Flagstar Bank, N.A. saw its long‑term deposit rating raised to Baa3 from Ba1 and its short‑term deposit rating lifted to Prime‑3 from Not Prime on April 2, 2026, both upgrades placing the bank firmly in the investment‑grade category.
The upgrade was driven by a combination of stronger financial performance, the successful remediation of a material weakness in internal controls, and a bolstered capital position. Flagstar returned to profitability in Q4 2025, reporting a net income of $29 million after posting losses in Q4 2024 and Q3 2025, and has maintained regulatory capital ratios that exceed requirements.
Strategically, the bank has been de‑risking its balance sheet by reducing exposure to multi‑family and commercial‑real‑estate loans while expanding its commercial‑and‑industrial (C&I) lending platform. This shift has helped lift earnings and supports the bank’s long‑term growth plan.
"We are very pleased Moody’s reviewed the company and our progress and upgraded several of our ratings, including our long‑ and short‑term deposit ratings to investment grade. This is the second time in the last few weeks that a major rating agency has upgraded Flagstar," said Joseph M. Otting, Executive Chairman, President and CEO. "I think we’re now pivoting to the growth side of the story," added CFO Lee Smith, underscoring the bank’s focus on expansion.
The upgrade follows Fitch’s investment‑grade deposit rating upgrade in March 2026 and comes after a February 2024 downgrade that reflected earlier financial and governance challenges. Flagstar’s acquisition of parts of Signature Bank in March 2023 and the merger of its holding company into the bank subsidiary in October 2025 have also strengthened its balance sheet. With the new ratings, Flagstar is expected to improve its funding profile, broaden access to corporate, institutional, and municipal deposit relationships, and support its continued growth strategy.
The rating action signals renewed confidence from a major credit agency and positions Flagstar to compete more effectively for deposits and capital in a tightening funding environment. The upgrade is a key milestone in the bank’s turnaround and a positive indicator for its future financial health.
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