Flagstar Reports Fourth Quarter and Full Year 2012 Results

          Flagstar Reports Fourth Quarter and Full Year 2012 Results

Delivers third consecutive quarter of profitability, net income of $223.7
million for 2012

Continues to emphasize risk management, quality control and strengthening and
de-risking the balance sheet

PR Newswire

TROY, Mich., Jan. 23, 2013

TROY, Mich., Jan.23, 2013 /PRNewswire/ --Flagstar Bancorp, Inc. (NYSE: FBC)
(the "Company"), the holding company for Flagstar Bank, FSB (the "Bank"),
today reported fourth quarter 2012 net income applicable to common
stockholders of $66.8 million, or $1.12 per share (diluted), as compared to
third quarter 2012 net income of $79.7 million, or $1.36 per share (diluted),
and a fourth quarter 2011 net loss of $(78.2) million, or $(1.41) per share
(diluted). The full year 2012 net income applicable to common stockholders
was $223.7 million, or $3.74 per share (diluted), compared to a full year 2011
net loss of $(198.9) million, or $(3.62) per share (diluted).

"We are pleased to report fourth quarter and full year financial results that
demonstrate continued performance improvement and sustainable profitability,"
said Michael Tierney, President and Chief Executive Officer of the Company.
"During the fourth quarter we significantly reduced credit costs, further
strengthened and de-risked the balance sheet, and improved the Tier 1 leverage
capital ratio by over 100 basis points from the previous quarter. We remain
dedicated to building a strong culture of compliance, and we believe that the
initiatives we completed during the fourth quarter demonstrate our continued
emphasis on quality, risk management and sound governance. Our sustained
profitability is a testament to the hard work of Flagstar's talented
employees, and I thank them for their continued dedication."

Mr. Tierney continued, "With the recently announced sale of a substantial
portion of Flagstar's Northeast-based commercial loan portfolio, we are
refocusing our business strategy on our national mortgage presence and our
Michigan-based community banking model. We remain committed to being the
largest bank headquartered in Michigan, through our 111 branches and our
commercial banking team, and we look forward to continuing to meet and exceed
the needs of our clients and communities. At the same time, we will
continually strive to improve our risk management systems and processes, and
deliver enhanced value to all of our stakeholders."

Highlights

  oDelivered strong financial performance:

       oNet income applicable to common stockholders of $66.8 million, or
         $1.12 per diluted share.
       oGain on loan sale income remained strong, at $239.0 million,
         reflecting a margin of 1.53 percent.
       oNet interest income increased slightly from the prior quarter to
         $73.9 million.
       oTotal provisions related to the representation and warranty reserve
         decreased by 75.2 percent from the prior quarter to $32.5 million.

  oStrengthened and de-risked the balance sheet:

       oTotal repurchase pipeline decreased by $201.4 million from the prior
         quarter to $224.2 million, as the Company continued to work through
         the existing population of repurchase requests.
       oContinued to add reserves for pending and threatened litigation.
       oEntered into a definitive agreement to sell a substantial portion of
         Northeast-based commercial loan portfolio, which is expected to be
         capital accretive (discussed in Commercial Loan Sale below).

  oImproved capital ratios, liquidity remained strong:

       oTier 1 capital ratio (to adjusted total assets) increased by 110
         basis points to 10.41 percent.
       oCash on hand and interest-earning deposits of approximately $1.0
         billion.

  oNon-performing loans were flat from prior quarter, but declined
    significantly from December 31, 2011:

       oConsumer non-performing loans increased by 13.4 percent from the
         prior quarter, driven primarily by an increase in performing
         nonaccrual TDRs, but declined by 19.1 percent from December 31, 2011.
       oCommercial non-performing loans declined by 29.5 percent from the
         prior quarter and 14.5 percent from December 31, 2011.

Commercial Loan Sale

As previously announced, effective December 31, 2012 the Bank entered into a
definitive Transaction Purchase and Sale Agreement (the "Agreement") with CIT
Bank, the wholly-owned U.S. commercial bank subsidiary of CIT Group Inc.
(NYSE: CIT) ("CIT"). Under the terms of the Agreement, CIT will acquire $1.3
billion in commercial loan commitments, $785.0 million of which is currently
outstanding. The Company expects that the total purchase price for the
portfolio will be approximately $779.0 million and that a vast majority of the
assets will be sold during the first quarter of 2013.

Net Interest Income

Fourth quarter 2012 net interest income increased slightly to $73.9 million,
as compared to $73.1 million for the third quarter 2012. Net interest margin
for the Bank also increased to 2.26 percent, as compared to 2.21 percent for
the third quarter 2012, driven primarily by an improvement in our funding
costs.

Interest income decreased by $4.3 million from the prior quarter, driven
primarily by a lower average balance of investment securities
available-for-sale primarily resulting from the sale of non-agency
collateralized mortgage obligation securities during the third quarter 2012
and lower average balances of loans held-for-investment. Fourth quarter 2012
average yield on interest-earnings assets was 3.44 percent, as compared to
3.54 percent for the third quarter 2012.

Interest expense decreased by $5.2 million during the fourth quarter 2012 from
the third quarter 2012, more than offsetting the decline in interest income.
The decrease in interest expense from prior quarter was primarily due to an
improvement in the funding mix and a lower average cost of deposits.

The Company's average cost of funds for the fourth quarter 2012 was 1.60
percent, a decrease from the third quarter 2012 of 1.73 percent, driven
primarily by a decrease in the average rate paid on retail certificates of
deposits. During the fourth quarter 2012, the Company reduced higher cost
retail deposits. The average cost of total deposits decreased during the
fourth quarter 2012 to 0.86 percent, as compared to 1.02 percent during the
third quarter 2012.

Non-interest Income

Fourth quarter 2012 non-interest income increased to $285.8 million, as
compared to $273.7 million for the third quarter 2012. Excluding the
provision related to the representation and warranty reserve - change in
estimate, which decreased by $99.3 million (discussed in Credit-Related Costs
and Asset Quality below), non-interest income would have totaled $311.0
million for the fourth quarter 2012, as compared to $398.2 million for the
third quarter 2012. This decrease from the prior quarter was primarily due to
lower net gain on loan sales.

Fourth quarter 2012 net gain on loan sales decreased to $239.0 million, as
compared to $334.4 million for the third quarter 2012, but increased as
compared to $106.9 million for the fourth quarter 2011. The decrease from the
prior quarter was reflective of both a decrease in mortgage rate lock
commitments and a decrease in marginon rate lock commitments. Mortgage rate
lock commitments decreased to $16.2 billion for the fourth quarter 2012, as
compared to $18.1 billion for the third quarter 2012, driven by seasonal and
competitive mortgage patterns, as well as actions to manage volume levels.

As compared to the fourth quarter 2011, net gain on loan sales increased by
$132.1 million, primarily driven by increases in mortgage rate lock
commitments and increased margin on rate lock commitments.

