Flagstar Bancorp (FBC) 8-K Flagstar Reports 2007 Second Quarter Results

Exhibit 99.1

NEWS RELEASE

FOR MORE INFORMATION, CONTACT:

Paul D. Borja

Executive Vice President / CFO

(248) 312-2000

FOR IMMEDIATE RELEASE

FLAGSTAR REPORTS 2007 SECOND QUARTER RESULTS

TROY, Mich. (July 31, 2007) – Flagstar Bancorp, Inc. (NYSE:FBC), today reported 2007 second quarter net earnings of $15.1 million, or $0.25 per share (diluted). Second quarter 2006 net earnings were $28.6 million, or $0.44 per share (diluted). For the six months ended June 30, 2007, net earnings totaled $22.9 million, or $0.37 per share diluted compared to $47.6 million, or $ 0.74 per share (diluted) for the same six month period in 2006. On a linked-quarter basis, net earnings increased from $7.8 million, or $0.12 per share (diluted) in the first quarter 2007.

Return on average equity and return on average assets for the second quarter 2007 were 7.69% and 0.38%, respectively, as compared to 14.46% and 0.76% for the same period in 2006 and 3.85% and 0.19% for the first quarter 2007. Return on average equity and average assets for the six months ended June 30, 2007 were 5.79% and 0.29%, respectively, as compared to 12.12% and 0.63% for the six months ended June 30, 2006.

The 2007 second quarter earnings as compared to the same period in 2006 reflect, among other factors, a decrease in net interest income, a decrease in gains on sales of mortgage servicing rights and an increase in non-interest expense. These were offset, in part, by an improvement in gain on loan sales, an increase in loan servicing income, and an increase in other non-interest income.

On a linked quarter basis, net earnings increased as a result of an increase in other income, an increase in gain on sales of mortgage servicing rights, and an increase in gain on loan sales. These were offset, in part, by a decrease in net interest income, an increase in the provision for loan losses, and an increase in non-interest expense. A significant portion of other income for the second quarter relates to recoveries that Flagstar realized as part of its continual efforts to mitigate losses incurred in connection with a fraud discovered in March 2004 relating to a series of warehouse loans.

Balance Sheet and Capital

Consolidated assets, increased $0.7 billion or 4.5%, from $15.5 billion at December 31, 2006 to $16.2 billion at June 30, 2007 and increased $1.0 billion or 6.6% from $15.2 billion at June 30, 2006. The increase from March 31, 2007 reflects an increase in loans available for sale. Flagstar Bank, our wholly owned subsidiary, was considered “well-capitalized” for regulatory purposes at June 30, 2007, with regulatory capital ratios of 6.04% core capital and 10.96% risk-based capital.

Net Interest Margin

Flagstar Bank’s net interest margin for the second quarter 2007 was 1.43%, which was unchanged from the first quarter 2007 and as compared to 1.54% for the second quarter 2006. For the six months ended June 30, 2007 the net interest margin was 1.42% as compared to 1.64% reported for the six months ended June 30, 2006.

Retail Banking Operations

Flagstar Bank had 156 retail banking branches at June 30, 2007, an increase of 7.6% as compared to 145 branches as of June 30, 2006 and an increase of 3.3% from 151 branches at December 31, 2006. During the second quarter of 2007, the total number of retail accounts increased 7.8% to over 288,800 as compared to approximately 267,900 at June 30, 2006 and 3.9% to over approximately 277,900 at December 31, 2006.

Mortgage Banking Operations

Loan production for second quarter 2007 increased 39.6% to $7.4 billion, including $7.2 billion of residential loans, as compared to $5.3 billion, including $4.9 billion of residential loans, for second quarter of 2006. It increased 27.6% as compared to loan originations of $5.8 billion, including $5.5 billion in residential loans in the first quarter 2007. During the second quarter of 2007, Flagstar originated $11.5 million in subprime loans, which comprised 0.2% of residential loan originations and as to which we retained $0.2 million for our investment loan portfolio.

For the six months ended June 30, 2007 loan production increased 33.3% to $13.2 billion, including $12.7 billion of residential loans, as compared to, $9.9 billion, including $9.2 billion of residential loans, for the six months ended June 30, 2006. During the six months ending June 30, 2007, Flagstar originated $43.3 million in subprime loans, which comprised 0.3% of residential loan originations and as to which we retained $7.6 million for our investment loan portfolio. At June 30, 2007, subprime loans comprised 0.5% of total assets.

