IndyMac Bancorp 10Q 2005 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2005


o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to

Commission file number 1-8972

INDYMAC BANCORP, INC.

(Exact name of registrant as specified in its charter)


Delaware		95-3983415
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

155 North Lake Avenue, Pasadena, California		91101-7211
(Address of principal executive offices)		(Zip Code)

(Registrant’s telephone number, including area code)

(800) 669-2300

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes þ No o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No o

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common stock outstanding as of October 21, 2005: 64,193,350 shares

FORM 10-Q QUARTERLY REPORT

For the Period Ended September 30, 2005

TABLE OF CONTENTS


		Page

PART I. FINANCIAL INFORMATION
Forward-Looking Statements			2
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			2
Highlights for the Quarter			2
Business Segment Results			6
Product Profitability Analysis			13
Loan Production			20
Loan Sales			24
Mortgage Servicing and Other Retained Interests			26
Mortgage-Backed Securities and Loans Held for Investment			30
Net Interest Margin			37
Interest Rate Sensitivity			41
Credit Risk and Reserves			42
Operating Expenses			46
Share Repurchase Activities			47
Future Outlook			47
Liquidity and Capital Resources			48
Off-Balance Sheet Arrangements			52
Aggregate Contractual Obligations			53
Key Operating Risks			54
Critical Accounting Policies and Judgments			56
Item 3. Quantitative and Qualitative Disclosures About Market Risk			56
Item 1. Financial Statements (Unaudited)			57
	Consolidated Balance Sheets		57
	Consolidated Statements of Earnings		59
	Consolidated Statements of Shareholders’ Equity and Comprehensive Income		60
	Consolidated Statements of Cash Flows		61
	Notes to Consolidated Financial Statements		62
Item 4. Controls and Procedures			69

PART II. OTHER INFORMATION
Item 1. Legal Proceedings			69
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			69
Item 5. Other Information			69
Item 6. Exhibits			69
Exhibit 10.1
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

FORWARD-LOOKING STATEMENTS

This Form 10-Q contains statements that may be deemed to be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements include statements regarding our projected financial condition and results of operations, plans, objectives, future performance and business. Forward-looking statements typically include the words “anticipate,” “believe,” “estimate,” “expect,” “project,” “plan,” “forecast,” “intend,” “goal,” “target” and other similar expressions. These statements reflect our current views with respect to future events and financial performance. They are subject to risks and uncertainties that could cause future results to differ materially from historical results or from the results anticipated. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates or as of the date hereof if no other date is identified. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. For further information on our key operating risks, refer to “Key Operating Risks” beginning on page 61 and to IndyMac’s annual report on Form 10-K for the year ended December 31, 2004.

References to “IndyMac Bancorp” or the “Parent Company” refer to the parent company alone while references to “IndyMac,” the “Company,” or “we” refer to IndyMac Bancorp, Inc. and its consolidated subsidiaries. References to “IndyMac Bank” or the “Bank” refer to our subsidiary IndyMac Bank, F.S.B. and its consolidated subsidiaries. The following discussion addresses the Company’s financial condition and results of operations for the three and nine months ended September 30, 2005.


ITEM 2.	*MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS*

HIGHLIGHTS FOR THE QUARTER

Highlights for the quarters ended September 30, 2005 (including charges related to Gulf Coast Hurricanes of $3.1 million, net of tax, or $0.05 per share), September 30, 2004 and June 30, 2005, were as follows:


			Three Months Ended						Nine Months Ended

			September 30,		September 30,		June 30,		September 30,		September 30,
			2005		2004(1)(2)		2005		2005		2004(1)(2)

			(Dollars in millions, except per share data)
Income Statement
	Net interest income after provision for loan losses		$	108	$	99	$	94	$	304	$	295
	Gain on sale of loans			151		109		159		455		311
	Other income			24		7		35		66		(19	)
	Net revenues			283		215		289		825		587
	Operating expenses			151		122		151		446		334
	Net earnings			79		56		83		228		153
	Basic earnings per share(3)			1.25		0.92		1.33		3.65		2.60
	Diluted earnings per share(4)		$	1.18	$	0.88	$	1.26	$	3.46	$	2.49
Other Per Share Data
	Dividends declared per share		$	0.40	$	0.32	$	0.38	$	1.14	$	0.87
	Book value per share at end of quarter			23.06		19.64		22.12		23.06		19.64
	Closing price per share		$	39.58	$	36.20	$	40.73	$	39.58	$	36.20
	Average Common Shares (in thousands)
		Basic		63,268		61,254		62,304		62,460		58,800
		Diluted		67,055		63,904		65,799		65,872		61,421


		Three Months Ended						Nine Months Ended

		September 30,		September 30,		June 30,		September 30,		September 30,
		2005		2004(1)(2)		2005		2005		2004(1)(2)

		(Dollars in millions, except per share data)
Performance Ratios
	Return on average equity (annualized)		22.48%		18.51%		25.25%		23.01%		18.11%
	Return on average assets (annualized)		1.38%		1.30%		1.67%		1.49%		1.25%
	Dividend payout ratio(5)		33.90%		36.36%		30.16%		32.95%		34.94%
	Net interest margin		2.09%		2.52%		2.08%		2.20%		2.69%
	Net interest margin, thrift.		1.96%		2.03%		1.93%		2.03%		2.02%
	Efficiency ratio(6)		53%		56%		52%		54%		56%
	Operating expenses to loan production		0.86%		1.15%		1.02%		1.01%		1.21%
Balance Sheet and Asset Quality Ratios
	Average interest-earning assets	$	21,122	$	15,862	$	18,561	$	18,989	$	14,967
	Average equity	$	1,399	$	1,213	$	1,321	$	1,324	$	1,128
	Debt to equity ratio(7)		12.3:1		12.3:1		12.8:1		12.3:1		12.3:1
	Core capital ratio(8)		7.51%		7.53%		7.22%		7.51%		7.53%
	Risk-based capital ratio(8)		11.58%		11.83%		11.77%		11.58%		11.83%
	Non-performing assets to total assets		0.36%		0.76%		0.38%		0.36%		0.76%
	Allowance for loan losses to total loans held for investment		0.70%		0.78%		0.72%		0.70%		0.78%
	Allowance for loan losses and other credit reserves to non-performing loans		103.70%		67.30%		101.43%		103.70%		67.30%
	Allowance for loan losses to annualized net charge-offs		672.64%		900.89%		739.05%		720.10%		658.70%
	Provision for loan losses to net charge-offs		170.93%		102.18%		131.60%		145.69%		103.04%
Other Selected Items
	Loans serviced for others(9)	$	73,787	$	44,501	$	63,676	$	73,787	$	44,501
	Loan production(10)		17,537		10,607		14,833		44,344		27,481
	Mortgage industry share(11)		2.19%		1.60%		1.84%		1.97%		1.27%
	Pipeline of mortgage loans in process		8,945		6,433		8,294		8,945		6,433
	Loans sold	$	15,539	$	8,941	$	11,534	$	36,727	$	21,486
	Loans sold/mortgage loans produced		92%		86%		81%		86%		81%
	Mortgage banking revenue (“MBR”) margin on loans sold (12)		1.23%		1.68%		1.64%		1.51%		2.06%

(1)

For the quarter and nine months ended September 30, 2004, the data is presented on a pro forma basis excluding the effect of change in accounting principle for rate lock commitments under SAB No. 105 and for the impact of the purchase accounting adjustments for Financial Freedom. Total adjustments were $11 million and $63 million, respectively, for the three and nine months ended September 30, 2004. A full reconciliation between the pro forma amounts and amounts calculated in accordance with general accepted accounting principals, or GAAP, is as follows:


	Three Months Ended						Nine Months Ended

	September 30, 2004

	GAAP		Adjustments		Pro Forma		GAAP		Adjustments		Pro Forma

	(Dollars in millions, except per share data)
Gain on sale of loans	$	98	$	11	$	109	$	248	$	63	$	311
Net revenues		204		11		215		524		63		587
Other expense		122		—		122		334		—		334
Income taxes		32		5		37		75		25		100

Net earnings	$	50	$	6	$	56	$	115	$	38	$	153

Diluted earnings per share	$	0.78	$	0.10	$	0.88	$	1.87	$	0.62	$	2.49


	(2)	The Company previously classified the initial deferral of the incremental direct origination costs net of the fees collected on the loans as a net reduction in operating expenses. However, during the second quarter of 2005 we have revised the presentation to reflect the deferral of the total fees collected as a reduction of fee and other income and the deferral of the incremental direct origination costs as a reduction of operating expenses. All prior periods have been revised to conform with the current presentation. This revision had no impact on reported earnings or the balance sheet in the current period or in any prior period. Certain performance ratios based on net revenues or operating expenses have been revised accordingly.

	(3)	Net earnings for the period divided by weighted average basic shares outstanding for the period.

	(4)	Net earnings for the period divided by weighted average dilutive shares outstanding for the period.

	(5)	Dividends declared per common share as a percentage of diluted earnings per share.

	(6)	Defined as operating expenses divided by net interest income and other income.

	(7)	Debt includes deposits.

	(8)	IndyMac Bank, F.S.B. (excludes unencumbered cash at the Parent Company available for investment in IndyMac Bank). Risk-based capital ratio is calculated based on the regulatory standard risk weighting adjusted for the additional risk weightings for subprime loans.

	(9)	Represents the unpaid principal balance on loans sold with servicing retained by IndyMac.


(10)	Includes newly originated commitments on construction loans and warehouse lending.

(11)	Our market share is calculated based on our total loan production, both purchased (correspondent and conduit) and originated (retail and wholesale), in all of our channels (the numerator) divided by the MBA’s estimate of the overall mortgage market (the denominator) per its October 26, 2005 Mortgage Finance Forecast. As we review industry publications such as National Mortgage News, we have confirmed that our calculation is consistent with its methodologies for reporting market share of IndyMac and our mortgage banking peers. It is important to note that these industry calculations cause purchased mortgages to be counted more than once, i.e., first when they are originated and again by the purchasers (through correspondent and conduit channels) of the mortgages. Therefore, our market share calculation may not be mathematically precise in the absolute sense, but it is consistent with industry calculations, which provide investors with a good view of our relative standing compared to the other top mortgage lending peers.

(12)	Gain on sale of loans and net interest income earned while loans were held for sale divided by total loans sold.

SUMMARY OF OVERALL RESULTS

The Company achieved net earnings of $79.3 million, or $1.18 per share for the third quarter of 2005, including $3.1 million, net of tax, or $0.05 per share of estimated losses related to Gulf Coast Hurricanes. This represents increases of 40 percent and 34 percent, respectively, compared with pro forma net earnings of $56.4 million, or $0.88 per share in the third quarter of 2004. GAAP earnings totaled $49.7 million or $0.78 per share for the third quarter of 2004.

During the third quarter of 2005, our loan production of $17.5 billion, including both mortgage and commercial loan production, reached a new record, up 18% from the record production in the second quarter of 2005 and 65% over the third quarter of 2004. For the three months ended September 30, 2005, total mortgage production was $17.0 billion, up 19% and 64% respectively from the second quarter of 2005 and the third quarter of 2004, respectively. Mortgage production growth in the third quarter continues to be driven by geographic expansion, increases in sales personnel and active customers, and volume growth in our conduit division. Based on this production and the mortgage industry volume published by the Mortgage Bankers Association (“MBA”) on October 26, 2005, our mortgage industry share increased to 2.19%, up 37% from 1.60% a year ago.

As a result of record production, our average interest-earning assets have grown 33% from $15.9 billion for the quarter ended September 30, 2004 to $21.1 billion for the third quarter of 2005. This has led to the increase in our net interest income by $10.8 million in the third quarter of 2005 over the third quarter a year ago despite net interest margin compression of 43 basis points. Additionally, corresponding to the increase in our loan production, our loan sale volume increased 74% to $15.5 billion in the third quarter of 2005, generating gain on sale of loans of $151.1 million for the third quarter of 2005, up 39% from the corresponding period in 2004. Total mortgage banking revenue margin was 1.23% for the third quarter of 2005, down from 1.68% for the same period in 2004.

For the nine months ended September 30, 2005, the Company attained net earnings of $231.0 million, or $3.51 per share, up 41% from $2.49 reported for comparable periods in 2004 on a pro forma basis.

ESTIMATED LOSSES FROM GULF COAST HURRICANES

Historically, we have not suffered significant losses due to hurricanes because most hurricane damage is covered by borrowers’ insurance. Gulf Coast Hurricanes are unique for several reasons, including the massive flooding of urban areas, the evacuation of an entire urban region (New Orleans, Louisiana) and regional economic disruption such as job losses of borrowers. In the wake of these hurricanes, many significant uncertainties still exist. These include the types and extent of government intervention and assistance, potential environmental issues arising from contamination, continued regional inaccessibility, regional payment forbearances by other mortgage lenders and long-term economic impacts.

Overall, the areas impacted by Gulf Coast Hurricanes do not represent a significant portion of IndyMac’s business, but our national presence does expose us to losses from the disasters. Our exposure to losses from Gulf Coast Hurricanes relate to loans that are held for investment, or for sale, and also to loans in securitized pools in which IndyMac has retained residual interests. We have estimated total probable losses of $5.2 million pretax ($3.1 million net of tax) on the affected loans. The losses have been recorded as additional provisions for loan losses and secondary market reserves or valuation adjustments to the residual securities. The following table summarizes the recordation of these losses on the consolidated statements of earnings.


			Losses Recorded

			(Dollars in
			thousands)
Charges related to the Hurricanes
	Provision for loan losses		$	1,300
	Reduction to gain on sale of loans			1,300
	Gain on mortgage-backed securities, net			2,600

		Total hurricane losses recorded — pretax	$	5,200

Further details concerning these estimated losses can be found in IndyMac’s Current Report on Form 8-K dated October 31, 2005.

BUSINESS SEGMENT RESULTS

The Company conducts business substantially through IndyMac Bank, F.S.B. via two primary operating segments, the mortgage banking and the thrift segments. These segments provide clear transparency to the two primary activities in our hybrid model: mortgage banking with high asset turn and high returns on equity, and thrift investing characterized by lower but more consistent returns on equity.

Our mortgage banking segment consists of the following divisions:


Mortgage Professionals		This group is responsible for the production of mortgage loans through relationships with mortgage brokers, mortgage bankers, financial institutions and homebuilders. Mortgage loans are either funded by us (wholesale division) or obtained as closed loans on a flow basis (wholesale and correspondent divisions) or through bulk purchases (conduit division).
Consumer Direct and Indirect		This division offers consumers mortgage lending through our Web site, direct Internet leads developed through online advertising, affinity relationships, company referral programs, relationships with realtors and through our Southern California retail banking branches.
Financial Freedom		This group is responsible for the generation of predominantly reverse mortgage products with senior customers (age 62 or older). This group also services all reverse mortgage loans originated.
Retained Assets and Servicing Division		This division manages the assets the Company retains in conjunction with its mortgage loan sales. The assets held include the following asset classes: (i) mortgage servicing rights (“MSRs”), interest-only strips, prepayment penalty securities and residual securities; (ii) derivatives and securities held as hedges of such assets, including swaps, options, futures, principal-only securities, agency debentures and U.S. Treasury bonds; (iii) loans acquired through clean-up calls or originated through the Company’s customer retention programs; and (iv) investment and non-investment grade securities.
		Further, the division continues to service all loans sold with servicing retained, loans held on the balance sheet pending sale and mortgage loans held for investment.

The thrift segment includes the following divisions:


Mortgage-backed Securities (“MBS”)		Assets include predominantly AAA-rated agency and private label MBS.
Prime SFR Mortgage Loans		Assets include all single-family residential mortgage loans held for investment other than discontinued products.
Home Equity Division		This division specializes in providing HELOC and closed end second mortgages nationwide through IndyMac’s wholesale and retail channels.
Consumer Construction and Lot Loans		This division provides construction-to-permanent and lot loan financing to individuals who are in the process of building their own homes. This channel leverages our relationship sales force in the mortgage professional channel to produce these products in addition to programs offered directly to consumers.
Builder Construction		This division offers land acquisition, development and construction financing to homebuilders for residential construction.
Warehouse Lending		This group offers short-term lines of credit to approved correspondent sellers nationwide. The group functions as a financial intermediary for lenders, providing them with the financial capacity to fund loans and hold them on balance sheet until they are sold to approved investors.
Discontinued Products		Home improvement and manufactured housing loans.

The following tables summarize the Company’s financial results for the three months ended September 30, 2005 and 2004, illustrating the revenues earned by its two primary segments via each of its operating divisions.


				Mortgage Banking

							MSRs and			Mortgage
Three Months Ended				Production			Other Retained			Banking												Total
September 30, 2005				Divisions			Assets			Overhead			Total			Thrift			Other			Company

				(Dollars in thousands)
Operating Results
Net interest income				$	35,937		$	12,161		$	33		$	48,131		$	60,518		$	2,777		$	111,426
Provision for loan losses					—			—			—			—			(3,528	)		—			(3,528	)
Gain (loss) on sale of loans					136,342			8,348			—			144,690			14,720			(8,324	)		151,086
Gain (loss) on securities					—			(390	)		—			(390	)		412			706			728
Service fee income					3,384			5,834			—			9,218			1,568			(482	)		10,304
Other income					145			731			622			1,498			10,273			907			12,678

	Net revenues (expense)				175,808			26,684			655			203,147			83,963			(4,416	)		282,694
	Operating expenses				121,563			9,845			9,989			141,397			27,062			43,823			212,282
	FAS 91 Deferral				(54,300	)		(707	)		—			(55,007	)		(5,496	)		(286	)		(60,789	)

		Pretax income (loss)			108,545			17,546			(9,334	)		116,757			62,397			(47,953	)		131,201

			Net income (loss)	$	65,599		$	10,615		$	(5,647	)	$	70,567		$	37,751		$	(29,043	)	$	79,275

Relevant Financial and Performance Data
Average interest-earning assets				$	7,767,105		$	519,850		$	51		$	8,287,006		$	12,082,104		$	752,430		$	21,121,540
Allocated capital				$	477,400		$	251,304		$	12,680		$	741,384		$	638,258		$	19,322		$	1,398,964
Loans produced				$	15,745,797		$	330,439		$	—		$	16,076,236		$	1,460,830		$	—		$	17,537,066
Loans sold					15,691,191			366,836			N/A			16,058,027			832,327			(1,351,145	)		15,539,209
MBR margin					1.10	%		2.65	%		N/A			1.13	%		2.04	%		N/A			1.23	%
Return on equity (ROE)					55	%		17	%		N/A			38	%		23	%		N/A			22	%
Return on assets (ROA)					3.28	%		2.98	%		N/A			2.96	%		1.24	%		N/A			1.38	%
Net interest margin, thrift.					N/A			N/A			N/A			N/A			1.99	%		N/A			1.96	%
Average FTE					3,548			137			624			4,309			598			1,023			5,930


				Mortgage Banking

							MSRs and			Mortgage
Three Months Ended				Production			Other Retained			Banking												Total
September 30, 2004				Divisions			Assets			Overhead			Total			Thrift			Other			Company

				(Dollars in thousands)
Operating Results
Net interest income				$	33,418		$	12,757		$	—		$	46,175		$	55,164		$	(749	)	$	100,590
Provision for loan losses					—			—			—			—			(1,498	)		—			(1,498	)
Gain (loss) on sale of loans					90,492			6,351			—			96,843			10,663			(9,454	)		98,052
Gain (loss) on securities					—			(12,550	)		—			(12,550	)		199			2,913			(9,438	)
Service fee income					—			(2,035	)		—			(2,035	)		409			10,368			8,742
Other income					2,239			236			608			3,083			6,443			(1,814	)		7,712

	Net revenues (expense)				126,149			4,759			608			131,516			71,380			1,264			204,160
	Operating expenses				97,964			5,011			12,219			115,194			18,687			31,061			164,942
	FAS 91 Deferral				(38,043	)		—			—			(38,043	)		(3,165	)		(1,761	)		(42,969	)

		Pretax income (loss)			66,228			(252	)		(11,611	)		54,365			55,858			(28,036	)		82,187

			Net income (loss)	$	40,068		$	(152	)	$	(7,025	)	$	32,891		$	33,794		$	(16,959	)	$	49,726

Relevant Financial and Performance Data
Average interest-earning assets				$	4,263,033		$	914,369		$	—		$	5,177,402		$	10,337,046		$	347,810		$	15,862,258
Allocated capital				$	315,440		$	226,674		$	—		$	542,114		$	527,220		$	143,728		$	1,213,062
Loans produced				$	9,256,594		$	416,035		$	—		$	9,672,629		$	934,765		$	—		$	10,607,394
Loans sold					9,249,161			416,035			N/A			9,665,196			838,527			(1,563,075	)		8,940,648
MBR margin(1)					1.34	%		2.43	%		N/A			1.39	%		1.70	%		N/A			1.68	%
Return on equity (ROE)					51	%		—			N/A			24	%		26	%		N/A			16	%
Return on assets (ROA)					3.60	%		(0.04	)%		N/A			2.19	%		1.29	%		N/A			1.14	%
Net interest margin, thrift.					N/A			N/A			N/A			N/A			2.12	%		N/A			2.03	%
Average FTE					2,940			123			559			3,622			421			919			4,962


(1)	The 2004 MBR margin is computed using the pro forma gain on sale of $109 million for the third quarter of 2004, excluding the effect of SAB No. 105 and purchase accounting adjustments for Financial Freedom, totaling $11 million.

