8-K

UNITED STATES

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 (Date of earliest event reported): February 24, 2012

Flagstar Bancorp, Inc.

(Exact name of registrant as specified in its charter)

Michigan	1-16577	38-3150651
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer 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:

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

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

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

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

Item 1.01 Entry into a Material Definitive Agreement

On February 24, 2012, Flagstar Bank, FSB (the “Bank”), a wholly-owned subsidiary of Flagstar Bancorp, Inc. (the “Company”), entered into that certain Stipulation and Order of Settlement and Dismissal (the “Stipulation”) with the United States of America (the “Government”) relating to certain underwriting practices associated with loans insured by the Federal Housing Administration (the “FHA”) of the United States Department of Housing and Urban Development (“HUD”).

Pursuant to the Stipulation, the Bank agreed to comply with all applicable HUD and FHA rules related to its continued participation in the Direct Endorsement Lender program (the “DEL program”), make an initial payment of $15,000,000 within 30 business days of the effective date of the Stipulation, become obligated to make contingent payments upon the occurrence of certain future events as described below, and complete a monitoring period by an independent third party chosen by the Bank and approved by HUD. The Bank agreed to make payments of up to a total of $117,889,806 (the “Additional Payments”) if and only if each of the following events happen:

(i) the Bank generates positive income for a sustained period, such that its deferred tax asset (the “DTA”), which has been offset by a valuation allowance (the “DTA Valuation Allowance”), is likely to be realized as evidenced by the reversal of the DTA Valuation Allowance in accordance with US GAAP;

(ii) the Bank is able to include capital derived from the reversal of the DTA Valuation Allowance in its Tier 1 capital; and

(iii) the Company fully repays, or otherwise settles to the satisfaction of the U.S. Department of the Treasury (the “U.S. Treasury”), the $266.7 million previously invested by the U.S. Treasury in the Company under the TARP program or, to the extent not fully repaid or settled, any such remaining amount is excluded from Tier 1 capital for purposes of calculating the Tier 1 capital ratio as discussed below.

Upon the occurrence of each of the future events described above, and within 30 business days of the occurrence of the last such event, and provided that doing so would not violate any banking regulatory requirement or the Office of the Comptroller of the Currency (“OCC”) does not otherwise object, the Bank will begin making Additional Payments provided that (i) each annual payment would be equal to the lesser of $25 million and the portion of the Additional Payments that remains outstanding after deducting any prior payments and (ii) no obligation to make such Additional Payments shall arise until the Bank's call report as filed with the OCC, including any amendments thereto, for the period ending at least six months prior to the making of such Additional Payment reflects a minimum Tier 1 capital ratio, after excluding any un-extinguished portion of TARP preferred stock, of 11% (or higher ratio if imposed by the OCC).

Subject to the Bank’s full compliance with the terms of the Stipulation, the Government immediately released the Bank and all of its current or former officers, directors, employees, affiliates and assigns from any civil or administrative claim it has or may have under various federal laws, the common law or equitable theories of fraud or mistake of fact in connection with the mortgage loans the Bank endorsed for FHA insurance during the period January 1, 2002 to date. In addition, HUD will not refuse to pay any insurance claim or seek indemnification or other relief or in connection with the mortgage loans the Bank endorsed for FHA insurance during the period January 1, 2002 to date on the basis of the conduct alleged in the complaint or referenced in the Stipulation. The Stipulation also includes default provisions, including acceleration of the Additional Payments in the event of certain changes in control and business combinations, and representations and warranties about the Bank’s financial conditions. The foregoing is only a summary of the material terms of the Stipulation, which will be filed as an exhibit to a future periodic report.

Item 2.02 Results of Operations and Financial Condition

On January 24, 2012, the Company issued a press release regarding its results of operations and financial condition for the three months and year ended December 31, 2011 (the “Earnings Release”). Subsequent to issuing the Earnings Release, the Bank entered into the Stipulation. As a result, on February 24, 2012, the Company issued a press release announcing the Stipulation and preliminary revisions to results of operations and financial condition for the three months and year ended December 31, 2011 (the “Preliminary Revised Earnings Release”). The text of the Preliminary Revised Earnings Release is included as Exhibit 99.1 to this report and incorporated herein by reference. On February 27, 2012, the Company issued a press release announcing final revisions to results of operations and financial condition for the three months and year ended December 31, 2011 (the “Final Revised Earnings Release”). The text of the Final Revised Earnings Release is included as Exhibit 99.2 to this report and incorporated herein by reference. The Company will include final financial statements and additional analyses for the three months and year ended December 31, 2011 as part of its Annual Report on Form 10-K.