Flagstar’s gain on sale spread increased to 47 basis points during the quarter ended June 30, 2007, as compared to 44 basis points for the first quarter 2007 and 20 basis points for the quarter ended June 30, 2006. For the six months ending June 30, 2007, the gain on sale increased 20 basis points to 46 basis points, as compared to 26 basis points for the same period in 2006.

At June 30, 2007, Flagstar’s mortgage servicing portfolio totaled $21.5 billion with a weighted average service fee of 36.9 basis points. This is a decrease from $22.4 billion at June 30, 2006 with a weighted average servicing fee of 35.6 basis points and an increase from $15.0 billion at December 31, 2006 with a weighted average servicing fee of 37.1 basis points. The capitalized value of Flagstar’s servicing portfolio at June 30, 2007 was $266.5 million, or 1.24% of the outstanding balance of loans serviced for others, with an estimated market value of $333.3 million. This compares to the capitalized value at December 31, 2006 of $173.3 million, or 1.15% with an estimated market value of $197.6 million and a capitalized value at June 30, 2006 of $231.0 million, or 1.03% with an estimated market value of $328.7 million.

Asset Quality

Net charge-offs of loans during the second quarter 2007 increased to $6.5 million from $5.6 million during the first quarter 2007 and $5.8 million during the second quarter 2006. Second quarter 2007 total non-performing assets were $190.7 million at June 30, 2007, as compared to $160.2 million at December 31, 2006 and $150.4 million at June 30, 2006. Of non-performing assets, real estate owned decreased 2.6% to $78.9 million at June 30, 2007 from $81.0 million at December 31, 2006 and $69.3 million at June 30, 2006. Repurchased and non-performing assets decreased 43.4% to $12.5 million at June 30, 2007 compared to $22.1 million at December 31, 2006 and $9.9 million at June 30, 2006.

Non-performing loans, which include loans 90 days or more past due and matured loans, increased to $99.3 million at June 30, 2007 as compared to $57.1 million at December 31, 2006 and $50.0 million recorded at June 30, 2006. At June 30, 2007, 78.2% of non-performing loans were secured by first or second mortgages on single-family homes as compared to 90.7% at December 31, 2006 and 89.9% at June 30, 2006.

Loans 90 days or more past due were 1.30% of loans held for investment at June 30, 2007 as compared to 0.64% at December 31, 2006 and 0.53% at June 30, 2006. The aggregate of loans past due 30 days or less and 60 days or less increased 29.4% to $80.6 million at June 30, 2007 from $62.3 million at December 31, 2006.

During the second quarter 2007, Flagstar increased its allowance for loan losses to $53.4 million, or 0.70% of loans held for investment at June 30, 2007, from $45.8 million, or 0.51% of loans held for investment, at December 31, 2006 and from $39.6 million, or 0.42% of loans held for investment, at June 30, 2006.

Single-family residential first mortgage loans held for investment at June 30, 2007 had an average FICO credit score of 720 and an average original loan-to-value ratio of 73.2%.

Stock Repurchase Plan

Through June 30, 2007, Flagstar repurchased 3,388,430 shares for a total of $41.7 million under its previously announced stock repurchase plan.

As Previously Announced

The Company’s quarterly earnings conference call will be held on Wednesday, August 1, 2007 from 11 a.m. until noon (Eastern).

Questions for discussion at the conference call may only be submitted in advance by e-mail toinvestors@flagstar.com.

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 (913) 981-5517 or toll free at (800) 289-0468, passcode: 3411266.