Gain on loan sale margin is calculated based on residential first mortgage
rate lock commitments and actual sales of residential first mortgage loans,
and is net of sales expenses, hedging costs and provisions related to the
representation and warranty reserve (i.e., the portion of the reserve
established at the time of sale). Gain on loan sale margin decreased to 1.53
percent for the fourth quarter 2012, as compared to 2.42 percent for the third
quarter 2012, but increased from 1.02 percent for the fourth quarter 2011.
The decrease from the prior quarter was largely attributable to a decrease in
gross gain on sale margin, as well as a 12.5 percent increase in mortgage loan
sales (which serves as the denominator in computing the reported margin) as
compared to the prior quarter. As compared to the fourth quarter 2011, gain
on loan sale margin increased by 51 basis points, reflective of strong
consumer demand for the refinancing of residential mortgage loans in a
declining interest rate environment and fewer competitors in the marketplace.

Loan fees and charges increased to $40.8 million for the fourth quarter 2012,
as compared to $37.4 million for the third quarter 2012. Loan fees are driven
by mortgage loan originations, which increased to $15.4 billion for the fourth
quarter 2012, as compared to $14.5 billion for the third quarter 2012.

Net servicing revenue, which is the combination of net loan administration
income (including the off-balance sheet hedges of mortgage servicing rights)
and the gain (loss) on trading securities (i.e., the on-balance sheet hedges
of mortgage servicing rights), increased to $25.0 million for the fourth
quarter 2012, as compared to $11.3 million for the third quarter 2012. This
increase from the prior quarter was primarily attributable to effective hedge
positioning, despite significant rate volatility intra-quarter and the absence
of uncertainty from the central banks with respect to quantitative easing.

The Company also recorded a net loss on sales of mortgage servicing rights of
$7.7 million during the fourth quarter 2012, due to bulk sales of mortgage
servicing rights related to $13.8 billion in underlying mortgage loans. The
Company intends to continue to look for opportunistic ways to reduce its
concentration of mortgage servicing rights.

Credit-Related Costs and Asset Quality

For the fourth quarter 2012, total credit-related costs (see non-GAAP
reconciliation) decreased to $97.6 million, as compared to $189.7 million for
the third quarter 2012 and $173.2 million for the fourth quarter 2011. The
declines from the prior quarter, and the same quarter in 2011, were driven
primarily by a decrease in representation and warranty reserve - change in
estimate provisions (exclusive of provisions for representation and warranty
reserve which are taken through gain on loan sale income).

The Company maintains a representation and warranty reserve on the balance
sheet, which reflects an estimate of losses that may occur on both loans that
have been sold or securitized into the secondary market and those currently in
the repurchase pipeline, primarily to the GSEs. At December31, 2012, the
representation and warranty reserve was $193.0 million, a decrease as compared
to $202.0 million at September30, 2012, but an increase of $73.0 million as
compared to $120.0 million at December 31, 2011. The decrease from the prior
quarter includes an $11.0 million reclassification of reserves associated with
loans insured by the MBIA Insurance Corporation ("MBIA"). This
reclassification reflects the nature of the reserves following the filing by
MBIA of its lawsuit against the Bank (discussed in Non-interest Expense
below).

Representation and warranty reserve - change in estimate provision was $25.2
million for the fourth quarter 2012, as compared to $124.5 million for the
third quarter 2012 and $69.3 million for the fourth quarter 2011. The
declines from the prior quarter, and the same quarter in 2011, primarily
reflect decreases in net charge-offs of loan repurchases.

At December 31, 2012, the total repurchase pipeline decreased to $224.2
million, as compared to $425.6 million at September 30, 2012, as the Company
continued to work through the existing population of repurchase requests. New
audit file review requests increased by 12.7 percent from the prior quarter,
which management believes is a reflection of the GSEs continuing their reviews
as they transition to a new review process.

The provision for loan losses in the fourth quarter 2012 decreased to $50.4
million, as compared to $52.6 million for the third quarter 2012 and $63.5
million for the fourth quarter 2011. At December31, 2012, the allowance for
loan losses remained unchanged at $305.0 million, as compared to September30,
2012, and decreased as compared to $318.0 million at December 31, 2011. At
December31, 2012, the ratio of the allowance for loan losses to
non-performing loans held-for-investment was 76.3 percent, relatively
unchanged as compared to 76.5 percent at September30, 2012, but increased as
compared to 65.1 percent at December 31, 2011.

The consumer allowance for loan losses increased to $260.7 million at
December31, 2012, as compared to $244.6 million at September30, 2012, which
reflects management's view of potentially higher losses from re-defaults
within the portfolio of troubled debt restructurings ("TDRs"), as well as an
increase in the level of TDRs. The total commercial allowance for loan losses
decreased to $44.3 million at December31, 2012, as compared to $60.4 million
at September30, 2012, reflecting the continued run-off in the commercial loan
portfolio and reversal of $12.6 million in reserves associated with the
December sale of commercial loans under the Agreement with CIT.

Total non-performing loans were $399.8 million as of December31, 2012,
essentially unchanged as compared to $398.9 million at September30, 2012, but
decreased by 18.1 percent from December 31, 2011. Consumer non-performing
loans increased to $313.4 million at December31, 2012, as compared to $276.3
million at September30, 2012, but decreased by 19.1 percent from December 31,
2011. The increase from the prior quarter was driven primarily by an increase
in TDRs, virtually all of which were performing as agreed, as a result of the
implementation of the Office of the Comptroller of the Currency guidance on
bankruptcies. Commercial non-performing loans decreased to $86.4 million at
December31, 2012, as compared to $122.6 million at September30, 2012 and
$101.0 million at December 31, 2011. The decrease from the prior quarter was
primarily driven by continued work-outs and individual note sales within the
portfolio.

Asset resolution expense, which includes expenses associated with foreclosed
properties (including the foreclosure claims in process with respect to
government insured loans for which the Bank files claims with HUD) increased
to $21.2 million for the fourth quarter 2012, as compared to $12.5 million for
the third quarter 2012, but decreased as compared to $32.4 million for the
fourth quarter 2011. The increase from the prior quarter was driven primarily
by the recognition of a $7.8 million benefit applied against asset resolution
expense in the third quarter 2012, as a result of the Company's participation
in a HUD-coordinated market auction of loans repurchased with government
guarantees.

Non-interest Expense

Non-interest expense was $237.0 million for the fourth quarter 2012, as
compared to $233.5 million for the third quarter 2012 and $205.8 million for
the fourth quarter 2011. Excluding asset resolution expense (discussed in
Credit-Related Costs and Asset Quality above), non-interest expense would have
totaled $215.7 million for the fourth quarter 2012, as compared to $221.0
million for the third quarter 2012 and $173.4 for the fourth quarter 2011.
The decrease in non-interest expense (excluding asset resolution expense) from
the prior quarter is primarily due to a $15.2 million decrease in loss on
extinguishment of debt resulting from the Company's prepayment of FHLB
advances during the third quarter 2012.

As compared to the fourth quarter 2011, the increase in non-interest expense
was driven by an increase in compensation and benefits related to significant
staffing increases in the default servicing and loss mitigation areas, an
increase in commissions driven by increased mortgage loan originations, and an
increase in general and administrative expense from additional legal reserves
for pending and threatened litigation.