The following table provides additional detail on the results for the production divisions of our mortgage banking segment for the three months ended September 30, 2005 and 2004:


				Mortgage Banking Production Divisions

																			Financial
				Mortgage Professionals												Consumer			Freedom			Total
Three Months Ended																Direct and			(Reverse			Production
September 30, 2005				Wholesale			Correspondent			Conduit			Total			Indirect			Mortgage)			Divisions

				(Dollars in thousands)
Operating Results
Net interest income				$	16,458		$	3,983		$	13,164		$	33,605		$	1,598		$	734		$	35,937
Provision for loan losses					—			—			—			—			—			—			—
Gain (loss) on sale of loans					83,131			14,597			3,483			101,211			13,275			21,856			136,342
Gain (loss) on securities					—			—			—			—			—			—			—
Service fee income					—			—			—			—			—			3,384			3,384
Other income					—			—			31			31			88			26			145

	Net revenues (expense)				99,589			18,580			16,678			134,847			14,961			26,000			175,808
	Operating expenses				64,271			8,532			4,803			77,606			23,282			20,675			121,563
	FAS 91				(35,239	)		(5,034	)		—			(40,273	)		(7,648	)		(6,379	)		(54,300	)

		Pretax income (loss)			70,557			15,082			11,875			97,514			(673	)		11,704			108,545

			Net income (loss)	$	42,687		$	9,125		$	7,184		$	58,996		$	(407	)	$	7,010		$	65,599

Relevant Financial and Performance Data
Average interest-earning assets				$	3,686,819		$	741,485		$	2,808,114		$	7,236,418		$	377,158		$	153,529		$	7,767,105
Allocated capital				$	203,516		$	39,616		$	147,716		$	390,848		$	21,452		$	65,100		$	477,400
Loans produced				$	7,749,550		$	1,651,558		$	4,718,369		$	14,119,477		$	791,707		$	834,613		$	15,745,797
Loans sold					7,749,550			1,651,558			4,718,369			14,119,477			791,707			780,007			15,691,191
MBR margin					1.29	%		1.12	%		0.35	%		0.95	%		1.88	%		2.90	%		1.10	%
Pretax income/loan sold					0.91	%		0.91	%		0.25	%		0.69	%		(0.09	)%		1.50	%		0.69	%
Return on equity (ROE)					83	%		91	%		19	%		60	%		(8	)%		43	%		55	%
Return on assets (ROA)					4.58	%		4.87	%		1.01	%		3.23	%		(0.41	)%		9.80	%		3.28	%
Net interest margin					1.77	%		2.13	%		1.86	%		1.84	%		1.68	%		1.90	%		1.84	%
Average FTE					1,861			221			116			2,198			537			813			3,548


				Mortgage Banking Production Divisions

				Mortgage Professionals												Financial
													Consumer			Freedom			Total
Three Months Ended				Wholesale/									Direct and			(Reverse			Production
September 30, 2004				Correspondent			Conduit			Total			Indirect			Mortgage)			Divisions

				(Dollars in thousands)
Operating Results
Net interest income				$	20,625		$	7,498		$	28,123		$	4,969		$	326		$	33,418
Provision for loan losses					—			—			—			—			—			—
Gain (loss) on sale of loans					60,483			4,435			64,918			15,362			10,212			90,492
Gain (loss) on securities					—			—			—			—			—			—
Service fee income					—			—			—			—			—			—
Other income					—			(120	)		(120	)		375			1,984			2,239

	Net revenues (expense)				81,108			11,813			92,921			20,706			12,522			126,149
	Operating expenses				50,341			3,884			54,225			31,709			12,030			97,964
	FAS 91 Deferral				(23,772	)		—			(23,772	)		(8,948	)		(5,323	)		(38,043	)

		Pretax income (loss)			54,539			7,929			62,468			(2,055	)		5,815			66,228

			Net income (loss)	$	32,996		$	4,797		$	37,793		$	(1,243	)	$	3,518		$	40,068

Relevant Financial and Performance Data
Average interest-earning assets				$	3,075,301		$	671,012		$	3,746,313		$	428,061		$	88,659		$	4,263,033
Allocated capital				$	195,112		$	43,563		$	238,675		$	33,925		$	42,840		$	315,440
Loans produced				$	5,864,322		$	2,155,478		$	8,019,800		$	858,060		$	378,734		$	9,256,594
Loans sold					5,864,322			2,155,478			8,019,800			858,060			371,301			9,249,161
MBR margin					1.38	%		0.55	%		1.16	%		2.37	%		2.84	%		1.34	%
Pretax income/loan sold					0.93	%		0.37	%		0.78	%		(0.24	)%		1.57	%		0.72	%
Return on equity (ROE)					67	%		44	%		63	%		(15	)%		N/A			51	%
Return on assets (ROA)					4.18	%		2.77	%		3.93	%		(1.11	)%		N/A			3.60	%
Net interest margin					2.67	%		4.45	%		2.99	%		4.62	%		N/A			3.12	%
Average FTE					1,661			63			1,724			804			412			2,940

The following table provides additional detail on the results for divisions of our thrift segment for the three months ended September 30, 2005 and 2004:


				Thrift

													Consumer
				Mortgage-			Prime SFR			Home			Construction			Builder
Three Months Ended				Backed			Mortgage			Equity			and Lot			Construction			Warehouse			Discontinued
September 30, 2005				Securities			Loans			Division			Loans			Financing			Lending			Products			Total Thrift

				(Dollars in thousands)
Operating Results
Net interest income				$	8,358		$	18,905		$	9,029		$	11,155		$	12,055		$	253		$	763		$	60,518
Provision for loan losses					—			(1,800	)		—			(1,197	)		—			(31	)		(500	)		(3,528	)
Gain (loss) on sale of loans					—			4,022			870			9,828			—			—			—			14,720
Gain (loss) on securities					—			—			(654	)		1,066			—			—			—			412
Service fee income					—			344			1,223			—			1			—			—			1,568
Other income					—			1,393			2,527			5,895			314			145			(1	)		10,273

	Net revenues (expense)				8,358			22,864			12,995			26,747			12,370			367			262			83,963
	Operating expenses				247			780			3,975			16,495			4,768			575			222			27,062
	FAS 91 Deferral				—			—			(548	)		(3,172	)		(1,776	)		—			—			(5,496	)

		Pretax income (loss)			8,111			22,084			9,568			13,424			9,378			(208	)		40			62,397

			Net income (loss)	$	4,907		$	13,361		$	5,789		$	8,122		$	5,674		$	(126	)	$	24		$	37,751

Relevant Financial and Performance Data
Average interest-earning assets				$	2,189,352		$	5,075,925		$	1,686,216		$	2,198,570		$	850,653		$	33,155		$	48,233		$	12,082,104
Allocated capital				$	46,878		$	245,309		$	114,046		$	125,599		$	98,834		$	3,301		$	4,291		$	638,258
Loans produced				$	—		$	—		$	57,561		$	816,358		$	538,911		$	48,000		$	—		$	1,460,830
Loans sold				$	—		$	—		$	169,791		$	662,536		$	—		$	—		$	—		$	832,327
Return on equity (ROE)					42	%		22	%		20	%		26	%		23	%		(15	)%		2	%		23	%
Return on assets (ROA)					0.88	%		1.04	%		1.34	%		1.46	%		2.67	%		(1.50	)%		0.23	%		1.24	%
Net interest margin					1.51	%		1.48	%		2.12	%		2.01	%		5.62	%		3.03	%		6.28	%		1.99	%
Efficiency ratio					3	%		3	%		26	%		48	%		24	%		144	%		29	%		25	%
Average FTE					6			10			37			420			97			18			10			598


				Thrift

													Consumer
				Mortgage-			Prime SFR			Home			Construction			Builder
Three Months Ended				Backed			Mortgage			Equity			and Lot			Construction			Warehouse		Discontinued
September 30, 2004				Securities			Loans			Division			Loans			Financing			Lending		Products			Total Thrift

				(Dollars in thousands)
Operating Results
Net interest income				$	7,264		$	17,386		$	6,786		$	15,224		$	7,409		$	—	$	1,095		$	55,164
Provision for loan losses					—			(400	)		509			(537	)		(270	)		—		(800	)		(1,498	)
Gain (loss) on sale of loans					—			3,161			—			7,502			—			—		—			10,663
Gain (loss) on securities					199			—			—			—			—			—		—			199
Service fee income					—			—			409			—			—			—		—			409
Other income					—			895			1,406			4,050			92			—		—			6,443

	Net revenues (expense)				7,463			21,042			9,110			26,239			7,231			—		295			71,380
	Operating expenses				113			797			2,965			11,307			3,029			—		476			18,687
	FAS 91 Deferral				—			—			(468	)		(1,830	)		(867	)		—		—			(3,165	)

		Pretax income (loss)			7,350			20,245			6,613			16,762			5,069			—		(181	)		55,858

			Net income (loss)	$	4,447		$	12,248		$	4,001		$	10,141		$	3,067		$	—	$	(110	)	$	33,794

Relevant Financial and Performance Data
Average interest-earning assets				$	1,991,141		$	4,709,068		$	1,223,260		$	1,712,003		$	642,013		$	—	$	59,561		$	10,337,046
Allocated capital				$	43,208		$	232,653		$	87,159		$	92,626		$	66,362		$	—	$	5,212		$	527,220
Loans produced				$	—		$	—		$	71,076		$	597,807		$	265,882		$	—	$	—		$	934,765
Loans sold				$	—		$	529,492		$	—		$	309,035		$	—		$	—	$	—		$	838,527
Return on equity (ROE)					41	%		21	%		18	%		44	%		18	%		N/A		(8	)%		26	%
Return on assets (ROA)					0.88	%		1.03	%		1.29	%		2.35	%		1.91	%		N/A		(0.84	)%		1.29	%
Net interest margin					1.45	%		1.47	%		2.21	%		3.54	%		4.59	%		N/A		7.31	%		2.12	%
Efficiency ratio					2	%		4	%		29	%		35	%		29	%		N/A		43	%		21	%
Average FTE					4			11			20			303			69			—		14			421

The following table provides additional details on the results for all other business units for the three months ended September 30, 2005 and 2004:


							Total
Three Months Ended							Operating									Corporate			Total
September 30, 2005				Eliminations			Results			Deposits			Treasury			Overhead			Company

				(Dollars in thousands)
Operating Results
Net interest income				$	9,363		$	118,012		$	—		$	(3,250	)	$	(3,336	)	$	111,426
Provision for loan losses					—			(3,528	)		—			—			—			(3,528	)
Gain (loss) on sale of loans					(8,324	)		151,086			—			—			—			151,086
Gain (loss) on securities					706			728			—			—			—			728
Service fee income					(482	)		10,304			—			—			—			10,304
Other income					(643	)		11,128			679			156			715			12,678

	Net revenues (expense)				620			287,730			679			(3,094	)		(2,621	)		282,694
	Operating expenses				4,470			172,929			3,501			1,660			34,192			212,282
	FAS 91				(286	)		(60,789	)		—			—			—			(60,789	)

		Pretax income (loss)			(3,564	)		175,590			(2,822	)		(4,754	)		(36,813	)		131,201

			Net income (loss)	$	(2,156	)	$	106,162		$	(1,707	)	$	(2,876	)	$	(22,304	)	$	79,275

Relevant Financial and Performance Data
Average interest-earning assets(1)				$	—		$	20,369,110		$	175		$	805,128		$	(52,873	)	$	21,121,540
Allocated capital				$	—		$	1,379,642		$	1,697		$	47,853		$	(30,228	)	$	1,398,964
Loans produced				$	—		$	17,537,066		$	—		$	—		$	—		$	17,537,066
Loans sold					(1,351,145	)		15,539,209			N/A			N/A			N/A		$	15,539,209
Return on equity (ROE)					N/A			31	%		N/A			N/A			N/A			22	%
Return on assets (ROA)					N/A			1.95	%		N/A			N/A			N/A			1.38	%
Net interest margin					N/A			2.30	%		N/A			N/A			N/A			2.09	%
Efficiency ratio					N/A			39	%		N/A			N/A			N/A			53	%
Average FTE					—			4,907			211			36			776			5,930


																						SAB
																						No. 105 &
							Total												Total			Purchase
Three Months Ended							Operating									Corporate			Company			Accounting			Total Company
September 30, 2004				Eliminations			Results			Deposits			Treasury			Overhead			Pro forma			Adjustments			GAAP

				(Dollars in thousands)
Operating Results
Net interest income				$	7,083		$	108,422		$	—		$	(5,030	)	$	(2,802	)	$	100,590		$	—		$	100,590
Provision for loan losses					—			(1,498	)		—			—			—			(1,498	)		—			(1,498	)
Gain (loss) on sale of loans					1,650			109,156			—			—			—			109,156			(11,104	)		98,052
Gain (loss) on securities					2,913			(9,438	)		—			—			—			(9,438	)		—			(9,438	)
Service fee income					10,368			8,742			—			—			—			8,742			—			8,742
Other income					(3,636	)		5,890			981			114			727			7,712			—			7,712

	Net revenues (expense)				18,378			221,274			981			(4,916	)		(2,075	)		215,264			(11,104	)		204,160
	Operating expenses				871			134,752			3,864			391			25,935			164,942			—			164,942
	FAS 91 Deferral				(1,761	)		(42,969	)		—			—			—			(42,969	)		—			(42,969	)

		Pretax income (loss)			19,268			129,491			(2,883	)		(5,307	)		(28,010	)		93,291			(11,104	)		82,187

			Net income (loss)	$	11,657		$	78,342		$	(1,744	)	$	(3,211	)	$	(16,946	)	$	56,441		$	(6,715	)	$	49,726

Relevant Financial and Performance Data
Average interest-earning assets				$	—		$	15,514,448		$	—		$	354,577		$	(6,767	)	$	15,862,258		$	—		$	15,862,258
Allocated capital				$	—		$	1,069,334		$	1,211		$	33,178		$	109,339		$	1,213,062		$	—		$	1,213,062
Loans produced				$	—		$	10,607,394		$	N/A		$	N/A		$	N/A		$	10,607,394		$	—		$	10,607,394
Loans sold				$	(1,563,075	)	$	8,940,648		$	N/A		$	N/A		$	N/A		$	8,940,648		$	—		$	8,940,648
Return on equity (ROE)					N/A			29	%		N/A			N/A			N/A			19	%		—			16	%
Return on assets (ROA)					N/A			1.90	%		N/A			N/A			N/A			1.30	%		—			1.14	%
Net interest margin					N/A			2.78	%		N/A			N/A			N/A			2.52	%		—			2.52	%
Efficiency Ratio					N/A			41	%		N/A			N/A			N/A			56	%		—			59	%
Average FTE					—			4,043			161			28			730			4,962			—			4,962


	Eliminations by Type

	Interdivision			MSR Economic
Three Months Ended September 30, 2005	Loan Sales			Value			Other			Total

	(Dollars in thousands)
Net interest income	$	5,355		$	—		$	4,008		$	9,363
Gain on sale of loans		(10,124	)		—			1,800			(8,324	)
Gain on sale of securities		706			—			—			706
Service fee income (loss)		1,928			(2,410	)		—			(482	)
Other income		—			—			(643	)		(643	)
Operating expenses		—			—			(4,184	)		(4,184	)

	$	(2,135	)	$	(2,410	)	$	981		$	(3,564	)


	Eliminations by Type

	Interdivision		MSR Economic
Three Months Ended September 30, 2004	Loan Sales		Value		Other			Total

	(Dollars in thousands)
Net interest income	$	5,878	$	—	$	1,205		$	7,083
Gain on sale of loans		1,650		—		—			1,650
Gain on sale of securities		2,913		—		—			2,913
Service fee income		5,032		5,336		—			10,368
Other income		—		—		(3,636	)		(3,636	)
Operating expenses		—		—		890			890

	$	15,473	$	5,336	$	(1,541	)	$	19,268

Accounting Methodology for Reporting Segment Financial Results

The profitability of each operating channel is measured on a fully-leveraged basis after allocating capital based on regulatory capital rules. The Company uses a fund transfer pricing (“FTP”) system to allocate interest expense to the operating channels. Each operating channel is allocated funding with maturities and interest rates matched with the expected lives and repricing frequencies of the channel’s assets. The difference between these allocations and the Company’s actual net interest income and capital levels resulting from centralized management of funding costs is reported in the Treasury unit.

The mortgage production divisions, with the exception of Financial Freedom (reverse mortgages), are credited with gain on sale at production based on the actual amount realized for those loans sold in the period plus an estimate of gain on loans produced but not yet sold. The results for prior periods may be restated to reflect the actual amounts ultimately realized on sale. Differences between the gain on sale credited to the production divisions and the consolidated gain on sale due to timing of loan sales are eliminated in consolidation and reported in the Elimination column. Additionally, loans are occasionally transferred (“sold”) from the production divisions to the thrift divisions at a premium based on the estimated fair value. The premium paid for the loans is recorded as a gain in the production divisions and a premium on the asset in the thrift divisions. In subsequent periods, this premium is amortized as part of the thrift divisions’ net interest margin and the amortization is reversed in the Elimination column.

Under the Statement of Financial Accounting Standards No. 91, “Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases” (“SFAS No. 91”), certain fees and related incremental direct costs associated with originating loans are required to be deferred when incurred. Due to the fact that for the production divisions, all loans produced are represented as sold in the period, the SFAS No. 91 fee and expense deferral is assumed to occur within the same period. This is reflected as a reclass reducing operating expenses and loan fees with the net deferral reported as a component of the gain on sale. The deferral of direct origination costs is shown separately as a contra to the gross operating expenses to enable the computation of gross cost per funded loan.

The Company hedges the MSRs to protect the economic value of the MSRs. The results in the business segment tables above reflect the economic fair value of the MSRs. The economic fair value may vary from the GAAP value due to the lower of cost or market limitations of GAAP. Differences between the economic value and the GAAP value are eliminated in consolidation.

The Company’s corporate overhead costs such as corporate salaries and related expenses, excess capital, and non-recurring corporate items are not allocated to the operating channels. Also, for purposes of calculating average interest-earning assets, the allowance for loan losses is excluded.

PRODUCT PROFITABILITY ANALYSIS

As part of our process of measuring results and holding managers responsible for specific targets, we evaluate profitability at the product level in addition to our segment results. We currently have four product groups:


Standard Consumer Home Loans Held for Sale		Includes first mortgage products originated for sale through the various IndyMac channels (excluding servicing retained and consumer construction channels). These products include agency conforming/jumbo, Alt-A and subprime loans.
Specialty Consumer Home Loans Held for Sale and/or Investment		Includes specialty mortgage products originated through the various IndyMac channels and adjusted for intercompany activity. These products include, HELOCs/seconds, reverse mortgages, CTP/ Lot and discontinued products.
Home Loans and Related Investments		Includes all investment related activity including home loans held for investment, variable cash flow instruments, mortgage-backed securities and other related investments.
Specialty Commercial Loans Held for Investment		Includes the consolidated loan activity associated with loans that are made to commercial customers such as homebuilders, commercial builders and mortgage brokers and bankers for the purposes of either building residential homes or financing the purchase of these homes.

The following table summarizes the profitability for each of the four product groups and the loan servicing operations for the three months ended September 30, 2005:


										Home
				Standard			Specialty			Loans &			Specialty			Loan
				Consumer Home			Consumer			Related			Commercial			Servicing						Total
				Loans			Home Loans			Investments			Loans			Operations			Other			Company

				(Dollars in thousands)
Operating Results
Net interest income				$	29,393		$	28,911		$	41,184		$	15,236		$	(41	)	$	(3,257	)	$	111,426
Provision for loan losses					—			(1,546	)		(1,800	)		(182	)		—			—			(3,528	)
Gain (loss) on sale of loans					101,776			36,746			12,564			—			—			—			151,086
Service fee income					—			4,607			8,106			1			—			(2,410	)		10,304
Gain (loss) on sale of securities					—			412			316			—			—			—			728
Other income					—			7,819			2,124			1,087			634			1,014			12,678

	Net revenue (expense)				131,169			76,949			62,494			16,142			593			(4,653	)		282,694
	Variable expenses				59,473			29,183			1,593			4,840			—			—			95,089
	FAS 91				(45,634	)		(12,376	)		(707	)		(2,072	)		—			—			(60,789	)
	Fixed expenses				43,438			14,828			9,279			2,152			3,673			43,823			117,193

		Pretax income (loss)			73,892			45,314			52,329			11,222			(3,080	)		(48,476	)		131,201

			Net income (loss)	$	44,705		$	27,344		$	31,659		$	6,789		$	(1,863	)	$	(29,359	)	$	79,275

Balance Sheet Data
Average interest-earning assets(1)				$	7,201,633		$	4,277,106		$	7,762,950		$	1,077,261		$	—		$	802,590		$	21,121,540
Allocated capital				$	378,505		$	281,415		$	542,382		$	120,347		$	4,643		$	71,672		$	1,398,964
Performance Ratios
Return on equity (ROE)					47	%		39	%		23	%		22	%		N/A			N/A			22	%
Net interest margin					1.62	%		2.68	%		2.10	%		5.61	%		N/A			N/A			2.09	%
MBR margin					0.98	%		2.53	%		3.80	%		N/A			N/A			N/A			1.23	%
Efficiency ratio					44	%		40	%		16	%		30	%		N/A			N/A			53	%
Operating Data
Loan production					13,283,041			3,295,823			274,372			683,830			—			—			17,537,066
Loans sold					13,372,120			1,800,253			366,836			—			—			—			15,539,209

The following table provides details on the profitability for the standard consumer home loans held for sale for the three months ended September 30, 2005:


				Standard Consumer Home Loans Held for Sale

				Agency
				Conforming/
				Jumbo			Alt-A			Subprime			Total

				(Dollars in thousands)
Operating Results
Net interest income				$	2,734		$	19,496		$	7,163		$	29,393
Provision for loan losses					—			—			—			—
Gain (loss) on sale of loans					3,343			92,810			5,623			101,776
Service fee income					—			—			—			—
Gain (loss) on sale of securities					—			—			—			—
Other income					—			—			—			—

	Net revenues (expense)				6,077			112,306			12,786			131,169
	Variable expenses				5,027			48,327			6,119			59,473
	FAS 91				(3,857	)		(37,082	)		(4,695	)		(45,634	)
	Fixed expenses				3,169			35,374			4,895			43,438

		Pretax income (loss)			1,738			65,687			6,467			73,892

			Net income (loss)	$	1,051		$	39,741		$	3,913		$	44,705

Balance Sheet Data
Average interest-earning assets(1)				$	537,876		$	5,787,212		$	876,545		$	7,201,633
Allocated capital				$	27,720		$	296,846		$	53,939		$	378,505
Performance Ratios
Return on equity (ROE)					15	%		53	%		29	%		47	%
Net interest margin					2.02	%		1.34	%		3.24	%		1.62	%
MBR margin					0.75	%		0.93	%		2.48	%		0.98	%
Efficiency ratio					71	%		42	%		49	%		44	%
Operating Data
Loan production				$	799,341		$	11,850,739		$	632,961		$	13,283,041
Loans sold				$	812,499		$	12,044,472		$	515,149		$	13,372,120


Agency Conforming/ Jumbo		First mortgage loans for sale that meet the underwriting guidelines of Fannie Mae and Freddie Mac. Also includes loans that meet all these guidelines, but exceed the loan size acceptable to these agencies.

Alt-A		First mortgage loans for sale that have prime credit characteristics, but do not meet the GSE underwriting guidelines. We sell Alt-A loans to the GSEs on a negotiated basis even though the loans do not meet the GSE underwriting guidelines.

Subprime		Includes first mortgage loans that are extended to borrowers with impaired credit with one or more of the following characteristics: 1) FICO score of less than 620; 2) late mortgage payment in the last 12 months; and 3) bankruptcy in the last 2 years.

The following table provides details on the profitability for the specialty consumer home loans held for sale and/or investment for the three months ended September 30, 2005:


				Specialty Consumer Home Loans Held for Sale and/or Investment

				HELOCs/			Reverse
				Seconds			Mortgages			CTP/Lot			Discontinued			Total

				(Dollars in thousands)
Operating Results
Net interest income				$	16,237		$	734		$	11,177		$	763		$	28,911
Provision for loan losses					—			—			(1,046	)		(500	)		(1,546	)
Gain (loss) on sale of loans					4,472			21,856			10,418			—			36,746
Service fee income					1,223			3,384			—			—			4,607
Gain (loss) on sale of securities					(654	)		—			1,066			—			412
Other income					2,527			26			5,267			(1	)		7,819

	Net revenues (expense)				23,805			26,000			26,882			262			76,949
	Variable expenses				7,005			14,236			7,942			—			29,183
	FAS 91				(3,121	)		(6,379	)		(2,876	)		—			(12,376	)
	Fixed expenses				1,263			6,439			6,904			222			14,828

		Pretax income (loss)			18,658			11,704			14,912			40			45,314

			Net income (loss)	$	11,288		$	7,010		$	9,022		$	24		$	27,344

Balance Sheet Data
Average interest-earning assets(1)				$	2,078,870		$	153,529		$	1,996,474		$	48,233		$	4,277,106
Allocated capital				$	153,944		$	16,657		$	106,523		$	4,291		$	281,415
Performance Ratios
Return on equity (ROE)					29	%		167	%		34	%		2	%		39	%
Net interest margin					3.10	%		1.90	%		2.22	%		6.28	%		2.68	%
MBR margin					2.81	%		2.90	%		1.94	%		N/A			2.53	%
Efficiency ratio					22	%		55	%		43	%		29	%		40	%
Operating Data
Loan production					1,106,109			834,613			1,355,101			—			3,295,823
Loans sold					368,622			780,007			651,624			—			1,800,253


HELOCs/ Seconds		Home equity lines of credit and closed-end second mortgages.

Reverse Mortgages		Reverse mortgage loans extended to borrowers age 62 and older secured by equity in a primary residence.

CTP/ Lot		Loans made to homeowners for the construction of new custom homes and the subsequent permanent mortgage, and lot loans.

Discontinued		Dealer originated manufactured housing and home improvement loans.