Flagstar Bancorp, with $16.2 billion in total assets, is the largest publicly held savings bank headquartered in the Midwest. At June 30, 2007, Flagstar operated 156 banking centers in Michigan, Indiana and Georgia and 73 home loan centers in 19 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 Ended
Summary of the Consolidated	June 30,			March 31,			June 30,
Statements of Earnings	2007			2007			2006
Interest income	$	222,464		$	220,570		$	192,648
Interest expense		(172,547	)		(168,598	)		(141,910	)
Net interest income		49,917			51,972			50,738
Provision for loan losses		(11,452	)		(8,293	)		(5,859	)
Net interest income after provision		38,465			43,679			44,879
Non-interest income
Loan fees and charges, net		837			638			1,239
Deposit fees and charges		5,710			4,978			5,692
Loan servicing fees, net		3,149			2,615			309
Gain on loan sales, net		28,144			25,154			9,650
Gain on MSR sales, net		5,610			115			34,932
Net loss on securities available for sale		—			729			—
Other income		13,994			5,669			9,750
Total non-interest income		57,444			39,898			61,572
Non-interest expenses
Compensation and benefits		(42,847	)		(42,424	)		(38,758	)
Commissions		(19,517	)		(15,306	)		(20,911	)
Occupancy and equipment		(17,038	)		(16,786	)		(16,748	)
General and administrative		(11,178	)		(12,007	)		(10,957	)
Other		(5,366	)		(3,504	)		(749	)
Total non-interest expense		(95,946	)		(90,027	)		(88,123	)
Capitalized direct cost of loan closing		23,712			18,629			25,769
Total non-interest expense after capitalized direct cost of loan closing		(72,234	)		(71,398	)		(62,354	)
Earnings before federal income tax		23,675			12,179			44,097
Provision for federal income taxes		(8,544	)		(4,420	)		(15,457	)
Net earnings	$	15,131		$	7,759		$	28,640
Basic earnings per share	$	0.25		$	0.12		$	0.45
Diluted earnings per share	$	0.25		$	0.12		$	0.44
Dividends paid per common share	$	0.10		$	0.10		$	0.15
Dividend payout ratio		39.7	%		77.7	%		33.3	%
Net interest spread — Consolidated		1.27	%		1.33	%		1.41	%
Net interest margin — Consolidated		1.35	%		1.42	%		1.49	%
Interest rate spread — Bank only		1.30	%		1.34	%		1.30	%
Net interest margin — Bank only		1.43	%		1.43	%		1.54	%
Return on average assets		0.38	%		0.19	%		0.76	%
Return on average equity		7.69	%		3.85	%		14.46	%
Efficiency ratio		67.28	%		77.72	%		55.52	%
Average interest earning assets	$	14,799,436		$	14,792,298		$	13,650,019
Average interest paying liabilities	$	14,582,350		$	14,702,275		$	13,427,419
Average stockholders’ equity	$	786,768		$	806,110		$	791,998
Equity/assets ratio (average for the period)		4.99	%		5.22	%		5.22	%
Ratio of charge-offs to average loans held for investment		0.36	%		0.23	%		0.23	%

Flagstar Bancorp, Inc.

	For the Six Months Ended
Summary of the Consolidated	June 30,			June 30,
Statements of Earnings	2007			2006
Interest income	$	443,033		$	383,947
Interest expense		(341,145	)		(274,534	)
Net interest income		101,888			109,413
Provision for losses		(19,745	)		(9,923	)
Net interest income after provision		82,143			99,490
Non-interest income
Loan fees and charges, net		1,475			2,850
Deposit fees and charges		10,688			10,503
Loan servicing fees, net		5,764			4,664
Gain on loan sales, net		53,298			26,735
Gain on MSR sales, net		5,725			43,518
Net gain (loss) on securities available for sale		729			(3,557	)
Other income		19,663			19,481
Total non-interest income		97,342			104,194
Non-interest expenses
Compensation and benefits		(85,271	)		(78,631	)
Commissions		(34,822	)		(37,878	)
Occupancy and equipment		(33,824	)		(33,656	)
General and administrative		(23,183	)		(20,828	)
Other		(8,872	)		(6,635	)
Total non-interest expense		(185,972	)		(177,628	)
Capitalized direct cost of loan closing		42,340			47,204
Total non interest expense after capitalized direct cost of loan closing		(143,632	)		(130,424	)
Earnings before federal income tax		35,853			73,260
Provision for federal income taxes		(12,963	)		(25,710	)
Net earnings	$	22,890		$	47,550
Basic earnings per share	$	0.37		$	0.75
Diluted earnings per share	$	0.37		$	0.74
Dividends paid per common share	$	0.20		$	0.30
Dividend payout ratio		53.9	%		40.1	%
Net interest spread — Consolidated		1.21	%		1.48	%
Net interest margin — Consolidated		1.39	%		1.60	%
Interest rate spread — Bank only		1.26	%		1.45	%
Net interest margin — Bank only		1.42	%		1.64	%
Return on average assets		0.29	%		0.63	%
Return on average equity		5.79	%		12.12	%
Efficiency ratio		72.09	%		61.06	%
Average interest earning assets	$	14,795,867		$	13,747,769
Average interest paying liabilities	$	14,642,313		$	13,509,251
Average stockholders’ equity	$	790,410		$	784,828
Equity/assets ratio (average for the period)		4.93	%		5.18	%
Ratio of charge-offs to average loans held for investment		0.33	%		0.20	%

Flagstar Bancorp, Inc.

