IndyMac Bancorp (IDMCQ) 8-K Results of Operations and Financial Condition

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): January 25, 2007 (January 23, 2007)

INDYMAC BANCORP, INC.

(Exact name of registrant as specified in its charter)

Delaware	1-08972	95-3983415
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

888 East Walnut Street, Pasadena, California91101-7211

(Address of Principal Executive Office)

Registrant’s telephone number, including area code:

(800) 669-2300

Check the appropriate box below if theForm 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

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

o  Soliciting material pursuant toRule 14a-12 under the Exchange Act (17 CFR240.14a-12)

o   Pre-commencement communications pursuant toRule 14d-2(b) under the Exchange Act (17 CFR240.14d-2(b))

o   Pre-commencement communications pursuant toRule 13e-4(c) under the Exchange Act (17 CFR240.13e-4(c))

TABLE OF CONTENTS

		Page
Item 2.02	Results of Operations and Financial Condition		2
Item 7.01	Regulation FD Disclosure		2
	Forward-looking Statements		2
	Management’s Discussion and Analysis of Financial Condition and Results of Operations		2
	Highlights		2
	Summary of Business Segment Results		6
	Product Profitability Analysis		13
	Loan Production		20
	Loan Sales		25
	Mortgage Servicing and Other Retained Assets		28
	Mortgage-Backed Securities and Loans Held for Investment		36
	Net Interest Margin		44
	Interest Rate Sensitivity		48
	Credit Risk and Reserves		49
	Expenses		53
	Share Repurchase Activities		54
	Future Outlook		54
	Liquidity and Capital Resources		55
Item 9.01	Financial Statements and Exhibits		60
	Consolidated Balance Sheets		60
	Consolidated Statements of Earnings		61
	Consolidated Statements of Stockholders’ Equity and Comprehensive Income		62
	Consolidated Statements of Cash Flows		63
Item 5.02	Departure of Directors or Principal Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers		64
Item 5.03(a)	Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year		65
Exhibit 3.1	IndyMac Bancorp, Inc. Amended and Restate Bylaws
Exhibit 10.1	Board Compensation Policy and Stock Ownership Requirements, revised January 23, 2007
Exhibit 99.1	Press Release regarding IndyMac Bancorp, Inc. Earnings for the Three Months and Year Ended December 31, 2006
Exhibit 99.2	Webcast Presentation regarding IndyMac Bancorp, Inc. Earnings Review
Signature			68
EXHIBIT 3.1
EXHIBIT 10.1
EXHIBIT 99.1
EXHIBIT 99.2

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ITEM 2.02.  RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On January 25, 2007, IndyMac Bancorp, Inc., a Delaware corporation (the “Company” or “Indymac Bancorp”), issued an earnings press release announcing its results of operations and financial condition for the quarter and the year ended December 31, 2006. A copy of the Company’s press release is furnished as Exhibit 99.1 hereto.

On January 25, 2007, the Company will host a live webcast presentation in connection with its quarterly release of earnings. A copy of the Company’s webcast presentation is furnished as Exhibit 99.2 hereto.

ITEM 7.01.  REGULATION FD DISCLOSURE

FORWARD-LOOKING STATEMENTS

Certain statements contained in thisForm 8-K may be deemed to be forward-looking statements within the meaning of the federal securities laws. The words “anticipate,” “believe,” “estimate,” “expect,” “project,” “plan,” “forecast,” “intend,” “goal,” “target,” and similar expressions identify forward-looking statements that are inherently subject to risks and uncertainties, many of which cannot be predicted or quantified. Actual results and the timing of certain events could differ materially from those projected in or contemplated by the forward-looking statements due to a number of factors, including,the effect of economic and market conditions including industry volumes and margins; the level and volatility of interest rates; the Company’s hedging strategies, hedge effectiveness and asset and liability management; the accuracy of subjective estimates used in determining the fair value of financial assets of Indymac; the credit risks with respect to our loans and other financial assets; the actions undertaken by both current and potential new competitors;the availability of funds from Indymac’s lenders and from loan sales and securitizations to fund mortgage loan originations and portfolio investments;the execution of Indymac’s growth plans and ability to gain market share in a significant market transition; the impact of disruptions triggered by natural disasters; the impact of current, pending or future legislation,regulationsor litigation; and other risk factors described in the reports that Indymac files with the Securities and Exchange Commission, including its Annual Report onForm 10-K, Quarterly Reports onForm 10-Q, and its reports onForm 8-K.

