Flagstar Bank, National Association

OCC Comptroller's Handbook, Rating Credit Risk (April 2001) - https://occ.treas.gov/publications-and-resources/publications/comptrollers-handbook/files/rating-credit-risk/index-rating-credit-risk.html; FFIEC UBPR User's Guide, Section III, Analysis of Past-Due, Nonaccrual & Restructured Loans and Leases - https://www.ffiec.gov/data/ubpr/report-user-guide

Nonperforming loans consist of nonaccrual loans $3,139M plus loans 90 days or more past due and still accruing $0M, measured against total loans and leases $69,172M.

Provide board and management analysis of the nonperforming loan drivers, updated risk-rating support, workout and collection status for material credits, charge-off review support, and portfolio-level action plans for segments contributing to elevated nonperformance.

Interagency Guidance on Concentrations in Commercial Real Estate Lending (Dec 2006); SR 07-1 — Federal Reserve interagency guidance

Total CRE (construction $3,332M + multifamily $34,144M + non-farm non-residential $1,287M) measured against total risk-based capital (Tier 1 $8,912M + Tier 2 $848M). The interagency CRE concentration threshold is 300% of total risk-based capital; construction is also subject to a separate 100% threshold (procedure A-04).

Heightened risk-management practices required: portfolio stress testing under CRE-specific scenarios, granular concentration MIS reporting, sub-limits by property type and geography, board-approved CRE risk-appetite statement, and documented exit / mitigation plan if the concentration is rising.

OCC Comptroller's Handbook, "Earnings"; FFIEC UBPR User's Guide §IV — Earnings Analysis

YTD net income $-1,019M on average assets $112,048M. Typical community-bank peer ROA is 0.9–1.1%; sustained sub-0.5% ROA can indicate margin compression, asset-quality deterioration, or expense growth out of pace with revenue. Negative ROA triggers heightened supervisory attention.

Provide written analysis of the drivers (margin compression, noninterest expense growth, credit costs, fee compression). If ROA is negative, submit an earnings-restoration plan to the primary regulator with quarterly milestones and a path back to peer-range earnings within four to eight quarters.

FFIEC UBPR User's Guide §IV — Earnings Analysis

Efficiency ratio is 100.97%. An elevated efficiency ratio indicates noninterest expense is consuming a high share of operating revenue and may weaken the institution’s ability to absorb credit costs, funding-cost pressure, or revenue disruption.

Provide expense and revenue decomposition by major line item, including compensation, occupancy, technology, professional services, and noninterest income trends. Submit a board-reviewed operating plan with measurable expense controls, revenue initiatives, and quarterly efficiency targets.

OCC Comptroller's Handbook, "Earnings"

Year-to-date net income is $-1,019M. Negative earnings reduce internal capital generation and may indicate margin pressure, expense imbalance, elevated credit costs, or nonrecurring losses requiring supervisory attention.

Provide a written earnings-restoration plan identifying the drivers of the loss, expected recurrence, capital impact, and corrective actions. Include quarterly milestones for returning to sustainable profitability and board reporting that tracks actual performance against the plan.

FASB ASC Topic 326, Financial Instruments - Credit Losses; Interagency Policy Statement on Allowances for Credit Losses (June 2020; revised April 2023) - https://www.federalreserve.gov/frrs/guidance/interagency-policy-statement-on-allowances-for-credit-losses.htm

Allowance for credit losses $1,201M is measured against nonaccrual loans $3,139M while nonaccrual loans are measured against total loans and leases $69,172M.

Provide the current CECL methodology, qualitative factor support, loss-rate support, individually evaluated loan analysis, charge-off timing review, and board approval materials showing why the allowance remains appropriate despite low nonaccrual coverage.

FFIEC UBPR User's Guide §IV — Earnings Analysis; OCC Comptroller's Handbook, "Interest Rate Risk"

Year-to-date net interest margin is 2.17%. Compressed margin can reduce core earnings capacity and may indicate asset-yield pressure, funding-cost pressure, interest-rate-risk exposure, or adverse balance-sheet mix.

Provide management's margin analysis, including earning-asset yields, funding costs, repricing gaps, deposit betas, and modeled sensitivity to parallel and nonparallel rate shocks. Document board-approved actions to restore sustainable margin without assuming excessive credit, liquidity, or interest-rate risk.

OCC Comptroller's Handbook, "Earnings"

Year-to-date net interest margin is 2.17% while the efficiency ratio is 100.97%. The combination of sub-3% margin and above-70% efficiency ratio indicates weakened recurring earnings capacity from both revenue pressure and operating-cost burden.

Provide an integrated earnings analysis showing whether margin pressure, deposit repricing, asset mix, noninterest expense, or fee-income weakness is the primary driver. Submit a board-approved profitability plan with coordinated pricing, funding, balance-sheet, and expense actions and quarterly monitoring metrics.

Interagency Policy Statement on Funding and Liquidity Risk Management (March 2010); FFIEC Liquidity and Funds Management Handbook

Gross loans and leases $69,172M against total deposits $76,448M. A loans/deposits ratio above 100% indicates the institution funds loan growth with non-deposit (wholesale, brokered, or borrowed) funding sources, increasing liquidity and funding-cost sensitivity.

Provide an updated Contingency Funding Plan with specific playbook triggers (deposit-runoff thresholds, asset-sale order). Quantify uninsured-deposit runoff under stress scenarios. Document back-up borrowing capacity at FHLB, the discount window, and any standing facilities; pre-position collateral.

12 CFR § 337.6 — Brokered deposits; FDIC Brokered Deposit Rule

Brokered deposits $14,940M against total deposits $76,448M. Elevated brokered-deposit reliance can increase liquidity sensitivity, funding-cost volatility, and supervisory restrictions if capital condition weakens.

Provide a brokered-deposit funding plan with board-approved concentration limits, maturity distribution, rate-sensitivity analysis, and contingency actions if brokered channels become unavailable or restricted. Demonstrate compliance monitoring for 12 CFR § 337.6.

Federal Reserve SR 16-11, Supervisory Guidance for Assessing Risk Management at Supervised Institutions with Total Consolidated Assets Less than $100 Billion (June 8, 2016; revised February 17, 2021) - https://www.federalreserve.gov/supervisionreg/srletters/sr1611.htm; 12 CFR Part 30, Appendix D - OCC Guidelines Establishing Heightened Standards for Certain Large Insured National Banks, Insured Federal Savings Associations, and Insured Federal Branches - https://www.ecfr.gov/current/title-12/chapter-I/part-30/appendix-Appendix%20D%20to%20Part%2030

Total CRE (construction $3,332M + multifamily $34,144M + non-farm non-residential $1,287M) is measured against total risk-based capital (Tier 1 $8,912M + Tier 2 $848M), while brokered deposits $14,940M are measured against total deposits $76,448M. The combined breach indicates management may be accepting concentrated credit risk while relying materially on non-core funding.

Provide board-approved risk appetite limits covering CRE concentration, brokered deposits, and aggregate balance-sheet risk. Submit management reporting that tracks limit breaches, escalation steps, responsible owners, and remediation deadlines. Provide an integrated capital, liquidity, and concentration reduction plan with stress scenarios showing the effect of CRE losses and brokered-deposit runoff.