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Press release from PR Newswire

Flagstar Reports Fourth Quarter and Full Year 2010 Results

Tuesday, January 25, 2011

Flagstar Reports Fourth Quarter and Full Year 2010 Results22:10 EST Tuesday, January 25, 2011TROY, Mich., Jan. 25, 2011 /PRNewswire/ -- Flagstar Bancorp, Inc. (NYSE: FBC) (the "Company"), the holding company for Flagstar Bank FSB, today reported its annual and fourth quarter results for 2010.  "Flagstar Bank made significant progress in 2010 toward improving our asset quality, de-risking our balance sheet and strengthening our capital base. We also continued to build top notch management by attracting new talent to our leadership team, maintained our leadership position as a premier mortgage lender, and have begun seeing the returns from our transformation to a super community bank through growth in new accounts and business banking relationships", commented Joseph P. Campanelli, Chairman of the Board, President and CEO.The Company reduced its net loss by 23% during the year ended December 31, 2010, as compared to the same period for 2009.  For the year ended December 31, 2010, the net loss applicable to common stockholders totaled $(393.6) million, or $(2.44) per share (diluted) based on average shares outstanding of 161,565,000, as compared to a net loss of $(513.8) million, or $(16.17) per share (diluted) based on average shares outstanding of 31,766,000 during the same period in 2009.  The loss for 2010 included a loss of $176.5 million related to its sale of non-performing residential loans during the fourth quarter.For fourth quarter 2010, the Company had a net loss applicable to common stockholders of $(192.1) million, or $(0.74) per share (diluted) based on average shares outstanding of 259,946,000, as compared to a third quarter 2010 net loss of $(22.6) million, or $(0.15) per share (diluted) based on average shares outstanding of 153,405,000. This loss included a loss of $176.5 million related to its sale of non-performing residential loans during the fourth quarter. As of December 31, 2010 there were 553,313,000 shares outstanding.  Fourth quarter 2009 net loss was $(71.6) million, or $(1.53) per share (diluted) based on average shares outstanding of 46,862,000.  Key Items for Fourth Quarter:Completed public equity offering of $400.0 million.Sold $474.0 million of non-performing residential first mortgage loans and transferred $104.2 million of similar loans to available-for-sale, marking them to fair value.Originated residential mortgages of $9.2 billion, an increase of 20% from prior quarter.Improved net interest margin to 2.08%, from 1.55% in prior quarter.Increased loan fees up 17% from prior quarter, to  $28.6 million.Increased net servicing revenue up 21% from prior quarter, to $28.1 million.Decreased asset resolution expense related to non-performing residential and commercial loans,  by 12% from the prior quarter to $30.0 million.Decreased non-performing loans held for investment by 65% from prior quarter. Asset QualityAs previously announced on November 15, 2010, the Company sold $474.0 million of non-performing residential first mortgage loans and transferred $104.2 million in such loans to the available-for-sale category, resulting in a $176.5 million loss reflected as an increase in the provision for loan losses.Non-performing assets held for investment decreased to $498.0 million at December 31, 2010, from $1.1 billion at September 30, 2010 and $1.3 billion at December 31, 2009.  Non-performing residential first mortgage loans available for sale, which were transferred to this category in November totaled $94.9 million (with a fair value of $45.6 million), at December 31, 2010. This category of assets is comprised of non-performing loans (i.e., loans 90 days or more past due, and matured loans), real estate owned and net repurchased assets, and it excludes repurchased assets that are insured by the Federal Housing Agency (FHA).  The decline in non-performing assets includes the sale of $474.0 million in non-performing residential first mortgage loans and the transfer of $104.2 million of non-performing loans to the available-for-sale category.  The allowance for loan losses at December 31, 2010 decreased to $274.0 million from $474.0 million at September 30, 2010 and equaled 4.35% of loans held for investment and 86.1% of non-performing loans held-for-investment.  The allowance for loan losses at September 30, 2010 equaled 6.48% of loans held for investment and 52.0% of non-performing loans held-for-investment. At December 31, 2009, the allowance for loan losses was $524.0 million and equaled 6.79% of loans held for investment and 48.9% of non-performing loans. The decline in the allowance resulted principally from the sale of non-performing residential loans and the transfer of similar loans to the available-for-sale category and the concurrent charge-off of the related allowance.Non-performing residential first mortgage loans held for investment decreased 82%, to $119.9 million at December 31, 2010, as compared to $651.9 million at September 30, 2010.  The decrease reflected the sale of certain non-performing loans and the transfer of the additional non-performing loans to the available-for-sale category as discussed above.  