8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report: October 19, 2004

Flagstar Bancorp, Inc.

(Exact name of registrant as specified in its charter)

Michigan	1-16557	38-3150651
(State or other jurisdiction of	(Commission File	(I.R.S. Employer
incorporation)	Number)	Identification No.)

5151 Corporate Drive, Troy, Michigan	48098
(Address of principal executive offices)	(Zip Code)

(248) 312-2000
(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition

     On October 19, 2004, Flagstar Bancorp, Inc. issued a press release regarding its results of operations and financial condition for the quarter and nine months ended September 30, 2004. The text of the press release is included as Exhibit 99.1 to this report. The information included in the press release text is considered to be “furnished” under the Securities Exchange Act of 1934. The Company will include final financial statements and additional analyses for the quarter and nine months ended September 30, 2004, as part of its Form 10-Q covering that period.

Item 9.01 Financial Statements and Exhibits

     (c) The following exhibit is being furnished herewith:

Exhibit No.	Exhibit Description
99.1	Press release text of Flagstar Bancorp, Inc. dated October 19, 2004.

SIGNATURE

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

	FLAGSTAR BANCORP, INC.
Dated: October 25, 2004	By:	/s/ Michael W. Carrie
	Michael W. Carrie
	Executive Director, Chief Financial Officer and Treasurer

  2

Exhibit Index

Exhibit No.
99.1	Press release text of Flagstar Bancorp, Inc. dated October 19, 2004.

EX-99.1

Exhibit 99.1

NEWS RELEASE

FOR MORE INFORMATION CONTACT:

Michael W. Carrie

Executive Director / Treasurer/ CFO

(248) 312-2000

FOR IMMEDIATE RELEASE

FLAGSTAR REPORTS THIRD QUARTER RESULTS

FLAGSTAR ANNOUNCES NET EARNINGS OF $0.62 PER SHARE

RETAIL BANKING PROFITS CONTRIBUTE 60.1% OF TOTAL

Troy, Mich. (October 19, 2004) — Flagstar Bancorp, Inc. (NYSE:FBC), today released quarterly earnings of $40.0 million, or $0.62 per share – diluted.

Highlights in the quarter include:

• An annualized return on average equity of 22.3%;

• An annualized return on average assets of 1.3%;

• A retail banking contribution of approximately $0.37 per share;

• Continued strong net interest income of $55.9 million;

Retail Banking

The Company’s retail banking operation provided 60.1% of net earnings compared to 33.0% for all of 2003 and 58.8% reported in the second quarter of 2004. The Company opened 5 banking centers during the quarter.

Flagstar’s deposits were $7.5 billion at September 30, 2004 compared with $5.7 billion at December 31, 2003 and $6.5 billion at June 30, 2004. At September 30, 2004, consumer direct transaction account balances, including checking, savings, and money market accounts, represented $2.2 billion, compared with $2.0 billion at December 31, 2003. On a sequential quarter basis, the Company’s average cost of deposits increased by 4 basis points.

Net Interest Income

Net interest was reported at $55.9 million compared to $52.0 million in the comparable period last year and $59.3 million in the June 2004 quarter. The net interest margin for the quarter was 1.98%, down 11 basis points when compared with the 2.09% reported for the same period last year.

On a sequential quarter basis, the Company’s net interest income decreased $3.4 million. Also, the net interest margin decreased 15 basis points from the 2.13% recorded in the second quarter of 2004.

Loan sale gains

Gains recorded on the sales of mortgage loans were $24.2 million during the quarter ended September 30, 2004 from $91.7 million in the comparable 2003 period. This decreased gain was attributable to the $9.5 billion decrease in the amount of loans sold during the quarter. The gain on sale spread equaled 49 basis points in the third quarter of 2004 versus 56 basis points in the third quarter of 2003.

As previously reported, the Company originated $6.8 billion in residential mortgage loans in the third quarter of 2004. This production level compares to the $16.0 billion originated in the comparable 2003 period. This decrease was primarily attributable to a decrease in the amount of mortgage loan refinancings.

	For the three months ended						For the nine months ended
	September 2004			September 2003			September 2004			September 2003
Net gain on loan sales	$	24,241		$	91,665		$	63,886		$	335,169
Plus: FASB 133 adjustment		(117	)		(4,051	)		(6,662	)		9,253
Plus: Secondary Market Reserve		2,875			1,979			16,791			13,887
Gain on loan sales	$	26,999		$	89,593		$	74,015		$	358,309
Loans sold	$	5,495,477		$	16,027,089		$	21,221,693		$	45,519,629
Sales spread		0.49	%		0.56	%		0.35	%		0.79	%

Mortgage Servicing

     Loans serviced for others

At September 30, 2004, the Company serviced $20.8 billion in loans for others. This volume is down 31.6% from December 31, 2003 and down 22.1% from June 30, 2004. During the quarter the Company originated $5.5 billion and sold $9.8 billion of servicing rights. The MSR sales consisted of $5.9 billion of bulk sales, $3.6 billion of flow sales and $0.3 billion of servicing release sales.