While all of the above items are important, the highlighted items represent those that, in management’s view, merit increased focus given current conditions.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

HIGHLIGHTS

The following highlights the Company’s consolidated financial condition and results of operations for the quarters and years ended December 31, 2006 and 2005 and the quarter ended September 30, 2006. The 2005 data has been retrospectively adjusted to reflect the stock option expenses under Statement of Financial Accounting Standards (“SFAS”) No. 123(R),Share-Based Payment (“SFAS No. 123(R)”). The 2006 data reflects the Company’s adoption of SFAS No. 158,Employer’s Accounting for Defined Benefit Pension and Other Postretirement Plans(“SFAS No. 158”), on December 31, 2006. SFAS No. 158 requires (a) recognition of the funded status (measured as the difference between the fair value of the plan assets and the benefit obligation) of a benefit plan as an asset or liability in the employer’s statement of financial position, (b) measurement of the funded status as of the employer’s fiscal year-end with limited exceptions, and (c) recognition of changes in the funded status in the year in which the changes occur through comprehensive income. As a result, the Company recorded in its consolidated balance sheet an increase in pension and other postretirement liability of $10.1 million, deferred taxes of $3.9 million and accumulated other comprehensive income (“AOCI”) of $6.2 million.

References to “Indymac Bancorp” or the “Parent Company” refer to the parent company, IndyMac Bancorp, Inc., alone, while references to “Indymac,” the “Company,” or “we” refer to the parent company and its consolidated subsidiaries. References to “Indymac Bank” or the “Bank” refer to our subsidiary IndyMac Bank, F.S.B. and its consolidated subsidiaries.

