February 7, 2025 | Premium Service | Last week in our quarterly conference call with annual subscribers to the Premium Service, we were asked about several banks that are in the bottom quartile of the WGA Bank Top 100 indices. Below we go through several of the bottom 29 banks in the test group to see if there are any members of the purgatorio for large banks which may be redeemed.
Source: WGA LLC
One of the names we discussed last week was the bank f/k/a New York Community Bank and now Flagstar Financial (FLG), which disclosed a large, $1.1 billion provision at year-end. Commercial credit is big and lumpy. Of note, FLG management is upbeat and guiding to credit expenses in the low hundreds of millions of dollars in 2025, ‘26 and ‘27. FLG CFO Lee Smith put some color on 2024:
“During 2024, $3 billion of multifamily loans have reset and as of January 22nd, 41% or $1.2 billion have paid off. The remaining $1.8 billion repriced per the contractual terms of the loan agreement and $1.5 billion of those loan resets are current. In other words, 90% of multifamily loans resetting in 2024 have either paid off or have repriced and are current. Another indicator that borrowers are standing behind their properties. As we look forward, we have approximately $5 billion of multifamily loans either resetting or maturing in '25, another $5 billion in 2026, and almost $9 billion in 2027.”