The information in this Item 2.02, including the exhibit attached hereto, is furnished pursuant to Item 2.02 and shall not be deemed “filed” for any other purpose, including for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section. The information in this Item 2.02 of this Current Report on Form 8-K shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act regardless of any general incorporation language in such filing.

Item 7.01 Regulation FD Disclosure

On January 25, 2012, the Company held a quarterly conference call to review fourth quarter 2011 earnings and furnished a slide presentation to accompany the call (the “Presentation”). Subsequent to furnishing the Presentation, the Bank entered into the Stipulation and issued the Final Revised Earnings Release. As a result, the Company has revised certain slides in the Presentation, which are furnished as Exhibit 99.3 to this Current Report on Form 8-K and incorporated by reference herein.

The information in this Item 7.01, including the exhibit attached hereto, is furnished pursuant to Item 7.01 and shall not be deemed “filed” for any other purpose, including for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that Section. The information in this Item 7.01 of this Current Report on Form 8-K shall not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act regardless of any general incorporation language in such filing.

Item 9.01 Financial Statements and Exhibits

(d)	Exhibits.
99.1	Press release of Flagstar Bancorp, Inc. dated February 24, 2012
99.2	Press release of Flagstar Bancorp, Inc. dated February 27, 2012
99.3	Flagstar Bancorp, Inc. Revised Conference Call Presentation Slides — Fourth Quarter 2011 Financial Results

This Current Report on Form 8-K 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 Current Report on Form 8-K 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, including the timing and impact of the settlement on financial results, the fair value of the Additional Payments, current expectations, plans or forecasts of its core business drivers, credit related costs, asset quality, capital adequacy and liquidity, the implementation of the Company's business plan and growth strategies, the Bank’s compliance with the terms and conditions of the settlement, the result of improvements to the Company's servicing processes, and other similar matters.

Forward-looking statements may cause actual results to differ materially from current expectations, therefore you should not place undue reliance on any forward-looking statement and should 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, the Company’s Forms 10-K and Form 10-Qs: the accuracy and ability to estimate the financial impact of the settlement, including the fair value of the Additional Payments; the impact of performance and enforcement of commitments under, and provisions contained in, the settlement; and the timing of the recognition and payment of the Additional Payments. 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.

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: February 27, 2012	By:	/s/ Paul D. Borja
		Paul D. Borja
		Executive Vice-President and Chief Financial Officer

Exhibit Index

Exhibit No.	Description
99.1	Press release of Flagstar Bancorp, Inc. dated February 24, 2012
99.2	Press release of Flagstar Bancorp, Inc. dated February 27, 2012
99.3	Flagstar Bancorp, Inc. Revised Conference Call Presentation Slides — Fourth Quarter 2011 Financial Results

EX-99.1

Exhibit 99.1

  NEWS RELEASE For more information, contact: Paul D. Borja Executive Vice President / CFO Bradley T. Howes Investor Relations Officer (248) 312-2000   FOR IMMEDIATE RELEASE

Flagstar Enters into Agreement with Department of Justice

Announces Revised Fourth Quarter and Full Year 2011 Results

Reaffirms Guidance and Remains On-track to Achieve Profitability in 2012

TROY, Michigan. (February 24, 2012)—Flagstar Bancorp, Inc. (NYSE:FBC) (the “Company”), the holding company for Flagstar Bank, FSB (the “Bank”), today announced that the Bank has entered into an agreement (the “Agreement”) with the United States Department of Justice (the “DOJ”) relating to certain underwriting practices associated with loans insured by the Federal Housing Administration (“FHA”) of the Department of Housing and Urban Development (“HUD”). As a result of the Agreement, the Company will be revising its fourth quarter and full year 2011 financial results (as further described below). However, the Company is reaffirming the 2012 guidance it provided on its fourth quarter 2011 earnings call.