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	Three Months Ended									Year Ended
	December 31,			December 31,			September 30,			December 31,			December 31,
	2006			2005			2006			2006			2005
	(Dollars in millions, except per share data)
Selected Balance Sheet Information (at period end)(1)
Cash and cash equivalents	$	542		$	443		$	521		$	542		$	443
Securities (trading and available for sale)		5,443			4,102			4,950			5,443			4,102
Loans held for sale		9,468			6,024			8,341			9,468			6,024
Loans held for investment		10,177			8,278			10,030			10,177			8,278
Allowance for loan losses		(62	)		(55	)		(61	)		(62	)		(55	)
Mortgage servicing rights		1,822			1,094			1,631			1,822			1,094
Other		2,105			1,566			1,973			2,105			1,566
Total Assets		29,495			21,452			27,385			29,495			21,452
Deposits		10,898			7,672			10,111			10,898			7,672
Advances from Federal Home Loan Bank		10,413			6,953			9,333			10,413			6,953
Other borrowings		4,637			4,367			4,595			4,637			4,367
Other liabilities		1,519			917			1,409			1,519			917
Total Liabilities		27,467			19,909			25,448			27,467			19,909
Shareholders’ Equity		2,028			1,543			1,938			2,028			1,543
Income Statement(1)
Net interest income before provision for loan losses	$	133		$	109		$	137		$	527		$	425
Provision for loan losses		9			2			5			20			10
Gain on sale of loans		165			137			160			668			592
Service fee income		22			19			21			101			44
(Loss) gain on mortgage-backed securities, net		(4	)		6			19			21			18
Fee and other income		13			11			14			50			37
Net revenues		320			281			346			1,347			1,106
Operating expenses		211			163			203			789			618
Net earnings		72			70			86			343			293
Basic earnings per share(2)		1.02			1.11			1.25			5.07			4.67
Diluted earnings per share(3)		0.97			1.06			1.19			4.82			4.43
Other Operating Data
Mortgage production	$	25,946		$	18,025		$	23,968		$	89,951		$	60,774
Total loan production(4)		26,328			18,478			24,439			91,698			62,714
Mortgage industry share(5)		4.51	%		2.51	%		3.83	%		3.59	%		2.01	%
Pipeline of mortgage loans in process(6)		11,821			10,488			14,556			11,821			10,488
Loans sold		23,417			15,570			19,508			79,049			52,297
Loans sold/mortgage loans produced		90	%		86	%		81	%		88	%		86	%
Mortgage loans serviced for others (as of period end)(7)		139,817			84,495			124,395			139,817			84,495
Total mortgage loans serviced (as of period end)		147,994			90,721			130,807			147,994			90,721
Average full-time equivalent employees		8,477			6,733			8,186			7,935			6,240
Other Per Share Data
Dividends declared per share	$	0.50		$	0.42		$	0.48		$	1.88		$	1.56
Dividend payout ratio(8)		52	%		40	%		40	%		39	%		35	%
Book value per share at period end		27.78			24.02			27.35			27.78			24.02
Closing price per share at period end		45.16			39.02			41.16			45.16			39.02
Average Common Shares (in thousands)
Basic		71,059			63,650			68,866			67,701			62,760
Diluted		74,443			66,737			72,286			71,118			66,115
Performance Ratios
Return on average equity (“ROE”) (annualized)		14.56	%		18.62	%		18.27	%		19.09	%		21.23	%
Return on average assets (“ROA”) (annualized)		0.85	%		1.18	%		1.17	%		1.17	%		1.38	%
Net interest income to pretax income after minority interest		122.52	%		93.44	%		95.97	%		94.82	%		87.55	%
Net interest margin		1.76	%		2.01	%		2.13	%		2.02	%		2.16	%
Net interest margin, thrift(9)		1.64	%		2.02	%		2.02	%		1.93	%		2.10	%
Mortgage banking revenue (“MBR”) margin on loans sold(10)		0.91	%		1.10	%		1.03	%		1.06	%		1.36	%
Efficiency ratio(11)		64	%		58	%		58	%		58	%		55	%
Operating expenses to loan production		0.80	%		0.88	%		0.83	%		0.86	%		0.99	%
Balance Sheet and Asset Quality Ratios
Average interest-earning assets	$	29,868		$	21,614		$	25,507		$	26,028		$	19,645
Average equity		1,969			1,501			1,871			1,796			1,381
Debt to equity ratio(12)		13.5:1			12.9:1			13.1:1			13.5:1			12.9:1
Core capital ratio(13)		7.39	%		8.21	%		7.60	%		7.39	%		8.21	%
Risk-based capital ratio(13)		11.72	%		12.20	%		11.62	%		11.72	%		12.20	%
Non-performing assets to total assets		0.63	%		0.34	%		0.51	%		0.63	%		0.34	%
Allowance for loan losses to total loans held for investment		0.61	%		0.67	%		0.61	%		0.61	%		0.67	%
Allowance for loan losses to non-performing loans held for investment		57.51	%		127.10	%		77.43	%		57.51	%		127.10	%
Loan Loss Activity
Allowance for loan losses to annualized net charge-offs		2.0	x		7.2	x		8.2	x		4.9	x		7.2	x
Provision for loan losses to net charge-offs		117.77	%		80.97	%		267.45	%		156.50	%		129.57	%
Net charge-offs (annualized) to average non-performing loans held for investment		32.47	%		17.63	%		10.45	%		16.82	%		16.65	%
Net charge-offs (annualized) to average loans held for investment		0.31	%		0.10	%		0.08	%		0.14	%		0.10	%