The current portfolio contains 165,265 loans that have a weighted rate of 6.11%, a weighted service fee of 35.7 basis points, and a weighted 15 months of seasoning. Revenue from the portfolio earned $25.3 million during the quarter, down $3.2 million over the comparable 2003 period.

	For the three months ended				For the nine months ended
	September 2004		September 2003		September 2004		September 2003
Beginning balance	$	26,667,308	$	28,953,871	$	30,395,079	$	21,586,797
Originations		5,495,477		14,978,660		21,221,693		45,519,629
Sales		9,821,057		11,263,152		24,778,683		29,465,765
Amortizations and prepayments		1,517,519		3,357,298		6,013,880		8,328,580
Ending balance	$	20,824,209	$	29,312,081	$	20,824,209	$	29,312,081

     Mortgage servicing rights

The capitalized value of the servicing portfolio is $175.6 million, or 0.84% of the outstanding balance of the underlying mortgage balances. The preliminary market value of the portfolio is $232.2 million. During the quarter, no impairment adjustment was made to the book value of the portfolio. The Company wrote off $15.5 million in book value for loan prepayment and amortization.

Secondary Market Reserve

     Repurchased assets

Net repurchased assets pending foreclosure totaled $20.9 million at September 30, 2004 compared to $12.0 million at December 31, 2003 and $21.9 million at June 30, 2004. During the third quarter of 2004, the Company repurchased $10.8 million in non-performing assets previously sold to the secondary market. During 2003, the Company repurchased a total of $46.3 million in non-performing assets.

     Reserve for losses on repurchased assets

The reserve for losses on repurchased assets was increased $2.7 million, or 26.2% to $13.0 million at September 30, 2004 from $10.3 million at December 31, 2003. Losses attributable to repurchased assets totaled $3.5 million for both the three months ended September 30, 2004 and 2003.

Asset Quality

     Non-performing loans

Non-performing loans at September 30, 2004 were $57.4 million, down $0.9 million or 1.5% from year-end 2003 and down $2.2 million from June 30, 2004. Total delinquencies in the Company’s investment loan portfolio equaled 1.14% at September 30, 2004, compared with 1.54% at December 31, 2003 and 1.20% at June 30, 2004.

Consistent with the Company’s business model, 95.2% of non-performing loans were backed by single-family homes.

     Provision for Losses

The provision for losses was $3.2 million for the three months ended September 30, 2004 from $3.4 million during the third quarter of 2003 and $3.6 million in the quarter ended June 30, 2004. The provision for losses in the current quarter and the comparable quarter in 2003 included a $3.2 million and a $3.4 million increase in the allowance for losses, respectively. Net charge-offs were an annualized 0.18% and 0.33% of average investment loans during the three months ended September 30, 2004 and September 30, 2003, respectively. Net charge-offs were 0.35% of average investment loans during 2003.

     Allowance for losses

The allowance for losses totaled $41.0 million at September 30, 2004. Management believes the current reserve is set at an appropriate level given the current business environment and the current portfolio of investment loans.

The allowance for losses as a percentage of non-performing loans is 71.4%. The allowance for losses as a percentage of investment loans was 0.43% at September 30, 2004.

Balance Sheet and Capital Management

Consolidated assets at September 30, 2004 were $12.8 billion, compared with $10.6 billion at December 31, 2003 and $12.0 billion at June 30, 2004.

Flagstar’s stockholders’ equity now stands at $731.2 million, or 5.72% of total assets. The book value of the common stock at September 30, 2004 equaled $11.92 per share. Flagstar Bank, the Company’s wholly-owned subsidiary reported capital ratios that categorize the Bank as a “well-capitalized” institution for regulatory purposes. The Bank’s Core capital ratio stood at 6.15% and the Total risk-based capital ratio stood at 11.20% at September 30, 2004.

As Previously Announced

The Company’s quarterly earnings conference call will be held on Wednesday, October 20, 2004 at 11:00 a.m. Eastern Time.

The conference call will also be webcast at http://www.flagstar.com/inside/presentations.jsp

To participate, please telephone at least ten minutes prior at (888) 855-5428; passcode 855458.