“Flagstar Bank is one of the leading originators and servicers of FHA insured loans, and we remain committed to continuing in that capacity,” said Joseph P. Campanelli, Chairman of the Board, President and CEO. “This agreement with the Department of Justice allows us to move forward, and to continue to focus on core operations and on serving our customers.”

Campanelli added, “As our recent results demonstrate, our mortgage origination, commercial and retail banking operations continue to perform well, positioning us to achieve profitability in 2012. Importantly, the default rates on the FHA loans we have underwritten continue to perform favorably relative to the rest of the industry. We are pleased to have resolved this matter and look forward to continuing as a committed partner with FHA and HUD. We look forward to executing on our strategic plan to grow and diversify our business and create value for our shareholders.”

Material Terms of Agreement with the DOJ

On February 24, 2012, the Bank and the DOJ entered into the Agreement pursuant to which the Bank will:

• Agree to comply with all applicable HUD and FHA rules related to the continued participation in the direct endorsement lender program;

• Make an initial payment of $15 million within 30 business days of the effective date of the Agreement;

• Only upon the occurrence of certain future events (as further described below), become obligated to make payments of up to approximately $118 million (the “Additional Payments”); and

• Complete a monitoring period by an independent third party chosen by the Bank and approved by HUD.

The Additional Payments will occur if and only if each of the following events happen:

• The Company generates positive income for a sustained period, such that part or all of its Deferred Tax Asset (“DTA”), which has been offset by a valuation allowance (the “DTA Valuation Allowance”), is likely to be realized, as evidenced by the reversal of the DTA Valuation Allowance in accordance with US GAAP;

• The Company is able to include capital derived from the reversal of the DTA Valuation Allowance in its Tier 1 capital; and

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• The Company’s obligation to repay the $266.7 million in preferred stock held by the U.S. Department of Treasury under the TARP program has been either extinguished or excluded from Tier 1 capital for purposes of calculating the Tier 1 capital ratio as described in the paragraph below.

Upon the occurrence of each of the future events described above, and provided doing so would not violate any banking regulatory requirement or the Office of Comptroller of Currency (the “OCC”) does not otherwise object, the Bank will begin making Additional Payments provided that (i) each annual payment would be equal to the lesser of $25 million or the portion of the Additional Payments that remains outstanding after deducting prior payments; and (ii) no obligation arises until the Bank’s call report as filed with the OCC, including any amendments thereto, for the period ending at least six months prior to the making of such Additional Payments, reflects a minimum Tier 1 capital ratio, after excluding any un-extinguished portion of TARP, of 11% (or higher ratio if required by regulators).

Revised Fourth Quarter and Full Year 2011 Financial Results

On January 24, 2012, the Company issued its earnings release announcing financial results for the fourth quarter and full year 2011. Subsequent thereto, the Company signed the Agreement and has determined that it will recognize an accrued liability, based upon the initial payment of $15 million as of December 31, 2011. The Company also expects to recognize an accrued liability as of December 31, 2011 relating to the Additional Payments, which it believes, for accounting purposes, will be based upon the fair value method.

The Company is currently assessing the fair value of the Additional Payments based on its current expectations of the timing of the payments, applicable discount rates and other factors. The Company believes that it will have an increase in net loss of between $25.9 million and $34.3 million for the fourth quarter 2011, which would include both the initial payment of $15 million and the fair value of the Additional Payments ranging from $10.9 million to $19.3 million. The fair value of the Additional Payments will be evaluated on a quarterly basis based upon the factors set forth above, each of which may vary substantially. As a result of the expected increase in net loss based on such range, the Bank expects its Tier 1 capital ratio at December 31, 2011 to range from 8.94% to 9.00%. Based on profitable operations during January 2012 and a slightly higher balance sheet at January 31, 2012, the Bank expects its Tier 1 capital ratio at January 31, 2012 to range from 9.15% to 9.21%.

The Company expects to issue a press release in the near future announcing the financial impact of the Agreement as of December 31, 2011.