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(1)	The items under the balance sheet and income statement sections are rounded individually and therefore may not necessarily add up to the total due to such rounding.
(2)	Net earnings for the period divided by weighted average basic shares outstanding for the period.
(3)	Net earnings for the period divided by weighted average dilutive shares outstanding for the period.
(4)	Includes newly originated commitments on construction loans.
(5)	Our market share is calculated based on our total loan production, both purchased (correspondent and conduit) and originated (retail and wholesale), in all channels (the numerator) divided by the Mortgage Bankers Association (“MBA”) January 8, 2007 Mortgage Finance Long-Term Forecast estimate of the overall mortgage market (the denominator). 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, 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.
(6)	The amount includes $1.9 billion, $1.3 billion and $2.8 billion of non-specific rate locks on bulk purchases in our conduit channel at December 31, 2006, December 31, 2005 and September 30, 2006, respectively.
(7)	Represents the unpaid principal balance on loans sold with servicing retained by Indymac.
(8)	Dividends declared per common share as a percentage of diluted earnings per share.
(9)	Net interest margin, thrift represents the combined margin from thrift, elimination and other, and corporate overhead.
(10)	Mortgage banking revenue margin is calculated using the sum of consolidated gain on sale of loans and the net interest income earned on loans held for sale by our mortgage banking production divisions divided by total loans sold.
(11)	Defined as operating expenses divided by net interest income and other income.
(12)	Debt includes deposits.
(13)	Ratio is for Indymac Bank and 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.

SUMMARY OF OVERALL RESULTS

Three Months ended December 31, 2006

The Company recorded net earnings of $72.2 million, or $0.97 per share, for the fourth quarter of 2006. This represented an increase of 3% and a decrease of 8% in net earnings and earnings per share, respectively, compared with net earnings of $70.4 million, or $1.06 per share, for the fourth quarter of 2005. The earnings for the fourth quarter of 2005 were retrospectively adjusted to reflect the stock option expenses due to the adoption of SFAS No. 123(R). Weighted-average diluted shares outstanding increased to $74.4 million shares for the fourth quarter of 2006 from $66.7 million shares a year ago, mainly due to the issuance of common stock through the Direct Stock Purchase Plan and exercise of common stock options and warrants. Return on equity was 15% for the fourth quarter of 2006 compared with 19% for the fourth quarter of 2005.

Net revenues in the fourth quarter of 2006 were $319.5 million, reflecting an increase of 14% over the fourth quarter of 2005. Key drivers of this growth included the following:

1) Growth in average interest earning assets of 38% from $21.6 billion during the quarter ended December 31, 2005 to $29.9 billion for the quarter ended December 31, 2006, leading to an increase in net interest income of 21% to $132.6 million. However, Indymac’s net interest margin declined to 1.76% in the fourth quarter of 2006 compared to 2.01% in the fourth quarter of 2005 as we continued to experience the negative impact from the yield curve inversion and an increase in our thrift funding cost due to the maturity of

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lower rate fixed-rate liability. The increase in average interest earning assets primarily resulted from growth in production, increased retention of securities and loans in our held for investment portfolio, offset by the sale of loans.

2) Growth in our mortgage production of 44% over the fourth quarter of 2005 to an all-time record of $25.9 billion, representing market share of 4.51% based on the industry volume published by the MBA on January 8, 2007. The increase in production led to an increase in loans sold to $23.4 billion, or 90% of mortgage loans produced in the fourth quarter of 2006, and consequently to an increase in gain on sale of loans, a key component of net revenue. This increase in loans sold mitigated theyear-over-year decline in the revenue margin on sales. The MBR margin on loans sold was 0.91% in the fourth quarter of 2006, which was down from 1.10% in the fourth quarter of 2005, and 1.03% in the third quarter of 2006. The decline in MBR margin is due to a decline in higher margin pay option ARM volume and due to a higher mix of lower margin conduit and correspondent channel volume.

