- Key insight: Flagstar Bank extended CEO Joseph Otting's employment contract by one year and announced other leadership changes, as the Long Island-based bank continues to recover from a near-collapse.
- Supporting data: Along with the contract extension and a future base salary increase, Otting received a restricted stock unit award valued at $10 million, according to a securities filing.
- Forward look: Otting's base salary increase is set to take effect next March.
Flagstar Bank is rewarding its chief executive officer with a contract extension, a higher salary and $10 million in stock awards, and also expanding the duties of two other C-suite executives.
Joseph Otting, who joined the company two years ago two years ago as the Long Island-based bank was fighting for survival, has agreed to lead Flagstar until at least March 2028, the bank said in a press release. But he will pass along the president title. It will be shared by Lee Smith, chief financial officer, and Richard Raffetto, who most recently was the president of commercial and private banking, the release said. In addition, Smith and Raffetto will also serve as co-chief operating officers.
The leadership changes are taking place a few weeks after the $87.1 billion-asset bank
The updates, which were announced Monday afternoon, may provide clues about who could someday lead Flagstar when the 68-year-old Otting leaves the job. According to the release, the changes "further strengthen the bank's executive management team and support the continued execution of its long-term strategic plan, senior executive development, and succession planning."
In an interview with American Banker last year, Otting said he expected to be with the bank for five years in total.
"I think by the end of 2027, we'll be a really strong-performing bank and then the board at that point will have to make a determination … what kind of skills, talents and experience would they like to have run the bank going forward," he said at the time.
Otting was named president and CEO of Flagstar in March 2024, as part of an investor group that pumped $1.05 billion of capital into the struggling bank to provide stability. The one-time comptroller of the currency, during the first Trump administration, Otting has spent the past two years
During the first quarter, Flagstar reported
Under the new leadership structure, Otting will continue to
The restricted stock unit award will vest in equal quarterly installments between March 6, 2027, and March 6, 2028, the bank said in the filing.
The board's decision to extend Otting's contract reflects "confidence in [Otting's] leadership, the bank's return to profitability and its commitment to ensuring stability and continuity as the bank continues to transform into a high-performing regional bank," the bank said in the release.
Under Otting's amended employment contract, he will be entitled to receive a payment equal to one times his base salary and bonus immediately prior to March 6, 2028, "in exchange for agreeing to certain post-employment restrictive covenants," according to the securities filing.
Otting's total pay package for 2025 was more than $7.6 million, according to the company's most recent proxy statement. The package included $3 million in stock awards and $3.375 million in cash as a non-equity incentive compensation award, the proxy statement shows.
The promotion of Smith, 50, and Raffetto, 57, to their new roles is effective immediately. The bank did not previously have a chief operating officer, a Flagstar spokesperson said Tuesday.
Smith, who was named CFO in late 2024, will continue to be Flagstar's finance chief, the bank said. In addition to overseeing accounting and finance, treasury, investor relations, corporate real estate and vendor management and mortgage banking, Smith will also now lead human resources, information technology and operations.
Raffetto, an industry veteran who
Neither Smith nor Raffetto will receive additional cash or equity-based compensation in connection with their new roles, the bank said in its securities filing.
"This transition is a natural next step in the long-term maturity of Flagstar and capitalizes on the depth of talent we have built across our organization," Otting said in the bank's release. "By expanding Rich's and Lee's roles … we are promoting their development and benefiting from the deep bench of talent here while positioning the bank to execute on our strategic plan."
Also on Monday, Flagstar said that Bao Nguyen, Flagstar's general counsel and chief of staff, will now be chief legal officer, reporting to Otting. Nguyen will remain chief of staff, and will also become the chief operating officer for consumer and retail banking, working with Reggie Davis, who will continue to lead Flagstar's consumer and retail banking business, the release said.
Davis will report to Raffetto, the bank spokesperson said.
Nguyen will not receive additional compensation for his new role, the bank said in the filing.
Peter Sullivan will succeed Nguyen as general counsel and take over management of the legal department, the bank said. Sullivan, who most recently was Flagstar's chief regulatory counsel, joined the bank in 2024 and previously worked at PNC Financial Services Group and the Office of the Comptroller of the Currency, according to a biography shared by the bank.
Finally, Sydney Menefee, who has been leading Flagstar's strategic capital and financial management, will become chief audit executive by the end of June, reporting to Otting and the chair of the board's audit committee, the bank said. Menefee, who formerly worked at the OCC, joined Flagstar in 2024, according to her LinkedIn profile.