Compensation and benefits increased to $72.1 million for the fourth quarter
2012, as compared to $67.4 million for the third quarter 2012, reflecting
incentive compensation and retention expenses. Commission expense also
increased to $22.2 million for the fourth quarter 2012, as compared to $19.9
million for the third quarter 2012. This increase from the prior quarter was
consistent with an increase in mortgage loan originations during the quarter.

The fourth quarter 2012 general and administrative expense includes
approximately $27.0 million with respect to the Company's assessment of
exposure from pending and threatened litigation. This includes the
reclassification of $11.0 million previously recorded in the representation
and warranty reserve. The total amount reserved by the Company for pending
and threatened litigation, including amounts paid in anticipation of a future
settlement, was approximately $82.7 million at December 31, 2012. Included in
this reserve are amounts for the previously disclosed lawsuit filed by Assured
Guaranty Municipal Corp., formerly known as Financial Security Assurance Inc.
("Assured"), and for the lawsuit that MBIA filed against the Bank on January
11, 2013. The MBIA claims relate to approximately $1.1 billion of non-agency
securitization transactions in 2006 and 2007 involving fixed and adjustable
rate second mortgage loans that Flagstar held at the time in its investment
portfolio. MBIA guaranteed the offered securities. The Assured and MBIA
cases are pending in the United States District Court for the Southern
District of New York. The bench trial in the Assured case concluded on
November 13, 2012, and the Company expects a decision in late January.
Although there can be no assurance as to the ultimate outcome of the Assured
and MBIA lawsuits, the Company believes that the Bank has meritorious defenses
and intends to continue to defend itself vigorously. The actual costs of
resolving the Assured and MBIA claims, and the other pending and threatened
litigation, may be materially higher or lower than the amounts reserved.

Capital

The Bank was considered "well-capitalized" for regulatory purposes at
December31, 2012, and had regulatory capital ratios of 10.41 percent for the
Tier 1 capital ratio (to adjusted total assets) and 19.16 percent for the
total risk-based capital ratio (to risk-weighted assets).

At December31, 2012, the Company had an equity-to-assets ratio of 9.38
percent.

Balance Sheet and Funding

Total assets at December31, 2012 were $14.1 billion, as compared to $14.9
billion at September30, 2012.The decrease from the prior quarter was
primarily driven by a decrease in held-for-sale residential first mortgage
loans resulting from an excess of residential first mortgage loan sales over
residential first mortgage loan originations, and a decrease in commercial
real estate loans held-for-investment driven by the Company's continued
emphasis on reducing the balances of loans originated prior to 2009. During
the quarter, commercial loans related to the Agreement with CIT were
transferred from the loans held-for-investment portfolio to the loans
held-for-sale portfolio.

Loans are primarily funded with deposits obtained through branches in Michigan
and from public entities. Funds are also obtained through loan repayments and
sales of loans and securities in the ordinary course of business, advances
from the FHLB in varying maturities depending on current needs, customer
escrow accounts and security repurchase agreements. Several of these sources
are relied upon at different times to address daily and forecasted liquidity
needs for operational requirements and policy levels while managing overall
net interest costs and interest rate risk.

Total deposits were $8.3 billion at December31, 2012, a decrease of $1.2
billion as compared to September30, 2012. The decrease from the prior
quarter was primarily attributable to a $1.2 billion transfer of principal and
interest custodian accounts serviced for GSEs to a third party. Retail
checking and savings balances increased, more than offsetting a decrease in
retail and wholesale certificates of deposit, as the Company continued to
replace higher costing funding with core deposits.

At December31, 2012 and September30, 2012, the Bank had approximately $1.0
billion of cash on hand and interest-earning deposits. The Bank also
maintains a line of credit with the FHLB under which borrowings are
collateralized by residential first mortgage loans and other assets of the
Bank. At December31, 2012, the Bank had outstanding borrowings from the FHLB
of $3.2 billion, as compared to $3.1 billion at September30, 2012. At
December31, 2012, the Bank had an additional $1.1 billion of collateralized
borrowing capacity available at the FHLB.

Earnings Conference Call

As previously announced, the Company's quarterly earnings conference call will
be held on Thursday, January24, 2013 from 11 a.m. until Noon (Eastern).

Questions may be asked during the conference call or by emailing questions in
advance to investors@flagstar.com

To join the call, please dial (800) 684-1259 toll free or (913) 312-1503, and
use passcode: 3359641. Please call at least 10 minutes before the call is
scheduled to begin. A replay will be available for five business days by
calling (888) 203-1112 toll free or (719) 457-0820, using passcode: 3359641.

The conference call will also be available as a live audiocast on the Investor
Relations section of flagstar.com. It will be archived on that site and will
be available for replay and download. A slide presentation to accompany the
conference call will also be posted on the site.

About Flagstar

Flagstar Bancorp, Inc. (NYSE: FBC) is the holding company for Flagstar Bank, a
full-service financial institution offering a range of products and services
to consumers, businesses, and homeowners. With $14.1 billion in total assets
at December31, 2012, Flagstar is the largest publicly held savings bank
headquartered in the Midwest. Flagstar originates loans nationwide and is one
of the leading originators of residential first mortgage loans. For more
information, please visit flagstar.com.

Non-GAAP

This press release contains both financial measures based on accounting
principles generally accepted in the United States (GAAP) and non-GAAP based
financial measures, which are used where management believes it to be helpful
in understanding the Company's results of operations or financial position.
Where non-GAAP financial measures are used, the comparable GAAP financial
measure, as well as the reconciliation to the comparable GAAP financial
measure, can be found in this press release. These disclosures should not be
viewed as a substitute for operating results determined in accordance with
GAAP, nor are they necessarily comparable to non-GAAP performance measures
that may be presented by other companies.

Forward Looking Statements

This press release contains "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995, as amended.
Forward-looking statements, by their nature, involve estimates, projections,
goals, forecasts, assumptions, risks and uncertainties that are difficult to
predict and could cause actual results or outcomes to differ materially from
those expressed in a forward-looking statement. Forward-looking statements
contained in this press release and any information related to expectations
about future events or results are based upon information available to the
Company as of the date hereof. Forward-looking statements can be identified
by such words as "anticipates," "intends," "plans," "seeks," "believes,"
"expects", "estimates," and similar references to future periods. Examples of
forward-looking statements include, but are not limited to, statements made
regarding the Company's results of operations, current expectations, plans or
forecasts of core business drivers, credit related costs, asset quality,
capital adequacy and liquidity, the implementation of the Company's business
plan and growth strategies, the impact, timing and consummation of the
commercial loan sale and other similar matters. Although we believe that
these forward-looking statements are based on reasonable estimates and
assumptions, they are not guarantees of future performance and are subject to
known and unknown risks, uncertainties, contingencies, and other factors.
Accordingly, we cannot give you any assurance that our expectations will in
fact occur or that actual results will not differ materially from those
expressed or implied by such forward-looking statements. We caution you not
to place undue reliance on any forward-looking statement and to consider all
of the following uncertainties and risks, as well as those more fully
discussed in the Company's filings with the Securities and Exchange Commission
("SEC"), including, but not limited to, our Forms 10-K and 10-Q: volatile
interest rates that impact, among other things, the mortgage banking business,
our ability to originate loans and sell assets at a profit, prepayment speeds
and our cost of funds; changes in regulatory capital requirements or an
inability to achieve or maintain desired capital ratios; actions of mortgage
loan purchasers, guarantors and insurers regarding repurchases and indemnity
demands and uncertainty related to foreclosure procedures; uncertainty
regarding pending and threatened litigation; our ability to control credit
related costs and forecast the adequacy of reserves; the imposition of
regulatory enforcement actions against us; our compliance with the Consent
Order with the Office of the Comptroller of the Currency, which was disclosed
on October 23, 2012; and the commercial loan sale may not have the projected
impact or be consummated in a timely manner. Except to the extent required
under the federal securities laws and the rules and regulations promulgated by
the SEC, the Company undertakes no obligation to update any such statement to
reflect events or circumstances after the date on which it is made.