3) An increase in credit costs related to the loan loss provision, secondary market reserve, andmarking-to-market delinquent loansheld-for-sale and residuals and non-investment grade securities.

•  Provision for loan loss increased from $1.6 million for the fourth quarter of 2005 to $9.0 million for the fourth quarter of 2006. The increase is a direct result of increased delinquencies in our portfolio. Non-performing assets increased during the quarter to 0.63% of total assets at December 31, 2006 compared to 0.34% of total assets at December 31, 2005. The allowance for loan losses currently represents 2.0 times annualized net charge-offs, down from 7.2 times at December 31, 2005, as annualized net charge-offs in the fourth quarter of 2006 increased to 0.31% of average loans held for investment from 0.10% during the fourth quarter of 2005.

•  Net (loss) gain on mortgage-backed securities decreased from a gain of $5.9 million in the fourth quarter of 2005 to a loss of $4.1 million in the fourth quarter of 2006. The decrease was primarily due to higher unrealized losses on AAA-rated and agency interest-only and residual securities of $10.3 million and increased impairment on mainly residual securities of $4.5 million, partially offset by an increase in unrealized gain on prepayment penalty securities of $2.5 million. The unrealized losses and impairment mainly resulted from higher loss assumptions based on our recent credit experience and projected credit performance in certain HELOC residual securities in our thrift segment. In addition, a change in prepayment modeling on certain residual and non-investment grade securities resulted in an impairment of $5.3 million.

4) Service fee income of $22.1 million in the fourth quarter of 2006 grew 18% over the fourth quarter of 2005 mainly driven by a 65% increase in the principal amount of mortgage loans serviced for others to $139.8 billion at December 31, 2006.

Operating expenses of $210.8 million also reflected a 29% increase from the fourth quarter of 2005, consistent with the growth in our operations and infrastructure investments to execute on our strategy to increase production and revenue. During 2006, we opened three new regional centers, which increased our total regional centers to 16 at December 31, 2006. In addition, average full-time equivalent employees (“FTE”) increased 26% to 8,477 for the fourth quarter of 2006.

The effective tax rate on earnings for the quarter ended December 31, 2006 decreased to 39.1% from the 39.5% for the quarter ended December 31, 2005. The decline was due to a lower blended state tax rate as the Company further expanded geographically into states with lower tax rates. The cumulative effect of the decline for the year and the effect of the decline on the net deferred tax liability further reduced the effective tax rate for the fourth quarter of 2006 to 33.3% from the 39.7% for the fourth quarter of 2005.

Year ended December 31, 2006

For the year ended December 31, 2006, the Company’s net earnings were $342.9 million, or $4.82 per share, an all-time record. This represents an increase of 17% from $293.1 million, or $4.43 per share, for the year ended December 31, 2005, while the industry volumes were down by 17%. The earnings for the year ended December 31,

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2005 were also retrospectively adjusted to reflect stock option expenses resulting from the adoption of SFAS No. 123(R). Return on equity was 19% for the year ended December 31, 2006 compared with 21% for the year ended December 31, 2005.

Net revenues of $1.3 billion for 2006 reflect an increase of 22% over 2005. Key drivers of this growth included the following:

1) Growth in average interest earning assets of 32% from $19.6 billion in 2005 to $26.0 billion in 2006, leading to an increase in net interest income of 24% to $526.7 million. The increase is primarily driven by the growth in production as mentioned above. Net interest margin declined from 2.16% to 2.02% during a period in which the Federal Reserve increased short-term interest rates by 100 basis points. The yield curve inversion and increase in thrift segment funding costs mentioned above contributed to the decline. This decline somewhat mitigated the positive impact from the growth in average interest earning assets.

2) Growth in mortgage production of 48% in 2006 over 2005 to $90.0 billion, led to a 51% increase in loans sold to $79.0 billion. Our market share increased from 2.01% in 2005 to 3.59% in 2006. Leading this growth were our Financial Freedom and conduit channels with increases in production of 71% and 90%, respectively. This volume growth mitigated a decline in the MBR margin on loans sold, resulting from the previously mentioned shift in product and channel mix. Increased credit costs also impacted the MBR margin, albeit to a significantly lesser effect. The MBR margin on loans sold was 1.06% in 2006, down from 1.36% in 2005.