Non-performing commercial real estate mortgages decreased to $175.6 million at December 31, 2010 as compared to $238.6 million at September 30, 2010, principally due to charge-offs and continuing efforts to dispose of these assets. The Company maintains a secondary marketing reserve on its balance sheet, which reflects the estimate of losses that it expects to incur on loans that it sold or securitized into the secondary market.  At December 31, 2010, the secondary marketing reserve was $79.4 million, as compared to $77.5 million at September 30, 2010 and $66.0 million at December 31, 2009.  For the fourth quarter 2010, the Company incurred a secondary marketing reserve provision expense of $10.3 million, as compared to $13.0 million in the third quarter 2010.  CapitalFlagstar Bank remained "well-capitalized" for regulatory purposes at December 31, 2010, with regulatory capital ratios of 9.61% for Tier 1 capital and 18.49% for total risk-based capital. The Company had a tangible common equity ratio of 7.4% at December 31, 2010.On November 2, 2010, the Company announced that it completed public equity offerings of $400 million, comprised of common stock and convertible preferred stock.  The public offerings resulted in aggregate net proceeds of $385.8 million, after deducting underwriting fees and estimated offering expenses. On December 21, 2010, at a special meeting of stockholders, stockholders approved a proposal to increase the number of shares of common stock, $0.01 par value per share, issuable by the Company from 300,000,000 to 700,000,000. As a result of the stockholder approval, the convertible preferred shares outstanding on the conversion date, December 22, 2010, automatically converted into 283,845,000 shares of common stock, bringing the total number of common shares outstanding at December 31, 2010 to 553,313,000 shares. Mortgage Banking OperationsIn the fourth quarter 2010, gain on loan sales was $76.9 million, as compared to $103.2 million for the third quarter 2010 and $96.5 million for the fourth quarter 2009.  This reflects the decrease in interest rate lock commitments and a decline in margin. Gain on loan sale margins decreased to 0.89% for the fourth quarter 2010, as compared to 1.35% for both the third quarter 2010 and the fourth quarter 2009.Mortgage rate lock commitments decreased to $8.9 billion during the fourth quarter 2010 as compared to $11.0 billion during the third quarter 2010 and increased slightly from $7.9 billion during the fourth quarter 2009.  Loan production, substantially comprised of agency-eligible residential first mortgage loans, increased to $9.2 billion in the fourth quarter 2010, as compared to $7.6 billion in the third quarter 2010 and $6.9 billion in the fourth quarter 2009. Loan sales for the fourth quarter of 2010 were $8.6 billion, as compared to $7.6 billion for the third quarter 2010 and $7.1 billion for the fourth quarter 2009. For the twelve months ended December 31, 2010 gain on loan sales decreased 41% to $297.0 million as compared to $501.3 million for the twelve months ended December 31, 2009.   This decrease reflects the 18% decrease in loan sales volume to $26.5 billion for the year ended December 31, 2010, compared to $32.3 billion for the same period 2009. Gain on sale margin decreased to 1.12 % for the year ended December 31, 2010 from 1.55% for the 2009 period. For the twelve months ended December 31, 2010, loan production was $26.6 billion, which was comprised of $15.5 billion originated through the correspondent channel, $9.1 billion originated through the broker channel and $2.0 billion originated through the retail channel, as compared to $32.4 billion for the twelve months ended December 31, 2009. At December 31, 2010, loans serviced for others totaled $56.0 billion and had a weighted average servicing fee of 30.8 basis points. This was an increase from $52.3 billion at September 30, 2010 with a weighted average servicing fee of 31.5 basis points, and a slight decrease from $56.5 billion at December 31, 2009 with a weighted average servicing fee of 32.1 basis points.Net Interest Margin Net interest margin for the Bank increased to 2.08% for the fourth quarter 2010 as compared to 1.55% for the third quarter 2010 and 1.67% for the fourth quarter 2009.  The increase from third quarter 2010 reflects a 0.54% decline in funding costs and a 3.7% decline in average interest bearing liabilities to $10.7 billion, which was partially offset by a 0.3% decrease in earning asset yields and a decline in average interest earning assets to $10.8 billion for the fourth quarter 2010.  The decline in funding costs during the fourth quarter was due to reduced borrowings and rates associated with Federal Home Loan Bank (FHLB) advances and the payoff during the third quarter of 2010 all of the remaining repurchase agreements.   