Flagstar Bancorp, Inc.
Consolidated Statements of Financial Condition
(In thousands, except share data)
                               December31, 2012  September30,  December31,
                                                  2012           2011
Assets                         (Unaudited)        (Unaudited)
Cash and cash items            $   38,070         $ 53,883       $ 49,715
Interest-earning deposits      914,723            949,514        681,343
Cash and cash equivalents      952,793            1,003,397      731,058
Securities classified as       170,086            170,073        313,383
trading
Securities classified as       184,445            198,861        481,352
available-for-sale
Loans held-for-sale            3,791,188          3,251,936      1,800,885
Loans repurchased with         1,841,342          1,931,163      1,899,267
government guarantees
Loans held-for-investment      5,586,633          6,552,399      7,038,587
Less: allowance for loan       (305,000)          (305,000)      (318,000)
losses
Loans held-for-investment, net 5,281,633          6,247,399      6,720,587
Total interest-earning assets  12,183,417         12,748,946     11,896,817
Accrued interest receivable    91,992             106,458        105,200
Repossessed assets, net        120,732            119,468        114,715
Federal Home Loan Bank stock   301,737            301,737        301,737
Premises and equipment, net    219,059            211,981        203,578
Mortgage servicing rights      710,791            686,799        510,475
Other assets                   416,214            669,950        455,236
Total assets                   $   14,082,012     $ 14,899,222   $ 13,637,473
Liabilities and Stockholders'
Equity
Deposits                       $   8,294,295      $ 9,489,169    $ 7,689,988
Federal Home Loan Bank         3,180,000          3,088,000      3,953,000
advances
Long-term debt                 247,435            248,560        248,585
Total interest-bearing         11,721,730         12,825,729     11,891,573
liabilities
Accrued interest payable       13,420             12,522         8,723
Representation and warranty    193,000            202,000        120,000
reserve
Other liabilities              833,500            608,372        537,461
Total liabilities              12,761,650         13,648,623     12,557,757
Stockholders' Equity
Preferred stock                260,390            258,973        254,732
Common stock                   559                558            556
Additional paid in capital     1,476,569          1,475,380      1,471,463
Accumulated other              (1,658)            (2,042)        (7,819)
comprehensive loss
Accumulated deficit            (415,498)          (482,270)      (639,216)
Total stockholders' equity     1,320,362          1,250,599      1,079,716
Total liabilities and          $   14,082,012     $ 14,899,222   $ 13,637,473
stockholders' equity



Flagstar Bancorp, Inc.

Consolidated Statements of Operations

(In thousands, except per share data)


                     For the Three Months Ended                 For the Year Ended
                     December31,  September30,  December31,  December31,  December31,
                     2012          2012           2011          2012          2011
                     (Unaudited)   (Unaudited)    (Unaudited)   (Unaudited)
Interest Income
Loans                $  112,464    $  114,158     $  116,790    $  456,141    $  427,022
Securities
classified as
available-for-sale   2,277         4,912          8,929         22,609        35,602

or trading
Interest-earning     674           672            426           2,220         2,785
deposits and other
Total interest     115,415       119,742        126,145       480,970       465,409
income
Interest Expense
Deposits             15,017        17,819         20,944        70,143        95,546
FHLB advances        24,756        27,091         27,646        106,625       117,963
Other                1,701         1,753          1,692         6,971         6,527
Total interest     41,474        46,663         50,282        183,739       220,036
expense
Net interest income  73,941        73,079         75,863        297,231       245,373
Provision for loan   50,351        52,595         63,548        276,047       176,931
losses
Net interest income
after provision for  23,590        20,484         12,315        21,184        68,442
loan losses
Non-Interest Income
Loan fees and        40,793        37,359         28,610        142,908       77,843
charges
Deposit fees and     5,154         5,255          6,332         20,370        29,629
charges
Loan administration  25,010        11,099         28,295        100,007       94,604
Gain on trading      12            237            674           (2,011)       21,088
securities
Loss on transferors' (780)         (118)          (847)         (2,552)       (5,673)
interest
Net gain on loan     238,953       334,427        106,919       990,898       300,789
sales
Net loss on sales
of mortgage          (7,687)       (1,332)        (2,823)       (12,319)      (7,903)
servicing rights
Net (loss) gain on
securities           (310)         2,616          —             2,636         —
available-for-sale
Net gain on sale of  —             —              21,379        —             22,676
assets
 Total
other-than-temporary
impairment           —             —              (11,569)      2,810         (30,456)

 (loss) gain
Gain (loss)
recognized in other  —             —              4,437         (5,002)       6,417
comprehensive income
before taxes
Net impairment
losses recognized in —             —              (7,132)       (2,192)       (24,039)

earnings
Representation and
warranty reserve -   (25,231)      (124,492)      (69,279)      (256,289)     (150,055)

change in estimate
Other fees and       9,881         8,686          6,493         39,786        26,557
charges, net
Total non-interest 285,795       273,737        118,621       1,021,242     385,516
income



                   (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)
Non-Interest
Expense
Compensation and   72,081       67,386       60,011       270,859      224,711
benefits
Commissions        22,154       19,888       14,151       75,345       39,345
Occupancy and      19,184       18,833       19,448       73,674       70,117
equipment
Asset resolution   21,241       12,487       32,408       91,349       128,313
Federal insurance  12,202       12,643       11,401       49,273       41,581
premiums
Other taxes        856          2,036        606          4,219        2,784
Warrant expense    5,422        1,516        138          8,935        (6,889)
(income)
Loss on
extinguishment of  —            15,246       —            15,246       —
debt
General and        83,822       83,456       67,674       239,795      134,718
administrative
Total
non-interest       236,962      233,491      205,837      828,695      634,680
expense
Income (loss)
before federal     72,423       60,730       (74,901)     213,731      (180,722)
income taxes
Provision
(benefit) for      4,235        (20,380)     264          (15,645)     1,056
federal income
taxes
Net income (loss)  68,188       81,110       (75,165)     229,376      (181,778)
Preferred stock
dividend/accretion (1,417)      (1,417)      (3,016)      (5,658)      (17,165)
(1)
Net income (loss)
applicable to      $  66,771    $  79,693    $ (78,181)   $  223,718   $ (198,943)
common
 stockholders
Income (loss) per
share
 Basic (2)   $  1.13      $  1.37      $ (1.41)     $  3.77      $ (3.62)
 Diluted (2) $  1.12      $  1.36      $ (1.41)     $  3.74      $ (3.62)

    The preferred stock dividend/accretion for the three months ended
    December31, 2012 and September30, 2012 and the year ended December31,
(1) 2012, respectively, represents only the accretion. On January 27, 2012,
    the Company elected to defer payment of dividends and interest on the
    preferred stock.
    The three months and year ended December31, 2011 have been restated for a
(2) one-for-ten reverse stock split announced September 27, 2012 and began
    trading on October 11, 2012.