The following table provides details on the profitability for the home loans and related investments and the loan servicing operations for the three months ended September 30, 2005:


				Home Loans and Related Investments

				Retained Assets						SFR Loans						Loan Servicing
				and Retention						Held for						Operations
				Activities			MBS			Investment			Total			Expense

				(Dollars in thousands)
Operating Results
Net interest income				$	12,161		$	8,358		$	20,665		$	41,184		$	(41	)
Provision for loan losses					—			—			(1,800	)		(1,800	)		—
Gain (loss) on sale of loans					8,348			—			4,216			12,564			—
Service fee income					7,762			—			344			8,106			—
Gain (loss) on sale of securities					316			—			—			316			—
Other income					731			—			1,393			2,124			634

	Net revenues (expense)				29,318			8,358			24,818			62,494			593
	Variable expenses				1,593			—			—			1,593			—
	FAS 91				(707	)		—			—			(707	)		—
	Fixed expenses				8,252			247			780			9,279			3,673

		Pretax income (loss)			20,180			8,111			24,038			52,329			(3,080	)

			Net income (loss)	$	12,209		$	4,907		$	14,543		$	31,659		$	(1,863	)

Balance Sheet Data
Average interest-earning assets(1)				$	519,850		$	2,189,352		$	5,053,748		$	7,762,950		$	—
Allocated capital				$	251,304		$	46,878		$	244,200		$	542,382		$	4,643
Performance Ratios
Return on equity (ROE)					19	%		42	%		24	%		23	%		N/A
Net interest margin					9.28	%		1.51	%		1.62	%		2.10	%		N/A
MBR margin					2.65	%		N/A			N/M			3.80	%		N/A
Efficiency ratio					31	%		3	%		3	%		16	%		N/A
Operating Data
Loan production					274,372			—			—			274,372			—
Loans sold					366,836			—			—			366,836			—


Retained Assets and Retention Activities		Mortgage banking, trading and hedging activity associated with the purchase, management and sale of mortgage banking assets and variable cash flow instruments retained in connection with the Company’s loan sales. Activity also includes loans acquired through clean-up calls and originated through customer retention programs.

MBS		Trading and investment activity related to the purchase, management and sale of investment grade mortgage-backed securities.

SFR Loans Held for Investment		Company-wide loan investment activity related to the purchase, management and sale of single family residential mortgage loans held for investment.

Loan Servicing Operations Expense		Includes all fixed operating costs associated with servicing loans held for sale, held for investment and loans serviced for others that are not allocated to the respective products for which these services are provided.

The following table provides details on the profitability for the specialty commercial loans held for investment for the three months ended September 30, 2005:


				Specialty Commercial Loans Held for Investment

				Single						Warehouse
				Spec			Subdivision			Lending			Total

				(Dollars in thousands)
Operating Results
Net interest income				$	2,928		$	12,055		$	253		$	15,236
Provision for loan losses					(151	)		—			(31	)		(182	)
Gain (loss) on sale of loans					—			—			—			—
Service fee income					—			1			—			1
Gain (loss) on sale of securities					—			—			—			—
Other income					628			314			145			1,087

	Net revenues (expense)				3,405			12,370			367			16,142
	Variable expenses				971			3,869			—			4,840
	FAS 91				(296	)		(1,776	)		—			(2,072	)
	Fixed expenses				678			899			575			2,152

		Pretax income (loss)			2,052			9,378			(208	)		11,222

			Net income (loss)	$	1,241		$	5,674		$	(126	)	$	6,789

Balance Sheet Data
Average interest-earning assets(1)				$	193,453		$	850,653		$	33,155		$	1,077,261
Allocated capital				$	18,212		$	98,834		$	3,301		$	120,347
Performance Ratios
Return on equity (ROE)					27	%		23	%		N/A			22	%
Net interest margin					6.00	%		5.62	%		N/A			5.61	%
Efficiency ratio					38	%		24	%		N/A			30	%
Operating Data
Loan production					96,919			538,911			48,000			683,830
Loans sold					—			—			—			—


Single Spec		Loans that are made to homebuilders to build individual custom homes for resale to consumers.

Subdivision Construction		Subdivision lending for commercial acquisition, development and construction loans to commercial builders.

Warehouse Lending		Warehouse lines of credit to mortgage brokers to finance their inventory of loans prior to sale.

The following table provides details on the profitability for all other business units for the three months ended September 30, 2005:


				Deposits			Treasury			Corporate OH			Total Company

				(Dollars in thousands)
Operating Results
Net interest income				$	3,734		$	(3,250	)	$	(3,741	)	$	111,426
Provision for loan losses					—			—			—			(3,528	)
Gain (loss) on sale of loans					—			—			—			151,086
Service fee income					—			—			(2,410	)		10,304
Gain (loss) on sale of securities					—			—			—			728
Other income					679			156			179			12,678

	Net revenues (expense)				4,413			(3,094	)		(5,972	)		282,694
	Variable expenses				—			—			—			95,089
	FAS 91				—			—			—			(60,789	)
	Fixed expenses				7,235			1,660			34,928			117,193

		Pretax income (loss)			(2,822	)		(4,754	)		(40,900	)		131,201

			Net income (loss)	$	(1,707	)	$	(2,876	)	$	(24,776	)	$	79,275

Balance Sheet Data
Average interest-earning assets(1)				$	175		$	805,128		$	(2,713	)	$	21,121,540
Allocated capital				$	1,697		$	47,853		$	22,122		$	1,398,964
Performance Ratios
Return on equity (ROE)					N/A			N/A			N/A			22	%
Net interest margin					N/A			N/A			N/A			2.09	%
Efficiency ratio					N/A			N/A			N/A			53	%
Operating Data
Loan production				$	—		$	—		$	—			17,537,066
Loans sold				$	—		$	—		$	—			15,539,209


Deposits		Includes all deposit generating activities to raise deposits from retail bank branch customers to be used in certain lending activities. The Deposits group is organized as a cost center whereby its interest expense from deposits is offset by allocations from Treasury.

Treasury		Includes all financing activity related to providing funds (FHLB and private borrowings, debt and other securities issuances and deposits generation) to IndyMac businesses to fund loans and investments. The use of funds is charged to each business unit according to IndyMac’s capital allocation and funds transfer pricing methodology with the difference residing in Treasury.

Corporate Overhead		Includes all corporate fixed costs that do not vary in the short term with changes in business activity. Fixed costs include corporate administration, financial management, enterprise risk management, centralized information technology and other unallocated fixed costs.

LOAN PRODUCTION

The Company achieved new record mortgage loan production of $17.0 billion and $42.8 billion, respectively, for the third quarter and first nine months of 2005, up 64% and 60%, respectively, from the $10.3 billion and $26.7 billion reported for the comparable periods in 2004. The record mortgage production reached during this quarter is an increase of 19% over the prior record of $14.2 billion of mortgage loans produced in the second quarter of 2005. Total third quarter and nine month loan production, including subdivision construction and warehouse lending commitments, reached $17.5 billion and $44.3 billion, respectively, both records for the Company.

Our continued production growth in the third quarter of 2005 is the result of strong production through our mortgage professional wholesale and correspondent channels, the volume of which increased 60% year over year and 9% compared to the second quarter of 2005, by focusing on less cyclical products, such as Alt-A, reverse mortgages, and HELOCs, and expanding regional operation centers, sales force, and active customer base. Compounding the production growth in wholesale and correspondent channels was the conduit channel, the volume of which increased 119% year over year and 47% from the second quarter of 2005. Additionally, we continued to further penetrate the purchase and cash-out refinance market, increasing our purchase and cash-out refinance transactions from 86% a year ago to 90% for the third quarter of 2005 and successfully adapting our production mix to the increasing customer preference for adjustable rate mortgages. Option ARM loans accounted for 25% of our loan production for the third quarter of 2005, down from 32% in the second quarter of 2005 and 26% for the third quarter of 2004.

At September 30, 2005, our total pipeline was a record high at $8.9 billion, up 39% from a year ago and 8% from June 30, 2005. The purchase and cash-out refinance transactions continue to be the largest part of our pipeline volume, with the growth in the cash-out refinances which includes our reverse mortgages. Since our acquisition of Financial Freedom in July 2004, the division has benefited from its position as the leader in the reverse mortgage market, generating $835.0 million in reverse mortgages during the third quarter of 2005, up 31% from the second quarter of 2005 and 120% from a year ago.

The following tables summarize our loan production and pipeline by purpose, interest rate type, product type, S&P loss estimate, geographic distribution, and channels as of and for the quarters ended September 30, 2005 and 2004, and June 30, 2005.


	As of and For the Three Months Ended

	September 30,			September 30,			Percent			June 30,			Percent
	2005			2004			Change			2005			Change

	(Dollars in millions)
Production and Pipeline by Purpose:
Mortgage loan production:
Purchase transactions	$	7,425		$	4,568			63	%	$	6,370			17	%
Cash-out refinance transactions		7,790			4,366			78	%		6,336			23	%
Rate/term refinance transactions		1,735			1,407			23	%		1,493			16	%

Total mortgage loan production	$	16,950		$	10,341			64	%	$	14,199			19	%

% purchase and cash-out refinance transactions		90	%		86	%					89	%
Mortgage industry market share		2.19	%		1.60	%		37	%		1.84	%		19	%
Mortgage pipeline:
Purchase transactions	$	3,654		$	2,808			30	%	$	3,681			(1	)%
Cash-out refinance transactions		3,945			2,446			61	%		3,457			14	%
Rate/term refinance transactions		1,346			1,179			14	%		1,156			16	%

Mortgage pipeline at period end	$	8,945		$	6,433			39	%	$	8,294			8	%

% purchase and cash-out refinance transactions		85	%		82	%					86	%


		Three Months Ended

		September 30,			September 30,			June 30,
		2005			2004			2005

Production by Amortization Type as a Percent of Mortgage Production:
	Fixed Rate Mortgages		30	%		26	%		26	%
	Option ARMs		25	%		26	%		32	%
	Hybrid ARMs		20	%		26	%		19	%
	Hybrid ARMs Interest Only		25	%		22	%		23	%

			100	%		100	%		100	%


			Three Months Ended												Nine Months Ended

			September 30,		September 30,		Percent			June 30,		Percent			September 30,		September 30,		Percent
			2005		2004		Change			2005		Change			2005		2004		Change

			(Dollars in millions)												(Dollars in millions)
Total Production:
Standard First Mortgage Products:
	Alt-A		$	11,097	$	6,679		66	%	$	9,679		15	%	$	28,335	$	17,403		63	%
	Jumbo			523		371		41	%		352		49	%		1,393		1,508		(8	)%
	Agency conforming			315		360		(13	)%		241		31	%		843		1,498		(44	)%
	Subprime			639		613		4	%		452		41	%		1,573		1,577		0	%
	Expanded subprime(1)			1,396		361		287	%		1,166		20	%		3,489		585		496	%

Total standard first mortgage products (S&P evaluated)(2)				13,970		8,384		67	%		11,890		18	%		35,633		22,571		58	%
Specialty Consumer Home Mortgage Products:
Home equity line of credit/Seconds				1,106		830		33	%		753		47	%		2,482		1,608		54	%
Reverse mortgages				835		379		120	%		639		31	%		1,981		379		423	%
Consumer construction				1,039		748		39	%		917		13	%		2,655		2,111		26	%

		Subtotal mortgage production		16,950		10,341		64	%		14,199		19	%		42,751		26,669		60	%
Builder construction commitments				539		266		103	%		594		(9	)%		1,486		812		83	%
Warehouse lending				48		—		N/A			40		20	%		107		—		N/A

		Total production	$	17,537	$	10,607		65	%	$	14,833		18	%	$	44,344	$	27,481		61	%

The following table summarizes the estimated lifetime losses for mortgage production using the S&P Levels model for the quarters ended September 30, 2005 and 2004, and June 30, 2005.


		Three Months Ended

		September 30, 2005						June 30, 2005						September 30, 2004

		Average						Average						Average
		Lifetime			Percent of			Lifetime			Percent of			Lifetime			Percent of
		Loss Rate			Total			Loss Rate			Total			Loss Rate			Total

		(Dollars in millions)
Volume by S&P Lifetime Loss Estimate(2):
Agency conforming equivalent (l 45 bps)			0.21	%		66	%		0.21	%		68	%		0.20	%		70	%
	Prime Alt-A Equivalent (45-80 bps)		0.58	%		24	%		0.58	%		25	%		0.57	%		20	%
	Subprime Equivalent (L80 bps)		1.95	%		10	%		1.69	%		7	%		1.93	%		10	%

Total S& P lifetime loss estimate			0.50	%		100	%		0.43	%		100	%		0.49	%		100	%

Total S&P evaluated production					$	13,970					$	11,890					$	8,326


(1)	Loans in this category are represented by high quality borrowers from a credit/FICO perspective but loans have a subprime characteristic such as a higher LTV or debt to income ratio.

(2)	While IndyMac production is evaluated using the S&P Levels model, the data is not audited or endorsed by S&P. S&P evaluated production excludes second liens, HELOC, reverse mortgages, construction loans, and warehouse lending.

The following table indicates the geographic distribution of our production for the three months ended September 30, 2005 and 2004, and June 30, 2005.


			September 30,			September 30,			June 30,
			2005			2004			2005

Geographic distribution:
	California			43	%		46	%		44	%
	Florida			8	%		6	%		7	%
	New York			6	%		6	%		9	%
	Virginia			5	%		3	%		4	%
	New Jersey			4	%		4	%		4	%
	Other			34	%		35	%		32	%

		Total		100	%		100	%		100	%


				Three Months Ended												Nine Months Ended

				September 30,		September 30,		Percent			June 30,		Percent			September 30,		September 30,		Percent
Volume by Divisions:				2005		2004		Change			2005		Change			2005		2004		Change

				(Dollars in millions)
Mortgage Loan Production:
	Mortgage Professionals, wholesale/correspondent			$	9,401	$	5,864		60	%	$	8,612		9	%	$	24,922	$	15,110		65	%
	Mortgage Professionals, Conduit				4,718		2,155		119	%		3,207		47	%		10,530		5,117		106	%
	Consumer Direct and Indirect				792		858		(8	)%		738		7	%		2,216		3,163		(30	)%
	Financial Freedom				835		379		120	%		639		31	%		1,981		379		423	%
	Servicing Retention				330		416		(21	)%		174		90	%		726		1,116		(35	)%
	HELOC				58		71		(18	)%		56		4	%		156		150		4	%
	Consumer Construction and Lot				816		598		36	%		773		6	%		2,220		1,633		36	%

		Total Mortgage Loan Production			16,950		10,341		64	%		14,199		19	%		42,751		26,668		60	%
Commercial Loan Production:
	Builder Construction				539		266		103	%		594		(9	)%		1,486		812		83	%
	Warehouse Lending				48		N/A		N/A			40		20	%		107		N/A		N/A

		Total Commercial Loan Production			587		266		121	%		634		(7	)%		1,593		812		96	%

			Total Production	$	17,537	$	10,607		65	%	$	14,833		18	%	$	44,344	$	27,480		61	%

The table below provides key production drivers for mortgage professionals’ wholesale and correspondent channels, for the three months ended September 30, 2005 and 2004, and June 30, 2005:


	Three Months Ended

	September 30,		September 30,		Percent			June 30,		Percent
	2005		2004		Change			2005		Change

	(Dollars in millions)
Key Production Drivers:
Active customers during the quarter(1)		6,473		4,760		36	%		6,191		5	%
Sales personnel		692		551		26	%		678		2	%
Number of regional offices		11		8		38	%		10		10	%


(1)	Active customers are defined as customers who funded at least one loan during the most recent 90-day period.

LOAN SALES

The following table summarizes the amount of loans sold and the relevant performance ratios on loan sales during the three and nine months ended September 30, 2005 and 2004 (three and nine months ended September 30, 2004 is reflected on a pro forma basis (1)), and three months ended June 30, 2005:


		Three Months Ended															Nine Months Ended

		September 30,			September 30,			Percent						Percent			September 30,			September 30,			Percent
		2005			2004(1)			Change			June 30, 2005			Change			2005			2004(1)			Change

		(Dollars in thousands)															(Dollars in thousands)
Total loans sold		$	15,539,209		$	8,940,648			74	%	$	11,534,100			35	%	$	36,727,060		$	21,485,818			71	%
Gross gain on mortgage loan sales			111,464			167,862			(34	)%		204,304			(45	)%		433,263			348,870			24	%
Hedging gains (losses)			39,622			(58,706	)		167	%		(44,927	)		188	%		21,522			(37,739	)		157	%

	Net gains on sale		151,086			109,156			38	%		159,377			(5	)%		454,785			311,131			46	%
Net interest income on loans held for sale			39,562			40,772			(3	)%		29,664			33	%		101,436			132,499			(23	)%

Total mortgage banking revenue		$	190,648		$	149,928			27	%	$	189,041			1	%	$	556,221		$	443,630			25	%

Ratios:
Gross margin before hedging			0.72	%		1.88	%		(62	)%		1.77	%		(59	)%		1.18	%		1.62	%		(27	)%
Net margin after hedging			0.97	%		1.22	%		(20	)%		1.38	%		(30	)%		1.24	%		1.45	%		(14	)%
MBR margin			1.23	%		1.68	%		(27	)%		1.64	%		(25	)%		1.51	%		2.06	%		(27	)%

As shown in the table below, year over year, lower total mortgage banking revenue margin is primarily driven by increases in conduit volume. Margins on core products have been relatively stable.


			Three Months Ended

			September 30, 2005					June 30, 2005					September 30, 2004(1)

			Amount		MBR			Amount		MBR			Amount		MBR
			Sold		Margin			Sold		Margin			Sold		Margin

			(Dollars in billions)
Conduit loans			$	4.3		0.32	%	$	2.3		0.32	%	$	0.8		1.14	%
	12-MAT Option ARMs			3.7		1.73	%		3.2		3.04	%		3.3		1.92	%
	Financial Freedom			0.8		2.90	%		0.6		2.89	%		0.4		2.84	%
	All others			6.8		1.34	%		5.4		1.24	%		4.4		1.50	%

		Total MBR margin	$	15.6		1.23	%	$	11.5		1.64	%	$	8.9		1.68	%

MBR margin excluding conduit			$	11.3		1.57	%	$	9.2		1.98	%	$	8.1		1.74	%

(1)

The gain on mortgage loan sales for the three months ended September 30, 2004 excluded the $5.1 million SAB No. 105 and $6.0 million purchase accounting adjustments related to the Financial Freedom acquisition. The GAAP gain on mortgage loan sales was $98.1 million for the three months ended September 30, 2004 representing a net margin after hedging of 1.10%. For the nine months ended September 30, 2004, the gain on mortgage loan sales excluded the $57.3 million SAB No. 105 and $6.0 million purchase accounting adjustments related to the Financial Freedom acquisition. The GAAP gain on mortgage loan sales was $247.8 million for the nine months ended September 30, 2004 representing a net margin after hedging of 1.16%.

The Company hedges the interest rate risk inherent in its pipeline of mortgage loans held for sale to protect its margin on sale of loans. IndyMac focuses on trying to maintain stable profit margins with an emphasis on forecasting expected fallout to more precisely estimate our required hedge coverage ratio and minimize hedge costs. By closely monitoring key factors such as product type, origination channels, progress or “status” of transactions, as well as changes in market interest rates since IndyMac committed a rate to the borrower (“rate lock commitments”), the Company seeks to quantify the optional component of each rate lock, and in turn, the aggregate rate lock pipeline. By accurately evaluating these factors, the Company has been able to minimize the purchase of options and also stabilize gain on sale margins over different rate environments.

During the third quarter of 2005, the Company’s pipeline hedging activities resulted in hedging gains of $39.6 million compared to hedging losses of $58.7 million for the third quarter of 2004. The hedging gains in the third quarter of 2005 were consistent with the rising interest rate environment and against the decline in the value of our pipelines.

In addition to mortgage loans held for sale, the pipeline also includes rate lock commitments. Rate lock commitments on mortgage loans that are intended to be sold are considered to be derivatives pursuant to SFAS No. 133,“Accounting for Derivative Instruments and Hedging Activities,” (“SFAS 133”). The rate lock commitments are initially valued at zero and continue to be adjusted for changes in value resulting from changes in market interest rates, pursuant to the Staff Accounting Bulletin No. 105,“Application of Accounting Principles to Loan Commitments.” The Company hedges the risk of changes in fair value of rate lock commitments by selling forward contracts on securities of Fannie Mae or Freddie Mac, Euro Dollar futures and other hedge instruments as the Company deems appropriate to prudently manage this risk. These forward and futures contracts are also accounted for as derivatives and recorded at fair value.

The following table shows the various channels through which loans were distributed.


		Three Months Ended									Nine Months Ended

		September 30,			September 30,			June 30,			September 30,			September 30,
		2005			2004			2005			2005			2004
		Distribution			Distribution			Distribution			Distribution			Distribution
		Percentages			Percentages			Percentages			Percentages			Percentages

		(Dollars in millions)
Sales to the Government-Sponsored Enterprises			8	%		15	%		9	%		10	%		26	%
Private-label securitizations			60	%		67	%		77	%		62	%		48	%
Whole loan sales			27	%		10	%		11	%		23	%		17	%

	Subtotal sales		95	%		92	%		97	%		95	%		91	%
Investment portfolio acquisitions			5	%		8	%		3	%		5	%		9	%

	Total loan distribution Percentage		100	%		100	%		100	%		100	%		100	%

	Total loan distribution	$	16,283		$	9,748		$	11,844		$	38,698		$	23,724

We maintain multiple channels for loan dispositions to achieve sustainable liquidity and develop a deep and diverse investor base. Also, through multiple channels, IndyMac can consistently sell investment and non-investment grade bonds and AAA-rated and agency interest-only or whole loans for cash at “economic” level.

Loan sales to government-sponsored enterprises (“GSEs”) decreased to 8% of total sales for the third quarter of 2005 compared to 15% for the third quarter of 2004. The decrease reflects the fact that a higher percentage of loans produced consist of ARM mortgages which the Company does not generally sell to the GSEs. In addition, higher margins are generated by securitizing certain fixed rate loans in private transactions, versus selling them to the GSEs. This resulted from a significant tightening of spreads demanded on the private labeled mortgage-backed securities, which was not replicated with the GSEs.

In conjunction with the sale of mortgage loans in private-label securitizations and GSEs transactions, the Company generally retains certain assets. The primary assets retained include MSRs and, to a lesser degree, AAA-rated and agency interest-only securities, AAA-rated principal-only securities, prepayment penalty securities, investment and non-investment grade securities, and residual securities. The allocated cost of the retained assets at the time of sale is recorded as an asset with an offsetting increase to the gain on sale of loans (or a reduction in the cost basis of the loans sold). The calculation of the $151.1 million in gain on sale of loans earned during the three months ended September 30, 2005 included the retention of $212.9 million MSRs, and $57.8 million other retained assets. During the three months ended September 30, 2005, the assets previously retained generated cash flows of $119.3 million. More information on the valuation assumptions related to the Company’s retained assets can be found at page 28, under the heading “Valuation of MSRs, Interest-Only, Prepayment Penalty, and Residual Securities.”

