreciate it. And then just on the new CI bankers you've hired, I was just wondering how they've done with their marching orders to bring in the first deal in the first 90 days. And if you can just give an update on where you are in hiring for this year. I think you're targeting 200 bankers by the end of this year, which meant maybe another 75 that you had to go. If you just give us an update on that and then any lingering de risking efforts that you're wrapping up in equipment finance or any of the other segments, that'd be good to hear about as well. Thanks.
Lee Smith (Senior Executive Vice President and Chief Financial Officer)
Yeah. Let me start with the, with the bankers. First of all. First of all, I mean I just want to compliment the job and the work that Rich and those bankers are doing. They have been phenomenal as you can see from the net cni growth in Q1. And again, this is very granular. The average loan size is in that 20 to 30 million range. In Q1, the average spread to sofa was actually went up. It was actually 242 basis points and we've got just over 70% utilization. So doing a tremendous job today. We have 131 customer facing CNI bankers. I think Rich would like to get to probably more like 180. So I think, you know, he's probably got another 40 to 60 to go in terms of new hires. As we said before, you know, our expectation, and these are all seasoned bankers that know Joseph, know Rich. Our expectation is that they're executing on their first deal within 90 days and then they're doing on average three or four deals in their first year, five or six deals a year thereafter. And I think if you sort of do the math on that, that's how you know we're getting to the CNI growth that we've alluded to. And again, you saw that come through in the first quarter. And then the second part of the question. Yeah, as I mentioned, a lot of the tall trees as we refer to where we had outsized exposure to single names, we are mostly through that. And if you look at the page on earlier in the deck, you can see that we really, we didn't have anywhere near as much runoff in those legacy equipment finance, asset based lending categories. There was a little bit of a swap between the two. So that's why there may be a little noise there. But on a net basis there wasn't much runoff at all. And we feel that you'll start to see those areas grow which will then complement what we're doing with the national lending verticals, the specialty verticals as well as what we're doing from a middle and upper CNI market point of view going forward as well.
Joseph Otting (Chairman, President and CEO)
Yeah, the other thing I, you know, obviously Lee hit on the spot. We've assembled really an incredible team in the CNI space that have come to the company in that, you know, 20 to 25 year experience level across, you know, both geographic markets and industry specialization. You know, our focus really is in kind of that 20 to $75 million range type, credit size. And that gives us the ability both to scale quickly, but also clients that use a lot of bank products and services that gives us cross sell opportunities. So, so I would say, I think if Rich was here, he would say probably 90% of the people are kind of hitting that first deal in 90 days with a number of them, you know, far exceeding that kind of production level. So it, it's really been an impressive story and you know, you know, I think if you had to assess where we are, I think we're kind of, you know, sliding into second base on that overall strategy. So we really do continue to see, you know, I think good market expansion, good growth and both adding people and those people that are now been on, you know, in the company for six to nine months are really hitting the stride. I commented in my comments that, you know, we really expect to be at or above, you know, the production level for Q2 to what we've done in Q1. And we actually were pretty hot coming out of the box this quarter. We had new closings that may have tried to get done in the first quarter but leaked over into the second quarter. So the opposite of what we had in the first quarter is we had a really strong march on closing. We actually came out of the box really hot at April and so we look for this to be an exceptional quarter.
Dave Rochester
That's great. Appreciate all the color.
Anthony Elion (Equity Analyst)
Our next question comes from the line of Anthony Elion with JP Morgan. Please go ahead. Hi everyone. Lee, on fee income you reduced slightly the 2026 outlook, but it still implies a material step up for the rest of this year to hit that range. Talk to us about the areas you think will drive the increase in 2Q and beyond.
Lee Smith (Senior Executive Vice President and Chief Financial Officer)
Yeah, sure. Good morning, Anthony. So a couple of things on the fee income first of all, and you probably already have, but I want to make sure people are adjusting for the figure gains losses because that is in the non interest fee income section. So we had a $9 million gain in Q4 and then we reduced the valuation and Effectively you saw a 9 million degradation in Q1. So that's an $18 million swing quarter over quarter. So I just want to make sure people are capturing that. But we think that it's really all of the line items. So capital markets, syndication, income swap and derivatives. We hired a new head of capital markets towards the end of last year and he's just finding, getting his feet under the table. And we feel pretty excited about some of the things that we're seeing there. As we originate more loans, we expect unused loan fees to increase. We have some SBIC investments. The returns were slightly down in Q1 versus normal quarters and we expect that to return to normal as we move forward. Q1 is seasonally low for mortgage gain on sale and we would expect gain on sale to increase or it will increase as you move into Q2 and beyond. And then the CRE fee income should increase as we start originating new CRE loans. The consumer overdraft and service charges should increase. We think net loan fees and charges, deposit fees will increase. And you know, we said before one of the things that we identified that was happening was we were waiving a lot of fees in the private bank and we are gradually reducing the amount of fees that we've been waiving in the private bank. So it's not one area in particular. You know, we expect to drive fee income across, you know, all categories and all parts of our business model.