About Flagstar

Flagstar Bancorp, Inc. is a full-service financial services company, offering a range of products and services to consumers, businesses, and homeowners. With $13.6 billion in total assets at December 31, 2011, Flagstar is the largest publicly held savings bank headquartered in the Midwest. As of December 31, 2011, Flagstar operated 113 branches in Michigan, 27 home loan centers in 13 states, and a total of four commercial banking offices in Massachusetts, Connecticut, and Rhode Island. Flagstar originates loans nationwide and is one of the leading originators of residential first mortgage loans. For more information, please visit www.flagstar.com.

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, including the timing and impact of the Agreement on financial results, the fair value of the Additional Payments, 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 result of improvements to the Company’s servicing processes, the Bank’s compliance with the terms and conditions of the Agreement, and other similar matters.

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Forward-looking statements may cause actual results to differ materially from current expectations, therefore you should not place undue reliance on any forward-looking statement and should 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: the accuracy and ability to estimate the financial impact of the Agreement, including the fair value of the Additional Payments; the impact of performance and enforcement of commitments under, and provisions contained in, the Agreement; when or whether final regulatory and court approvals will be received and the Agreement will be finalized; and the timing of the recognition and payment of the Additional Payments. 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.

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EX-99.2

Exhibit 99.2

  NEWS RELEASE For more information, contact: Paul D. Borja Executive Vice President / CFO Bradley T. Howes Investor Relations Officer (248) 312-2000   FOR IMMEDIATE RELEASE

Flagstar Issues Revised 2011 Results Based on Completed Analysis

Fourth Quarter and Full Year 2011 Results Revised to Reflect Increase of $29.1 million in Net Loss

TROY, Michigan. (February 27, 2012)—Flagstar Bancorp, Inc. (NYSE:FBC) (the “Company”), the holding company for Flagstar Bank, FSB (the “Bank”), today completed its analysis of the impact to its fourth quarter and full year 2011 financial results arising from the agreement the Bank announced with the U.S. Department of Justice on February 24, 2012. This agreement was described in the Company’s earlier press release issued on February 24, 2012. Based on its analysis of the agreement, the Company has revised its fourth quarter and full year 2011 financial results to reflect an increase of $29.1 million, or $(0.05) per share in net loss applicable to common shareholders.

As a result, for the three months ended December 31, 2011, net loss applicable to common shareholders increased to $(74.0) million, or $(0.13) per diluted share, as compared to the previously reported $(44.9) million, or $(0.08) per diluted share. For the year ended December 31, 2011, net loss applicable to common shareholders increased to $(194.7) million, or $(0.35) per diluted share, as compared to the previously reported $(165.6) million, or $(0.30) per diluted share. The Company expects to review its fair value analysis of the settlement amount quarterly going forward, as required by accounting rules, and make further adjustments as necessary. At December 31, 2011 the Bank remained well-capitalized with a revised Tier 1 capital ratio of 8.98 percent, and based on profitable operations during January 2012 and a slightly higher balance sheet at January 31, 2012, expects a January 31, 2012 Tier 1 capital ratio of 9.18 percent.

“Our revised 2011 financial results from the agreement are well within the range initially contemplated in our announcement last Friday,” said Joseph P. Campanelli, Chairman of the Board, President and CEO. “We are pleased to have this matter resolved in a manner that allows us to be a leader in originating loans as we continue our partnership with FHA and HUD. We remain well-capitalized, with strong liquidity and a committed management team that is executing on a solid business model intended to move the Company to profitability in 2012.”

The revised financial results will be reflected in the Company’s Annual Report on Form 10-K, and are included in the financial highlights below.

Flagstar Bancorp, Inc.

(In thousands, except share data)

	As Reported December 31, 2011			As Revised December 31, 2011
Consolidated Statements of Financial Condition
Other liabilities	$	504,161		$	533,261
Total liabilities		12,524,457			12,553,557
Retained earnings (accumulated deficit)		(605,916	)		(635,016	)
Total stockholders’ equity		1,113,016			1,083,916
Summary of Selected Consolidated Financial and Statistical Data
Equity/assets ratio		8.16	%		7.95	%
Tier 1 capital ratio		9.19	%		8.98	%
Total risk-based capital ratio		17.07	%		16.70	%
Book value per common share	$	1.54		$	1.49

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Flagstar Bancorp, Inc.

