Financial institution Flagstar undergoes second leadership shift in Chief Financial Officer role within a year
Flagstar Bank, the regional bank based in Troy, Michigan, is currently undergoing a significant phase of operational improvement, cost reduction, and strategic refocusing. This transformation comes after the resignation of Joseph Otting as CEO and the appointment of Lee Smith as CFO, effective December 27, 2022[1].
Joseph Otting, the former comptroller of the currency, described Lee Smith as an instrumental member of Flagstar's executive team. Smith joined Flagstar in 2013 as the chief operating officer before moving to the mortgage division in 2020[2]. Craig Gifford, the former U.S. Bank executive, was brought aboard as Flagstar's CFO in April 2022[3].
In April 2022, Flagstar received a $1.05 billion capital injection from investors, with Brian Callanan, general counsel for Liberty Strategic Capital, appointed to Flagstar's board of directors. This capital infusion was in exchange for several leadership changes at Flagstar, including the appointment of Otting as CEO and Gifford as CFO[4].
Flagstar's financial performance has shown steady improvement since the leadership changes. In Q2 2025, the bank reported a net loss attributable to common stockholders of $78 million, a 28% improvement over the prior quarter and a 77% improvement compared to Q2 2024. Net interest margin (NIM) improved slightly to 1.81%, and non-interest expenses fell 27% year-over-year[5].
The bank is prioritizing growth in commercial and industrial loans, with $1.9 billion in C&I loan commitments reported in Q2 2025. There is no specific public information indicating recent major acquisitions since Lee Smith's CFO appointment and Otting’s CEO resignation, but the company is undertaking a corporate restructuring[2][4].
Flagstar Financial, the holding company, has approved a merger into Flagstar Bank, N.A., the bank entity itself. This reorganization is intended to simplify the corporate structure, reduce costs, and streamline regulatory and operational oversight. The merger is subject to regulatory and shareholder approval and is expected to finalize before the end of 2025[4].
The simplification of the legal and regulatory structure through the merger indicates an effort to reduce regulatory complexity but also suggests ongoing regulatory oversight. Flagstar remains under standard federal banking regulatory supervision as a large regional bank[4].
As of March 31, 2025, Flagstar had $97.6 billion in assets, $67.1 billion in loans, $73.9 billion in deposits, and $8.2 billion in stockholders’ equity, with a Common Equity Tier 1 (CET1) ratio of 12.3%, demonstrating it remains well-capitalized[2][4].
Otting stated that Flagstar has been working to elevate its status. The departure of CEO Otting and the CFO change appear aligned with this strategic transition rather than triggering regulatory concerns or abrupt shifts in growth strategy[1][2][4].
As Craig Gifford steps down from his position at Flagstar but will stay until March 31 for a seamless handover, Flagstar Bank continues its journey towards profitability, with a goal to achieve sustained profitability by late 2025[1].
References:
- Reuters
- Bloomberg
- Fortune
- American Banker
- Flagstar Bank Q2 2025 Earnings Release
Investing in Flagstar Bank may be an opportunity for those interested in business, as the regional bank, undergoing operational improvement and strategic refocusing, has demonstrated steady financial improvement since the leadership changes in April 2022. With a focus on growth in commercial and industrial loans and a planned merger to streamline regulatory and operational oversight, Flagstar Bank aims to achieve sustained profitability by late 2025.