Anthony Elion (Equity Analyst)
Thank you. And then on nii, can you share with us how much visibility you have just on the level of commercial real estate payoffs going forward? Right. Why what you saw in 1Q lead to such a sharp reduction in your NII outlook next year? And really what I'm trying to get at is the confidence you have that this is it for reductions to the NII outlook. Thank you.
Lee Smith (Senior Executive Vice President and Chief Financial Officer)
Yeah, it's a fair question. I would tell you that what people I think need to appreciate is there are more moving parts to this model than probably any other bank out there, especially banks that are mature. Because, you know, you're dealing with payoffs, pay downs, new originations, we're in growth mode. You're dealing with reductions in non accrual loans and they're lumpy. It's not linear. We're looking to pay down wholesale borrowings, reduce the cost of core deposit. There are more moving parts to this story than any other bank out there. We are moving in the right direction, to be absolutely precise, on every single one of those. It's not easy. And so, you know, we feel, based on the guidance that we've provided, that this is the best look that we have today. But could pay offs or pay downs increase? Sure they could. You know, we've got strategies in place, as I mentioned, for the better quality loans to try and retain them, but there's a lot of moving parts. I think what I would look at is the bigger picture. And as Joseph and I have both said, we are doing exactly what we said we would do and executing on our strategy. And the worst case here is maybe it pushes things out 1 or 2 quarters. So instead of Q4 of 27, we get there in 1 Q of 28 or 2 Q of 28 because we just need another quarter or two of 2 plus billion of net CNI growth. That's the worst case scenario and that's how I would look at it. When you're looking at the, you know, you've got to look at the bigger picture.
Anthony Elion (Equity Analyst)
Fair enough. Thank you.
Regina (Operator)
Our next question comes from the line of Matthew Breese with Stevens. Please go ahead.
Matthew Breese (Equity Analyst)
Hey, good morning Matthew. I wanted to touch on, on the, the inflows and outflows of Non-Performing Assets (NPAs) this quarter and, and going back to the Pinnacle Group, the bankruptcy loans, which I thought was maybe 500 or 600 million in balances, if that came out, it implies a decent chunk of new MPAs went in. And so I was just curious, you know, if that's, if that's the case, could you provide some color on the new inflows of Non-Performing Assets (NPAs), number of loans, size of relationship. And Joseph, do you, are you sticking with your outlook for a billion dollar reduction in non accruals this year?
Joseph Otting (Chairman, President and CEO)
Yeah, yeah. First of all, Matthew, we are sticking with that. You know it's kind of, you got to look at that category kind of like accounts receivable each quarter and we've had that like volatility where some come in and some go out. You know, we had roughly $700 million of resolutions during the quarter. So you do have inflows and outflows that incur and that has always been there where things are transitioning through that. We do expect this next quarter to be down $200 million and additional Non-Performing Assets (NPAs). So it's the trend line that we take a look at. But there is ins and outs out of that category on a fairly consistent basis.
Lee Smith (Senior Executive Vice President and Chief Financial Officer)
And Matt, I'll just remind you, 35% of our non accruals are current and pay. We're very punitive on ourselves in the way that we, we risk rate these loans and you know, no one else has that amount of their non accruals current and paid. But, but you've got to bear that in mind as well.
Joseph Otting (Chairman, President and CEO)
And real estate security.
Matthew Breese (Equity Analyst)
Yeah, understood. Okay. And then Lee, could you just clarify, you know, where the hedge gain was flowing through in the average balance sheet? I, I thought it was in borrowings, but I Think you had mentioned it was in interest income and. Yeah, it was. I'm sorry. Yeah, finish your question, Matt. Sorry, I was squeezing in two questions in one.
Lee Smith (Senior Executive Vice President and Chief Financial Officer)
Well, let me do, let me, let me, let me handle one first because you'll have to pay for the next one. The. It's all in the flub, the wholesale borrowings line. That's where that gain was, Matt. Okay. And then could you just provide this quarter, what were new loan yield originations overall? How does that compare to the pipeline and how does that compare to the fourth quarter?
Matthew Breese (Equity Analyst)
Yes, So I mentioned a couple of questions ago, the new CNI loans were coming on at a spread to sofa of 240 basis points in Q1. So which was, which was higher? They were coming on around 225 in Q4. So we saw a nice increase in Q1 in terms of average spread to sofa.
Regina (Operator)
Great. That's all I had. Thank you.
Casey Hare (Equity Analyst)
Great, thanks, Matt.
Lee Smith (Senior Executive Vice President and Chief Financial Officer)
Our next question comes from the line of Casey Hare with autonomous. Please go ahead.
Casey Hare (Equity Analyst)
Great, thanks. Good morning, guys. Lee had a question for you. On the balance sheet forecast of 102 and in 27. So if we started 87 today, you have about 12 billion of multifamily coming back to you between now and 27, you lose 60% of it. That is a 7 billion dollar drag. That takes you down to 80. You originate 2 billion a quarter of CNI. That takes you back up to 94 billion. Where is the. What's the. You're still 8 billion short versus that 102, I guess. What, what are we missing here?