Summary of the Consolidated	June 30,			March 31,			December 31,			June 30,
Statements of Financial Condition:	2007			2007			2006			2006
Total assets	$	16,179,468		$	15,432,122		$	15,497,205		$	15,225,864
Mortgage backed securities held to maturity		1,069,350			1,156,805			1,565,421			1,664,171
Loans held for sale		5,110,768			3,791,142			3,188,795			2,817,428
Loans held for investment, net		7,602,073			7,933,445			8,893,906			9,387,460
Allowance for loan losses		53,400			48,500			45,779			39,606
Servicing rights		266,545			226,794			173,288			230,984
Deposits		7,697,810			7,975,382			7,623,488			7,843,249
FHLB advances		5,529,055			5,604,000			5,407,000			4,290,000
Repurchase agreements		1,705,418			625,426			990,806			1,145,578
Stockholders’ equity		770,275			797,658			812,234			803,944
Other Financial and Statistical Data:
Equity/assets ratio		4.76	%		5.17	%		5.24	%		5.28	%
Core capital ratio		6.04	%		6.29	%		6.37	%		6.39	%
Total risk-based capital ratio		10.96	%		11.42	%		11.55	%		11.15	%
Book value per share	$	12.78		$	12.79		$	12.77		$	12.65
Shares outstanding		60,260			62,360			63,605			63,529
Average shares outstanding		60,691			63,427			63,588			63,438
Average diluted shares outstanding		61,110			64,041			64,328			64,333
Loans serviced for others	$	21,508,835		$	19,124,378		$	15,032,504		$	22,379,937
Weighted average service fee (bps)		36.9			37.0			37.1			35.6
Value of servicing rights		1.24	%		1.19	%		1.15	%		1.03	%
Allowance for loan losses to non performing loans		53.8	%		65.0	%		80.2	%		79.20	%
Allowance for loan losses to loans held for investment		0.70	%		0.61	%		0.51	%		0.42	%
Non performing assets to total assets		1.18	%		1.04	%		1.03	%		0.99	%
Number of bank branches		156			155			151			145
Number of loan origination centers		73			72			76			87
Number of employees (excluding loan officers & account executives)		2,689			2,522			2,510			2,548
Number of loan officers and account executives		462			448			444			530

Flagstar Bancorp, Inc.

Loan Originations
(Dollars in millions)
(unaudited)

	For the Three Months Ended
	June 30,				March 31,				June 30,
Loan type	2007				2007				2006
Residential mortgage loans	$	7,162	96.5	%	$	5,489	95.4	%	$	4,901	93.2	%
Consumer loans		110	1.5			104	1.8			194	3.7
Commercial loans		150	2.0			160	2.8			165	3.1
Total loan production	$	7,422	100.0	%	$	5,753	100.0	%	$	5,260	100.0	%

	For the Six Months Ended
	June 30,				June 30,
Loan type	2007				2006
Residential mortgage loans	$	12,652	96.0	%	$	9,249	93.1	%
Consumer loans		214	1.6			374	3.8
Commercial loans		309	2.4			311	3.1
Total loan production	$	13,175	100.0	%	$	9,934	100.0	%

Gain on Loan Sales

(Dollars in thousands)
(unaudited)

	For the Three Months Ended
	June 30,			March 31,			June 30,
Description	2007			2007			2006
Net gain on loan sales	$	28,144		$	25,154		$	9,650
Plus: FASB 133 adjustment		(3,604	)		(3,945	)		(3,337	)
Plus: LOCOM adjustment		63			26			—
Plus: secondary market reserve		2,379			2,163			1,420
Gain on loan sales	$	26,982		$	23,398		$	7,733
Loans sold	$	5,370,633		$	5,289,617		$	3,964,625
Sales spread		0.47	%		0.44	%		0.20	%

	For the Six Months Ended
	June 30,			June 30,
Description	2007			2006
Net gain on loan sales	$	53,298		$	26,735
Plus: FASB 133 adjustment		(7,549	)		(8,719	)
Plus: LOCOM adjustment		89			—
Plus: secondary market reserve		4,543			2,426
Gain on loan sales	$	50,381		$	20,442
Loans sold	$	11,020,249		$	7,858,695
Sales spread		0.46	%		0.26	%

Flagstar Bancorp, Inc.