Net interest margin for the Bank for the year ended December 31, 2010 was 1.64% as compared to 1.65% for the twelve months ended December 31, 2009. This decrease reflects a 0.70% decline in funding costs and a decrease in average interest bearing liabilities of $2.1 billion, for the year ended December 31, 2010 as compared to the same period for 2009. It also reflects a 0.65% decline in yield on earning assets and a $2.3 billion decrease in average earning assets when compared to the year ended December 31, 2009. As part of the Bank's focus on reducing its borrowing costs, it initiated a restructuring of several of its FHLB advances intended to better match its funding maturities with asset maturities to maintain an asset sensitive balance sheet and obtain the benefit of the current lower interest rate environment.  To this end, the Bank prepaid $500 million in advances otherwise due in 2011 and restructured seven other advances totaling $1.9 billion to extend maturities during which time the now-current interest rates would apply.  In addition, the Bank reduced its deposit funding costs as higher yielding certificates of deposit matured and were replaced with lower-cost deposits.  These deposits included both retail and government certificates of deposits, as to which the average rate on retail certificates of deposits declined 0.60% during the fourth quarter of 2010 and 0.97% for the year ended December 31, 2010, while government certificate rates declined 0.14% and 0.72% for the quarter ended and year ended December 31, 2010, respectively.  This caused the overall deposit costs to decline 0.40% and 0.84% for the fourth quarter of 2010 and the year ended December 31, 2010, respectively.Net Interest IncomeFourth quarter 2010 net interest income increased to $54.4 million, as compared to $41.1 million during the third quarter 2010 and $47.2 million during the fourth quarter 2009.  The increase reflects a 0.55% decrease in funding costs offset by a 0.03% decrease in the average yield. Net interest income for the twelve months ended December 31, 2010 declined to $175.6 million from $211.5 million for the same 2009 period. Fourth quarter loan loss provisions of $225.4 million included $176.5 million in losses recorded on the non-performing loan sale and the reclassification of non-performing loans to the available for sale portfolio.   Loan loss provisions for the year ended December 31, 2010 decreased 15% to $426.4 million from $504.4 million for the year ended December 31, 2009. Non-interest IncomeFourth quarter non-interest income equaled $136.5 million, as compared to $144.9 million for the third quarter 2010 and $131.6 million for the fourth quarter 2009.  For the year ended December 31, 2010 non-interest income totaled $453.7 million as compared to $523.3 million for the same 2009 period.  Non-interest income included the following components:Gain on loan sales decreased $26.3 million to $76.9 million, compared to $103.2 million for the third quarter 2010, reflecting the decrease in margin for the fourth quarter of 2010 to 0.89% from 1.35% for the third quarter 2010 and the decline in interest rate locks on mortgage loans to $8.9 billion in the fourth quarter 2010 from $11.0 billion in the third quarter 2010. Residential mortgage loan sales were $8.6 billion for the fourth quarter of 2010 as compared to $7.6 billion in the third quarter 2010. For the year ended December 31, 2010, the gain on loan sales was $297.0 million as compared to $501.3 million for the same period in 2009. The 41% decline is reflective of the decline in both the volume of loan sales and the margin. Net servicing revenue, which is the combination of net loan administration income and the related hedging effect of gain (loss) on trading securities, increased 21% to $28.1 million during fourth quarter 2010 as compared to $23.2 million during third quarter 2010. The increase reflects a 7.5% increase in the average loans serviced for others portfolio to $54.3 billion for fourth quarter 2010 as compared to $50.5 billion for the third quarter 2010. Net servicing revenue for the year ended December 31, 2010 was $89.2 million, as compared to $13.0 million for the year ended December 31, 2009. Loan fees, which arise from the origination of residential mortgage loans, increased 17% to $28.6 million for the fourth quarter 2010 as compared to $24.4 million for the third quarter 2010. The increase in loan fees reflected the 21% increase in originations to $9.2 billion during the fourth quarter 2010 as compared to $7.6 billion during the third quarter 2010.  For the year ended December 31, 2010, loan fees declined 29% to $89.5 million from $125.2 million for the same 2009 period, reflecting the 17% decline in residential loan originations for the year ended December 31, 2010 to $26.6 billion as compared to $32.4 billion for the year ended December 31, 2009.Other fees and charges were $(4.7) million, as compared to $(7.7) million for the third quarter 2010, principally as the result of a $2.6 million decrease in secondary market reserve provisions accrued for expected losses on loans repurchased from the secondary market. For the year ended December 31, 2010 and 2009, other fees and charges were a loss of $(41.1) million and $(50.0) million, respectively, which the decline reflects in part, the decline in the secondary market provisions to $61.5 million during 2010 as compared to $75.6 million during 2009. Non-interest ExpenseNon-interest expense decreased to $150.8 million for the fourth quarter 2010, as compared to $152.5 million for the third quarter 