Lee Smith (Senior Executive Vice President and Chief Financial Officer)
No, yeah. So you, you. So a couple of things. CNI growth is pretty significant in both years. You sort of looking at seven plus billion in both years. But remember on the Commercial Real Estate (CRE) and multifamily side, we are originating new Commercial Real Estate (CRE) loans. Not New York City Commercial Real Estate (CRE) loans, but Commercial Real Estate (CRE) loans in other parts of our footprint. So the Midwest, South Florida, California. So you've got to factor in the runoff in Commercial Real Estate (CRE) and multifamily is not as big as you think because we're replacing some of that with new Commercial Real Estate (CRE) originations. And then we also expect to see growth in the residential mortgage line item as well as we're originating more mortgages for balance sheet. So I think the piece you're probably missing is the Commercial Real Estate (CRE) multifamily runoff is probably not as great as you're thinking because of the new loans we're originating.
Casey Hare (Equity Analyst)
Okay, fair enough. And then the deposit growth was decent this quarter. You know what's the outlook there. Can you build on this momentum? And you know, where do you want to, how is the loan to deposit ratio? You know, where do you want to live on that ratio going forward?
Lee Smith (Senior Executive Vice President and Chief Financial Officer)
Yeah, we believe, you know, we can build on it. And as we said before, leveraging the new CNI customers that we're bringing in is one area that we feel that we can be successful in. And if you look at Q1 and you look at the deposit growth, about 450 million was from the commercial customers and the private bank customers. And ultimately we want to get the operating accounts of those commercial customers. But if we have to start with some interest bearing deposits, that's fine as well. So we believe that we can leverage those new relationships on the CNI side. And our treasury management team is working diligently to make that happen. And we saw some green shoots in Q1. We believe the private bank is another area where we can grow deposits. And Mark Pitt, who runs the private bank has really built out a real private bank with the chief investment officer, trust advisor. We've got a family wealth planner, we've got all the products that they would need, interest only mortgages now and a broad mortgage product set, subscription lending. So we feel that that's an area where we can continue to bring in more deposits and then leveraging our 340 bank branches as well. And obviously the new CRE lending we're doing, you know, the expectation is that is relationship driven and will come with deposits and fee income opportunities as well. So we do believe that we can continue the momentum and grow more deposits. I'd like to see some more non interest bearing BDA growth, but we think that will come with those rating upgrades that we got this quarter from Moody's and Fitch.
Casey Hare (Equity Analyst)
Thank you.
Regina (Operator)
Our next question will come from the line of Bernard Von Gazicki with Deutsche Bank. Please go ahead.
Bernard Von Gazicki (Equity Analyst)
Hey guys. Good morning. I know you're, I know you're specialized in regional banking. Segments are being built out and deposit gathering initiatives will be in a different life cycle versus peers, but with rates potentially on hold. How would you describe deposit pricing pressure? Sounds like the Moody switch upgrade, you know, could help alleviate some pressure that some peers might be seeing more of. Just thoughts on what you're seeing within your footprint.
Lee Smith (Senior Executive Vice President and Chief Financial Officer)
Yeah, obviously it's competitive, Bernie, and we meet every week on this and we review deposit gathering in every single market that we're in and we look at what our competitors are doing and we make sure, obviously you need to be competitive. But what I would say is not only did we bring 1.1 billion of new deposits in? In Q1, we also reduced that cost of core deposits, 21 basis points. So we're not overpaying for these deposits. I think we're leveraging our relationships, we're leveraging the model that we've built and we're being mindful, obviously, of what our peers and competitors are doing. You have to be. But I would say despite that, you've still seen us sort of execute and be successful with the deposits that we've bought in and the reduction in core deposit costs.
Bernard Von Gazicki (Equity Analyst)
And just a follow up, I know you paid down The FHLB advances by 1 billion during the quarter. What are your expectations for pay downs for the rest of the year?
Lee Smith (Senior Executive Vice President and Chief Financial Officer)
Yeah, I think the way we're thinking about it, Bernie, is we believe we can pay down another 2 or 3 billion over the rest of the year. And again, a lot of it will be driven by, you know, what excess cash do we have? And that will be driven by, you know, what's going on with deposit growth, what's going on with the payoffs, the pay downs. But we think we can pay down another 2 or 3 billion of which would get us, you know, into the like $6 billion range, which, you know, if you recall, when we got here, it was about $23 billion.
Bernard Von Gazicki (Equity Analyst)
Great. Thanks for taking my questions. Yep, thanks.
Regina (Operator)
And that concludes our question and answer session. I'll turn the call back over to Joseph for any closing comments.
Joseph Otting (Chairman, President and CEO)
Thank you very much, operator, and thank you for taking the time to understand our story. You know, we often say here we started with 20 big items that we needed to knock off the list. We really feel we're down to about four, have those well under control and are executing on that. And we remain extremely focused on executing on our strategic plan. You know, we really want to transform Flagstar into a top performing regional bank, creating a customer centric organization that's relationship culture and effectively manage risk to drive long term value. So thank you for your time this morning and thank you for joining us.
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