(In thousands, except share data)

	For the Three Months Ended						For the Year Ended
	As Reported December 31, 2011			As Revised December 31, 2011			As Reported December 31, 2011			As Revised December 31, 2011
Consolidated Statements of Operations
General and administrative	$	34,374		$	63,474		$	101,418		$	130,518
Total non-interest expense		172,537			201,637			601,380			630,480
Loss before federal income taxes		(41,601	)		(70,701	)		(147,422	)		(176,522	)
Net Loss		(41,865	)		(70,965	)		(148,478	)		(177,578	)
Net loss applicable to common stockholders		(44,881	)		(73,981	)		(165,643	)		(194,743	)
Loss per share—basic		(0.08	)		(0.13	)		(0.30	)		(0.35	)
Loss per share—diluted		(0.08	)		(0.13	)		(0.30	)		(0.35	)
Summary of Selected Consolidated Financial and Statistical Data
Return on average assets		(1.27	)%		(2.09	)%		(1.24	)%		(1.46	)%
Return on average equity		(15.82	)%		(26.08	)%		(13.97	)%		(16.42	)%
Efficiency ratio (1)		88.7	%		103.7	%		95.3	%		99.9	%
Efficiency ratio (credit-adjusted) (1)		53.1	%		64.2	%		60.6	%		64.3	%
Average stockholders’ equity	$	1,135,078		$	1,134,761		$	1,185,822		$	1,185,742
(1)    See Non-GAAP reconciliation.
Average Balances, Yields and Rates
Average other liabilities	$	2,001,254		$	2,001,571		$	1,632,402		$	1,632,483
Average stockholders’ equity		1,135,078			1,134,761			1,185,822			1,185,742
Non-GAAP Reconciliation
Pre-tax, pre-credit-cost income
Loss before tax provision	$	(41,601	)	$	(70,701	)	$	(147,422	)	$	(176,522	)
Pre-tax, pre-credit-cost income		131,613			102,513			337,589			308,489
Efficiency ratio (credit-adjusted)
Non-interest expense		172,537			201,637			601,380			630,480
Adjusted non-interest expense		140,129			169,229			473,067			502,167
Efficiency ratio		88.7	%		103.7	%		95.3	%		99.9	%
Efficiency ratio (credit-adjusted)		53.1	%		64.2	%		60.6	%		64.3	%

About Flagstar

Flagstar Bancorp, Inc. is a full-service financial services company, offering a range of products and services to consumers, businesses, and homeowners. With $13.6 billion in total assets at December 31, 2011, Flagstar is the largest publicly held savings bank headquartered in the Midwest. As of December 31, 2011, Flagstar operated 113 branches in Michigan, 27 home loan centers in 13 states, and a total of four commercial banking offices in Massachusetts, Connecticut, and Rhode Island. Flagstar originates loans nationwide and is one of the leading originators of residential first mortgage loans. For more information, please visit www.flagstar.com.

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

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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, including the timing and impact of the agreement with the U.S. Department of Justice, noted above, on financial results, the fair value of the future payments required thereby, compliance with the terms and conditions of such agreement, 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 result of improvements to the Company’s servicing processes, and other similar matters.

Forward-looking statements may cause actual results to differ materially from current expectations, therefore you should not place undue reliance on any forward-looking statement and should 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: the accuracy and ability to estimate the financial impact of the agreement with the U.S. Department of Justice, noted above, including the fair value of the future payments required thereby; the impact of performance and enforcement of commitments under, and provisions contained in, such agreement; and the timing of the recognition and payment of such future payments. 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.

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EX-99.3

Exhibit 99.3

Fourth Quarter 2011 Highlights

??Net loss to common stockholders of $(74.0) million

$102.5 million in pre? tax, pre? credit? cost income

Credit related costs of $173.2, compared to $111.7 in prior quarter

Gain on loan sale income increased to $106.9 million, or 102 bps

Net loan fees and charges increased by 55.6% from prior quarter to $28.6 million

Net servicing revenue increased by 71.3% from prior quarter to $29.0 million

Bank net interest margin improved by 13 basis points from prior quarter to 2.43%

??Maintained strong capital and liquidity levels

Tier 1 capital ratio of 9.0%

Cash and cash equivalents of $731.1 million, in addition to $244 million in unencumbered marketable securities and over $550 million in unused capacity at FHLB