MORTGAGE SERVICING AND OTHER RETAINED ASSETS

MORTGAGE SERVICING AND MORTGAGE SERVICING RIGHTS

In addition to its own loans, IndyMac serviced $73.8 billion of mortgage loans (including reverse mortgages and HELOCs) owned by others at September 30, 2005, with a weighted average coupon of 5.98%. In comparison, IndyMac serviced $63.7 billion of mortgage loans owned by others at June 30, 2005, with a weighted average coupon of 5.91%. The table below shows the activity in the servicing portfolios during the periods ended September 30, 2005 and 2004 and June 30, 2005:


		Servicing Portfolio

		Three Months Ended									Nine Months Ended

		September 30,			September 30,			June 30,			September 30,			September 30,
		2005			2004			2005			2005			2004

		(Dollars in millions)									(Dollars in millions)
Unpaid principal balance at beginning of period		$	63,676		$	34,618		$	55,995		$	50,219		$	30,774
Additions			15,561			13,048			11,454			36,567			24,810
Clean-up calls exercised			(276	)		(298	)		(210	)		(755	)		(1,289	)
Loan payments and prepayments			(5,174	)		(2,867	)		(3,563	)		(12,244	)		(9,794	)

	Unpaid principal balance at end of period	$	73,787		$	44,501		$	63,676		$	73,787		$	44,501

The capitalized value of MSRs totaled $940.6 million as of September 30, 2005, and $738.8 million as of June 30, 2005, an increase of $201.8 million. The table below shows the activity in MSRs.


		Three Months Ended									Nine Months Ended

		September 30,			September 30,			June 30,			September 30,			September 30,
		2005			2004			2005			2005			2004

		(Dollars in thousands)
Balance at beginning of period		$	738,844		$	493,876		$	734,238		$	640,794		$	443,688
Additions			212,768			153,409			149,616			495,284			295,957
Transfers from (to) prepayment penalty and/or AAA-rated and agency interest-only securities			—			—			(3,364	)		(8,491	)		(13,898	)
Clean-up calls exercised			(730	)		(2,425	)		(471	)		(2,597	)		(14,441	)
Amortization			(60,911	)		(38,848	)		(52,083	)		(158,786	)		(100,455	)
Valuation/impairment			50,635			(54,201	)		(89,092	)		(25,598	)		(59,040	)

	Balance at end of period	$	940,606		$	551,811		$	738,844		$	940,606		$	551,811

Although we hedge our MSRs on an economic basis, we have elected to designate SFAS No. 133 fair value hedge accounting on certain tranches of the total MSRs. The changes in the value of the designated MSRs attributable to the hedged risk, and the fair value of the designated hedges, are recorded through income if the hedging relationships are proven to be effective under the provisions of SFAS No. 133. All MSRs, regardless of hedge designation, are then adjusted to the lower of cost or market (“LOCOM”).

Each quarter, we evaluate the MSRs for impairment in accordance with SFAS No. 140,“Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.” We stratify our MSRs based on predominant risk characteristics, underlying loan type, interest rate type and interest rate band. Then, for each stratum, we determine the fair value of MSRs using our valuation models, which are benchmarked quarterly to third party opinions of value. If the carrying value exceeds the fair value by individual stratum, a valuation allowance is recorded as a charge to service fee income in current earnings; however, if such impairment is determined to be other-than-temporary and the recoverability of the value is remote, we recognize a direct write-down. Unlike a valuation allowance, a direct write-down permanently reduces the carrying value of the MSR asset and the related valuation allowance. As of September 30, 2005, the valuation

allowance on MSRs totaled $125.8 million. The temporary valuation write-ups were $50.6 million on MSRs during the third quarter of 2005 while the MSR hedges had losses of $54.7 million.

AAA-RATED AND AGENCY INTEREST-ONLY, PREPAYMENT PENALTY

AND RESIDUAL SECURITIES

We evaluate the carrying value of our AAA-rated agency and interest-only, prepayment penalty and residual securities by discounting estimated net future cash flows. For these securities, estimated net future cash flows are primarily based on assumptions related to prepayment speeds, in addition to expected credit loss assumptions on the residual securities. Our models used for estimation are periodically tested against historical prepayment speeds and our valuations benchmarked to external sources where available.

A summary of the activity in the AAA-rated and agency interest-only, prepayment penalty and residual securities portfolios for the three and nine months ended September 30, 2005 and 2004, and for the three months ended June 30, 2005, follows:


			Three Months Ended									Nine Months Ended

			September 30,			September 30,			June 30,			September 30,			September 30,
			2005			2004			2005			2005			2004

			(Dollars in thousands)
AAA-rated and agency interest-only securities
	Beginning balance		$	63,052		$	155,234		$	83,080		$	90,658		$	146,179
		Retained investments from securitizations		11,558			—			4,106			15,664			38,936
		Transfer from MSRs		—			(395	)		—			—			13,898
		Sales		—			—			—			—			(15,171	)
		Clean-up calls exercised		—			(695	)		(171	)		(171	)		(3,501	)
		Cash received, net of accretion		(5,469	)		(8,966	)		(5,669	)		(17,352	)		(31,778	)
		Valuation gains (losses) before hedges		4,864			(27,921	)		(18,294	)		(14,794	)		(31,306	)

	Ending balance		$	74,005		$	117,257		$	63,052		$	74,005		$	117,257

Prepayment penalty securities:
	Beginning balance		$	62,283		$	11,565		$	45,649		$	33,451		$	2,096
		Retained investments from securitizations		20,998			16,565			1,749			31,140			26,586
		Transfer from MSRs		—			—			3,364			8,491			—
		Clean-up calls exercised		—			(15	)		—			—			(15	)
		Cash received, net of accretion		(8,413	)		(1,283	)		(4,162	)		(15,387	)		(2,911	)
		Valuation gains		1,310			1,467			15,683			18,483			2,543

	Ending balance		$	76,178		$	28,299		$	62,283		$	76,178		$	28,299

Residual securities
	Beginning balance		$	145,794		$	72,632		$	131,374		$	135,386		$	56,156
		Retained investments from securitizations		17,404			37,635			18,150			35,584			65,969
		Cash received, net of accretion		(3,414	)		153			(8,948	)		(15,322	)		(14,641	)
		Valuation (losses) gains before hedges		(5,450	)		2,701			5,218			(1,314	)		5,637

	Ending balance		$	154,334		$	113,121		$	145,794		$	154,334		$	113,121

VALUATION OF MSRS, INTEREST-ONLY, PREPAYMENT PENALTY,

AND RESIDUAL SECURITIES

MSRs, AAA-rated and agency interest-only securities, prepayment penalty securities, and residual securities are recorded at fair market value. MSRs are further subject to the lower of cost or market limitations. Relevant information and assumptions used to value these securities at September 30, 2005, June 30, 2005, and December 31, 2004 are shown below.


	Actual															Valuation Assumptions

					Gross Wtd.			Servicing			3-Month			Weighted		Lifetime			3-Month						Remaining
	Book		Collateral		Average			Fee/Interest			Prepayment			Average		Prepayment			Prepayment			Discount			Cumulative
	Value		Balance		Coupon			Strip			Speeds			Multiple		Speeds			Speeds			Yield			Loss Rate(1)

	(Dollars in thousands)
September 30, 2005
MSRs	$	940,606	$	73,786,515		5.98	%		0.37	%		25.7	%		3.47		22.0	%		20.5	%		10.9	%		N/A

AAA-rated and agency interest- only securities	$	74,005	$	7,104,367		6.57	%		0.40	%		28.2	%		2.60		20.0	%		27.4	%		8.8	%		N/A

Prepayment penalty securities	$	76,178	$	12,825,520		5.92	%		N/A			33.5	%		N/A		25.2	%		24.6	%		9.5	%		N/A

Prime residual securities	$	4,694	$	1,282,883		6.10	%		1.06	%		57.5	%		0.35		65.6	%		40.6	%		15.0	%		0.08	%
Lot loan residual securities		33,531	$	766,281		7.22	%		2.68	%		35.8	%		1.63		41.5	%		41.6	%		21.5	%		0.34	%
HELOC residual securities		64,269	$	1,412,405		7.80	%		2.88	%		48.3	%		1.58		44.6	%		50.0	%		19.0	%		0.85	%
Subprime residual securities		51,840	$	4,368,788		7.37	%		2.72	%		37.1	%		0.44		36.2	%		26.1	%		24.9	%		2.92	%

Total non-investment grade residual securities	$	154,334

June 30, 2005
MSRs	$	738,844	$	63,675,945		5.91	%		0.37	%		23.6	%		3.17		24.1	%		26.5	%		9.7	%		N/A

AAA-rated and agency interest- only securities	$	63,052	$	7,245,470		6.30	%		0.37	%		27.4	%		2.37		18.4	%		26.8	%		11.6	%		N/A

Prepayment penalty securities	$	62,283	$	10,232,512		5.72	%		N/A			22.2	%		N/A		25.5	%		27.8	%		9.2	%		N/A

Prime residual securities	$	4,693	$	1,378,280		6.16	%		1.33	%		48.5	%		0.26		33.2	%		35.8	%		15.0	%		0.10	%
Lot loan residual securities		23,983	$	578,922		7.03	%		2.98	%		41.3	%		1.39		41.9	%		41.3	%		19.7	%		0.68	%
HELOC residual securities		64,038	$	1,397,532		7.47	%		3.14	%		44.3	%		1.46		45.4	%		50.0	%		19.0	%		0.82	%
Subprime residual securities		53,080	$	4,273,283		7.37	%		2.77	%		29.9	%		0.45		35.9	%		30.1	%		24.9	%		2.87	%

Total non-investment grade residual securities	$	145,794

December 31, 2004
MSRs	$	640,794	$	50,218,965		5.73	%		0.36	%		24.0	%		3.54		20.8	%		21.9	%		10.3	%		N/A

AAA-rated and agency interest- only securities	$	90,658	$	8,472,502		6.65	%		0.38	%		34.3	%		2.82		14.9	%		26.9	%		11.3	%		N/A

Prime residual securities	$	6,495	$	1,668,429		6.55	%		1.00	%		40.9	%		0.39		36.9	%		37.3	%		15.0	%		0.21	%
Lot loan residual securities		17,675	$	441,884		7.02	%		4.13	%		36.5	%		0.97		41.0	%		41.6	%		19.3	%		0.42	%
HELOC residual securities		66,077	$	1,352,181		6.48	%		3.41	%		32.1	%		1.43		36.7	%		43.4	%		19.0	%		0.91	%
Subprime residual securities		45,139	$	2,757,236		7.44	%		3.29	%		24.1	%		0.50		33.6	%		22.8	%		24.7	%		2.55	%

Total non-investment grade residual securities	$	135,386


(1)	As a percentage of the original pool balance, the actual cumulative loss rate to date totaled 0.04%, 0.16%, 0.63% for prime, HELOC and subprime, respectively, at September 30, 2005. No loss has been incurred on the lot loans as of September 30, 2005.

The lifetime prepayment speeds represent the annual constant prepayment rate (“CPR”) we estimate for the remaining life of the collateral supporting the asset. For MSRs and AAA-rated and agency interest-only securities, we project prepayment rates using an industry standard prepayment model. The model considers key factors such as refinance incentive, housing turnover, seasonality and aging of the pool of loans. Prepayment speeds incorporate expectations of future rates implied by the market forward LIBOR/swap curve as well as collateral specific current coupon information.

The weighted-average multiple for MSRs, AAA-rated and agency interest-only securities and residual securities represent the book value divided by the product of collateral balance and servicing fee/interest strip. While the weighted-average life of such assets is a function of the undiscounted cash flows, the multiple is a function of the discounted cash flows. With regard to AAA-rated and agency interest-only securities, the marketplace frequently uses calculated multiples to assess the overall impact valuation assumptions have on value. Collateral type, coupon, loan age and the size of the interest strip must be considered when comparing these multiples. The mix of collateral types supporting servicing-related assets is primarily non-conforming/conventional, which may make comparisons of the Company’s MSR multiples misleading relative to peer multiples whose product mix is substantially different.

As of September 30, 2005, the weighted-average multiple for MSRs had increased compared to June 30, 2005, primarily due to the lower prepayment assumptions based on rising long-term interest rates during the quarter. The weighted-average multiple for AAA-rated and agency interest-only securities increased slightly over the second quarter based on the market value of trust IOs with comparable characteristics. We have also assumed higher weighted average prepayment assumptions on IOs during the third quarter, primarily due to newly retained IOs with less than prime loss characteristics. Our residual securities are less interest-rate sensitive and thus the weighted-average multiples are more comparable from period to period.

The prepayment penalty securities are held mainly as hedges of the related MSR asset. As of September 30, 2005, the prepayment penalty securities as a percent of the underlying collateral is 59 basis points, down from 61 basis points at June 30, 2005, consistent with our expectation in current rising interest rate environment. While the relative value of prepayment penalty securities as a percent of the underlying collateral declined, the value of our MSRs has increased.

HEDGING INTEREST RATE RISK ON SERVICING-RELATED ASSETS

With respect to the investment in servicing-related assets (AAA-rated and agency interest-only securities, non-investment grade residual securities and MSRs), the Company is exposed to interest rate risk as a result of other than predicted prepayment of loans. Our retained assets and servicing division is responsible for the management of interest rate and prepayment risks in the servicing-related assets, subject to policies and procedures established by, and oversight from, our management-level Interest Rate Risk committee (“IRRC”), Variable Cash Flow Instruments Committee (“VCI”), management level Enterprise Risk Management (“ERM”) group, and our Board of Directors-level ERM committee.

The objective of our hedging strategy is to mitigate the impact of changes in interest rates on the net economic value of the balance sheet and quarterly earnings, not to speculate on interest rates. As such, we manage the comprehensive interest rate risk of our servicing-related assets using financial instruments and our servicing portfolio retention efforts. Historically, we have hedged servicing-related assets using a mix of securities on our balance sheet, such as AAA-rated principal-only securities, prepayment penalty securities, buying and/or selling mortgage-backed or U.S. Treasury securities, as well as derivatives such as futures, floors, interest rate swaps, or options. As there are no hedge instruments that would be perfectly correlated with these hedged assets, we use a mix of the above instruments designed to correlate well with the hedged servicing assets and our anticipated servicing retention rates.

The following table breaks out the components of service fee income/expense and the net (loss) gain on mortgage-backed securities. Included in the $518 thousands of unrealized loss on residuals were $2.6 million

valuation adjustments related to Gulf Coast Hurricanes. Please refer to page 5, Estimated Losses from Gulf Coast Hurricanes, for further discussion.


			Three Months Ended									Nine Months Ended

			September 30,			September 30,			June 30,			September 30,			September 30,
			2005			2004			2005			2005			2004

			(Dollars in thousands)
Service fee (expense) income:
	Gross service fee income		$	75,246		$	37,686		$	64,358		$	194,593		$	95,645
	Amortization			(60,912	)		(38,848	)		(52,083	)		(158,787	)		(100,455	)

	Service fee (expense) income, net of amortization			14,334			(1,162	)		12,275			35,806			(4,810	)
	Valuation adjustments on MSRs			50,635			(54,201	)		(89,092	)		(25,598	)		(59,040	)
	Hedge (loss) gain on MSRs			(54,665	)		64,105			87,616			15,314			41,641

		Total service fee (expense) income	$	10,304		$	8,742		$	10,799		$	25,522		$	(22,209	)

Net loss on securities:
	Realized gain on available for sale securities		$	673		$	2,412		$	5,731		$	6,054		$	3,943
	Impairment on available for sale securities			(138	)		(647	)		(78	)		(553	)		(1,313	)
	Unrealized gain on prepayment penalty securities			1,310			1,467			15,683			18,484			1,075
	Unrealized loss on AAA- rated and agency interest-only and residual securities			(518	)		(25,220	)		(12,826	)		(17,612	)		(24,201	)
	Net (loss) gain on trading securities and other instruments used to hedge AAA-rated and agency interest-only and residual securities			(599	)		12,550			7,341			5,560			2,657

		Total gain (loss) on mortgage-backed securities, net	$	728		$	(9,438	)	$	15,851		$	11,933		$	(17,839	)

MORTGAGE-BACKED SECURITIES AND LOANS HELD FOR INVESTMENT

The following table details the loans held for investment and MBS as of September 30, 2005, and December 31, 2004. The Company invests in these assets to generate core interest income, stabilize company-wide earnings and provide a consistent return on equity.

Our MBS portfolio includes trading securities such as AAA-rated and agency interest-only securities, prepayment penalty securities, and non-investment grade residual securities that are generally retained from our securitizations and securities used to hedge them. Changes in the fair value of the trading securities are recorded in earnings. Please refer to page 27 for further discussions on AAA-rated and agency interest-only, prepayment penalty and residual securities.

With the exceptions of other non-investment grade and certain other investment grade securities which are retained from our securitizations, our available for sale portfolio is comprised of high-quality MBS purchased from third parties for yield purposes. At September 30, 2005, 90% of the portfolio was rated AAA with an expected weighted-average life of 2.43 years.

During 2004, the Company completed three separate on-balance sheet financing transactions with the objectives of improving the liquidity profile and lowering cost of funds. As a result, certain loans were recharacterized as securities which were included in the AAA-rated non-agency securities available for sale. At September 30, 2005, they were $1.0 billion AAA-rated HELOC-backed certificates that are guaranteed by a third party insurer and $135.4 million of AAA-rated senior mortgage-backed securities issued by us. These assets amounted to $1.0 billion and $198.0 million, respectively, at December 31, 2004.


					September 30,			December 31,
					2005			2004

					(Dollars in thousands)
Loans held for investment:
	SFR mortgage				$	5,257,247		$	4,458,784
	Consumer construction					1,593,297			1,443,450
	Builder construction					840,808			643,116
	HELOC					34,054			45,932
	Land and other mortgage					218,681			158,471
	Revolving warehouse lines of credit					32,631			—

				Total — loans held for investment		7,976,718			6,749,753

Mortgage-backed securities:
	Trading securities:
		AAA-rated and agency interest-only securities				74,005			90,658
		AAA-rated principal-only securities				2,351			18,599
		Prepayment penalty securities				76,178			33,451
		Other investment grade securities				9,359			9,219
		Other non-investment grade securities				—			4,198
		Non-investment grade residual securities				106,638			78,911

				Total trading securities		268,531			235,036

	Available for sale securities:
		AAA-rated non-agency securities				3,241,329			3,166,600
		AAA-rated agency securities				45,695			14,903
		Other investment grade securities				84,081			137,603
		Other non-investment grade securities				53,041			78,854
		Non-investment grade HELOC residual securities				47,696			56,475

			Total available for sale securities			3,471,842			3,454,435

				Total — mortgage-backed securities		3,740,373			3,689,471

				Total	$	11,717,091		$	10,439,224

Percentage of securities portfolio rated investment grade						92	%		93	%
Percentage of securities portfolio rated AAA						90	%		89	%

OTHER INVESTMENT GRADE AND NON-INVESTMENT GRADE SECURITIES

Non-investment grade securities (rated below BBB-) are created in connection with our private-label securitizations and valued by discounting the estimated net future cash flows. We also may retain certain other investment grade securities from our securitizations and to a lesser extent purchased from third parties to serve as hedges for our AAA-rated and agency interest-only securities.

The fair value of other investment grade and non-investment grade securities by credit rating as of September 30, 2005 and December 31, 2004, is as follows:


			September 30, 2005

					Premium							December 31,
			Current		(Discount)							2004
			Face		to Face			Amortized
			Value		Value			Cost		Fair Value		Fair Value

			(Dollars in thousands)
Other investment grade mortgage-backed securities:
	AA		$	22,109	$	253		$	22,362	$	22,112	$	76,941
	A			256		(19	)		237		245		5,087
	BBB			32,119		(1,378	)		30,741		31,299		33,764
	BBB-			42,761		(3,389	)		39,372		39,784		31,030

		Total other investment grade mortgage-backed securities	$	97,245	$	(4,533	)	$	92,712	$	93,440	$	146,822

Non-investment grade mortgage-backed securities:
	BB		$	36,024	$	(4,406	)	$	31,618	$	32,501	$	53,065
	BB-			13,524		(172	)		13,352		13,523		13,516
	B+			—		—			—		—		101
	B			14,215		(8,402	)		5,813		6,186		14,449
	Other			9,570		(8,932	)		638		831		1,921

		Total other non-investment grade mortgage-backed securities	$	73,333	$	(21,912	)	$	51,421	$	53,041	$	83,052

At September 30, 2005, of the total other investment grade and non-investment grade mortgage-backed securities, $97.8 million was collateralized by prime loans and $48.6 million by subprime loans.

SFR MORTGAGE LOANS HELD FOR INVESTMENT

The Company’s portfolio of mortgage loans held for investment is comprised primarily of SFR mortgage loans, with a concentration in adjustable-rate and hybrid adjustable-rate mortgage loans to mitigate interest rate risk. The Company plans on increasing its portfolio of mortgage loans held for investment to achieve better balance in its thrift segment relative to its mortgage banking segment, which tends to be more cyclical. The Company added $744.2 million of mortgage loans in accordance with this strategy during the quarter ended September 30, 2005.

Included in our loans held for investment portfolio at September 30, 2005 was approximately $1.0 billion in 12MAT option ARM loans that have potential for negative amortization. The original weighted average loan-to-value (“LTV”) on these loans was 72%. However, the current LTV has declined to 59% attributable to the seasoning of the loans and the appreciation of the underlying property value which had a 13% impact.

The following table shows the composition of the portfolio and the relevant credit quality characteristics as of September 30, 2005, June 30, 2005 and December 31, 2004.


	September 30,			June 30,			December 31,
	2005			2005			2004

	(Dollars in thousands)
SFR mortgage loans held for investment	$	5,257,247		$	4,989,025		$	4,458,784
Average loan size	$	312		$	305		$	305
Non-performing loans as a percentage of SFR loans		0.59	%		0.55	%		0.60	%
Estimated average life in years(1)		2.4			2.6			2.4
Estimated average duration in years(2)		1.4			1.3			1.5
Yield		4.80	%		4.63	%		4.38	%
Fixed-rate mortgages		6	%		7	%		9	%
Adjustable-rate mortgages		33	%		28	%		18	%
Hybrid adjustable-rate mortgages		61	%		65	%		73	%


			September 30,			June 30,			December 31,
Additional Information			2005			2005			2004

Average FICO score(3)				717			717			720
Original average loan to value ratio				72	%		72	%		71	%
Current average loan to value ratio				59	%		N/M	(4)		N/M	(4)
Geographic distribution of top five states:
	Southern California			33	%		32	%		31	%
	Northern California			21	%		20	%		21	%
	Michigan			5	%		5	%		6	%
	Florida			5	%		5	%		4	%
	New York			4	%		4	%		4	%
	Virginia			3	%		3	%		3	%
	Other			29	%		31	%		31	%

		Total		100	%		100	%		100	%


(1)	Represents the estimated length of time, on average, the SFR loan portfolio will remain outstanding based on the Company’s estimates for prepayments.

(2)	Average duration measures the expected change in the value of a financial instrument in response to changes in interest rates.

(3)	FICO scores are the result of a credit scoring system developed by Fair Isaacs and Co. and are generally used by lenders to evaluate a borrower’s credit history. FICO scores of 700 or higher are generally considered in the mortgage industry to be very high quality borrowers with low risk of default, but in general, the secondary market will consider FICO scores of 620 or higher to be prime.

(4)	Not meaningful

CONSUMER CONSTRUCTION

IndyMac’s consumer construction division provides construction financing for individual consumers who want to build a new primary residence or second home. The primary product for this is a construction-to-permanent residential mortgage loan. This product typically provides financing for a construction term from 6 to 12 months and automatically converts to a permanent mortgage loan at the end of construction. The end result is a product that represents a hybrid activity between our portfolio lending activities and mortgage banking activities. The Company earns net interest income on these loans during the construction phase and the loans are generally fixed-rate during this period. When the loan converts to permanent status, the interest rate may be adjusted based on the underlying permanent note. As of September 30, 2005, based on the underlying note agreements, 52% of the construction loans would be converted to adjustable-rate permanent loans, 28% to hybrid adjustable-rate loans, and 20% to fixed-rate loans. New consumer construction commitments grew 13% from the second quarter of 2005 and 39% over the same quarter of 2004 to $1.0 billion, as we continue to take advantage of the strong “new home” purchase market. About 65% of new commitments are generated through mortgage broker customers of the Mortgage Bank and the remaining 35% of new commitments are retail originations. Once the loan has converted to a permanent mortgage loan, the mortgage is classified as a mortgage loan held for sale and may be sold in the secondary market or acquired by the SFR mortgage loan portfolio. The amount of construction loans that were converted to permanent status was $413 million for the third quarter of 2005, growing 3% from the second quarter of 2005 and 34% over the same quarter of 2004. Overall, the Company is one of the largest custom residential construction lenders in the nation. Consumer construction loans outstanding at September 30, 2005, increased 10% from December 31, 2004.