Flagstar Bancorp is the second largest banking institution headquartered in Michigan. Flagstar operates over 100 banking centers in Michigan and Indiana and loan centers in 25 states. Flagstar Bank is one of the nation’s largest 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.

(more)

SUMMARY OF SELECTED CONSOLIDATED FINANCIAL DATA

Summary of the Consolidated Statements of	At or for the three months ended						At or for the nine months ended
Earnings	September 30,						September 30,
	2004			2003			2004			2003
	( Unaudited, In Thousands, Except Share Data )
Interest income	$	140,818		$	133,539		$	411,873		$	380,533
Interest expense		84,914			81,494			245,671			227,971
Net interest income		55,904			52,045			166,202			152,562
Provision for losses		3,171			3,355			16,076			18,014
Net interest income after provision		52,733			48,690			150,126			134,548
Loan servicing fees, net		9,760			7,462			23,582			(31,203	)
Gain on loan sales, net		24,241			91,665			63,886			335,169
Gain on MSR sales, net		15,734			44,619			74,767			46,200
Other income		18,630			13,301			55,250			39,486
Operating expenses		59,509			65,963			185,225			189,023
Earnings before federal income tax		61,589			139,774			182,386			335,177
Provision for federal income taxes		21,598			49,000			64,248			117,496
Net earnings	$	39,991		$	90,774		$	118,138		$	217,681
Basic earnings per share	$	0.65		$	1.51		$	1.94		$	3.65
Diluted earnings per share	$	0.62		$	1.42		$	1.84		$	3.42
Dividends paid per common share	$	0.25		$	0.15		$	0.75		$	0.30
Interest rate spread		1.91	%		1.93	%		1.90	%		2.09	%
Net interest margin		1.98	%		2.09	%		2.04	%		2.32	%
Return on average assets		1.30	%		3.35	%		1.33	%		2.95	%
Return on average equity		22.29	%		62.47	%		22.74	%		57.61	%
Efficiency ratio		47.89	%		31.55	%		48.27	%		34.86	%
Average earning assets	$	11,192,229		$	9,913,596		$	10,867,536		$	8,806,619
Average paying liabilities	$	10,816,422		$	9,332,239		$	10,422,307		$	8,321,939
Average stockholders’ equity	$	717,711		$	581,249		$	692,694		$	503,767
Mortgage loans originated or purchased	$	6,809,277		$	16,027,089		$	25,260,811		$	48,577,571
Mortgage loans sold	$	5,495,477		$	14,978,660		$	21,221,693		$	45,519,629
Equity/assets ratio (average for the period)		5.83	%		5.37	%		5.83	%		5.11	%
Ratio of charge-offs to average investment loans		0.18	%		0.33	%		0.17	%		0.41	%
Summary of the Consolidated Statements of Financial Condition:

	September 30,			June 30,			December 31,			September 30,
	2004			2004			2003			2003
Total assets	$	12,783,121		$	11,965,611		$	10,570,193		$	10,950,926
Loans held for sale		2,174,186			2,157,845			2,759,551			3,254,212
Investment loans portfolio, net		9,415,255			8,681,371			6,804,235			5,310,915
Allowance for losses		40,980			41,704			36,017			39,407
Mortgage servicing rights		175,593			236,211			260,128			229,515
Deposits		7,542,581			6,534,492			5,680,167			5,662,737
FHLB advances		3,408,000			3,633,199			3,246,000			3,320,000
Stockholders’ equity		731,242			709,821			654,683			618,704
Other Financial and Statistical Data:
Equity/assets ratio		5.72	%		5.93	%		6.19	%		5.65	%
Core capital ratio		6.15	%		6.41	%		7.44	%		6.89	%
Total risk-based capital ratio		11.20	%		11.83	%		13.47	%		13.74	%
Book value per share	$	11.92		$	11.61		$	10.79		$	10.26
Shares outstanding		61,338			61,141			60,675			60,273
Mortgage loans serviced for others	$	20,824,209		$	26,667,308		$	30,395,079		$	29,312,081
Value of mortgage servicing rights		0.84	%		0.89	%		0.86	%		0.78	%
Allowance for losses to non performing loans		71.4	%		70.0	%		61.7	%		73.1	%
Allowance for losses to loans held for investment		0.43	%		0.48	%		0.53	%		0.73	%
Non performing assets to total assets		0.90	%		1.00	%		1.01	%		1.00	%
Number of bank branches		108			103			98			98
Number of loan origination centers		123			137			128			114
Number of salaried employees		2,407			2,482			2,523			2,864
Number of commissioned employees		989			997			989			1,075