Loans Held for Investment

(Dollars in thousands)
(unaudited)

Description	June 30, 2007				March 31, 2007
First mortgage loans	$	5,542,471	72.4	%	$	5,909,807	74.0	%
Second mortgage loans		61,107	0.8			65,601	0.8
Commercial real estate loans		1,381,552	18.0			1,325,057	16.8
Construction loans		82,301	1.1			75,178	0.9
Warehouse lending		267,740	3.5			271,493	3.4
Consumer loans		302,047	3.9			315,267	3.9
Non-real estate commercial loans		18,255	0.3			19,542	0.2
Total loans held for investment	$	7,655,473	100.0	%	$	7,981,945	100.0	%

Description	December 31, 2006				June 30, 2006
First mortgage loans	$	6,211,765	69.4	%	$	7,091,818	75.3	%
Second mortgage loans		715,154	8.0			470,885	5.0
Commercial real estate loans		1,301,819	14.6			1,210,212	12.8
Construction loans		64,528	0.7			62,847	0.7
Warehouse lending		291,656	3.3			190,466	2.0
Consumer loans		340,157	3.8			389,168	4.1
Non-real estate commercial loans		14,606	0.2			11,670	0.1
Total loans held for investment	$	8,939,685	100.0	%	$	9,427,066	100.0	%

Deposit Portfolio

(Dollars in thousands)
(unaudited)

Description	June 30, 2007					March 31, 2007
	Balance		Rate			Balance		Rate
Demand deposits	$	404,837		1.58	%	$	392,476		1.52	%
Savings deposits		133,099		1.48			140,349		1.50
Money market deposits		611,506		4.19			609,754		4.13
Certificates of deposits		3,756,718		5.00			3,775,817		4.97
Total retail deposits		4,906,160		4.52			4,918,396		4.49
Company controlled custodial deposits		369,861		—			305,378		—
Municipal deposits		1,540,177		5.35			1,772,324		5.36
Wholesale deposits		881,612		3.72			979,284		3.70
Total deposits	$	7,697,810		4.38	%	$	7,975,382		4.42	%

Description	December 31, 2006					June 30, 2006
	Balance		Rate			Balance		Rate
Demand deposits	$	380,162		1.28	%	$	340,843		0.75	%
Savings deposits		144,460		1.55			184,103		1.64
Money market deposits		608,282		4.05			656,902		3.88
Certificates of deposits		3,763,781		4.86			3,723,086		4.52
Total retail deposits		4,896,685		4.38			4,904,934		4.06
Company controlled custodial deposits		244,193		—			—		—
Municipal deposits		1,419,964		5.33			1,448,077		5.16
Wholesale deposits		1,062,646		3.66			1,490,238		3.53
Total deposits	$	7,623,488		4.30	%	$	7,843,249		4.17	%

Flagstar Bancorp, Inc.

Asset Quality
(Dollars in thousands)
(unaudited)

	Delinquencies at
Days delinquent	June 30, 2007						March 31, 2007
30	$	50,202			27.9	%	$	32,251			24.7	%
60		30,451			16.9			23,863			18.3
90		97,789			54.3			73,906			56.5
Matured — Delinquent		1,509			0.9			664			0.5
Total	$	179,951			100.0	%	$	130,684			100.0	%
Investment loans	$	7,655,473					$	7,981,945
Delinquency % (90+ Days and Matured)		1.30	%					0.93	%
	Delinquencies at
Days delinquent	December 31, 2006						June 30, 2006
30	$	40,140			33.6	%	$	28,703			30.5	%
60		22,163			18.6			15,253			16.2
90		56,554			47.4			49,530			52.8
Matured — Delinquent		517			0.4			497			0.5
Total	$	119,374			100.0	%	$	93,983			100.0	%
Investment loans	$	8,939,685					$	9,427,066
Delinquency % (90+ Days and Matured)		0.64	%					0.53	%
	Non-Performing Loans and Assets at
	June 30,			March 31,			December 31,			June 30,
	2007			2007			2006			2006
Non-Performing Loans	$	99,298		$	74,570		$	57,071		$	50,027
Real Estate Owned		78,916			76,765			80,995			69,253
Repurchased Assets/Non-Performing Assets		12,501			9,178			22,096			31,089
Non-Performing Assets	$	190,715		$	160,513		$	160,162		$	150,369
Non-Performing Loans as a Percentage of Investment Loans		1.30	%		0.93	%		0.64	%		0.53	%
Non-Performing Assets as a Percentage of Total Assets		1.18	%		1.04	%		1.03	%		0.99	%