The following tables present further information on our consumer construction portfolio.


	As of

	September 30,			June 30,			December 31,
	2005			2005			2004

	(Dollars in thousands)
Construction loans	$	1,593,297		$	1,493,948		$	1,443,450
Lot, land and other mortgage loans	$	102,150		$	112,735		$	37,172
Outstanding commitments	$	2,857,617		$	2,708,603		$	2,528,054
Average loan commitment	$	436		$	421		$	410
Non-performing loans		0.48	%		0.55	%		0.65	%
Annualized yield on construction loans		5.52	%		5.56	%		5.56	%
Fixed-rate loans		95	%		94	%		98	%
Adjustable-rate loans		5	%		6	%		2	%

Additional Information


		September 30,			June 30,			December 31,
		2005			2005			2004

Average loan-to-value ratio(1)			74	%		74	%		74	%
Average FICO score			712			711			707
Geographic distribution of top five states:
	Southern California		29	%		30	%		29	%
	Northern California		18	%		18	%		17	%
	Florida		7	%		6	%		5	%
	Hawaii		5	%		6	%		6	%
	New York		4	%		4	%		5	%
	Washington		3	%		3	%		3	%
	Other		34	%		33	%		35	%

	Total Consumer Construction		100	%		100	%		100	%


(1)	The average loan-to-value ratio is based on the estimated appraised value of the completed project compared to the commitment amount at June 30, 2005.

HOME EQUITY DIVISION

IndyMac’s Home Equity Division specializes in providing HELOC and closed-end second mortgages nationwide through IndyMac’s wholesale and retail channels. With a state-of-the-art web-based decision engine, utilizing a streamlined application process and competitive pricing, this division provides homeowners the ability to easily tap the excess equity in their homes for a variety of uses. With the HELOC product, homeowners have convenient access to their funds using the IndyMac Visa Equity Card or equity checks.

The HELOC portfolio, including the HELOC securitized loans, totaled $1.9 billion at September 30, 2005, which represents an increase of approximately $200 million from the portfolio size at December 31, 2004. During the third quarter of 2005, we produced $665 million of new HELOC commitments, largely from our mortgage banking segment and internal channels, and sold $170 million of HELOC loans, realizing a $2.3 million of gain on sale. For the nine months ended September 30, 2005, we produced $1.5 billion of new HELOC commitments and sold $462 million of HELOCs, realizing a $6.8 million of gain on sale. HELOC loans that we plan to sell or securitize are classified as held for sale on our balance sheet.

The following table presents information on the combined HELOC portfolio, including both held for sale and held for investment loans, as of and for the three months ended September 30, 2005, June 30, 2005, and December 31, 2004. All HELOC loans are adjustable rate loans and indexed to the prime rate.


	September 30,			June 30,			December 31,
	2005			2005			2004

	(Dollars in thousands)
Outstanding balance	$	584,083		$	461,293		$	404,342
Outstanding commitments(1)	$	1,081,413		$	913,845		$	838,534
Average spread over prime		1.58	%		1.31	%		1.41	%
Average FICO score		728			732			726
Average CLTV ratio(2)		78	%		76	%		76	%

Additional Information as of September 30, 2005


				Average Loan						30+ Days
		Outstanding		Commitment		Average Spread		Average		Delinquency
CLTV		Balance		Balance		Over Prime		FICO		Percentage

		(Dollars in thousands)
96% to 100%		$	115,780	$	79		2.64%		730		0.14%
91% to 95%			64,823		73		2.27%		723		0.28%
81% to 90%			161,632		71		2.03%		712		0.24%
71% to 80%			125,255		93		0.73%		727		0.27%
70% or less			116,593		88		0.43%		744		0.00%

	Total	$	584,083	$	82		1.58%		728		0.18%


(1)	On funded loans.

(2)	The CLTV combines the loan to value on both the first mortgage loan and the HELOC.

BUILDER CONSTRUCTION

IndyMac Bank’s homebuilder division provides land acquisition, development and construction financing to homebuilders for residential construction. Builder construction loans are typically adjustable rate loans, indexed to the prime interest rate with terms ranging from 12 to 24 months. The Bank earns net interest income on these loans. The homebuilder division has central operations in Pasadena, California with 15 satellite sales offices in California, Florida, Illinois, Arizona, Massachusetts, North Carolina and Oregon. Our typical customer is a middle size, professional homebuilder who builds between 200 and 2,000 homes per year. We do a limited amount of business with large private and public homebuilders, and have begun a small homebuilder program for homebuilders building 5 to 25 unit projects, and who typically build 5 to 100 homes per year.

Due to growth in the general homebuilding market, and our expansion into more geographic markets, in the third quarter of 2005 we entered into new tract construction commitments of $539 million, up 103%, or $273 million, from the third quarter of 2004, but declined slightly from the second quarter of 2005. Builder loans outstanding at September 30, 2005, including construction and land and other mortgage loans, totaled $1.1 billion, a $253.4 million, or 32%, increase compared to December 31, 2004. Our current weighted average loan to value is 71% and 98% of our builder construction loans are secured by corporate or personal guarantees of the builders as well as the underlying real estate. Our builder construction loans are predominantly indexed to the prime rate.

The following tables present further information on our builder construction portfolio.


	As of

	September 30,			June 30,			December 31,
	2005			2005			2004

	(Dollars in thousands)
Construction loans	$	840,808		$	752,466		$	643,116
Lot, land and other mortgage loans	$	209,802		$	175,216		$	154,123
Outstanding commitments	$	2,097,009		$	1,839,554		$	1,461,296
Average loan commitments(1)	$	10,871		$	9,185		$	7,033
Non-performing loans		0.40	%		0.71	%		1.45	%
Annualized yield on construction loans		8.99	%		8.56	%		7.35	%

Additional Information


		September 30,			June 30,			December 31,
		2005			2005			2004

Average loan-to-value ratio(2)			71	%		71	%		70	%
Geographic distribution of top five states:
	Southern California		40	%		41	%		42	%
	Northern California		15	%		15	%		22	%
	Illinois		9	%		11	%		11	%
	Florida		8	%		5	%		6	%
	Arizona		5	%		5	%		1	%
	New York		4	%		3	%		3	%
	Other		19	%		20	%		15	%

	Total Builder Construction		100	%		100	%		100	%


(1)	In calculating the average builder construction loan commitments, total commitments of $368.5 million of builder spec loans, with average loan commitments of $382 thousand are excluded in the calculation at September 30, 2005. As of December 31, 2004, builder spec loans had total commitments of $223.4 million with average loan commitments of $387 thousand.

(2)	The average loan-to-value ratio is based on the estimated appraised value of the completed project compared to the commitment amount at September 30, 2005.

For information related to the Company’s balance of non-performing assets and related credit reserves, see discussion in the “Credit Risk and Reserves” section at page 42.

NET INTEREST MARGIN

The following table sets forth information regarding our consolidated average balance sheets (all segments are combined), along with the total dollar amounts of interest income and interest expense and the weighted-average interest rates for the periods presented. Average balances are calculated on a daily basis. Non-performing loans are included in the average balances for the periods presented. The allowance for loan losses is excluded from the average loan balances.


		Three Months Ended

		September 30, 2005							September 30, 2004							June 30, 2005

		Average				Yield/			Average				Yield/			Average				Yield/
		Balance		Interest		Rate			Balance		Interest		Rate			Balance		Interest		Rate

		(Dollars in thousands)
Securities		$	3,589,084	$	52,624		5.82	%	$	3,042,119	$	36,129		4.72	%	$	3,563,192	$	47,701		5.37	%
Loans held for sale			9,065,447		125,969		5.51	%		5,608,086		72,927		5.17	%		6,844,766		87,756		5.14	%
Mortgage loans held for investment			5,392,079		65,173		4.80	%		5,014,168		54,537		4.33	%		5,312,122		61,339		4.63	%
Builder construction and income property			797,853		18,086		8.99	%		555,422		9,226		6.61	%		727,731		15,535		8.56	%
Consumer construction			1,468,487		20,440		5.52	%		1,284,467		18,203		5.64	%		1,398,654		19,372		5.56	%
Investment in Federal Home Loan Bank stock and other			808,590		8,098		3.97	%		357,996		3,981		4.42	%		714,107		7,043		3.96	%

	Total interest-earning assets		21,121,540		290,390		5.45	%		15,862,258		195,003		4.89	%		18,560,572		238,746		5.16	%

Other			1,723,374							1,437,673							1,458,128

	Total assets	$	22,844,914						$	17,299,931						$	20,018,700

Interest-bearing deposits		$	6,108,016		52,261		3.39	%	$	4,388,651		26,527		2.40	%	$	5,693,146		44,326		3.12	%
Advances from Federal Home Loan Bank			9,061,905		76,907		3.37	%		5,922,663		37,660		2.53	%		8,216,382		64,091		3.13	%
Other borrowings			4,806,036		49,796		4.11	%		4,769,125		30,226		2.52	%		3,594,250		33,924		3.79	%

	Total interest-bearing liabilities		19,975,957		178,964		3.55	%		15,080,439		94,413		2.49	%		17,503,778		142,341		3.26	%

Other			1,469,993							1,006,430							1,194,235

	Total liabilities		21,445,950							16,086,869							18,698,013
	Shareholders’ equity		1,398,964							1,213,062							1,320,687

	Total liabilities and shareholders’ equity	$	22,844,914						$	17,299,931						$	20,018,700

Net interest income				$	111,426						$	100,590						$	96,405

Net interest spread							1.90	%						2.40	%						1.90	%

Net interest margin							2.09	%						2.52	%						2.08	%

The net interest margin during the third quarter of 2005 was 2.09%, comparable to 2.08% from the second quarter of 2005, but down from 2.52% for the third quarter of 2004. Over the course of the last year, the Prime and short term LIBOR rates have increased significantly which affected the yield on interest-earning assets and the cost of borrowings. The yield on the interest-earning assets increased by 56 basis points, which was outpaced by the 106 basis points increase in cost of borrowings. As shown in the table below, while the yield on our thrift assets has been stable year over year, the yield on our mortgage loans held for sale has declined 125 basis points year over year due to the shift of our loan portfolio to more lower-rate ARM products. Also,

the Company currently do not place interest rate hedges on loans held for sale as we hold these loans for a short period of time, generally ranging from 10 to 90 days.


		Three Months Ended

		September 30, 2005							September 30, 2004							June 30, 2005

		Average		Net		Net			Average		Net		Net			Average		Net		Net
		Earning		Interest		Interest			Earning		Interest		Interest			Earning		Interest		Interest
		Assets		Income		Margin			Assets		Income		Margin			Assets		Income		Margin

		(Dollars in millions)
By Segment:
Thrift segment and other		$	12,835	$	63		1.96	%	$	10,685	$	55		2.03	%	$	12,315	$	59		1.93	%
Mortgage banking segment			8,287		48		2.30	%		5,177		46		3.55	%		6,246		37		2.38	%

	Total Company	$	21,122	$	111		2.09	%	$	15,862	$	101		2.52	%	$	18,561	$	96		2.08	%


		Nine Months Ended

		September 30, 2005							September 30, 2004

		Average				Yield			Average				Yield
		Balance		Interest		Rate			Balance		Interest		Rate

		(Dollars in thousands)
Securities		$	3,603,369	$	151,649		5.63	%	$	2,674,920	$	97,349		4.86	%
Loans held for sale			7,319,273		293,108		5.35	%		4,859,847		197,068		5.42	%
Mortgage loans held for investment			5,198,156		182,732		4.70	%		5,348,991		169,405		4.23	%
Builder construction and income property			727,197		46,614		8.57	%		536,229		26,086		6.50	%
Consumer construction			1,412,820		59,097		5.59	%		1,211,120		51,200		5.65	%
Investment in Federal Home Loan Bank stock and other			727,884		19,534		3.59	%		335,849		10,762		4.28	%

	Total interest-earning assets		18,988,699		752,734		5.30	%		14,966,956		551,870		4.93	%

Other			1,488,570							1,311,306

	Total assets	$	20,477,269						$	16,278,262

Interest-bearing deposits		$	5,686,527		132,479		3.11	%	$	4,101,224		72,706		2.37	%
Advances from Federal Home Loan Bank			8,192,796		193,711		3.16	%		5,635,089		102,499		2.43	%
Other borrowings			4,011,769		114,293		3.81	%		4,367,349		75,164		2.30	%

	Total interest-bearing liabilities		17,891,092		440,483		3.29	%		14,103,662		250,369		2.37	%

Other			1,261,778							1,046,709

	Total liabilities		19,152,870							15,150,371
	Stockholders’ equity		1,324,399							1,127,891

	Total liabilities and stockholders’ equity	$	20,477,269						$	16,278,262

Net interest income				$	312,251						$	301,501

Net interest spread							2.01	%						2.56	%

Net interest margin							2.20	%						2.69	%

Similar to the change in net interest margin for the quarter, the net interest margin for the nine months ended September 30, 2005 declined by 49 basis points from last year, primarily due to the lower-rate ARM loans in our mortgage loans held for sale portfolio.


		Nine Months Ended

		September 30, 2005							September 30, 2004

		Average		Net		Net			Average		Net		Net
		Earning		Interest		Interest			Earning		Interest		Interest
		Assets		Income		Margin			Assets		Income		Margin

		(Dollars in millions)
By Segment:
Thrift segment and other		$	12,252	$	186		2.03	%	$	10,240	$	155		2.02	%
Mortgage banking segment			6,737		126		2.50	%		4,727		147		4.14	%

	Total Company	$	18,989	$	312		2.20	%	$	14,967	$	302		2.69	%

The dollar amounts of interest income and interest expense fluctuate depending upon changes in the average balances and interest rates of interest-earning assets and interest-bearing liabilities. The following table details changes attributable to:


	•	changes in volume (changes in average outstanding balances multiplied by the prior period’s rate),

	•	changes in the rate (changes in the average interest rate multiplied by the prior period’s volume), and

	•	changes in rate/volume (“mix”) (changes in rates times the changes in volume).


				Three Months Ended September 30,
				2005 vs. 2004

				Increase/(Decrease) Due to

				Volume		Rate			Mix			Total Change

				(Dollars in thousands)
Interest income:
	Securities			$	6,613	$	8,376		$	1,506		$	16,495
	Loans held for sale				45,282		4,800			2,960			53,042
	Mortgage loans held for investment				4,270		5,919			447			10,636
	Builder construction and income property				4,063		3,339			1,458			8,860
	Consumer construction				2,665		(373	)		(55	)		2,237
	Investment in Federal Home Loan Bank stock and other				5,037		(407	)		(513	)		4,117

		Total interest income			67,930		21,654			5,803			95,387
Interest expense:
	Interest-bearing deposits				10,494		10,949			4,291			25,734
	Advances from Federal Home Loan Bank				20,119		12,502			6,626			39,247
	Other borrowings				773		18,806			(9	)		19,570

		Total interest expense			31,386		42,257			10,908			84,551

			Net interest income	$	36,544	$	(20,603	)	$	(5,105	)	$	10,836

						��
				Nine Months Ended September 30,
				2005 vs. 2004

				Increase/(Decrease) Due to

				Volume			Rate			Mix			Total Change

				(Dollars in thousands)
Interest income:
	Mortgage-backed securities			$	33,669		$	15,371		$	5,260		$	54,300
	Loans held for sale				99,458			(2,278	)		(1,140	)		96,040
	Mortgage loans held for investment				(4,929	)		18,854			(598	)		13,327
	Builder construction and income property				9,258			8,341			2,929			20,528
	Consumer construction				8,473			(494	)		(82	)		7,897
	Investment in Federal Home Loan Bank stock and other				12,538			(1,745	)		(2,021	)		8,772

		Total interest income			158,467			38,049			4,348			200,864
Interest expense:
	Interest-bearing deposits				28,012			22,991			8,770			59,773
	Advances from Federal Home Loan Bank				46,386			30,945			13,881			91,212
	Other borrowings				(3,991	)		47,833			(4,713	)		39,129

		Total interest expense			70,407			101,769			17,938			190,114

			Net interest income	$	88,060		$	(63,720	)	$	(13,590	)	$	10,750

INTEREST RATE SENSITIVITY

In addition to our hedging activities to mitigate the interest rate risk in our pipeline of mortgage loans held for sale, rate locks and our investment in servicing-related assets, we perform extensive, company-wide interest rate risk analyses. The primary measurement tool used to evaluate interest rate risk over the comprehensive balance sheet is a net portfolio value (“NPV”) analysis that simulates the effects changes in interest rates may have on the fair value of shareholders’ equity.

The following table sets forth the NPV and change in NPV that we estimate might result from a 100 basis point change in interest rates as of September 30, 2005, and December 31, 2004. Our NPV model has been built to focus on the Bank alone as the $1.2 billion of assets at the Parent Company and its non-bank subsidiaries have very little interest rate risk exposure.


		September 30, 2005								December 31, 2004

				Effect of Change in								Effect of Change in
				Interest Rates								Interest Rates

				Decrease			Increase					Decrease			Increase
		Fair Value		100 bps			100 bps			Fair Value		100 bps			100 bps

		(Dollars in thousands)
Cash and cash equivalents		$	306,932	$	306,932		$	306,932		$	352,664	$	352,664		$	352,664
Trading securities			254,592		260,209			248,075			215,480		202,801			224,716
Available for sale securities			2,387,056		2,426,820			2,329,779			2,362,108		2,398,485			2,303,858
Loans held for sale			5,389,688		5,456,785			5,286,774			4,474,459		4,530,902			4,385,744
Loans held for investment			7,938,022		7,998,558			7,844,739			6,725,541		6,792,345			6,616,173
MSRs			951,372		782,700			1,065,545			640,794		509,099			728,703
Other assets			1,253,370		1,307,736			1,292,034			898,496		959,259			926,602

	Total assets	$	18,481,032	$	18,539,740		$	18,373,878		$	15,669,542	$	15,745,555		$	15,538,460

Deposits		$	7,266,722	$	7,299,160		$	7,234,875		$	5,688,988	$	5,741,396		$	5,640,149
Advances from Federal Home Loan Bank			6,636,572		6,662,067			6,611,631			6,160,151		6,189,573			6,131,386
Other borrowings			2,287,221		2,288,890			2,285,555			1,865,801		1,867,124			1,864,481
Other liabilities			371,681		371,987			371,376			299,876		300,119			299,631

	Total liabilities		16,562,196		16,622,104			16,503,437			14,014,816		14,098,212			13,935,647
Shareholders’ equity (NPV)		$	1,918,836	$	1,917,636		$	1,870,441		$	1,654,726	$	1,647,343		$	1,602,813

% Change from base case					(0.06	)%		(2.52	)%				(0.45	)%		(3.14	)%

The increase in the net present value of equity from December 31, 2004, to September 30, 2005, is primarily due to (i) lower relative valuation of certain liabilities as interest rates have increased, and (ii) relative valuation of hedging instruments for MSRs and other retained assets. The September 30, 2005 results indicate that IndyMac Bank has a relatively neutral profile in a down 100 basis point scenario, but is exposed in an up rate scenario, similar to the profile at December 31, 2004. It should be noted that this analysis is based on instantaneous change in interest rates and does not reflect (i) the impact of changes in hedging activities as interest rates change, and (ii) changes in volumes and profits from our mortgage banking operations that would be expected to result from the interest rate environment.

The assumptions inherent in our interest rate shock models include expected valuation changes in an instantaneous and parallel interest rate shock, and assumptions as to the degree of correlation between the hedges and hedged assets and liabilities. These assumptions may not adequately reflect factors such as the spread-widening or spread-tightening risk among the changes in rates on Treasury, LIBOR/swap curve, mortgages, shape of the yield curve and volatility. In addition, the sensitivity analysis described in the prior paragraph is limited by the fact that it is performed at a particular point in time and does not incorporate other factors that would impact our financial performance in these scenarios, such as increases in income associated with the increase in production volume that could result from a decrease in interest rates. Consequently, the preceding estimates should not be viewed as a forecast, and it is reasonable to expect that actual results could vary significantly from the analyses discussed above.

CREDIT RISK AND RESERVES

The following table summarizes the Company’s allowance for loan losses/credit discounts and non-performing assets as of September 30, 2005. The overall adequacy of the allowance for loan losses is based on the allowance in its entirety. The allocation amongst the various loan products is representative of our judgments and assumptions at a specific point in time and may be reallocated in the future based on changes in performance and other circumstances.


										Total Reserves					QTD Net		YTD Net
						Allowance				as a		Non-			Charge		Charge
						For Loan		Credit		Percentage of		Performing			Offs/Net		Offs/Net
Type of Loan				Book Value		Losses		Discounts(2)		Book Value		Assets			REO (Gains)		REO (Gains)

				(Dollars in thousands)
Held for investment portfolio
	SFR mortgage loans and HELOCs			$	5,243,806	$	20,499	$	—		0.39%	$	25,983		$	145	$	1,220
	Land and other mortgage loans				218,681		4,115		—		1.88%		—			127		168
	Builder construction and income property loans				840,808		14,074		—		1.67%		4,162			—		72
	Consumer construction loans				1,593,297		10,201		—		0.64%		8,183			567		1,437
	Revolving warehouse Lines of credit				32,631		115		—		0.35%		—			—		—

		Total core held for investment loans			7,929,223		49,004		—		0.62%		38,328			839		2,897
	Discontinued product lines(1)				47,495		6,529		—		13.75%		5,318			1,225		2,886

			Total held for investment portfolio		7,976,718	$	55,533		—		0.70%		43,646			2,064		5,783

Held for sale portfolio					5,373,406			$	7,832		0.15%		17,460			—		—

			Total loans	$	13,350,124								61,106		$	2,064	$	5,783

Foreclosed assets
Core portfolios													8,880		$	369	$	2,165
Discontinued product lines													337			91		86

Total foreclosed assets													9,217		$	460	$	2,251

Total non-performing assets												$	70,323

Total non-performing assets as a percentage of total assets													0.36	%


(1)	Discontinued product lines include manufactured home loans and home improvement, which were discontinued during 1999.

(2)	The amount represents the lower of cost or market adjustments on non-performing loans in the held for sale portfolio.

The allowance for loan losses is allocated for segment reporting purpose to the various loan products, as shown in the table above. The entire allowance for loan losses is available to cover losses in any of the loan portfolios. A component of the overall allowance for loan losses is not specifically allocated to the loan portfolios in the overall assessment of adequacy (“unallocated component”). The unallocated component reflects management’s assessment of various factors that create inherent imprecision in the methods used to determine the specific portfolio allocations. Those factors include, but are not limited to levels of and trends in delinquencies and impaired loans, charge-offs and recoveries, volume and terms of the loans, effects of any changes in risk selection and underwriting standards, other changes in lending policies, procedures, and practices, and national and local economic trends and conditions. As of September 30, 2005, $19.1 million or 34% of the total allowance for loan losses was related to the unallocated component.

The following table provides additional comparative data on non-performing assets.