Flagstar Bancorp, Inc.
Summary of Selected Consolidated Financial and Statistical Data
(Dollars in thousands, except per share data)
(Unaudited)
                  For the Three Months Ended                      For the Year Ended
                  December31,    September30,   December31,    December31,    December31,
                  2012            2012            2011            2012            2011
Return on average 1.78         %  2.10         %  (2.21)       %  1.52         %  (1.49)       %
assets
Return on average 20.70        %  25.78        %  (27.56)      %  18.76        %  (16.78)      %
equity
Efficiency ratio  65.9         %  67.3         %  105.8        %  62.9         %  100.6        %
Efficiency ratio
(credit-adjusted) 56.0         %  46.9         %  65.8         %  46.8         %  64.8         %
(1)
Equity-to-assets
ratio (average    8.59         %  8.16         %  8.02         %  8.10         %  8.88         %
for the period)
Mortgage loans    $ 15,356,795    $ 14,513,635    $ 10,187,100    $ 53,586,856    $ 26,612,800
originated (2)
Other loans       $ 113,458       $ 165,668       $ 199,529       $ 754,155       $ 700,969
originated
Mortgage loans
sold and          $ 15,610,590    $ 13,876,626    $ 10,476,542    $ 53,094,326    $ 27,451,362
securitized
Interest rate
spread - bank     1.87         %  1.84         %  2.15         %  1.98         %  1.86         %
only (3)
Net interest
margin - bank     2.26         %  2.21         %  2.43         %  2.31         %  2.13         %
only (4)
Interest rate
spread -          1.84         %  1.81         %  2.13         %  1.96         %  1.85         %
consolidated (3)
Net interest
margin -          2.21         %  2.16         %  2.37         %  2.26         %  2.07         %
consolidated (4)
Average common
shares            55,842,910      55,801,692      55,535,992      55,762,196      55,434,296
outstanding (5)
Average fully
diluted shares    56,520,403      56,233,165      55,535,992      56,193,515      55,434,296
outstanding (5)
Average
interest-earning  $ 13,349,991    $ 13,476,917    $ 12,752,968    $ 13,104,401    $ 11,803,670
assets
Average interest
paying            $ 10,318,385    $ 10,737,734    $ 11,018,201    $ 10,786,253    $ 10,530,369
liabilities
Average
stockholder's     $ 1,290,082     $ 1,236,411     $ 1,134,716     $ 1,192,721     $ 1,185,731
equity
Charge-offs to
average           3.18         %  2.12         %  1.60         %  4.43         %  2.14         %
investment loans
(annualized)



                          December31, 2012  September30,   December31, 2011
                                             2012
Equity-to-assets ratio    9.38           %   8.39         %  7.92           %
Tier 1 capital ratio (to
adjusted total assets)    10.41          %   9.31         %  8.95           %
(6)
Total risk-based capital
ratio (to risk-weighted   19.16          %   17.58        %  16.64          %
assets) (6)
Book value per common     $  18.97           $ 17.76         $  14.80
share (5)
Number of common shares   55,863,053         55,828,470      55,577,564
outstanding (5)
Mortgage loans serviced   $  76,821,222      $ 82,414,799    $  63,770,676
for others
Weighted average service  29.2               30.1            30.8
fee (basis points)
Capitalized value of      0.93           %   0.83         %  0.80           %
mortgage servicing rights
Ratio of allowance for
loan losses to            76.3           %   76.5         %  65.1           %
non-performing loans
held-for-investment (7)
Ratio of allowance for
loan losses to loans     5.46           %   4.65         %  4.52           %
held-for-investment (7)
Ratio of non-performing
assets to total assets    3.70           %   3.48         %  4.43           %
(bank only)
Number of bank branches   111                111             113
Number of loan            31                 31              27
origination centers
Number of employees
(excluding loan officers  3,328              3,240           2,839
and account executives)
Number of loan officers   334                336             297
and account executives



(1) See Non-GAAP reconciliation.
(2) Includes residential first mortgage and second mortgage loans.
    Interest rate spread is the difference between the annualized average
(3) yield earned on average interest-earning assets for the period and the
    annualized average rate of interest paid on average interest-bearing
    liabilities for the period.
(4) Net interest margin is the annualized effect of the net interest income
    divided by that period's average interest-earning assets.
(5) Restated for a 1-for-10 reverse stock split announced September 27, 2012
    and began trading on October 11, 2012.
    Based on adjusted total assets for purposes of core capital and
(6) risk-weighted assets for purposes of total risk-based capital. These
    ratios are applicable to the Bank only.
(7) Bank only and does not include non-performing loans held-for-sale.





Loan Originations

(Dollars in thousands)

(Unaudited)
             For the Three Months Ended
             December31, 2012      September30, 2012     December31, 2011
Consumer
loans
 Mortgage $ 15,356,795  99.3  %  $ 14,513,635  98.8  %  $ 10,187,100  98.1  %
(1)
 Other    7,589         —        8,489         0.1   %  3,033         —
consumer (2)
Total
consumer     15,364,384    99.3  %  14,522,124    98.9  %  10,190,133    98.1  %
loans
Commercial   105,869       0.7   %  157,179       1.1   %  196,496       1.9   %
loans (3)
Total loan   $ 15,470,253  100.0 %  $ 14,679,303  100.0 %  $ 10,386,629  100.0 %
originations



                        For the Year Ended
                        December31, 2012      December31, 2011
Consumer loans
 Mortgage (1)        $ 53,586,856  98.6  %  $ 26,612,800  97.4  %
 Other consumer (2)  27,058        0.1   %  11,024        0.1   %
Total consumer loans    53,613,914    98.7  %  26,623,824    97.5  %
Commercial loans (3)    727,097       1.3   %  689,945       2.5   %
Total loan originations $ 54,341,011  100.0 %  $ 27,313,769  100.0 %

(1) Includes residential first mortgage and second mortgage loans.
(2) Other consumer loans include: warehouse lending, HELOC and other consumer
    loans.
(3) Commercial loans include: commercial real estate, commercial and
    industrial and commercial lease financing loans.