??Continued emphasis on credit risk management, primarily associated with loans originated prior to 2009

Fortified balance sheet, adding $71.0 million in total reserves

Converted to nationally recognized residential mortgage loan servicing system and made significant investments and enhancements in loss mitigation and default servicing

??Completed previously announced divestitures of Indiana and Georgia bank franchises, resulting in net gain of $21.4 million

??Grew interest earning assets, improved retail deposit mix and reduced overall cost of funds

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Summary Financial Results

($ in millions, except per share data)

Q4 2011 Q3 2011 Q4 2010

Net Interest Income $75.9 $65.6 $66.1

Provision $63.5 $36.7 $225.4

Gain on Loan Sale $106.9 $103.9 $76.9

Net Servicing Revenue [1] $29.0 $16.9 $28.1

Net Loss Applicable to Common Shareholders($74.0)($14.2)($192.1)

Diluted Earnings / (Loss) per Share($0.13)($0.03)($0.64)

Total Assets $13,637.5 $13,734.0 $13,643.5

Total Stockholders’ Equity $1,083.9 $1,159.3 $1,259.7

Book Value per Common Share $1.49 $1.63 $1.83

NPLs / Gross Loans HFI 6.94% 6.52% 5.05%

NPAs / Total Assets (Bank) 4.43% 4.09% 4.35%

ALLL / NPLs 65.11% 63.39% 86.05%

ALLL / Gross Loans HFI 4.52% 4.13% 4.35%

NPAs / Tier 1 Capital + Allowance for Loan Losses [2] 39.23% 35.88% 31.52%

Tier 1 Capital Ratio 8.98% 9.31% 9.61%

Total Risk Based Capital Ratio 16.70% 17.64% 18.55%

Total Equity / Total Assets 7.95% 8.44% 9.23%

[1] Net servicing revenue includes net loan administration income and net gain (loss) on trading securities.

[2]: See Non?GAAP reconciliation on pages 39 ?41.

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Pre?tax, Pre?credit?cost Income

??Pre?tax, pre?credit?cost income continues to be strong…

$ in millions

Three Months Ended Q4 2011 Q3 2011 Q2 2011 Q1 2011 Q4 2010

Loss before tax provision and dividends($70.41 6)7)($9.2)($69.9)($26.7)($185.3)

Add back:

Provision for loan losses 63.5 36.7 48.4 28.3 225.4

Asset resolution 32.4 34.5 23.3 38.1 41.8

Other than temporary impairment on investments AFS 7.1 1.3 15.6 0.0 1.3

Representation and warranty reserve 69.3 39.0 21.4 20.4 10.3

Write down of residual interests 0.8 0.2 2.3 2.4(3.8)

Total credit related costs: 173.2 111.7 110.9 89.2 275.0

Pre?tax, pre credit?cost income $102.131 56 $102.5 $41.0 $62.5 $89.7

Note: See Non?GAAP reconciliation on pages 39 ?41.

3 Totals may not foot due to rounding

Growth in Pre?tax, Pre?credit?cost Income

??Pre?tax pre?credit?cost income increased to $308.5 million for 2011…

($ in millions)

$400

$350

$300

$250

$200

$346.1

$150 $308.5

$290.8

$100

$50

$53.2 $70.8

$0

2007 2008 2009 2010 2011

Pre?tax, pre?credit?costincome

Note: See Non?GAAP reconciliation on pages 39 ?41.

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Regulatory Capital Ratios

??Regulatory capital ratios remains strong…

20.51%

19.73%

20.00% 18.55%

17.98% 17.64%

17.20% 16.87% 16.70%

15.00% 13.67%

12.06% 11.68%

07%

9.39% 9.24% 9.12% 9.61% 9.87% 10. 9.31%

10.00% 8.98%

7.19%

6.39% 6.19%

5.00%

0.00%

Jun?09 Sep?09 Dec?09 Mar?10 Jun?10 Sep?10 Dec?10 Mar?11 Jun?11 Sep?11 Dec?11

Tier 1 (Core) Capital Ratio Total Risk Based Capital Ratio

5

Full Income Statement

($ in millions, except per share data)