					September 30,			September 30,			December 31,
					2005			2004			2004

					(Dollars in thousands)
Loans held for investment
	Portfolio loans
		SFR mortgage loans			$	25,983		$	10,882		$	22,155
		Builder construction and income property loans				4,162			15,369			11,546
		Consumer construction loans				8,183			9,966			9,553

			Total portfolio non-performing loans			38,328			36,217			43,254
			Discontinued product lines			5,318			5,414			5,868

				Total non-performing loans held for investment		43,646			41,631			49,122

Allowance for loan losses to non-performing loans held for investment						127	%		127	%		108	%

Non-performing loans held for sale						17,460			56,327			54,611

				Total non-performing loans		61,106			97,958			103,733
Foreclosed assets						9,217			24,755			19,161

				Total non-performing assets	$	70,323		$	122,713		$	122,894

Total non-performing assets to total assets						0.36	%		0.76	%		0.73	%

The following shows the activity in the allowance for loan losses during the indicated periods:


			Three Months Ended						Nine Months Ended

			September 30,			September 30,			September 30,			September 30,
			2005			2004			2005			2004

			(Dollars in thousands)
Core portfolio loans
Balance, beginning of period			$	46,815		$	45,285		$	45,191		$	45,644
Provision for loan losses				3,028			698			6,710			2,799
Charge-offs net of recoveries
		SFR mortgage loans		(145	)		(488	)		(1,220	)		(2,534	)
		Land and other mortgage loans		(127	)		—			(168	)		—
		Builder construction		—			(7	)		(72	)		(17	)
		Consumer construction		(567	)		(271	)		(1,437	)		(675	)

	Charge-offs net of recoveries			(839	)		(766	)		(2,897	)		(3,226	)

Balance, end of period				49,004			45,217			49,004			45,217

Discontinued product lines
Balance, beginning of period				7,254			7,511			7,700			7,001
Provision for loan losses				500			800			1,715			3,399
	Charge-offs net of recoveries			(1,225	)		(700	)		(2,886	)		(2,789	)

Balance, end of period				6,529			7,611			6,529			7,611

		Total allowance for loan losses	$	55,533		$	52,828		$	55,533		$	52,828

Annualized charge-offs to average loans held for investment				0.11	%		0.09	%		0.11	%		0.11	%
Charge-offs to quarterly production				0.01	%		0.06	%		0.01	%		0.03	%
Core portfolio loans only
Annualized charge-offs to average loans held for investment				0.04	%		0.05	%		0.05	%		0.06	%
Charge-offs to quarterly production				0.01	%		0.03	%		0.01	%		0.02	%

Total credit-related reserves, including the allowance for loan losses and the market valuation reserves, amounted to $63.4 million at September 30, 2005, compared to $63.9 million at December 31, 2004. As of September 30, 2005, the allowance for loan losses of $55.5 million for loans held for investment, represented 0.70% of total loans held for investment, declining from 0.78% at December 31, 2004 and September 30, 2004. However, our allowance for loan losses to non-performing loans held for investment remained at 127% at September 30, 2005 and increased from 108% at December 31, 2004. Our non-performing assets as a percent of total assets improved further to 0.36% at September 30, 2005 from 0.76% and 0.73% at September 30, 2004 and December 31, 2004, respectively. The decreases in non-performing assets during the third quarter of 2005 were primarily due to the liquidations of non-performing loans held for sale, the sales of foreclosed assets and the payoffs of non-performing construction loans.

Loans are generally placed on non-accrual status when they are 90 days past due. Non-performing assets include non-performing loans and foreclosed assets. We record the balance of our assets acquired in foreclosure or by deed in lieu of foreclosure at estimated net realizable value. During the third quarter of 2005, our loans held for investment portfolio included approximately $34.4 million in loans that are collateralized by properties affected by Gulf Coast Hurricanes. We have entered into forbearance agreements with the borrowers to provide temporary payment relief. Based on the information currently available to us, we have provided a $1.3 million provision for loan losses during the third quarter to cover the potential losses from these loans.

Our determination of the level of the allowance for loan losses and, correspondingly, the provision for loan losses, is based on management’s judgments and assumptions regarding various matters, including general economic conditions, loan portfolio composition, loan demand, delinquency trends and prior loan loss experience. In assessing the adequacy of the allowance for loan losses, management reviews the performance in the portfolios of loans held for investment and the non-core portfolio of discontinued product lines, which consists of manufactured housing and home improvement loans.

While we consider the allowance for loan losses to be adequate based on information currently available, future adjustments to the allowance may be necessary due to changes in economic conditions, delinquency levels, foreclosure rates, or loss rates. The level of our allowance for loan losses is also subject to review by our primary federal regulator, the Office of Thrift Supervision (“OTS”). The OTS may require that our allowance for loan losses be increased based on its evaluation of the information available to it at the time of its examination of the Bank.

With respect to mortgage loans held for sale, pursuant to the applicable accounting rules, we do not provide an allowance for loan losses. Instead, a component for credit risk related to loans held for sale is embedded in the market valuation for these loans. Lower of cost or market valuation adjustments related to the credit risk on loans held for sale totaled $7.8 million at September 30, 2005.

SECONDARY MARKET RESERVES

We do not generally sell loans with recourse in our loan sale activities. However, we can be required to repurchase loans from investors when our loan sales contain individual loans that do not conform with the representations and warranties we made at the time of sale. We have made significant investments in our pre-production and post-production quality control processes to identify potential issues that could cause repurchases. We believe that these efforts have improved our production quality; however, possible increases in default rates due to an economic slowdown could cause the overall rate of repurchases to remain constant or even increase. Since 1993, the Company has repurchased a very small number of loans from its securitization trusts. The increase in repurchase activity in recent years has been primarily a function of IndyMac’s diversification of its loan sale channels to include whole loan and GSE sales. While sales through these channels typically generate enhanced cash flows, they tend to have a greater level of representation, warranty and repurchase risk. The following table shows the amount of loans we have repurchased from each distribution channel since the Company began active lending operations in January 1993.


		Amount				Percentage
		Repurchased		Total Sold		Repurchased

		(Dollars in millions)
Loans sold:
GSEs and whole loans		$	170.8	$	68,954		0.25	%
Securitization trusts			15.8		96,832		0.02	%

	Total	$	186.6	$	165,786		0.11	%

The Company maintains secondary market reserves for losses that arise in connection with loans that we may be required to repurchase from whole loan sales, securitization transactions and sales to the GSEs. These reserves, which totaled $27.4 million at September 30, 2005, have two general components: reserves for repurchases arising from representation and warranty claims and reserves for disputes with investors and vendors with respect to contractual obligations pertaining to mortgage operations. Also included in the reserves was a $1.3 million charge provided in the current quarter (reduction of gain on sale of loans) for potential investor claims on loans that we previously sold and which are collateralized by properties in the areas affected by Gulf Coast Hurricanes. The amount estimated is based on the current information available to us and could vary from the actual amount.

The table below shows the activity in the reserves during the three and nine months ended September 30, 2005.


	Three			Nine
	Months			Months

	(Dollars in thousands)
Balance, Beginning of the Period	$	37,043		$	35,610
Additions/provisions		4,115			14,108
Claims reimbursement and estimated discounts on loans held for sale/charge-offs		(13,934	)		(23,306	)
Recoveries on previous claims		220			1,032

Balance, September 30, 2005	$	27,444		$	27,444

During the second quarter of 2005, the Company reached a settlement with Washington Mutual over the previously disclosed lawsuit related to the loans sold by the Company to PNC Mortgage Corporation during the period 1997 to 2000, prior to Washington Mutual’s acquisition of PNC Mortgage Corporation in 2001. The settlement, including a cash payment of $10 million and the repurchase of certain loans of approximately $7.86 million, was made during the third quarter of 2005, and the lawsuit was fully resolved.

Reserve levels are a function of expected losses based on actual pending and expected claims and repurchase requests, historical experience, loan volume and loan sales distribution channels and the assessment of the probability of vendor or investor claims. While the ultimate amount of repurchases and claims is uncertain, management believes that the reserves are adequate. We have no other pending dispute similar to the Washington Mutual case as of September 30, 2005. The remaining secondary market reserves after the Washington Mutual settlement are for repurchases arising from general representation and warranty claims. We will continue to evaluate the adequacy of our reserves and may continue to allocate a portion of our gain on sale proceeds to these reserves going forward. The entire balance of our secondary market reserves is included on the consolidated balance sheets as a component of other liabilities.

OPERATING EXPENSES

A summary of operating expenses follows:


	Three Months Ended							Nine Months Ended

	September 30,		September 30,		June 30,			September 30,		September 30,
	2005		2004		2005			2005		2004

	(Dollars in thousands)
Salaries and related	$	80,173	$	60,099	$	82,267		$	237,280	$	162,688
Premises and equipment		14,006		11,450		13,630			40,249		30,981
Loan purchase costs		9,240		9,312		9,249			27,209		26,863
Professional services		7,759		5,580		6,202			20,917		16,497
Data processing		11,146		9,436		11,316			32,375		26,607
Office		8,626		4,658		8,383			23,632		16,395
Advertising and promotion		11,648		13,926		10,608			33,406		31,949
Operations and sale of foreclosed assets		1,227		1,848		(889	)		1,939		5,401
Litigation settlement		—		—		3,000			9,000		—
Other		7,106		5,499		6,802			20,005		16,239

	$	150,931	$	121,808	$	150,568		$	446,012	$	333,620

Our general and administrative expenses increased $29.1 million in the third quarter of 2005, largely due to increases in salaries, premises and equipment, data processing, office and travel expenses, over the same quarter of last year. The increases are attributable to the Company’s operational growth and geographic

expansions in pursuit of market share. The Company’s average full-time equivalent employees went up 21% from 4,910 for the quarter ended September 30, 2004 to 5,929 for the third quarter ended September 30, 2005 in support of our continued record-level of production volume. Additionally, we opened three new regional operations centers and a number of sales offices during the period, resulting in higher premises, data processing and office related expenses. In spite of the increases in our general and administrative expenses, our efficiency ratio improved to 53% for the third quarter of 2005 from 56% for the corresponding quarter a year ago. The operating expenses as a percent of loan production also improved from 1.15% a year ago to 0.86% for the current year third quarter. Total operating expenses for the third quarter of 2005 are fairly comparable to that of the second quarter of 2005. However, quarter over quarter, the salaries and related decreased by $2.1 million which is attributable to higher cost deferrals under SFAS 91 due to increased loan production, and a reduction in incentive compensation, partially offset by higher compensation related to increased number of employees.

For the nine months ended September 30, 2005, operating expenses totaled $446.0 million, up 34% from $333.6 million for the corresponding nine months in 2004. Included in the total operating expenses were $9 million pretax charges for the settlement of two previously disclosed class action lawsuits which have been fully resolved.

SHARE REPURCHASE ACTIVITIES

The following table summarizes the share repurchase activities during the three months ended September 30, 2005:


								Maximum Approximate
						Total Number of		Dollar Value
		Total				Shares Purchased		(in millions) of Shares
		Number of		Weighted		as Part of Publicly		that May Yet Be
		Shares		Average Price		Announced Plansor		Purchased Under the
Three Months Ended September 30, 2005		Purchased(1)		Paid Per Share		Programs		PlansorPrograms(2)

July 1, 2005 — July 31, 2005			84	$	42.87		—		63.6
August 1, 2005 — August 31, 2005			408		44.56		—		63.6
September 1, 2005 — September 30, 2005			—		—		—		63.6

	Total		492	$	44.27		—		63.6


(1)	All shares purchased during the periods indicated were purchased pursuant to the Company’s stock incentive plans at the then-current market prices.

(2)	Our Board of Directors approved a $100 million share repurchase program in June of 1999, which was subsequently increased by the Board in $100 million increments to a total of $500 million in April, August and October 2000, May 2001 and July 2002. The Board of Directors also approved a special repurchase of 3,640,860 shares from Countrywide, which was not a part of our share repurchase program and was completed in August 2000.

FUTURE OUTLOOK

On average, U.S. mortgage debt outstanding has grown approximately 7% to 8% per year over the last two decades and is projected, based on economic demographics, to continue this level of approximate growth. At this rate, mortgage debt outstanding roughly doubles every decade. With our unique and disciplined focus on home financing, we expect to outperform our peers and become a preeminent provider of such products in the United States. Operating with what we believe is the highest level of ethics and a customer-friendly orientation with the fairest lending model, IndyMac aims to be among the top eight lenders in the nation, earning at least $8 per share, by 2008. In so doing, the Company expects to provide solid returns to its shareholders consistent with its track record of 24 percent annualized total return under current management

for the period 1992 through September 30, 2005. This performance exceeds the annualized returns of 12 percent for the Dow Jones Industrial Average and 11 percent for the S&P 500 Index over the same period.

With that said, the past few years have been extraordinary years for the mortgage industry. Industry mortgage production has achieved historic highs in 2005 as a result of historically low interest rates, which led to record refinancing of mortgages. The industry continues to be in transition from these historic highs back to more normalized levels. According to forecasts published by the MBA, industry volumes are projected to decline in 2006 by 19% from 2005.

We now expect full year 2005 earnings per share to be approximately $4.65, up slightly from the $4.62 guidance we provided last quarter, as we see continued strength in our production operations, stable returns in our thrift segment and improved performance of our servicing asset as prepayments slow. As we look ahead to 2006, forecasting with precision remains difficult given the fact industry volumes are uncertain and projected to decline, the Fed is projected to continue to raise interest rates and industry competition is fierce and margins are under pressure. However, we have run multiple earnings scenarios and currently believe that earnings next year will likely exceed the current year level, and that the current consensus estimate for 2006 of $5.00 per share is a reasonable scenario. This EPS forecast is considered our best estimation in light of current market expectation for interest rates and industry volume. However, economy, interest rates and our industry remain volatile and, as a result, our actual results could vary significantly from this forecast.

The above forecast excludes the impact of the implementation of SFAS Statement No. 123 (revised 2004),Share-Based Payment, which requires the expensing of stock options. Given that the required implementation date of SFAS 123R has been delayed to fiscal years beginning after June 15, 2005, we do not expect to implement this standard until required on January 1, 2006.

This “Future Outlook” section contains certain forward-looking statements. See the section of this Form 10-Q entitled “Forward-Looking Statements” for a description of factors which may cause our actual results to differ from those anticipated.

LIQUIDITY AND CAPITAL RESOURCES

OVERVIEW

Our principal financing needs are to fund acquisitions of mortgage loans and our investment in mortgage loans, MBS and MSRs. Our primary sources of funds used to meet these financing needs are loan sales and securitizations, deposits, advances from the Federal Home Loan Bank (“FHLB”), borrowings, custodial balances and retained earnings. The sources used vary depending on such factors as rates paid, collateral requirements, maturities and the impact on our capital. Additionally, we may occasionally securitize mortgage loans that we intend to hold for investment to lower our costs of borrowing against such assets and reduce the capital requirement associated with such assets. During the quarter ended September 30, 2005, we had average total liquidity of $1.1 billion, which consists of unpledged liquid assets on hand plus amounts that may be immediately raised through the pledging of other available assets as collateral pursuant to committed financing facilities. We currently believe that our liquidity level is in excess of that necessary to satisfy our operating requirements and meet our obligations and commitments in a timely and cost effective manner.

PRINCIPAL SOURCES OF CASH

Loan Sales and Securitizations

Our business model relies heavily upon selling the majority of our mortgage loans shortly after acquisition. The proceeds of these sales are a critical component of the liquidity necessary for our ongoing operations. During the three months ended September 30, 2005, we sold $15.5 billion of our mortgage loans, which represents approximately 92% of our funded mortgage loans in the third quarter of 2005, to third party investors through three channels: (1) GSEs; (2) private label securitizations; and (3) whole loan sales. Our prime SFR mortgage loans division also elected to retain $744.2 million of the mortgage loans for our portfolio of mortgage loans held for investment to provide future interest income for the Company. The remainder of

our funded mortgage loans during the quarter is retained in our held for sale portfolio for future sale. Had we needed to raise more cash for liquidity reasons, loans retained in our held for investment portfolio could have been sold via one of the three channels.

Our liquidity could be negatively impacted if any of our sales channels were disrupted. Disruptions in our whole loan sales and mortgage securitization transactions can occur as a result of the performance of our existing securitizations, as well as economic events or other factors beyond our control.

Advances from Federal Home Loan Bank

The FHLB system functions as a borrowing source for regulated financial depositories and similar institutions that are engaged in residential housing finance. As a member of the FHLB of San Francisco, we are required to own capital stock of the FHLB and are authorized to apply for advances from the FHLB, on a secured basis, in amounts determined by reference to available collateral. SFR mortgage loans, agency and AAA-rated MBS are the principal collateral that may be used to secure these borrowings, although certain other types of loans and other assets may also be accepted pursuant to FHLB policies and statutory requirements. Currently, IndyMac Bank is approved for collateralized advances of up to $11.8 billion, of which $6.6 billion were outstanding at September 30, 2005. The FHLB offers several credit programs, each with its own fixed or floating interest rate, and a range of maturities.

Deposits/Retail Bank

We solicit deposits from the general public and institutions by offering a variety of accounts and rates through our network of 22 branches in Southern California, three of which were opened during the third quarter of 2005, our telebanking, and Internet channels.

Through our web site atwww.indymacbank.com, consumers can access their accounts 24-hours a day, seven days a week. Online banking allows customers to access their accounts, view balances, transfer funds between accounts, view transactions, download account information, and pay their bills conveniently from any computer terminal.

Our deposit products include regular savings accounts, demand deposit accounts, money market accounts, certificates of deposit, and individual retirement accounts.

The following table sets forth the balance of deposits, by deposit category, as of the following period ends:


		September 30, 2005					June 30, 2005					December 31, 2004

				% of					% of					% of
				Total					Total					Total
		Amount		Deposits			Amount		Deposits			Amount		Deposits

		(Dollars in thousands)
Non-interest-bearing checking		$	64,079		1	%	$	63,848		1	%	$	55,359		1	%
Interest-bearing checking			55,021		1	%		51,566		1	%		42,306		1	%
Savings			1,219,710		17	%		1,276,499		19	%		1,527,466		27	%
Custodial accounts			658,958		9	%		636,469		10	%		622,589		11	%

	Total core deposits		1,997,768		28	%		2,028,382		31	%		2,247,720		39	%
Certificates of deposit			5,263,182		72	%		4,556,150		69	%		3,495,759		61	%

	Total deposits	$	7,260,950		100	%	$	6,584,532		100	%	$	5,743,479		100	%

The following table sets forth the balance of deposits, by deposit channel, as of the following period ends:


		September 30, 2005					June 30, 2005					December 31, 2004

				% of					% of					% of
				Total					Total					Total
		Amount		Deposits			Amount		Deposits			Amount		Deposits

		(Dollars in thousands)
Branch		$	3,059,462		42	%	$	2,868,298		44	%	$	2,271,605		40	%
Internet			714,837		10	%		664,079		10	%		579,503		10	%
Telebanking			835,145		12	%		760,710		12	%		639,584		11	%
Money desk			1,992,548		27	%		1,654,976		25	%		1,630,199		28	%
Custodial			658,958		9	%		636,469		9	%		622,588		11	%

	Total deposits	$	7,260,950		100	%	$	6,584,532		100	%	$	5,743,479		100	%

Included in deposits at September 30, 2005, June 30, 2005, and December 31, 2004 were non-interest-bearing custodial accounts, primarily related to our GSE servicing portfolio, totaling $659.0 million, $636.5 million and $622.6 million, respectively.

Trust Preferred Securities and Warrants

On November 14, 2001, we completed an offering of Warrants and Income Redeemable Equity Securities (“WIRES”) to investors. Gross proceeds of the transaction were $175 million. The securities were offered as units consisting of trust preferred securities, issued by a trust formed by us, and warrants to purchase IndyMac Bancorp’s common stock. As part of this transaction, IndyMac Bancorp issued subordinated debentures to the trust and purchased common securities from the trust. The yield on the subordinated debentures and the common securities is the same as the yield on the trust preferred securities. The proceeds from the offering are used in ongoing operations and will fund future growth and/or repurchases of IndyMac Bancorp common stock under its share repurchase program (see “Share Repurchase Activities” on page 47). During the third quarter of 2005, total 86,900 shares of warrants were exercised at an average exercise price of $34.94 per share to purchase 138,794 shares of IndyMac Bancorp’s common stock. No redemption of subordinated debentures occurred in conjunction with the exercises of warrants during the third quarter of 2005. However, the holder of units has right to exchange the trust preferred securities related to the exercised warrants for subordinated debentures within 60 days following the exercise.

In both July and December 2003, two trusts formed by us each issued $30.0 million of trust preferred securities, yielding 6.05% and 6.30%, respectively. In December 2004, a trust formed by us issued an additional $30.0 million of trust preferred securities with a yield of 5.83%. In each of these transactions, IndyMac Bancorp issued subordinated debentures to, and purchased common securities from, each of the trusts. The yield on the subordinated debentures and the common securities in each of these transactions matches the yields on the related trust preferred securities. The proceeds of these securities have been used in ongoing operations.

Upon the adoption of FASB Interpretation No. 46,“Consolidation of Variable Interest Entities, an Interpretation of Accounting Research Bulletin (“ARB”) No. 51,”on July 1, 2003, the trusts have been deconsolidated from the financial statements of the Company. The subordinated debentures underlying the trust preferred securities, which represent the liabilities due from IndyMac Bancorp to the trusts, amounted to $215.7 million and $215.2 million at September 30, 2005, and December 31, 2004, respectively. These subordinated debentures are included in Other Borrowings on the consolidated balance sheets.

Other Borrowings, Excluding Subordinated Debentures Underlying Trust Preferred Securities

Other borrowings, excluding the subordinated debentures underlying the trust preferred securities, consist of loans and securities sold under committed financing facilities and uncommitted agreements to repurchase, CMO collateral and notes payable. Total other borrowings increased to $3.4 billion at September 30, 2005,

from $2.9 billion at December 31, 2004. The increase of $422.6 million was primarily the result of additional draws on our credit facilities to fund mortgage loan originations.

At September 30, 2005, we had $5.2 billion in committed financing facilities, of which $3.4 billion was utilized and $1.0 billion was available for use, based on eligible collateral. Decisions by our lenders and investors to make additional funds available to us in the future will depend upon a number of factors. These include our compliance with the terms of existing credit arrangements, our financial performance, eligible collateral, changes in our credit rating, industry and market trends in our various businesses, the general availability and interest rates applicable to financing and investments, the lenders’ and/or investors’ own resources and policies concerning loans and investments and the relative attractiveness of alternative investment or lending opportunities. As of September 30, 2005, we believe we were in compliance with all representations, warranties, and financial covenants under our borrowing facilities.

PRINCIPAL USES OF CASH

In addition to the financing sources discussed above, cash uses are funded by net cash flows from operations, sales of mortgage-backed securities and principal and interest payments on loans and securities. The amounts of net acquisitions of loans held for sale, and trading securities included as components of net cash used in operating activities totaled $3.1 billion during the nine months ended September 30, 2005 and $3.6 billion during the nine months ended September 30, 2004. Excluding the purchase and sale activity for loans held for sale and trading securities, the net cash provided by the Company’s operating activities totaled $69.6 million and $521.2 million for the nine months ended September 30, 2005 and 2004, respectively.

ACCUMULATED OTHER COMPREHENSIVE LOSS

Accumulated other comprehensive losses were $13.0 million at September 30, 2005, compared to $20.3 million of losses at December 31, 2004. This decrease in unrealized losses was a result of the increase in the fair value of the swaps and swaptions designated as cash flow hedges of floating rate borrowings. It should be noted that accumulated other comprehensive gain or loss does not include the increases in the fair value of loans held for investment that are funded by borrowings that are hedged by a portion of these interest rate swaps and swaptions. Accumulated other comprehensive gain or loss is not a component of the determination of regulatory capital.