Loans Held-for-Investment
(Dollars in thousands)
(Unaudited)
                    December31, 2012     September30, 2012    December31, 2011
Consumer loans
Residential first   $ 3,009,251  53.9  %  $ 3,086,096  47.1  %  $ 3,749,821  53.1  %
mortgage
Second mortgage     114,885      2.1   %  122,286      1.9   %  138,912      2.0   %
Warehouse lending   1,347,727    24.1  %  1,307,292    20.0  %  1,173,898    16.7  %
HELOC               179,447      3.2   %  192,117      2.9   %  221,986      3.2   %
Other               49,611       0.9   %  53,188       0.8   %  67,613       1.0   %
Total consumer      4,700,921    84.2  %  4,760,979    72.7  %  5,352,230    76.0  %
loans
Commercial loans
Commercial real     689,424      12.3  %  1,005,498    15.3  %  1,242,969    17.7  %
estate
Commercial and      189,988      3.4   %  597,273      9.1   %  328,879      4.7   %
industrial
Commercial lease    6,300        0.1   %  188,649      2.9   %  114,509      1.6   %
financing
Total commercial    885,712      15.8  %  1,791,420    27.3  %  1,686,357    24.0  %
loans
Total loans         $ 5,586,633  100.0 %  $ 6,552,399  100.0 %  $ 7,038,587  100.0 %
held-for-investment





Allowance for Loan Losses
(Dollars in thousands)
(Unaudited)
             For the Three Months Ended                 For the Year Ended
             December31,  September30,  December31,  December31,  December31,
             2012          2012           2011          2012          2011
Beginning    $  305,000    $  287,000     $  282,000    $  318,000    $  274,000
balance
Provision
for loan     50,351        52,595         63,548        276,047       176,931
losses
Charge-offs
Consumer
loans
Residential
first        (33,802)      (23,999)       (19,042)      (175,803)     (41,559)
mortgage
Second       (5,423)       (3,990)        (2,672)       (18,753)      (19,217)
mortgage
Warehouse    —             —              (562)         —             (1,122)
lending
HELOC        (5,000)       (1,483)        (3,515)       (17,159)      (16,980)
Other        (1,613)       (892)          (916)         (4,423)       (4,729)
Total
consumer     (45,838)      (30,364)       (26,707)      (216,138)     (83,607)
loans
Commercial
loans
Commercial   (13,443)      (15,532)       (2,527)       (105,285)     (57,626)
real estate
Commercial
and          (3,011)       (12)           —             (4,627)       (644)
industrial

Commercial   (1,191)       —              —             (1,191)       —
lease
financing
Total
commercial   (17,645)      (15,544)       (2,527)       (111,103)     (58,270)
loans
Total        (63,483)      (45,908)       (29,234)      (327,241)     (141,877)
charge-offs
Recoveries
Consumer
loans
Residential
first        5,530         5,899          401           18,561        1,656
mortgage
Second       196           428            65            1,912         1,642
mortgage
Warehouse    —             —              —             —             5
lending
HELOC        67            44             57            461           1,510
Other        731           448            319           1,786         1,603
Total
consumer     6,524         6,819          842           22,720        6,416
loans
Commercial
loans
Commercial   6,600         4,461          844           15,397        2,408
real estate
Commercial
and          8             33             —             77            122
industrial
Total
commercial   6,608         4,494          844           15,474        2,530
loans
Total        13,132        11,313         1,686         38,194        8,946
recoveries
Charge-offs,
net of       (50,351)      (34,595)       (27,548)      (289,047)     (132,931)
recoveries
Ending       $  305,000    $  305,000     $  318,000    $  305,000    $  318,000
balance
Net
charge-off   3.18       %  2.12        %  1.60       %  4.43       %  2.14       %
ratio
(annualized)





 Representation and Warranty Reserve
 (Dollars in thousands)
 (Unaudited)
                 For the Three Months Ended               For the Year Ended
                 December31, September30, December31,  December31, December31,
                 2012         2012          2011          2012         2011
                 (Dollars in thousands)
Balance,
beginning of     $  202,000   $  161,000    $  85,000     $  120,000   $  79,400
period
Provision
  Charged to
  gain on sale   7,285        6,432         3,481         24,410       8,993
  for current
  loan sales
  Charged to
  representation
  and
  warranty       25,231       124,492       69,280        256,289      150,055
  reserve -
  change in
  estimate
  Total          32,516       130,924       72,761        280,699      159,048
Charge-offs, net (41,516)     (89,924)      (37,761)      (207,699)    (118,448)
Balance, end of  $  193,000   $  202,000    $  120,000    $  193,000   $  120,000
period





Composition of Allowance for Loan Losses
(In thousands)
(Unaudited)
                        Collectively Evaluated  Individually
December31, 2012       Reserves (1)            Evaluated Reserves  Total
                                                (2)
Consumer loans
Residential first       $     68,685            $    150,545        $ 219,230
mortgage
Second mortgage         13,173                  7,028               20,201
Warehouse lending      899                     —                   899
HELOC                   15,274                  3,074               18,348
Other                   2,040                   —                   2,040
Total consumer loans    100,071                 160,647             260,718
Commercial loans
Commercial real estate  38,772                  2,538               41,310
Commercial and          2,868                   10                  2,878
industrial
Commercial lease        94                      —                   94
financing
Total commercial loans  41,734                  2,548               44,282
Total allowance for     $     141,805           $    163,195        $ 305,000
loan losses
September30, 2012
Consumer loans
Residential first       $     74,950            $    129,902        $ 204,852
mortgage
Second mortgage         12,478                  6,410               18,888
Warehouse lending      1,038                   —                   1,038
HELOC                   15,216                  2,340               17,556
Other                   2,229                   —                   2,229
Total consumer loans    105,911                 138,652             244,563
Commercial loans
Commercial real estate  47,113                  1,722               48,835
Commercial and          8,857                   20                  8,877
industrial
Commercial lease        2,725                   —                   2,725
financing
Total commercial loans  58,695                  1,742               60,437
Total allowance for     $     164,606           $    140,394        $ 305,000
loan losses



    Represents loans collectively evaluated for impairment in accordance with
(1) ASC 450-20, Loss Contingencies (formerly FAS 5), and pursuant to
    amendments by ASU 2010-20 regarding allowance for unimpaired loans.
    Represents loans individually evaluated for impairment in accordance with
(2) ASC 310-10, Receivables (formerly FAS 114), and pursuant to amendments by
    ASU 2010-20 regarding allowance for impaired loans.