2010 and $151.0 million for the fourth quarter 2009. For the year ended December 31, 2010, non-interest expense declined to $575.7 million, as compared to $672.1 million for the 2009 period. Asset resolution expenses, which are expenses associated with foreclosed property and repurchased assets, decreased 12% to $30.0 million, as compared to $34.2 million in the third quarter of 2010. The decline was principally due to the reduced amount of additional expenses experienced on foreclosed property and repurchased FHA-insured loans offset by an increase in gains recognized on sales of foreclosed properties. Asset resolution expenses related to foreclosed property arising from held-for-investment loans declined 22% in the fourth quarter of 2010 as compared to the third quarter 2010. Asset resolution expenses totaled $126.3 million for the year ended December 31, 2010 as compared to $96.6 million for the same period in 2009.  Compensation and benefits expense increased $6.3 million to $66.1 million in the fourth quarter of 2010, as compared to the third quarter 2010. The increase reflects the new employees to staff the new commercial lending initiatives, additional employees necessary to handle the increased loan production and an increase in incentive pay associated with increased loan underwriting activity. Commission expense increased $1.6 million, or 15%, to $12.6 million. This increase is consistent with the 21% increase in loan production for the fourth quarter 2010, as compared to the third quarter 2010. Compensation, benefits and commissions declined 20% to $238.2 million for the year ended December 31, 2010, reflecting a 48% decrease in commissions and an 11% decrease in compensation and benefits.Loss on the early extinguishment of debt decreased $11.9 million during the fourth quarter 2010 compared to third quarter 2010, reflecting the prepayment of a $250.0 million advance from the FHLB in the third quarter and no such prepayment in the fourth quarter. For the year ended December 31, 2010, losses on early extinguishment of debt increased 27% to $20.8 million as the result of the prepayment of two advances totaling $500 million and the early payoff of $310.6 million in repurchase agreements during 2010 as compared to FHLB advance prepayments of $650 million during 2009.The re-valuation of outstanding warrants at the end of fourth quarter 2010 resulted in expense of $7.9 million, as compared to income of $1.4 million recognized at the end of third quarter of 2010. The change in value resulted from an increase in the number of warrants to 6.9 million at December 31, 2010, due to the November 2, 2010 public equity offerings, and also from the increase in the market price of the Company's common stock since the end of third quarter 2010.  Warrant expense totaled $4.2 million for the year ended 2010 as compared to $23.3 million for the same period in 2009, reflecting the initial classification of the US Treasury warrants as liabilities during the first quarter of 2009. AssetsTotal assets at December 31, 2010 were $13.6 billion, as compared to $13.8 billion at September 30, 2010 and $14.0 billion at December 31, 2009.  The decrease from September 30, 2010 reflected a continued run-off of and the sale of non-performing residential mortgage loans within the Bank's held-for-investment portfolio, and decreases in interest-earning deposits, Federal Home Loan Bank stock and securities available for sale, partially offset by an increase in loans available for sale.   Funding Sources The Bank's primary sources of funds are deposits obtained through its 162 community banking branches and its internet banking platform as well as deposits obtained from municipalities and investment banking firms.  Funds are also obtained from time to time through loan repayments and sales of loans and securities in the ordinary course of business, advances from the FHLB, community banking operations, customer escrow accounts and security repurchase agreements.  The Bank relies upon several of these sources at any one time to address its daily and forecasted liquidity needs for operational requirements and policy levels while managing overall net interest costs.  Retail deposits were $5.4 billion at December 31, 2010 and September 30, 2010 and $5.5 billion at December 31, 2009.  At December 31, 2010, the Bank had a collateralized $4.8 billion line of credit with the FHLB with $1.1 billion of remaining capacity.Community Banking Operations Flagstar Bank had 162 community banking branches at both December 31, 2010 and September 30, 2010, and 165 branches at December 31, 2009.  Earnings Conference CallThe Company's quarterly earnings conference call will be held on Wednesday, January 26, 2011 from 11:00 a.m. until 12:00 noon (Eastern). Questions for discussion at the conference call may be submitted in advance by e-mail to investors@flagstar.com or asked live during the conference call.The conference call and accompanying slide presentation will be webcast live on the Investor Relations section of the Company's Web site, www.flagstar.com, with replays available at that site for at least 10 days.To listen by telephone, please call at least 10 minutes prior to the start of the conference call at (866) 294-1212 toll free or (702) 696-4911 and use passcode: 36800260.Flagstar Bancorp, with $13.6 billion in total assets, is the largest publicly held savings bank headquartered in the Midwest.  