REGULATORY CAPITAL REQUIREMENTS

IndyMac Bank is subject to regulatory capital regulations administered by the federal banking agencies. In addition, as a condition to its approval of our acquisition of SGV Bancorp, Inc. in July 2000, the OTS required that IndyMac Bank hold Tier 1 (core) capital of at least 8% of adjusted total assets for three years following the consummation of the transaction and maintain a total risk-based capital position of at least 10% of total risk-weighted assets. This particular condition expired on July 1, 2003. As of September 30, 2005, IndyMac Bank met all of the requirements of a “well-capitalized” institution under the general regulatory capital regulations.

During 2001, the OTS issued guidance for subprime lending programs which requires a lender to quantify the additional risks in its subprime lending activities and determine the appropriate amounts of allowances for loan losses and capital it needs to offset those risks. The Company generally classifies all non-GSE loans in a first lien position with a FICO score less than 620 and all non-GSE loans in a second lien position with a FICO score less than 660 as subprime. We report our subprime loan calculation in an addendum to the Thrift Financial Report that we file with the OTS. Subprime loans held for investment and subprime loans held for sale which are either delinquent or more than 90 days old since origination are supported by capital two times that of similar prime loans. These subprime loans totaled $202.5 million at September 30, 2005.

The following table presents IndyMac Bank’s actual and required capital ratios and the minimum required capital ratios to be categorized as “well-capitalized” at September 30, 2005. The impact of the additional risk-weighting criteria related to subprime loans had the effect of reducing IndyMac’s total risk-based capital by 17 basis points as noted in the table below.


	As Reported			Adjusted for
	Pre-Subprime			Additional Subprime			Well-Capitalized
	Risk-Weighting			Risk-Weighting			Minimum

Capital Ratios:
Tier 1 core		7.51	%		7.51	%		5.00	%
Tier 1 risk-based		11.27	%		11.11	%		6.00	%
Total risk-based		11.75	%		11.58	%		10.00	%

We believe that, under current regulations, IndyMac Bank will continue to meet its “well-capitalized” minimum capital requirements in the foreseeable future. IndyMac Bank’s regulatory capital compliance could be impacted, however, by a number of factors, such as changes to applicable regulations, adverse action by our regulators, changes in our mix of assets, interest rate fluctuations, loan loss provisions and credit losses, or significant changes in the economy in areas where we have most of our loans. Any of these factors could cause our actual future results to vary from anticipated future results and consequently could have an adverse impact on the ability of IndyMac Bank to meet its future minimum capital requirements.

OFF-BALANCE SHEET ARRANGEMENTS

In the ordinary course of our business, we engage in financial transactions that are not recorded on our balance sheet. These transactions are structured to manage our interest rate, credit or liquidity risks, to diversify funding sources or to optimize our capital usage.

Substantially all of our off-balance sheet arrangements relate to the securitization of mortgage loans. Our mortgage loan securitizations are normally structured as sales in accordance with SFAS 140, which involves the transfer of the mortgage loans to “qualifying special-purpose entities” that are not subject to consolidation. In a securitization, an entity transferring the assets is able to convert those assets into cash. Special-purpose entities used in such securitizations obtain cash to acquire the assets by issuing securities to investors. We also, generally, have the right to repurchase mortgage loans from the special-purpose entities if the remaining outstanding balance of the mortgage loans falls to a level where the cost of servicing the loans exceeds the revenues we earn.

In connection with our loan sales that are securitization transactions, there are $41 billion in loans owned by off-balance sheet trusts as of September 30, 2005. The trusts have issued bonds secured by these loans. We have no obligation to provide funding support to either the third party investors or the off-balance sheet trusts. Generally, neither the third party investors nor the trusts have recourse to our assets or us, and they have no ability to require us to repurchase their loans other than for non-credit-related recourse that can arise under standard representations and warranties. We maintain secondary market reserves for losses that could arise in connection with loans that we are required to repurchase from GSEs and whole loan sales.

We often retain certain interests, which may include subordinated classes of securities, MSRs, AAA-rated and agency interest-only securities, prepayment penalty and residual securities in the securitization trust. The performance of the loans in the trusts will impact our ability to realize the current estimated fair value of these assets that are included on our balance sheet. MSRs, AAA-rated and agency interest-only securities, prepayment penalty and residual securities were $940.6 million, $74.0 million, $76.2 million, and $154.3 million, respectively, at September 30, 2005.

Management does not believe that any of its off-balance sheet arrangements have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

AGGREGATE CONTRACTUAL OBLIGATIONS

The following table summarizes our material contractual obligations as of September 30, 2005. The payment amounts represent those amounts contractually due to the recipient and do not include any unamortized premiums or discounts, hedge basis adjustments, or other similar carrying value adjustments.


	Payment Due

	October 1, 2005		January 1, 2006		January 1, 2008
	through		through		through		After
	December 31, 2005		December 31, 2007		December 31, 2009		December 31, 2009		Total

	(Dollars in thousands)
Deposits Without a Stated Maturity	$	1,338,810	$	—	$	—	$	—	$	1,338,810
Custodial Accounts and Certificates of Deposits		2,519,971		3,326,261		68,959		6,949		5,922,140
FHLB Advances		4,501,000		1,805,000		315,000		—		6,621,000
Repurchase Agreements		2,368,872		—		—		—		2,368,872
HELOC Notes(1)		—		—		—		997,987		997,987
Other Notes		1,741		—		—		1,049		2,790
Trust Preferred Debentures		—		—		—		215,707		215,707
Accrued Interest Payable		96,366		—		—		—		96,366
Deferred Compensation		372		2,552		8,153		24,422		35,499
Operating Leases(2)		5,184		49,615		43,735		42,885		141,419
Employment Agreements(3)		2,831		13,606		325		—		16,762
Purchase Obligations		448		7,876		—		—		8,324

Total	$	10,835,595	$	5,204,910	$	436,172	$	1,288,999	$	17,765,676


(1)	HELOC notes are non-recourse and secured by AAA-rated HELOC certificates.

(2)	Total lease commitments are net of sublease rental income.

(3)	Represents compensation for ten senior executives and includes both base salary and estimated bonuses. Amount is calculated based on the terms in their respective written employment agreements.

A schedule of significant commitments at September 30, 2005 follows:


		Payment Due

		(Dollars in thousands)
Investment portfolio commitments to:
	Purchase loans pursuant to exercising clean-up calls	$	27,753
Undisbursed loan commitments:
	Builder construction	$	1,059,780
	Consumer construction		1,167,241
	HELOCs		515,541
	Revolving warehouse lending		74,207
Letters of credit		$	17,094

Additionally, in connection with standard representations and warranties on loan sales and securitizations, we are occasionally required to repurchase loans or make certain payments to settle claims based on breaches of these representations and warranties. From inception of our active mortgage banking operations on January 1, 1993 through September 30, 2005, we have sold $165.8 billion in loans and repurchased $186.6 million loans, or 0.11% of total loans sold. To provide for probable future losses related to loans sold, we have established a reserve based on estimated losses on actual pending and expected claims and repurchase requests, historical experience, loan sales volume and loan sale distribution channels and the assessment of the probability of vendor or investor claims, which is included in other liabilities on the consolidated balance sheets. The balance in this reserve totaled $27.4 million at September 30, 2005. See the “Secondary Market Reserves” section on page 45 for further information.

KEY OPERATING RISKS

Like all businesses, we assume a certain amount of risk in order to earn returns on our capital. The following is a summary discussion of key operating risks. For further information on these and other key operating risks, refer to IndyMac’s annual report on Form 10-K for the year ended December 31, 2004.

INTEREST RATE RISK

Due to the characteristics of our financial assets and liabilities and the nature of our business activities, our liquidity, financial position and results of operations may be materially affected by changes in interest rates in various ways. While we have devised and implemented a comprehensive asset/liability management strategy that seeks, on an economic and an accounting basis, to mitigate significant fluctuations in our financial position and results of operations likely to be caused by market interest rate changes, there can be no assurance that this strategy (including assumptions concerning the correlation thought to exist among different types of instruments) or its implementation will be successful in any particular interest rate environment. In addition, the impact of our interest rate risk management strategies on our economic and accounting performance may differ materially because GAAP results may not be consistent with economic performance.

VALUATION RISK

In connection with the loan sale process, we retain certain assets for which the market is limited and illiquid. As a result, valuations are derived using complex modeling and significant assumptions and judgments, in the absence of active market quotations or sale information to value such assets. The assets include MSRs, AAA-rated and agency interest-only securities, prepayment penalty securities, non-investment grade securities and residuals. In addition, from time to time, we may acquire these types of securities from third party issuers. These assets represented approximately 7% of total assets and 88% of total equity at September 30, 2005. The fair value of these assets could vary significantly as market conditions change. We periodically obtain appraisals from mortgage servicing brokers who benchmark our valuation assumptions to those of our industry peers and consider this information in the estimation of fair value.

CREDIT RISK

A significant portion of our investment portfolio consists of prime residential SFR loans held for investment and non-investment grade securities and residual securities collateralized by mortgage loans. We also provide construction loans to consumers and developers to build residential properties. The credit risk profile on consumer construction loans is very similar to that of our permanent mortgage loans, while builder construction loans tend to have a higher credit risk profile than permanent mortgage loans. While the majority of our loans are to prime quality borrowers and secured by residential property, there is no guarantee that, in the event of borrower default, we will be able to recoup the full principal amount and interest due on a loan. We have adopted underwriting and loan quality monitoring systems, procedures and credit policies, including the establishment and review of the allowance for loan losses, that management believes are prudent and appropriate to minimize this risk by tracking loan performance, assessing the likelihood of nonperformance and diversifying our loan portfolio. Such policies and procedures, however, may not prevent unexpected losses that could adversely affect our results. In addition, while we have discontinued our home improvement and manufactured housing lending programs, we continue to liquidate portfolios of these loans, which have greater credit risk than that of our core mortgage loan portfolios. At September 30, 2005, the book value of these non-core portfolios was $41.0 million, net of reserves.

We also sell loans to GSEs, to outside investors, and to securitization trusts. In these instances, we are subject to repurchase risk in the event of breaches of representations or warranties we make in connection with the loan sales. While we have established what we believe to be adequate secondary marketing reserves, there can be no guarantee that the amount reserved is sufficient to cover all potential losses resulting from such repurchases.

LIQUIDITY RISK

We finance a substantial portion of our assets through consumer deposits insured by the Federal Deposit Insurance Corporation (“FDIC”) and through borrowings from the FHLB. We also obtain financing from investment and commercial banks. There is no guarantee that these sources of funds will continue to be

available to us, or that our borrowings can be refinanced upon maturity, although we are not aware of any trends, events or uncertainties that we believe are reasonably likely to cause a decrease in our liquidity from these sources.

We utilize three sales channels to sell loans to the secondary market: whole loan sales, sales to the GSEs, and private-label securitizations. A disruption in the securitization market could adversely impact our ability to fund mortgage loans and our gains on sale, leading to a corresponding decrease in revenue and earnings. Likewise, a deterioration in the performance of our private-label securitizations could adversely impact the availability and pricing of future transactions.

CYCLICAL INDUSTRY

The mortgage industry is a cyclical business that generally performs better in a low interest rate environment such as the current one. The environment of historically low interest rates over the past three years has been very favorable for mortgage bankers, such as us. As the industry transitions to a higher interest rate environment, the demand for mortgage loans is expected to decrease, which would cause a lower level of growth, or even a reduction, in earnings per share, in the short run. In addition, other external factors, including tax laws, the strength of various segments of the economy and demographics of our lending markets, could influence the level of demand for mortgage loans. Gain on sale of loans is a large component of our revenue and would be adversely impacted by a significant decrease in our mortgage loan volume. We have continued to grow our investment in mortgage loans to provide a level of core net interest income in an effort to mitigate the cyclicality.

COMPETITION

We face significant competition in acquiring and selling loans. In our mortgage banking operations, we compete with other mortgage bankers, GSEs, established third party lending programs, investment banking firms, banks, savings and loan associations, and other lenders and entities purchasing mortgage assets. With regard to MBS issued through our mortgage banking operations, we face competition from other investment opportunities available to prospective investors. We estimate our market share of the U.S. mortgage market to be approximately 2.19% for the third quarter of 2005. A number of our competitors have significantly larger market share and financial resources. We seek to compete with financial institutions and mortgage companies through an emphasis on quality of service, diversified products and maximum use of technology.

The GSEs have made and we believe will continue to make significant technological and economic advances to broaden their customer bases. When the GSEs contract or expand, there are both positive and negative impacts on our mortgage banking lending operations. As GSEs expand, additional liquidity is brought to the market, and loan products can be resold more quickly. Conversely, expanding GSEs increase competition for loans, which may reduce profit margins on loan sales. We seek to address these competitive pressures by making a strong effort to maximize our use of technology, by diversifying into other residential mortgage products that are less affected by GSEs, and by operating in a more cost-effective manner than our competitors.

LAWS AND REGULATIONS

The banking industry in general is extensively regulated at the federal and state levels. Insured depository institutions and their holding companies are subject to comprehensive regulation and supervision by financial regulatory authorities covering all aspects of their organization, management and operations. The OTS and the FDIC are primarily responsible for the federal regulation and supervision of the Bank and its affiliated entities. In addition to their regulatory powers, these two agencies also have significant enforcement authority that they can use to address unsafe and unsound banking practices, violations of laws, and capital and operational deficiencies. Enforcement powers can be exercised in a number of ways, through either formal or informal actions. Informal enforcement actions customarily remain confidential between the regulator and the financial institution, while more formal enforcement actions are customarily publicly disclosed. Further, the Bank’s operations are subject to regulation at the state level, including a variety of consumer protection provisions. Banking institutions also are affected by the various monetary and fiscal policies of the U.S. government,

including those of the Federal Reserve Board, and these policies can influence financial regulatory actions. Accordingly, the actions of those governmental authorities responsible for regulatory, fiscal and monetary affairs can have a significant impact on the activities of financial services firms such as ours.

The Company’s financial condition and results of operations are reported in accordance with U.S. GAAP. While not impacting economic results, future changes in accounting principles issued by various accounting standard setters could impact our financial condition and operational results as reported under U.S. GAAP.

Additionally, political conditions could impact the Company’s earnings. Acts or threats of war or terrorism, as well as actions taken by the U.S. or other governments in response to such acts or threats, could impact business and economic conditions in which the Company operates.

GEOGRAPHIC CONCENTRATION

A majority of our loans are geographically concentrated in certain states, including California, Michigan, Florida and New York with 54% of our loan receivable balance at September 30, 2005 being in California. Any adverse economic conditions in these markets could cause the number of loans acquired to decrease, likely resulting in a corresponding decline in revenues and an increase in credit risk. Also, we could be adversely affected by business disruptions triggered by natural disasters or acts of war or terrorism in these geographic areas.

BUSINESS EXECUTION AND TECHNOLOGY RISK

Our business performance is highly dependent on solidly executing our hybrid thrift/mortgage banking business model. We must properly price and continue to expand our products, customer base and market share. In addition, the execution of our hedging activities is critical as we have significant exposure to changes in interest rates.

We are highly dependent on the use of technology in all areas of our business and we must take advantage of advances in technology to stay competitive. There are no guarantees as to our degree of success in anticipating and taking advantage of technological advances or that we will be more successful in the use of technology than our competitors.

CRITICAL ACCOUNTING POLICIES AND JUDGMENTS

Several of the critical accounting policies that are very important to the portrayal of our financial condition and results of operations require management to make difficult and complex judgments that rely on estimates about the effect of matters that are inherently uncertain due to the impact of changing market conditions and/or consumer behavior. We believe our most critical accounting policies relate to (1) assets that are highly dependent on internal valuation models and assumptions rather than market quotations, including, AAA-rated and agency interest-only securities, prepayment penalty securities, MSRs and non-investment grade and residual securities; (2) derivatives hedging instruments and hedge accounting; (3) our allowance for loan losses (“ALL”); and (4) our secondary market reserve.

Management discusses these critical accounting policies and related judgments with IndyMac’s audit committee and external auditors on a quarterly basis. We believe that the judgments, estimates and assumptions used in the preparation of our consolidated financial statements are appropriate given the factual circumstances at the time; however, given the sensitivity of our consolidated financial statements to these critical accounting policies, the use of other judgments, estimates and assumptions could result in material differences in our results of operations or financial condition.


ITEM 3.	*QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK*

See “Interest Rate Sensitivity” beginning on page 41 for quantitative and qualitative disclosure about market risk.


ITEM 1.	*FINANCIAL STATEMENTS*

INDYMAC BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


				September 30,			December 31,
				2005			2004

				Unaudited
				(Dollars in thousands)
Assets
Cash and cash equivalents				$	308,005		$	356,157
Securities classified as trading ($42.0 million and $54.4 million pledged as collateral for borrowings at September 30, 2005 and December 31, 2004, respectively)					268,531			235,036
Securities classified as available for sale, amortized cost of $3.5 billion at September 30, 2005 and December 31, 2004 ($2.3 billion pledged as collateral for borrowings at September 30, 2005 and December 31, 2004)					3,471,842			3,454,435
Loans receivable:
	Loans held for sale
		SFR mortgage			4,722,270			4,054,338
		HELOC			550,029			358,410
		Consumer lot loans			93,275			32,824

			Total loans held for sale		5,365,574			4,445,572

	Loans held for investment
		SFR mortgage			5,257,247			4,458,784
		Consumer construction			1,593,297			1,443,450
		Builder construction			840,808			643,116
		HELOC			34,054			45,932
		Land and other mortgage			218,681			158,471
		Revolving warehouse lines of credit			32,631			—
	Allowance for loan losses				(55,533	)		(52,891	)

			Total loans held for investment		7,921,185		��	6,696,862

		Total loans receivable ($9.1 billion and $8.1 billion pledged as collateral for borrowings at September 30, 2005 and December 31, 2004, respectively)			13,286,759			11,142,434
Mortgage servicing rights					940,606			640,794
Investment in Federal Home Loan Bank stock					538,856			390,716
Interest receivable					119,137			78,827
Goodwill and other intangible assets					80,986			81,445
Foreclosed assets					9,217			19,161
Other assets					603,805			426,639

		Total assets		$	19,627,744		$	16,825,644


			September 30,			December 31,
			2005			2004

			Unaudited
			(Dollars in thousands)

Liabilities and Shareholders’ Equity
Deposits			$	7,260,950		$	5,743,479
Advances from Federal Home Loan Bank				6,621,000			6,162,000
Other borrowings				3,585,356			3,162,241
Other liabilities				680,209			493,953

		Total liabilities		18,147,515			15,561,673

Shareholders’ Equity
	Preferred stock — authorized, 10,000,000 shares of $0.01 par value; none issued			—			—
	Common stock — authorized, 200,000,000 shares of $0.01 par value; issued 93,373,769 shares (64,183,982 outstanding) at September 30, 2005, and issued 91,168,915 shares (61,995,480 outstanding) at December 31, 2004			934			912
	Additional paid-in-capital			1,240,240			1,186,682
	Accumulated other comprehensive loss			(13,159	)		(20,304	)
	Retained earnings			772,628			616,516
	Treasury stock, 29,189,787 shares and 29,173,435 shares at September 30, 2005 and December 31, 2004, respectively			(520,414	)		(519,835	)

		Total shareholders’ equity		1,480,229			1,263,971

		Total liabilities and shareholders’ equity	$	19,627,744		$	16,825,644

The accompanying notes are an integral part of these statements.

INDYMAC BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS


					For the Three Months					For the Nine Months
					Ended September 30,					Ended September 30,

					2005		2004			2005		2004

					(Unaudited)
					(Dollars in thousands, except per share data)
Interest income
Mortgage-backed and other securities					$	52,624	$	36,129		$	151,649	$	97,349
Loans held for sale
	SFR mortgage					114,267		63,494			264,939		182,856
	HELOC					9,288		7,516			21,642		7,516
	Consumer lot loans					2,414		1,917			6,527		6,696

		Total loans held for sale				125,969		72,927			293,108		197,068
Loans held for investment
	SFR mortgage					59,513		50,770			168,447		149,732
	Consumer construction					20,440		18,203			59,097		51,201
	Builder construction					18,086		9,075			46,614		25,222
	Land and other mortgage					4,651		3,090			11,982		9,025
	HELOC					535		827			1,659		11,511
	Revolving warehouse lines of credit					474		—			644		—

		Total loans held for investment				103,699		81,965			288,443		246,691
Other						8,098		3,982			19,534		10,762

		Total interest income				290,390		195,003			752,734		551,870
Interest expense
	Deposits					52,261		26,527			132,479		72,706
	Advances from Federal Home Loan Bank					76,907		37,660			193,711		102,499
	Other borrowings					49,796		30,226			114,293		75,164

		Total interest expense				178,964		94,413			440,483		250,369

			Net interest income			111,426		100,590			312,251		301,501
Provision for loan losses						3,528		1,498			8,425		6,198

			Net interest income after provision for loan losses			107,898		99,092			303,826		295,303
Other income
	Gain on sale of loans					151,086		98,052			454,785		247,804
	Service fee income (loss)					10,304		8,742			25,521		(22,209	)
	Gain (loss) on mortgage-backed securities, net					728		(9,438	)		11,933		(17,839	)
	Fee and other income					12,678		7,712			28,649		20,528

		Total other income				174,796		105,068			520,888		228,284

			Net revenues			282,694		204,160			824,714		523,587
Other expense
	Operating expenses					150,931		121,808			446,012		333,620
	Amortization of other intangible assets					145		171			452		538

		Total other expense				151,076		121,979			446,464		334,158

	Earnings before provision for income taxes and minority interests					131,618		82,181			378,250		189,429
		Provision for income taxes				51,926		32,461			149,345		74,824

			Net earnings before minority interests			79,692		49,720			228,905		114,605
	Minority interests					417		(6	)		1,008		(6	)

				Net earnings	$	79,275	$	49,726		$	227,897	$	114,611

Earnings per share:
	Basic (net earnings divided by weighted-average basic shares outstanding)				$	1.25	$	0.81		$	3.65	$	1.95
	Diluted (net earnings divided by weighted-average diluted shares outstanding)				$	1.18	$	0.78		$	3.46	$	1.87
Weighted-average shares outstanding:
	Basic					63,268		61,254			62,460		58,800
	Diluted					67,055		63,904			65,872		61,421
Dividends declared per share					$	0.40	$	0.32		$	1.14	$	0.87

The accompanying notes are an integral part of these statements.

INDYMAC BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY AND COMPREHENSIVE INCOME


								Accumulated
						Additional		Other						Total						Total
	Shares			Common		Paid-In-		Comprehensive			Retained			Comprehensive			Treasury			Shareholders’
	Outstanding			Stock		Capital		Loss			Earnings			Income			Stock			Equity

	(Unaudited)
	(Dollars in thousands)
Balance at December 31, 2003		56,760,375		$	859	$	1,043,856	$	(26,454	)	$	518,408					$	(519,238	)	$	1,017,431
Common stock issued		3,330,000			33		100,138		—			—		$	—			—			100,171
Common stock options exercised		1,733,116			17		38,366		—			—			—			—			38,383
Net directors’ and officers’ notes receivable payments		—			—		43		—			—			—			—			43
Deferred compensation, restricted stock		114,047			2		1,989		—			—			—			—			1,991
Net unrealized loss on mortgage-backed securities available for sale		—			—		—		(1,719	)		—			(1,719	)		—			(1,719	)
Net unrealized loss on derivatives used in cash flow hedges		—			—		—		(2,987	)		—			(2,987	)		—			(2,987	)
Purchases of common stock		(17,766	)		—		—		—			—			—			(543	)		(543	)
Cash dividends		—			—		—		—			(51,345	)		—			—			(51,345	)
Net earnings		—			—		—		—			114,611			114,611			—			114,611

Total comprehensive income		—			—		—		—			—		$	109,905			—			—

Balance at September 30, 2004		61,919,772		$	911	$	1,184,392	$	(31,160	)	$	581,674					$	(519,781	)	$	1,216,036

Balance at December 31, 2004		61,995,480		$	912	$	1,186,682	$	(20,304	)	$	616,516					$	(519,835	)	$	1,263,971
Common stock options and warrants exercised		1,939,404			19		49,661		—			—		$	—			—			49,680
Net directors’ and officers’ notes receivable payments		—			—		25		—			—			—			—			25
Deferred compensation, restricted stock		265,450			3		3,872		—			—			—			—			3,875
Net unrealized loss on mortgage-backed securities available for sale		—			—		—		(11,688	)		—			(11,688	)		—			(11,688	)
Net unrealized gain on derivatives used in cash flow hedges		—			—		—		18,833			—			18,833			—			18,833
Purchases of common stock		(16,352	)		—		—		—			—			—			(579	)		(579	)
Cash dividends		—			—		—		—			(71,785	)		—			—			(71,785	)
Net earnings		—			—		—		—			227,897			227,897			—			227,897

Total comprehensive income		—			—		—		—			—		$	235,042			—			—

Balance at September 30, 2005		64,183,982		$	934	$	1,240,240	$	(13,159	)	$	772,628					$	(520,414	)	$	1,480,229

The accompanying notes are an integral part of these statements.