3) Provision for loan loss increased from $10.0 million for 2005 to $20.0 million for 2006 due to a considerable increase in our non-performing assets and related charge-offs. The allowance for loan losses currently represents 4.9 times net charge-offs, down from 7.2 times at December 31, 2005 as net charge-offs for 2006 increased 4 basis points to 0.14% of average loans held for investment.

4) Service fee income of $101.3 million in 2006 grew 129% over 2005 driven by the increase in the principal balance of loans serviced for others combined with solid hedging performance and slowing prepayments attributable to higher mortgage rates.

Operating expenses of $789.0 million reflected an increase of 28%, consistent with our strategy for growth as mentioned above. Accordingly, average FTE increased 27% from 6,240 to 7,935 during the year supporting this growth. The effective tax rate on earnings for the year ended December 31, 2006 decreased to 39.1% from the 39.5% for the year ended December 31, 2005. The decline was due to a lower blended state tax rate as mentioned earlier. The effect of the decline on the net deferred tax liability further reduced the effective tax rate for the year ended December 31, 2006 to 38.2%.

SUMMARY OF 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. Please refer to the Company’s annual report onForm 10-K for the year ended December 31, 2005 (“200510-K”), page 23, for further discussions of the divisions within the mortgage banking and thrift segments.

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The tables below summarize thequarter-over-quarter performance of Indymac’s divisions. Detailed operating results for each division are provided on pages 9 to 12.

	Mortgage Banking
				MSRs and
				Other			Mortgage												Total
	Production			Retained			Banking									Elimination			Operating			Corporate			Total
	Divisions			Assets			Overhead(1)			Total			Thrift			& Other			Results			Overhead			Company
	(Dollars in thousands)
Net Income Q406	$	70,500		$	18,117		$	(8,684	)	$	79,933		$	24,819		$	(3,900	)	$	100,852		$	(28,611	)	$	72,241
Net Income Q405		60,115			18,609			(7,368	)		71,356			32,177			(11,126	)		92,407			(21,969	)		70,438
$ Change		10,385			(492	)		(1,316	)		8,577			(7,358	)		7,226			8,445			(6,642	)		1,803
% Change		17	%		(3	)%		(18	)%		12	%		(23	)%		65	%		9	%		(30	)%		3	%
Average Capital Q406	$	668,250		$	430,267		$	17,246		$	1,115,763		$	706,480		$	2,541		$	1,824,784		$	143,799		$	1,968,583
Average Capital Q405		442,917			225,999			10,273			679,189			583,091			1,696			1,263,976			236,671			1,500,647
% Change		51	%		90	%		68	%		64	%		21	%		50	%		44	%		(39	)%		31	%
ROE Q406		42	%		17	%		N/A			28	%		14	%		N/A			22	%		N/A			15	%
ROE Q405		54	%		33	%		N/A			42	%		22	%		N/A			29	%		N/A			19	%
% Change		(22	)%		(49	)%		N/A			(32	)%		(36	)%		N/A			(24	)%		N/A			(22	)%

(1) Included production division overhead and servicing overhead of $5.9 million and $2.8 million, respectively, for the fourth quarter of 2006. For the fourth quarter of 2005, the production division overhead and servicing overhead were $4.9 million and $2.5 million, respectively.