At December 31, 2010, Flagstar operated 162 banking centers in Michigan, Indiana and Georgia and 27 home loan centers in 13 states.  Flagstar Bank originates loans nationwide and is one of the leading originators of residential mortgage loans.The information contained in this release is not intended as a solicitation to buy Flagstar Bancorp, Inc. stock and is provided for general information.  This release contains certain statements that may constitute "forward-looking statements" within the meaning of federal securities laws.  These forward-looking statements include statements about the Company's beliefs, plans, objectives, goals, expectations, anticipations, estimates, and intentions, that are subject to significant risks and uncertainties, and are subject to change based upon various factors (some of which may be beyond the Company's control).  The words "may," "could," "should," "would," "believe," and similar expressions are intended to identify forward-looking statements.Flagstar Bancorp, Inc.Summary of Selected Consolidated Financial Data(Dollars in thousands, except per share data)(Unaudited)For the Three Months EndedFor the Years EndedSummary of ConsolidatedStatements of OperationsDecember 31,2010September 30,2010December 31,2009December 31,2010December 31,2009     Interest income$           118,292$            123,217$        149,405$        497,737$        689,338     Interest expense(63,876)(82,103)(102,205)(322,118)(477,798)Net interest income54,41641,11447,200175,619211,540     Provision for loan losses(225,375)(51,399)(94,950)(426,353)(504,370)Net interest loss after provision(170,959)(10,285)(47,750)(250,734)(292,830)Non-interest income     Deposit fees and charges7,3857,5858,77432,18132,429     Loan fees and charges28,60524,36527,80289,535125,168     Loan administration28,26912,92427,40712,6797,167     Net (loss) gain on trading securities (173)10,354(515)76,5295,861     Net gain (loss) on residuals and transferors' interest3,812(4,665)(16,243)(7,847)(82,867)     Net gain on loan sales76,930103,21196,477296,965501,250     (Loss) gain on sales of mortgage servicing rights(2,303)(1,195)59(6,977)(3,886)     Net gain on sale securities available for sale--8,5566,6898,556     Impairment ? securities available for sale(1,313)-(304)(4,991)(20,747)     Other fees (4,749)(7,691)(20,455)(41,083)(49,645)       Total non-interest income136,463144,888131,558453,680523,286Non-interest expenses     Compensation, benefits and commissions(66,057)(59,844)(64,686)(238,188)(297,388)     Occupancy and equipment(17,614)(15,757)(16,456)(65,285)(70,009)     Asset resolution(30,037)(34,233)(26,930)(126,282)(96,591)     Federal insurance premiums(8,179)(8,522)(8,099)(37,389)(36,613)     Warrant (expense) income (7,854)1,4054,222(4,189)(23,338)     Loss on extinguishment of debt-(11,855)(16,446)(20,826)(16,446)     Other taxes481(1,964)(977)(3,180)(16,029)     General and administrative(21,568)(21,756)(21,597)(80,554)(116,617)        Total non-interest expense(150,828)(152,526)(150,969)(575,893)(673,031)Capitalized direct cost of loan closing4827235238905        Total non-interest expense after capitalized direct           cost of loan closing(150,780)(152,499)(150,734)(575,655)(672,126)Loss before federal income taxes and preferred stock   dividends(185,276)(17,896)(66,926)(372,709)(441,670)Provision for federal income taxes2,104--2,10455,008Net loss(187,380)(17,896)(66,926)(374,813)(496,678)     Preferred stock dividends(4,690)(4,690)(4,660)(18,748)(17,124)Net loss available to common stockholders$        (192,070)$           (22,586)$        (71,586)$      (393,561)$      (513,802)Basic loss per share (1)$              (0.74)$               (0.15)$            (1.53)$            (2.44)$          (16.17)Diluted loss per share (1)$              (0.74)$               (0.15)$            (1.53)$            (2.44)$          (16.17)(1) Restated for a 1 for 10 reverse stock split announced May 27Flagstar Bancorp, Inc.Summary of Selected Consolidated Financial Data(Dollars in thousands, except per share data)(Unaudited)For the Three Months EndedFor the Year EndedSummary of ConsolidatedStatements of OperationsDecember 31,2010September 30,2010December 31,2009December 31,2010December 31,2009Net interest spread ? Consolidated2.06%1.54%1.69%1.61%1.54%Net interest margin ? Consolidated2.02%1.48%1.54%1.56%1.55%Net interest spread ? Bank only2.07%1.55%1.74%1.63%1.58%Net interest margin ? Bank only2.08%1.55%1.67%1.64%1.65%Return on average assets(5.47)%(0.64)%(1.91)%(2.81)%(3.24)%Return on average equity(59.38)%(8.35)%(45.08)%(36.63)%(62.87)%Efficiency ratio79.0%82.0%84.3%91.5%91.5%Average interest earning assets$   10,773,561$   11,158,181$   12,283,918$   11,215,569$   13,584,016Average interest paying liabilities$   10,960,772$   11,383,551$   12,843,319$   11,437,410$   13,542,712Average stockholder's equity$     1,293,937$     1,082,499$        635,151$     1,074,571$        817,248Equity/assets ratio (average for the period)9.20%7.71%4.24%7.66%5.15%Ratio of charge-offs to average loans held