INDYMAC BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS


				For the Nine Months Ended
				September 30,

				2005			2004

				(Unaudited)
				(Dollars in thousands)
Cash flows from operating activities:
	Net earnings			$	227,897		$	114,611
	Adjustments to reconcile net earnings to net cash used in operating activities:
		Total amortization and depreciation			201,577			163,373
		Provision for valuation adjustment of mortgage servicing rights			25,598			59,040
		Gain on sale of loans			(454,785	)		(247,804	)
		(Gain) loss on mortgage-backed securities, net			(11,933	)		17,839
		Provision for loan losses			8,425			6,198
		Net increase in deferred tax liability			71,716			21,858
		Net (increase) decrease in other assets and liabilities			1,129			386,126

	Net cash provided by operating activities before activity for trading securities and loans held for sale				69,624			521,241
	Net sales of trading securities				74,550			58,599
	Net purchases of loans held for sale				(3,137,485	)		(3,708,016	)

			Net cash used in operating activities		(2,993,311	)		(3,128,176	)

Cash flows from investing activities:
	Net sales of and payments from loans held for investment				723,685			1,411,939
	Net sales (purchases) of and payments from mortgage-backed securities available for sale				58,182			(195,954	)
	Net increase in investment in Federal Home Loan Bank stock, at cost				(148,140	)		(48,870	)
	Net purchases of property, plant and equipment				(63,082	)		(36,920	)
	Purchase of Financial Freedom, net of cash received				—			(81,408	)

			Net cash provided by investing activities		570,645			1,048,787

Cash flows from financing activities:
	Net increase in deposits				1,515,565			934,736
	Net increase (decrease) in advances from Federal Home Loan Bank				459,000			(153,000	)
	Net increase in borrowings				422,608			1,564,344
	Net proceeds from issuance of common stock				—			100,170
	Net proceeds from stock options, warrants, and notes receivable				49,705			38,427
	Cash dividends paid				(71,785	)		(51,345	)
	Purchases of common stock				(579	)		(543	)

			Net cash provided by financing activities		2,374,514			2,432,789

Net (decrease) increase in cash and cash equivalents					(48,152	)		353,400
Cash and cash equivalents at beginning of period					356,157			115,485

Cash and cash equivalents at end of period				$	308,005		$	468,885

Supplemental cash flow information:
	Cash paid for interest			$	394,625		$	229,305

	Cash paid for income taxes			$	69,935		$	31,335

Supplemental disclosure of non-cash investing and financing activities:
	Net transfer of loans held for sale to loans held for investment			$	1,922,841		$	1,766,881

	Recharacterization of loans to mortgage-backed securities available for sale			$	—		$	1,000,262

	Net transfer of mortgage servicing rights to trading securities			$	8,491		$	13,898

The accompanying notes are an integral part of these statements.

INDYMAC BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2005

(Unaudited)


NOTE 1 —	BASIS OF PRESENTATION

IndyMac Bancorp, Inc. is a savings and loan holding company. References to “IndyMac Bancorp” or the “Parent Company” refer to the parent company alone while references to “IndyMac,” the “Company,” “we” or “us” refer to IndyMac Bancorp and its consolidated subsidiaries.

The consolidated financial statements include the accounts of IndyMac Bancorp and all of its wholly-owned and majority-owned subsidiaries, including IndyMac Bank, F.S.B. (“IndyMac Bank”). All significant intercompany balances and transactions with IndyMac’s consolidating subsidiaries have been eliminated in consolidation. Minority interests in IndyMac’s majority-owned subsidiary are included in “other liabilities” on the consolidated balance sheets and the minority interests on IndyMac’s earnings are reported separately. The consolidated financial statements of IndyMac are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Certain prior year amounts have been reclassified to conform to the current year presentation. The foregoing financial statements are unaudited; however, in the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the results for the interim periods have been included. Operating results for the three and nine months ended September 30, 2005 are not necessarily indicative of the results that may be expected for the year ending December 31, 2005. For further information, refer to the consolidated financial statements and footnotes thereto included in IndyMac’s annual report on Form 10-K for the year ended December 31, 2004.


NOTE 2 —	NEW ACCOUNTING PRONOUNCEMENTS

In December 2004, the Financial Accounting Standards Board (“FASB”) issued Statement No. 123 (revised 2004),“Share-Based Payment”(“SFAS No. 123(R)”), which requires the cost resulting from stock options be measured at fair value and recognized in earnings. This Statement replaces Statement No. 123,“Accounting for Stock-Based Compensation”(“SFAS No. 123”) and supersedes Accounting Principles Board Opinion No. 25,“Accounting for Stock Issued to Employees,”(“APB No. 25”) which permitted the recognition of compensation expense using the intrinsic value method. SFAS No. 123(R) will be effective July 1, 2005. However, on April 15, 2005, the Securities Exchange Commission (“SEC”) issued a press release announcing the amendment of the compliance date for SFAS No. 123(R) to be no later than the beginning of the first fiscal year beginning after June 15, 2005. The Company plans to adopt SFAS No. 123(R) on January 1, 2006 using the modified-retrospective method. Under the modified-retrospective method, the Company is allowed to restate prior periods by recognizing compensation cost in the amount previously reported in the pro forma footnote disclosures under the provisions of SFAS No. 123. We estimate that the impact of adoption of SFAS No. 123(R) will approximate the impact of the adjustments made to determine pro forma net income and pro forma earnings per share under SFAS No. 123.

In March 2005, the SEC issued Staff Accounting Bulletin No. 107 (“SAB No. 107”),Share-Based Payment, providing guidance on option valuation methods, the accounting for income tax effects of share-based payment arrangements upon adoption of SFAS No. 123(R), and the disclosures in MD&A subsequent to the adoption. We will provide SAB No. 107 required disclosures upon adoption of SFAS No. 123(R) on January 1, 2006.

On August 31, 2005, the FASB Staff issued FSP FAS 123(R)-1,Classification and Measurement of Freestanding Financial Instruments Originally Issued in Exchange for Employee Services under FASB Statement No. 123(R). This FSP defers the requirement that that a freestanding financial instrument originally subject to SFAS No. 123(R) becomes subject to the recognition and measurement requirements of other applicable generally accepted accounting principles (GAAP) when the rights conveyed by the instrument to the holder are no longer dependent on the holder being an employee of the entity. Such instruments shall continue to be accounted for under the provisions of SFAS No. 123(R) unless its terms are

INDYMAC BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

modified when the holder is no longer an employee. We will consider the provisions of this FSP and its impact on modified awards upon adoption of SFAS No. 123(R) on January 1, 2006.

On October 18, 2005, the FASB Staff issued FSP FAS 123(R)-2,Practical Accommodation to the Application of Grant Date as Defined in FASB Statement No. 123(R). This FSP permits the presumption that an understanding of the key terms and conditions of an individual employee’s award are known at the date the Board, or other corporate governing body, approves the award, as long as the award is a unilateral grant and the key terms and conditions are expected to be communicated to the recipient within a relatively short period of time. We will consider the provisions of this FSP and its impact on awards granted upon adoption of SFAS No. 123(R) on January 1, 2006.

On March 3, 2005, the FASB Staff issued FSP FIN 46(R)-5,Implicit Variable Interests under FASB Interpretation No. 46 (FIN 46R — Revised December 2003), Consolidation of Variable Interest Entities (“VIE”). This FSP requires a reporting enterprise to consider the impact of implicit variable interests in determining whether the reporting enterprise may absorb variability of the VIE or potential VIE. This staff position was effective in the second quarter of 2005 and its adoption did not have a material impact on our consolidated financial statements.

On September 29, 2005 the FASB posted for comment proposed FSP FIN 46(R)-c,Determining the Variability to be Considered in Applying FASB Interpretation No. 46(R). The proposed FSP describes using a “by design” approach to determine the variability to consider when applying FIN 46(R). Under the “by design” approach, the role of the contract or arrangement in the design of the entity shall govern whether the interest is treated as creating risk, or absorbing risk from the entity. Such review should include a detailed analysis of all documents, including original formation documents, governing documents, marketing materials, other contractual arrangements entered into by the entity, and should determine: a) the purpose for which the entity was created, b) identify the instruments the entity has purchased, issued, or otherwise entered into, and c) identify the variability to consider based on an understanding of the risks and rewards for that entity as a whole. Under the proposed FSP, determination of variability in entities with both senior interests and subordinated interests will be affected depending on whether the subordinated interests are considered substantive, meaning they will absorb expected losses prior to the senior interests. This FSP, if issued as proposed, could impact our accounting for our securitization trust transactions that we frequently enter. The proposed FSP is available for comment through November 30, 2005.

At the April 13, 2005 FASB Board meeting, the Board authorized the final drafting of certain amendments to Statement on Financial Accounting Standards No. 140,Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities(“SFAS 140”) regarding beneficial interests and servicing rights. On August 11, 2005 the Board issued three exposure drafts —Accounting for Transfers of Financial Assets, Accounting for Servicing of Financial Assets and Accounting for Certain Hybrid Financial Instrument —as proposed amendments to SFAS No. 140. Management is currently monitoring and evaluating the potential impact of these various amendments, including the proposed one-time irrevocable election to move servicing rights from a LOCOM (lower of cost or fair market value) to a fair value accounting basis, which management intends to adopt as soon as such election becomes available.

At the June 29, 2005 FASB Board meeting, the Board agreed to issue FSP FAS 115-1,The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investmentswhich will replace the guidance previously set forth in EITF 03-1,The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments. This FSP effectively eliminates the accounting guidance provided in EITF 03-1 in favor of existing impairment recognition guidance under SFAS No. 115, SAB No. 59, APB No. 18, and EITF Topic D-44. The FSP is for periods beginning after September 15, 2005, but its adoption is not expected to have a material impact on our consolidated financial statements.

INDYMAC BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

On October 6, 2005, the FASB Staff issued FSP FAS 13-1,Accounting for Rental Costs Incurred during a Construction Period. This FSP establishes that rental costs associated with ground or building operating leases that are incurred during a construction period shall be recognized as rental expense and included in earnings from continuing operations. The effective date of the FSP is for reporting periods beginning after December 15, 2005, but its adoption is not expected to have a material impact on our consolidated financial statements.

NOTE 3 — MORTGAGE-BACKED SECURITIES AND AGENCY NOTES

As of September 30, 2005 and December 31, 2004, our MBS and agency notes were comprised of the following:


			September 30,		December 31,
			2005		2004

			(Dollars in thousands)
Mortgage-backed securities — Trading
	AAA-rated and agency interest-only securities		$	74,005	$	90,658
	AAA-rated principal-only securities			2,351		18,598
	Prepayment penalty securities			76,178		33,451
	Other investment grade securities			9,359		9,219
	Other non-investment grade securities			—		4,198
	Non-investment grade residual securities			106,638		78,912

		Total mortgage-backed securities — Trading	$	268,531	$	235,036

Mortgage-backed securities and agency notes — Available for sale
	AAA-rated non-agency securities		$	3,241,329	$	3,166,600
	AAA-rated agency securities			45,695		14,903
	Other investment grade securities			84,081		137,603
	Other non-investment grade securities			53,041		78,854
	Non-investment grade HELOC residual securities			47,696		56,475

		Total mortgage-backed securities and agency notes — Available for sale	$	3,471,842	$	3,454,435

INDYMAC BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The unrealized losses and fair value of securities that have been in a continuous unrealized loss position for less than 12 months and 12 months or greater were as follows:


			As of September 30, 2005

			Less Than 12 Months					12 Months or Greater					Total

			Unrealized					Unrealized					Unrealized
			Losses			Fair Value		Losses			Fair Value		Losses			Fair Value

			(Dollars in thousands)
Securities — Available for Sale:
	AAA-rated agency securities		$	(81	)	$	35,070	$	(111	)	$	6,084	$	(192	)	$	41,154
	AAA-rated non-agency securities			(11,274	)		1,218,428		(25,143	)		939,273		(36,417	)		2,157,701
	Other non-investment grade securities			(556	)		29,099		—			—		(556	)		29,099

		Total Securities — Available for Sale	$	(11,911	)	$	1,282,597	$	(25,254	)	$	945,357	$	(37,165	)	$	2,227,954

The securities that have been in unrealized loss position for 12 months or more are primarily related to AAA-rated securities issued by private institutions. These unrealized losses are primarily attributable to changes in interest rates and individually were 5% or less of their respective amortized cost basis.

NOTE 4 — SEGMENT REPORTING

The Company operates through two primary segments: mortgage banking and thrift. The profitability of each operating channel is measured on a fully-leveraged basis after allocating capital based on regulatory capital rules. The Company uses a fund transfer pricing (“FTP”) system to allocate interest expense to the operating channels. Each operating channel is allocated funding with maturities and interest rates matched with the expected lives and repricing frequencies of the channel’s assets. The difference between these allocations and the Company’s actual net interest income and capital levels resulting from centralized management of funding costs is reported in the Treasury unit.

INDYMAC BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

average interest-earning assets, the allowance for loan losses is excluded. Prior period segment results have been revised to conform to current presentation.

Segment information for the three and nine months ended September 30, 2005 and 2004, was as follows:


		Mortgage Banking

		Production			MSRs and			MB									Total
		Divisions			Retained Assets			Overhead			Thrift			Other			Company

(Dollars in thousands)
Three months ended September 30, 2005
	Net interest income	$	35,937		$	12,161		$	33		$	60,518		$	2,777		$	111,426
	Net revenues (expense)		175,808			26,684			655			83,963			(4,416	)		282,694
	Net earnings (loss)		65,599			10,615			(5,647	)		37,751			(29,043	)		79,275
Allocated capital			477,400			251,304			12,680			638,258			19,322			1,398,964
Assets as of September 30, 2005		$	4,618,997		$	1,559,104		$	109,940		$	12,359,345		$	980,358		$	19,627,744
Return on equity			55	%		17	%		N/A			23	%		N/A			22	%
Three months ended September 30, 2004
	Net interest income	$	33,418		$	12,757		$	—		$	55,164		$	(749	)	$	100,590
	Net revenues (expense)		126,149			4,759			608			71,380			1,264			204,160
	Net earnings (loss)		40,068			(152	)		(7,025	)		33,794			(16,959	)		49,726
Allocated capital			315,440			226,674			—			527,220			143,728			1,213,062
Assets as of September 30, 2004		$	3,105,289		$	1,280,942		$	163,503		$	10,598,672		$	991,678		$	16,140,084
Return on equity			51	%		—			N/A			26	%		N/A			16	%
Nine months ended September 30, 2005
	Net interest income (expense)	$	87,031		$	39,076		$	119		$	174,692		$	11,333		$	312,251
	Net revenues (expense)		573,523			70,952			1,606			237,513			(58,880	)		824,714
	Net earnings (loss)		223,976			28,332			(19,181	)		107,688			(112,918	)		227,897
Allocated capital			391,604			246,409			12,343			601,503			72,540			1,324,399
Assets as of September 30, 2005		$	4,618,997		$	1,559,104		$	109,940		$	12,359,345		$	980,358		$	19,627,744
Return on equity			76	%		15	%		N/A			24	%		N/A			23	%
Nine months ended September 30, 2004
	Net interest income (expense)	$	101,822		$	44,583		$	—		$	162,957		$	(7,861	)	$	301,501
	Net revenues (expense)		369,222			11,851			1,681			217,251			(76,418	)		523,587
	Net earnings (loss)		131,094			(2,035	)		(21,406	)		104,393			(97,435	)		114,611
Allocated capital			253,469			210,971			—			504,452			158,999			1,127,891
Assets as of September 30, 2004		$	3,105,289		$	1,280,942		$	163,503		$	10,598,672		$	991,678		$	16,140,084
Return on equity			69	%		—			N/A			28	%		N/A			14	%

INDYMAC BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


NOTE 5 —	STOCK-BASED COMPENSATION

We have two stock incentive plans, the 2002 Incentive Plan, as Amended and Restated, and the 2000 Stock Incentive Plan, as amended (collectively, the “Plans”), which provide for the granting of non-qualified stock options, incentive stock options, restricted stock awards, performance stock awards, stock bonuses and other awards to our employees (including officers and directors). Options and awards are granted at the average market price of our common stock on the date of grant, and vest over varying periods. Options expire ten years from the date of grant. Unearned compensation on stock awards is being amortized to compensation expense over the service period, not exceeding five years, and is recorded as a reduction in shareholders’ equity.

As mentioned in Note 2, the Company will adopt SFAS No. 123(R) on January 1, 2006, which requires the recognition of compensation expenses related to stock options, and will revise all prior periods in accordance with SFAS No. 123(R) at the time of adoption. When revising prior periods under the modified-retrospective-transition method, the compensation cost recognized in prior periods will be the same as previously reported in the pro forma disclosures.

For the second quarter of 2005, we continue to measure and recognize compensation expense using the intrinsic value method specified in Accounting Principles Board Opinion No. 25,“Accounting for Stock Issued to Employees,” and provide disclosures on pro forma net income and pro forma basic and diluted earnings per share as if the fair value method had been applied to all stock awards as required under the provisions of SFAS 148,“Accounting for Stock-Based Compensation — Transition and Disclosure.”

The following table discloses the pro forma net income and pro forma basic and diluted earnings per share for the three and nine months ended September 30, 2005 and 2004:


			Three Months Ended						Nine Months Ended
			September 30,						September 30,

			2005			2004			2005			2004

			(Dollars in thousands, except per share data)
Net Earnings
	As reported		$	79,275		$	49,726		$	227,897		$	114,611
		Stock-based compensation expense		(2,513	)		(2,784	)		(7,901	)		(8,353	)
		Tax effect		779			1,100			2,373			3,300

	Pro forma		$	77,541		$	48,042		$	222,369		$	109,558

Basic Earnings Per Share
	As reported		$	1.25		$	0.81		$	3.65		$	1.95
	Pro forma		$	1.22		$	0.78		$	3.56		$	1.86
Diluted Earnings Per Share
	As reported		$	1.18		$	0.78		$	3.46		$	1.87
	Pro forma		$	1.15		$	0.75		$	3.37		$	1.78

During the three months ended September 30, 2005 and 2004, we recognized compensation expense of $1.3 million ($804,000, net of taxes) and $764,000 ($462,000, net of taxes), respectively, related to restricted stock awards. These expenses were included in net earnings as reported.


NOTE 6 —	DEFINED BENEFIT PENSION PLAN NET PERIODIC COST

We provided a defined benefit pension plan (the “DBP Plan”) to substantially all of our employees hired prior to January 1, 2003. Employees hired after December 31, 2002 are not eligible for the DBP Plan. The net

INDYMAC BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

periodic benefit cost of the DBP Plan, which is based on actuarial assumptions, is presented in the following table for the three and nine months ended September 30, 2005 and 2004:


	Three Months
	Ended						Nine Months Ended
	September 30,						September 30,

	2005			2004			2005			2004

	(Dollars in thousands)
Service cost	$	1,812		$	1,209		$	5,436		$	3,627
Interest cost		507			323			1,521			969
Expected return on assets		(453	)		(294	)		(1,359	)		(882	)
Recognized actuarial loss		139			73			417			219
Amortization of prior service cost		14			14			42			42

Net periodic benefit costs	$	2,019		$	1,325		$	6,057		$	3,975

The weighted-average assumptions used in computing the net periodic cost at September 30, 2005 and 2004, were as follows:


	Three Months
	Ended
	September 30,

	2005		2004

Assumed discount rate		6.00%		6.00%
Rate of compensation increase		4.00%		4.00%
Expected return on assets		7.50%		7.50%

The Company made a lump sum contribution of approximately $6.6 million to the DBP Plan during the third quarter of 2005 for the 2004 plan year.


NOTE 7 —	LEGAL MATTERS

In the ordinary course of business, the Company and its subsidiaries are defendants in or parties to a number of pending or threatened legal actions. Certain of such actions may involve alleged violations of employment laws, unfair trade practices, consumer protection laws, including claims relating to the Company’s loan origination and collection efforts, and other federal and state banking laws. Certain of such actions may include claims for breach of contract, restitution, compensatory damages, punitive damages and other forms of relief. The Company reviews these actions on an on-going basis and follows the provisions of Statement of Financial Accounting Standards No. 5,“Accounting for Contingencies”when making accrual and disclosure decisions. When assessing reasonably possible and probable outcomes, the Company bases its decisions on the evidence discovered and in its possession, the strength of probable witness testimony, the viability of its defenses and the likelihood of prevailing at trial or resolving the matter through alternative dispute resolution. While the Company can give no assurance that it will prevail on all claims made against it or that reserves the Company has established will be sufficient to satisfy any resulting liabilities, management believes, based on current knowledge and after consultation with counsel, that these legal actions, individually and in the aggregate, and the losses, if any, resulting from the final outcome thereof, will not have a material adverse effect on the Company and its subsidiaries’ financial position or results of operations.


ITEM 4.	*CONTROLS AND PROCEDURES*

The management of IndyMac is responsible for establishing and maintaining effective disclosure controls and procedures, as defined under Rules 13a-15 and 15d-15 of Securities Exchange Act of 1934. As of September 30, 2005, an evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of IndyMac’s disclosure controls and procedures. Based on that evaluation, management concluded that IndyMac’s disclosure controls and procedures as of September 30, 2005 were effective in ensuring that information required to be disclosed in this Quarterly Report on Form 10-Q was recorded, processed, summarized, and reported within the time period required by the SEC’s rules and forms.

There have been no significant changes in the Company’s internal control over financial reporting or in other factors that could significantly affect the Company’s disclosure of controls and procedures subsequent to September 30, 2005.

PART II. OTHER INFORMATION


ITEM 1.	*LEGAL PROCEEDINGS*


ITEM 2.	*UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS*

See “Share Repurchase Activities” beginning on page xx for a discussion of share repurchases conducted by IndyMac during the third quarter of 2005.


ITEM 5.	*OTHER INFORMATION*

None to report.


ITEM 6.	*EXHIBITS*


10	.1	IndyMac Bancorp, Inc. Board Compensation Policy & Stock Ownership Requirements, as Amended, Effective September 28, 2005.
31	.1	Chief Executive Officer’s Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31	.2	Chief Financial Officer’s Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	.1	Chief Executive Officer’s Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32	.2	Chief Financial Officer’s Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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, in the City of Pasadena, State of California, on October 31, 2005.


	INDYMAC BANCORP, INC.
	(Registrant)


	By:	/s/Michael W. Perry



	Michael W. Perry
	Chairman of the Board of Directors
	and Chief Executive Officer


	By:	/s/Scott Keys



	Scott Keys
	Executive Vice President
	and Chief Financial Officer

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IndyMac Bancorp (IDMCQ) Inactive 10-Q2005 Q3 Quarterly report

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