Q4 2011 Q3 2011 Q4 2010

Net Interest Income $75.9 $65.6 $66.1

Provision for Loan Losses 63.5 36.7 225.4

Net Interest Income after Provision 12.3 28.9(159.2)

Non?interest Income 118.6 112.6 136.5

Non?interest Expense 201.6 150.7 162.5

Net Earnings (before tax provision)(70.7)(9.2)(185.3)

Provision for Income Taxes 0.3 0.3 2.1

Net Earnings (before preferred dividends)(71.0)(9.5)(187.4)

Preferred Dividends(3.0)(4.7)(4.7)

Net Earni ngs($74.0)($14.2)($192.1)

Weighted average common shares outstanding $555.6 $554.8 $361.0

Diluted Loss per Share($0.13)($0.03)($0.64)

6 Totals may not foot due to rounding

Select Balance Sheet Items

($ in millions)

Q4 2011 Q3 2011 Q4 2010

Total assets $13,637.5 $13,734.0 $13,643.5

Cash and interest earning deposits $731.1 $902.8 $953.5

First mortgage and construction l oans 3,749.8 3,828.1 3,792.7

Second mortgage loans 138.9 146.5 174.8

Commercial real estate loans 1,243.0 1,268.9 1,250.3

Warehouse loans 1,173.9 995.7 720.8

Consumer lending (including HELOC and other) 289.6 305.9 358.0

Commercial and Industrial 330.1 234.1 8.9

Commercial lease financing 113.3 42.5

Investment loan portfolio $7,038.6 $6,821.7 $6,305.5

Loans held for sale $1,800.9 $2,080.9 $2,585.2

Loans repurchased with government guarantees 1,899.3 1,746.0 1,674.8

Securities classified as trading 313.4 312.8 160.8

Securities classified as available for sale 481.4 521.3 475.2

Mortgage servicing rights 510.5 437.3 580.3

7 Totals may not foot due to rounding

Non?GAAP Reconciliation

Non?GAAP Reconciliation

(Dollars in millions)

$ in millions

Three Months Ended Q4 2011 Q3 2011 Q2 2011 Q1 2011 Q4 2010

Loss before tax provision and dividends($70.7)($9.2)($69.9)($26.7)($185.3)

Add back:

Provision for loan losses 63.5 36.7 48.4 28.3 225.4

Asset resolution 32.4 34.5 23.3 38.1 41.8

Other than temporary impairment on investments AFS 7.1 1.3 15.6 0.0 1.3

Representation and warranty reserve 69.3 39.0 21.4 20.4 10.3

Write down of residual interests 0.8 0.2 2.3 2.4(3.8)

Total credit related costs: 173.2 111.7 110.9 89.2 275.0

Pre?tax, pre credit?cost income $102.5 $102.5 $41.0 $62.5 $89.7

$ in millions

For the Years Ended 2007 2008 2009 2010 2011

Loss before tax provision and dividends($58.8)($423.4)($441.7)($372.7)($176.5)

Add back:

Provision for loan losses 88.3 344.0 504.4 426.4 176.9

Asset resolution 10.5 46.2 104.1 161.3 128.3

Other than temporary impairment on investments AFS 2.8 62.4 20.7 5.0 24.0

Representation and warranty reserve 3.7 17.0 75.6 61.5 150.1

Write down of residual interests 6.8 24.6 82.9 9.3 5.7

Total credit related costs: 112.1 494.2 787.7 663.5 485.0

Pre?tax, pre credit?cost income $53.2 $70.8 $346.1 $290.8 $308.5

8 Totals may not foot due to rounding

Non?GAAP Reconciliation

Non?GAAP Reconciliation

(Dollars in millions)

$ in millions

12/31/2011 9/30/2011 12/31/2010

Non performing assets $ 603.1 $ 558.3 $ 498.0

Tier One Capital $ 1,219.4 $ 1,273.9 $ 1,306.1

Allowance for Loan Losses $ 318.0 $ 282.0 $ 274.0

Tier One Capital + Allowance for Loan Losses $ 1,537.4 $ 1,555.9 $ 1,580.1

Nonperforming assets / Tier One Capital + Allowance for Loan

Losses 39.23% 35.88% 31.52%

9 Totals may not foot due to rounding