forinvestment5.78%5.90%4.96%4.82%4.20%Flagstar Bancorp, Inc.Summary of Selected Consolidated Financial Data(Dollars in thousands, except per share data)(Unaudited)Summary of Consolidated Statements of Financial Condition:December 31,2010September 30,2010June 30,2010December 31,2009Total assets$        13,643,504$          13,836,573$          13,693,830$            14,013,331Securities classified as trading160,775161,000487,370330,267Securities classified as available for sale475,225503,568544,474605,621Loans available for sale2,585,2001,943,0961,849,7181,970,104Loans available for investment, net6,031,4836,838,2266,835,8177,190,308Allowance for loan losses(274,000)(474,000)(530,000)(524,000)Mortgage servicing rights580,299447,023474,814652,374Government insured repurchased assets1,731,2761,515,9281,362,519826,349Deposits7,998,0998,561,9438,254,0468,778,469FHLB advances3,725,0833,400,0003,650,0003,900,000Repurchase agreements-    -    -    108,000Stockholder's equity1,259,6631,060,7291,076,361596,724Other Financial and Statistical Data:Equity/assets ratio9.23%7.67%7.86%4.26%Core capital ratio (bank only)9.61%9.12%9.24%6.19%Total risk-based capital ratio (bank only)18.49%16.87%17.20%11.68%Book value per common share$                   1.83$                     5.30$                     5.41$                       7.53Shares outstanding at the period ended553,313153,513153,33846,877Average shares outstanding for the period ended   (000's)161,565128,411115,70731,766Average diluted shares outstanding for the period   ended (000's)161,565128,411115,70731,766Loans serviced for others$        56,040,063$          52,287,204$          50,385,208$            56,521,902Weighted average service fee (bps)30.831.532.432.1Value of mortgage servicing rights1.04%0.85%0.94%1.15%Allowance for loan losses to non performing   loans held for investment (1)86.1%52.0%52.3%48.9%Allowance for loan losses to loans held for   investment (1)4.35%6.48%7.20%6.79%Non-performing assets to total assets 4.35%8.25%9.06%9.25%Number of bank branches162162162165Number of loan origination centers27272832Number of employees (excluding loan   officers and account executives)3,0012,9222,8853,075Number of loan officers and account executives278285296336(1) Bank only and does not include non-performing loans available for saleLoan Originations(Dollars in thousands)(Unaudited)For the Three Months EndedLoan typeDecember 31,2010September 30,2010December 31, 2009Residential mortgage loans$        9,164,61599.9%$   7,613,50299.8%$     6,902,27199.9%Consumer loans1,022-    486-    936-    Commercial loans12,4400.112,7150.28,7050.1      Total loan production$        9,178,077100.0%$   7,626,703100.0%$     6,911,912100.0%Loan Originations(Dollars in thousands)(Unaudited)For the Years endedLoan typeDecember 31,2010December 31,2009Residential mortgage loans$   26,560,81099.9%$     32,330,65899.9%Consumer loans3,068-    5,802-    Commercial loans37,3520.138,6400.1     Total loan production$   26,601,230100.0%$     32,375,100100.0%Loans Held for Investment(Dollars in thousands)(Unaudited)DescriptionDecember 31,2010September 30,2010June 30,2010December 31,2009First mortgage residential loans$     3,784,70060.1%$      4,479,81461.3%$       4,614,82262.7%$        4,990,99464.7%Second mortgage residential loans174,7892.8185,0622.5196,7022.7221.6262.9Commercial real estate loans1,250,30119.81,341,00918.41,439,32419.51,600,27120.7Construction loans8,0120.19,9560.113,0030.216,6420.2Warehouse lending720,77011.4913,49412.5702,4559.5448,5675.8Consumer loans358,0365.7373,0865.1388,2505.3423,8425.5Non-real estate commercial8,8750.19,8050.111,2610.112,3660.2     Total loans held for        investment$     6,305,483100.0%$      7,312,226100.0%$       7,365,817100.0%$        7,714,308100.0%Composition of First Mortgage and Second Mortgage Residential Loans Held for InvestmentAs of December 31, 2010(In thousands)(unaudited)Portfolio Balance (1)Allowance (1)     Performing modified (TDR)$                    576,594$                       46,857     Performing and not delinquent within last 36 months2,084,57827,700     Performing with mortgage insurance122,677-         Other performing982,98443,042     Non-performing - 90+ day delinquent73,55118,746     Non-performing with mortgage insurance56,5871,915     30 day and 60 day delinquent62,5184,866Total$                 3,959,489$                     143,126(1) Includes first mortgage and second mortgage loansComposition of Commercial Real Estate and Non-Real Estate Loans Held for InvestmentAs of December 31, 2010(In thousands)(unaudited)Portfolio Balance Allowance     Performing ? not impaired$                    933,557$                    31,291     Special mention ? not impaired85,1035,907     Impaired73,63117,181     Non-performing ? not impaired6,485752     Non-performing160,40039,847Total$                 1,259,176$                    94,978Allowance for Loan Losses(Dollars in thousands)(Unaudited)For the Three Months EndedFor the Years EndedDecember 31,2010September 30,2010December 31, 2009December 31,2010December 31,2009Beginning Balance$               (474,000)$            (530,000)$            (528,000)$          (524,000)$     (376,000)     Provision for losses(48,914)(51,399)(94,950)(249,892)(504,370)     