	Mortgage Banking Production Divisions
	Mortgage Professionals Group												Consumer			Financial			Production
	Wholesale			Correspondent			Conduit			Total			Direct			Freedom			Divisions
	(Dollars in thousands)
Net Income Q406	$	32,658		$	1,682		$	16,818		$	51,158		$	594		$	18,748		$	70,500
Net Income Q405		38,283			2,747			10,750			51,780			(61	)		8,396			60,115
$ Change	$	(5,625	)	$	(1,065	)	$	6,068		$	(622	)	$	655		$	10,352		$	10,385
% Change		(15	)%		(39	)%		56	%		(1	)%		N/M			123	%		17	%
Average Capital Q406	$	235,845		$	64,863		$	230,960		$	531,668		$	9,377		$	127,205		$	668,250
Average Capital Q405		185,391			37,931			132,836			356,158			16,969			69,790			442,917
% Change		27	%		71	%		74	%		49	%		(45	)%		82	%		51	%
ROE Q406		55	%		10	%		29	%		38	%		25	%		58	%		42	%
ROE Q405		82	%		29	%		32	%		58	%		(1	)%		48	%		54	%
% Change		(33	)%		(64	)%		(10	)%		(34	)%		N/M			23	%		(22	)%

	Thrift
										Consumer
	Mortgage-			Prime SFR			Home			Construction			Builder
	Backed			Mortgage			Equity			and Lot			Construction			Warehouse			Discontinued
	Securities			Loans			Division			Loans			Financing			Lending			Products			Total Thrift
	(Dollars in thousands)
Net Income Q406	$	3,011		$	6,620		$	2,851		$	5,340		$	6,608		$	432		$	(43	)	$	24,819
Net Income Q405		4,145			11,382			6,023			4,105			6,743			(220	)		(1	)		32,177
$ Change	$	(1,134	)	$	(4,762	)	$	(3,172	)	$	1,235		$	(135	)	$	652		$	(42	)	$	(7,358	)
% Change		(27	)%		(42	)%		(53	)%		30	%		(2	)%		N/M			N/M			(23	)%
Average Capital Q406	$	65,217		$	246,883		$	140,692		$	127,789		$	107,536		$	14,983		$	3,380		$	706,480
Average Capital Q405		43,861			216,044			109,808			111,183			94,105			3,986			4,104			583,091
% Change		49	%		14	%		28	%		15	%		14	%		276	%		(18	)%		21	%
ROE Q406		18	%		11	%		8	%		17	%		24	%		11	%		(5	)%		14	%
ROE Q405		37	%		21	%		22	%		15	%		28	%		(22	)%		—			22	%
% Change		(51	)%		(49	)%		(63	)%		13	%		(14	)%		N/M			N/M			(36	)%

7

Total capital deployed in our operating business segments increased 44% to $1.8 billion in the fourth quarter of 2006 and earned a 22% return on equity before the impact of corporate overhead. Net of corporate overhead and including the excess undeployed capital, Indymac’s average capital of $2.0 billion earned a 15% return on equity for the fourth quarter of 2006.

We deployed 34% of our capital, or $668.3 million, into our mortgage production divisions in the fourth quarter of 2006, an increase of 51% over the fourth quarter of 2005. Mortgage production earnings grew 17%; however the return on equity declined from 54% to 42% reflecting the narrower mortgage banking revenue margins. The wholesale and correspondent divisions reflected stronger productionyear-over-year, but a reduction in net income as margins were lower in these two business linesyear-over-year. Our conduit division had a strong quarter with earnings growth of 56% mainly attributable to growth in production of 78%, while return on equity of 29% remained flat. Our reverse mortgage division continued to demonstrate strong returns with earnings and production growth of 123% and 51%, respectively.

We deployed 22% of our capital, or $430.3 million, into the MSRs and other retained assets division, up from 15% one year ago. This division’s ROE returned to a more normal level, declining from 33% in the fourth quarter of 2005 to 17% in the fourth quarter of 2006. We target our pricing and hedging strategies to earn expected ROE of 18% to 23% for this segment. Given the volatility in this segment, returns in a quarter may substantially exceed or fall below the targeted level.