Non-Performing Loans and Assets
(Dollars in thousands)
(Unaudited)
                                December31, 2012  September30,  December31,
                                                   2012           2011
Non-performing loans            $   399,825        $  398,948     $  488,367
held-for-investment
Real estate and other           120,732            119,468        114,715
non-performing assets, net
Non‑performing assets           520,557            518,416        603,082
held-for-investment, net
Non-performing loans            1,835              2,086          4,573
held-for-sale
Total non-performing assets     $   522,392        $  520,502     $  607,655
including loans held-for-sale
Ratio of non-performing assets  3.70          %    3.48        %  4.43       %
to total assets (Bank only)
Ratio of non-performing loans
held-for-investment to loans    7.16          %    6.09        %  6.94       %
held-for-investment
Ratio of non-performing assets
to loans held for investment    9.12          %    7.77        %  8.43       %
and repossessed assets



Asset Quality - Loans Held-for-Investment
(Dollars in thousands)
(Unaudited)
                    30-59 Days 60-89 Days Greater than Total Past Total
                    Past Due   Past Due   90 days      Due        Investment
                                                                  Loans
December31, 2012
Consumer loans (1)  $  66,687  $  18,578  $  313,418   $ 398,683  $ 4,700,921
Commercial loans    6,979      6,990      86,408       100,377    885,712
(1)
Total loans         $  73,666  $  25,568  $  399,826   $ 499,060  $ 5,586,633
September30, 2012
Consumer loans (1)  $  53,919  $  26,697  $  276,319   $ 356,935  $ 4,760,979
Commercial loans    9,563      432        122,629      132,624    1,791,420
(1)
Total loans         $  63,482  $  27,129  $  398,948   $ 489,559  $ 6,552,399
December31, 2011
Consumer loans (1)  $  83,670  $  41,602  $  387,362   $ 512,634  $ 5,352,230
Commercial loans    7,464      12,385     101,005      120,854    1,686,357
(1)
Total loans         $  91,134  $  53,987  $  488,367   $ 633,488  $ 7,038,587



    Consumer loans include: residential first mortgage, second mortgage,
(1) warehouse lending, HELOC, and other consumer loans. Commercial loans
    include: commercial real estate, commercial and industrial, and commercial
    lease financing loans.





Troubled Debt Restructurings
(Dollars in thousands)
(Unaudited)
                   TDRs
                   Performing  Non-performing  Total
December31, 2012  (Dollars in thousands)
Consumer loans     $ 588,475   $   143,188     $ 731,663
Commercial loans   1,287       2,056           3,343
Total TDRs         $ 589,762   $   145,244     $ 735,006
September30, 2012
Consumer loans     $ 612,956   $   106,250     $ 719,206
Commercial loans   1,329       3,230           4,559
Total TDRs         $ 614,285   $   109,480     $ 723,765
December31, 2011
Consumer loans     $ 499,438   $   167,076     $ 666,514
Commercial loans   17,737      29,509          47,246
Total TDRs         $ 517,175   $   196,585     $ 713,760





Gain on Loan Sales and Securitizations
(Dollars in thousands)
(Unaudited)
                    For the Three Months Ended
                    December31, 2012    September30, 2012    December31, 2011
Description         (000's)       bps    (000's)       bps     (000's)       bps
Valuation gain
(loss)
Value of interest   $ (143,364)   (94)   $ 97,176      73      $ (19,033)    (18)
rate locks
Value of forward    123,602       82     (91,329)      (68)    17,793        17
sales
Fair value of loans 213,512       138    273,270       198     96,911        92
held-for-sale
LOCOM adjustments
on loans            (1,103)       (1)    —             —       —             —
held-for-investment
Total valuation     192,647       125    279,117       203     95,671        91
gains
Sales gains
(losses)
Marketing gains,    161,163       103    218,262       157     73,560        70
net of adjustments
Pair-off (losses)   (107,572)     (70)   (156,520)     (113)   (58,831)      (56)
gains
Provision for
representation and  (7,285)       (5)    (6,432)       (5)     (3,481)       (3)
warranty reserve
Total sales gains   46,306        28     55,310        39      11,248        11
Total gain on loan
sales and           $ 238,953     153    $ 334,427     242     $ 106,919     102
securitizations
Total mortgage rate
lock commitments    $ 16,242,000         $ 18,089,000          $ 11,230,000
volume
Total loan sales    $ 15,610,590         $ 13,876,626          $ 10,476,542
and securitizations





                                     For the Year Ended
                                     December31, 2012     December31, 2011
Description                          (000's)       bps     (000's)       bps
Valuation gain (loss)
Value of interest rate locks         $ 15,235      3       $ 56,569      21
Value of forward sales               28,957        5       (78,798)      (29)
Fair value of loans held-for-sale    784,587       148     356,278       130
LOCOM adjustments on loans           (1,124)       —       16            —
held-for-investment
Total valuation gains                827,655       156     334,065       122
Sales gains (losses)
Marketing gains, net of adjustments  731,648       138     191,118       69
Pair-off (losses) gains              (543,995)     (102)   (215,402)     (78)
Provision for representation and     (24,410)      (5)     (8,993)       (3)
warranty reserve
Total sales gains                    163,243       31      (33,277)      (12)
Total gain on loan sales and         $ 990,898     187     $ 300,788     110
securitizations
Total mortgage rate lock commitments $ 66,732,000          $ 36,281,000
volume
Total loan sales and securitizations $ 53,094,326          $ 27,451,362





Average Balances, Yields and Rates
(Dollars in thousands)
(Unaudited)
                    For the Three Months Ended
                    December31, 2012         September30, 2012        December31, 2011
                    Average       Annualized  Average       Annualized  Average       Annualized
                    Balance                   Balance                   Balance
                                  Yield/Rate                Yield/Rate                Yield/Rate
Interest-Earning
Assets
Loans held-for-sale $ 3,631,780   3.47   %    $ 3,301,860   3.70   %    $ 2,468,813   3.94   %
Loans repurchased
with government     1,912,722     3.13   %    2,070,813     2.98   %    1,849,827     3.44   %
guarantees
Loans
held-for-investment
 Consumer loans 4,608,093     4.28   %    4,717,672     4.32   %    5,288,088     4.37   %
(1)
 Commercial     1,724,223     3.78   %    1,815,897     3.67   %    1,620,132     4.53   %
loans (1)
Loans               6,332,316     4.14   %    6,533,569     4.14   %    6,908,220     4.40   %
held-for-investment
Securities
classified as       362,819       2.51   %    505,361       3.89   %    813,865       4.39   %
available-for-sale
or trading
Interest-earning    1,110,354     0.24   %    1,065,314     0.25   %    712,242       0.24   %
deposits and other
Total
interest-earning    13,349,991    3.44   %    13,476,917    3.54   %    12,752,967    3.94   %
assets
Other assets        1,670,359                 1,680,208                 1,401,566
Total assets        $ 15,020,350              $ 15,157,125              $ 14,154,533
Interest-Bearing
Liabilities
Retail deposits
 Demand         $ 379,721     0.28   %    $ 364,612     0.27   %    $ 382,419     0.29   %
deposits
 Savings        1,891,901     0.68   %    1,768,897     0.65   %    1,432,094     0.81   %
deposits
 Money market   427,792       0.43   %    457,425       0.46   %    531,981       0.61   %
deposits
 Certificate of 3,253,647     1.02   %    3,227,201     1.21   %    3,010,919     1.52   %
deposits
Total retail       5,953,061     0.82   %    5,818,135     0.92   %    5,357,413     1.15   %
deposits
Government
deposits
Demand         81,555        0.44   %    107,944       0.48   %    82,278        0.52   %
deposits
 Savings        287,289       0.51   %    291,046       0.55   %    379,959       0.60   %
deposits
 Certificate of 444,668       0.62   %    375,922       0.64   %    407,386       0.60   %
deposits
Total government   813,512       0.56   %    774,912       0.58   %    869,623       0.60   %
deposits
Wholesale deposits 157,960       4.04   %    334,595       3.77   %    464,104       3.47   %
Total deposits      6,924,533     0.86   %    6,927,642     1.02   %    6,691,140     1.24   %
FHLB advances       3,145,341     3.13   %    3,561,532     3.03   %    4,078,476     2.69   %
Other               248,511       2.72   %    248,560       2.81   %    248,585       2.70   %
Total
interest-bearing    10,318,385    1.60   %    10,737,734    1.73   %    11,018,201    1.81   %
liabilities
Other liabilities   3,411,883                 3,182,980                 2,001,616
(2)
Stockholder's       1,290,082                 1,236,411                 1,134,716
equity
Total liabilities
and stockholder's   $ 15,020,350              $ 15,157,125              $ 14,154,533
equity