Provision for losses ? NPL sale(176,461)                 -                 -(176,461)                 -Total provision for losses(225,375)(51,399)(94,950)(426,353)(504,370)Charge offs, net of recoveries     First mortgage loans31,61438,18432,782143,830124,889     First mortgage loans ? NPL sale327,295                 -                 -327,295                 -     Second mortgage loans5,4546,13010,59726,02241,807     Commercial real estate loans55,83357,63142,311153,062144,963     Construction loans814174345742,887    Warehouse loans182(240)6141,6381,111     Consumer loans:          HELOC loans4,1854,36410,16020,08734,986          Other consumer loans3403571,3911,7643,788     Other3915566612,0811,939     Charge-offs, net of recoveries425,375107,39998,950676,353356,370Ending Balance$               (274,000)$            (474,000)$            (524,000)$          (274,000)$     (524,000)Composition of Allowance for Loan LossesAs of December 31, 2010(In thousands)(Unaudited)DescriptionGeneral ReservesSpecific ReservesTotal     First mortgage loans$                    109,262$                     8,677$               117,939     Second mortgage loans24,60758025,187     Commercial real estate loans39,17654,26093,436     Construction loans1,0044571,461     Warehouse lending3,1151,0564,171     Consumer loans24,8061324,819     Non-real estate commercial1,1174251,542     Other and unallocated5,445-5,445Total allowance for loan losses$                    208,532$                   65,468$               274,000Non-Performing Loans and Assets(Dollars in thousands)(Unaudited)December 31,2010September 30,2010June 30,2010December 31,2009Non-performing loans held for investment$               318,416$              911, 372$           1,013,828$         1,071,636Real estate owned151,085198,585198,230176,968Net repurchased assets/non-performing assets28,47231,16527,98545,697Non-performing assets (1)497,9731,141,1221,240,0431,294,301Non-performing loans available for sale94,889-    -    -    Non-performing assets including loans available for sale$              592,862$            1,141,122$           1,240,043$         1,294,301Non-performing loans held for investment as a percentage of loans held for investment (1)5.05%12.46%13.76%13.89%Non-performing assets as a percentage of total assets 4.35%8.25%9.06%9.25%(1) Does not include non-performing loans available for saleAsset Quality(Dollars in thousands)(Unaudited)December 31, 2010September 30, 2010June 30, 2010December 31, 2009Days delinquentBalance% ofTotalBalance% of TotalBalance% of TotalBalance% of Total30$           133,4492.1%$           112,7411.5%$             112,6971.5%$             143,5001.9%6053,7450.973,7401.083,0441.187,6251.190+ and matured delinquent318,4165.0911,37212.51,013,82813.81,071,63613.9Total$           505,6108.0%$        1,097,85315.0%$          1,209,56916.4%$          1,302,76116.9%Loans held for investment$        6,305,483$        7,312,226$          7,365,817$          7,714,308Gain on Loan Sales and Securitizations(Dollars in thousands)(Unaudited)For the Three Months EndedDecember 31, 2010September 30, 2010December 31, 2009Description(000's)bps(000's)bps(000's)bpsValuation gain (loss):     Value of interest rate locks$          (36,144)(42)$               4,3806$            (30,544)(43)     Value of forward sales54,9376431,6494260,83885     Fair value of loans available for sale37,09943140,993185106,153149     LOCOM adjustments on loans held for         investment248-    171-    207-    Total valuation gains$             56,14065$           177,193233$             136,654191Sales gains (losses):     Marketing gains34,30040$             17,14122$               41,61458     Pair off losses5,9987(77,404)(102)(35,990)(50)     Sales adjustments(7,552)(8)(4,404)(6)(37,269)(52)     Provisions for secondary marketing reserve(11,956)(14)(9,315)(12)(8,532)(12)Total sales (losses) gains20,79024(73,982)(98)(40,177)(56)Net gain on loan sales and securitizations$             76,93089$           103,211135$               96,477135Total loan sales and securitizations$        8,612,997$        7,619,097$          7,143,242Gain on Loan Sales and Securitizations(Dollars in thousands)(Unaudited)For the Twelve Months EndedDecember 31, 2010December 31, 2009Description(000's)bps(000's)bpsValuation gain (loss):     Value of interest rate locks$               4,3352$          (68,552)(21)     Value of forward sales8,056389,02027     Fair value of loans available for sale340,812129530,694164     LOCOM adjustments on loans held for          investment286-    (68)-    Total valuation gains353,489134$           551,094170Sales gains (losses):     Marketing gains106,76039$           144,81345     Pair off losses(114,778)(43)(41,564)(13)     Sales adjustments(13,306)(5)(126,623)(39)     Provisions for secondary marketing reserve(35,200)(13)(26,470)(8)Total sales (losses) gains(56,524)(22)(49,844)(15)Net gain on loan sales and securitizations$           296,965112$           501,250155Total loan sales and securitizations$      26,506,672$      32,326,643Average Balances, Yields and Rates(Dollars in thousands)(Unaudited)For the Three Months EndedDecember 31, 2010September 30, 2010December 31, 2009Average BalanceAnnualizedYield/RateAverage BalanceAnnualizedYield/RateAverage BalanceAnnualizedYield/Rate Interest-Earning Assets:Loans available for sale$        2,408,2754.39%$        2,166,0724.63%$        2,228,2225.28%Loans held for investment:     Mortgage loans4,276,0344.574,734,0314.525,437,7064.80     Commercial loans2,149,1275.112,163,0044.962,093,9284.83     Consumer loans364,9266.13381,7256.09440,8906.12Loans held for investment6,790,0874.837,278,7604.747,972,5244.88Securities classified as available for sale     or trading659,6505.28863,2015.081,654,2355.21Interest-bearing deposit915,5490.24848,8540.24397,7180.58Other-    -    1,2940.2731,2190.02Total-interest-earning assets10,773,5614.3711,158,1814.4012,283,9184.85Other assets3,284,5232,874,1632,697,323Total assets$      14,058,084$      14,032,344$      14,981,241Interest-Bearing Liabilities:         Demand deposits$           391,9720.42%$           378,1930.48%$           344,8280.51%         Savings deposits918,2890.96744,8890.97691,5241.12         Money Market deposits554,8030.88542,3500.96760,7291.34         Certificate of deposits3,314,2862.173,401,7392.773,756,4723.19      Total retail deposits5,179,3501.685,067,1712.145,553,5532.51         Demand deposits161,0560.28214,8660.26240,2630.46         Savings deposits313,3940.65171,8800.7488,3000.58         Certificate of deposits274,8200.80440,5400.94387,6390.76      Total government deposits749,2700.63827,2860.72716,2020.64      Wholesale deposits987,1893.151,427,4633.181,709,1403.03   Total deposits6,915,8091.787,321,9202.187,978,8952.46   FHLB Advances3,796,3533.263,813,0214.144,456,2424.29   Security repurchase agreements-    -    -    -    108,0004.34   Other248,6102.64248,6103.22300,1824.97Total interest-bearing liabilities 10,960,7722.3111,383,5512.8612,843,3193.17Other liabilities1,803,3751,566,2941,502,771Stockholder's equity1,293,9371,082,499635,151Total liabilities and stockholder's equity$      14,058,084$      14,032,344$      14,981,241Average Balances, Yields and Rates(Dollars in thousands)(Unaudited)For the Twelve Months EndedDecember 31, 2010December 31, 2009Average BalanceAnnualizedYield/RateAverage BalanceAnnualizedYield/Rate Interest-Earning Assets:Loans available for sale$          1,945,9134.69%$        2,743,2185.18%Loans held for investment:     Mortgage loans4,759,1054.645,815,2185.13     Commercial loans2,093,2624.932,177,9825.06     Consumer loans390,1666.03495,4545.51Loans held for investment7,242,5334.808,488,6545.14Securities classified as available for sale     or trading1,076,6105.192,048,7485.25Interest-bearing deposits947,2860.23267,2810.89Other3,2270.1036,1150.08Total-interest-earning assets11,215,5694.4313,584,0165.07Other assets2,814,6032,283,895Total assets$        14,030,172$      15,867,911Interest-Bearing Liabilities:         Demand deposits$             382,1950.50%$              303,2560.49%         Savings deposits761,4160.92557,1091.39         Money Market deposits560,2370.92702,1201.74         Certificate of deposits3,355,0412.713,950,7173.68      Total retail deposits5,058,8892.085,513,2023.03         Demand deposits264,4730.38117,2640.50         Savings deposits158,4930.6586,2410.77         Certificate of deposits309,0510.84611,4531.59      Total government deposits732,0170.63814,9581.35      Wholesale deposits1,456,2213.091,791,9993.55   Total deposits7,247,1272.138,120,1592.97   FHLB Advances3,849,8974.035,039,7794.33   Security repurchase agreements79,0533.48108,0004.33   Other261,3333.72274,7744.87Total interest-bearing liabilities 11,437,4102.8213,542,7123.53Other liabilities1,518,1911,507,951Stockholder's equity1,074,571817,248Total liabilities and stockholder's equity$        14,030,172$      15,867,911Pre-tax, pre-credit-cost Income(Non GAAP measure)(Dollars in thousands)(Unaudited)For the Three Months EndedDecember 31, 2010September 30, 2010December 31, 2009Loss before tax provision/benefit$                 (185,276)$                   (17,896)$                 (66,926)Add back:     Provision for loan losses225,37551,39994,950     Asset resolution30,03734,23326,930     Other than temporary impairment on AFS investments1,313-    304     Secondary marketing reserve provision10,34912,95827,287     Write down of residual interest(3,812)4,66516,243          Total credit-related-costs:263,262103,255165,714Pre-tax, pre-credit-cost income$                      77,986$                      85,359$                  98,788Pre-tax, pre-credit-cost Income(Non GAAP measure)(Dollars in thousands)(Unaudited)For the Twelve Months EndedDecember 31, 2010December 31, 2009Loss before tax provision/benefit$                 (372,709)$                 (441,670)Add back:     Provision for loan losses426,353504,370     Asset resolution126,28296,591     Other than temporary impairment on AFS investments4,99120,747     Secondary marketing reserve provision61,52375,627     Write down of residual interest7,84782,867     Reserve increase for reinsurance43224,846          Total credit-related-costs:627,428805,048Pre-tax, pre-credit-cost income$                    254,719$                    363,378SOURCE Flagstar Bancorp, Inc.For further information: Paul D. Borja, Executive Vice President / CFO, or Bradley T. Howes, Investor Relations Officer, +1-248-312-2000