    Consumer loans include: residential first mortgage, second mortgage,
(1) warehouse lending, HELOC and other consumer loans. Commercial loans
    include: commercial real estate, commercial and industrial, and commercial
    lease financing loans.
(2) Includes company controlled deposits that arise due to the servicing of
    loans for others, which do not bear interest.





Average Balances, Yields and Rates
(Dollars in thousands)
(Unaudited)
                        For the Year Ended
                        December31, 2012           December31, 2011
                                        Annualized                  Annualized
                        Average Balance             Average Balance
                                        Yield/Rate                  Yield/Rate
Interest-Earning Assets
Loans held-for-sale     $  3,078,284    3.75   %    $  1,928,339    4.31   %
Loans repurchased with  2,018,079       3.22   %    1,784,927       3.19   %
government guarantees
Loans
held-for-investment
 Consumer loans (1) 4,737,553       4.33   %    4,830,127       4.58   %
 Commercial loans   1,782,913       3.91   %    1,373,566       4.74   %
(1)
Loans                   6,520,466       4.21   %    6,203,693       4.61   %
held-for-investment
Securities classified
as available-for-sale   573,445         3.94   %    752,871         4.73   %
or trading
Interest-earning        914,127         0.24   %    1,133,840       0.25   %
deposits and other
Total interest-earning  13,104,401      3.66   %    11,803,670      3.94   %
assets
Other assets            1,622,369                   1,544,924
Total assets            $  14,726,770               $  13,348,594
Interest-Bearing
Liabilities
 Retail deposits
 Demand deposits   $  363,247      0.26   %    $  397,988      0.33   %
 Savings deposits  1,775,449       0.72   %    1,236,105       0.81   %
 Money market      463,490         0.48   %    561,943         0.69   %
deposits
 Certificate of    3,170,103       1.21   %    3,001,586       1.75   %
deposits
 Total retail deposits 5,772,289       0.94   %    5,197,622       1.30   %
 Government deposits
 Demand deposits   96,000          0.48   %    77,702          0.54   %
 Savings deposits  280,313         0.55   %    414,394         0.64   %
 Certificate of    393,731         0.64   %    296,830         0.62   %
deposits
 Total government      770,044         0.59   %    788,926         0.62   %
deposits
 Wholesale deposits    296,997         3.80   %    674,856         3.41   %
Total deposits          6,839,330       1.03   %    6,661,404       1.43   %
FHLB advances           3,698,362       2.88   %    3,620,368       3.26   %
Other                   248,561         2.80   %    248,597         2.63   %
Total interest-bearing  10,786,253      1.70   %    10,530,369      2.09   %
liabilities
Other liabilities (2)   2,747,796                   1,632,494
Stockholder's equity    1,192,721                   1,185,731
Total liabilities and   $  14,726,770               $  13,348,594
stockholder's equity



    Consumer loans include: residential first mortgage, second mortgage,
(1) warehouse lending, HELOC and other consumer loans. Commercial loans
    include: commercial real estate, commercial and industrial, and commercial
    lease financing loans.
(2) Includes company controlled deposits that arise due to the servicing of
    loans for others, which do not bear interest.





Non-GAAP Reconciliation
(Dollars in thousands)
(Unaudited)
                  For the Three Months Ended                 For the Year Ended
                  December31,  September30,  December31,  December31,  December31,
                  2012          2012           2011          2012          2011
Pre-tax,
pre-credit-cost
revenue
Income (loss)
before tax        $  72,423     $  60,730      $ (74,901)    $  213,731    $ (180,722)
provision
Add back
Provision for     50,351        52,595         63,548        276,047       176,931
loan losses
Asset resolution  21,241        12,487         32,408        91,349        128,313
Other than
temporary         —             —              7,132         2,192         24,039
impairment on AFS
investments
Representation
and warranty      25,231        124,492        69,279        256,289       150,055
reserve - change
in estimate
Write down of     780           118            847           2,552         5,673
residual interest
Total
credit-related    97,603        189,692        173,214       628,429       485,011
costs
Pre-tax,
pre-credit-cost   $  170,026    $  250,422     $ 98,313      $  842,160    $ 304,289
net revenue
Efficiency ratio
(credit-adjusted)
Net interest      $  73,941     $  73,079      $ 75,863      $  297,231    $ 245,373
income (a)
Non-interest      285,795       273,737        118,621       1,021,242     385,516
income (b)
Add:
Representation
and warranty      25,231        124,492        69,279        256,289       150,055
reserve - change
in estimate (d)
Adjusted income   384,967       471,308        263,763       1,574,762     780,944
Non-interest      236,962       233,491        205,837       828,695       634,680
expense (c)
Less: Asset
resolution        (21,241)      (12,487)       (32,408)      (91,349)      (128,313)
expense (e)
Adjusted
non-interest      $  215,721    $  221,004     $ 173,429     $  737,346    $ 506,367
expense
Efficiency ratio  65.9       %  67.3        %  105.8      %  62.9       %  100.6       %
(c/(a+b))
Efficiency ratio
(credit-adjusted) 56.0       %  46.9        %  65.8       %  46.8       %  64.8        %
((c-
e)/((a+b)+d)))



                      December31, 2012  September30, 2012  December31, 2011
Non-performing assets
/ Tier 1 capital +
allowance for loan
losses
Non-performing assets $   520,557        $   518,416         $   603,082
Tier 1 capital(1)    $   1,456,841      $   1,379,701       $   1,215,220
Allowance for loan    305,000            305,000             318,000
losses
Tier 1 capital +
allowance for loan    $   1,761,841      $   1,684,701       $   1,533,220
losses
Non-performing assets
/ Tier 1 capital +    29.5           %   30.8            %   39.3           %
allowance for loan
losses

(1) Represents Tier 1 capital for Bank.



SOURCE Flagstar Bancorp

Website: http://www.flagstar.com
Contact: Paul D. Borja, Chief Financial Officer, Bradley T. Howes, Investor
Relations Officer, +1-248-312-2000
 
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