We deployed 36% of our capital, or $706.5 million, to the thrift segment, a 21% increase over last year. Thrift’s return on equity declined from 22% to 14% over the same period. Net interest margin declined from 1.84% to 1.40%. Factors contributing to the decline included increased non-performing loans, higher cost of funds, higher cost of hedging, and higher premium amortization. As a result, net interest income remained flat in spite of 28% increase in average interest earning assets. Additionally, provision for loan losses and write-downs on HELOC residual securities increased substantially due to worsening credit quality of our portfolio and the collateral supporting the residual securities.

8

DETAIL CHANNEL SEGMENT RESULTS

The following tables summarize the Company’s financial results for the three months ended December 31, 2006 and 2005 by its two primary segments via each of its operating divisions:

	Mortgage Banking
				MSRs
				and
				Other			Mortgage												Total
	Production			Retained			Banking									Elimination			Operating			Corporate			Total
	Divisions			Assets			Overhead(1)			Total			Thrift			& Other(2)			Results			Overhead			Company
	(Dollars in thousands)
Three Months Ended December 31, 2006
Operating Results
Net interest income	$	48,667		$	15,758		$	428		$	64,853		$	56,900		$	13,763		$	135,516		$	(2,870	)	$	132,646
Provision for loan losses		—			—			—			—			(8,953	)		—			(8,953	)		—			(8,953	)
Gain (loss) on sale of loans		155,153			11,788			—			166,941			17,395			(19,365	)		164,971			—			164,971
Service fee income		6,455			15,016			—			21,471			(445	)		1,097			22,123			—			22,123
Gain (loss) on securities		—			863			—			863			(5,835	)		843			(4,129	)		—			(4,129	)
Other income		495			3,273			858			4,626			8,201			(494	)		12,333			513			12,846
Net revenues (expense)		210,770			46,698			1,286			258,754			67,263			(4,156	)		321,861			(2,357	)		319,504
Operating expenses		157,819			19,875			15,546			193,240			30,417			13,608			237,265			44,623			281,888
Deferred expense under SFAS 91		(63,162	)		(2,925	)		—			(66,087	)		(3,905	)		(655	)		(70,647	)		—			(70,647	)
Pretax income (loss)		116,113			29,748			(14,260	)		131,601			40,751			(17,109	)		155,243			(46,980	)		108,263
Net income (loss)	$	70,500		$	18,117		$	(8,684	)	$	79,933		$	24,819		$	(3,900	)	$	100,852		$	(28,611	)	$	72,241
Relevant Financial and Performance Data
Average interest-earning assets	$	12,415,322		$	1,041,331		$	2,974		$	13,459,627		$	16,122,311		$	(90,071	)	$	29,491,867		$	376,247		$	29,868,114
Allocated capital		668,250			430,267			17,246			1,115,763			706,480			2,541			1,824,784			143,799			1,968,583
Loans produced		24,210,906			1,009,730			N/A			25,220,636			1,107,380			N/A			26,328,016			N/A			26,328,016
Loans sold		23,335,591			655,085			N/A			23,990,676			1,476,125			(2,049,366	)		23,417,435			N/A			23,417,435
MBR margin		0.87	%		1.80	%		N/A			0.90	%		1.18	%		N/A			N/A			N/A			0.91	%
ROE		42	%		17	%		N/A			28	%		14	%		N/A			22	%		N/A			15	%
ROA		2.20	%		2.33	%		N/A			1.99	%		0.61	%		N/A			1.24	%		N/A			0.85	%
Net interest margin, thrift.		N/A			N/A			N/A			N/A			1.40	%		N/A			N/A			N/A			1.64	%
Average FTE		4,807			280			1,139			6,226			648			324			7,198			1,279			8,477
Three Months Ended December 31, 2005
Operating Results
Net interest income	$	33,883		$	8,898		$	(1,286	)	$	41,495		$	58,394		$	10,977		$	110,866		$	(1,467	)	$	109,399
Provision for loan losses		—			—			—			—			(1,553	)		—			(1,553	)		—			(1,553	)
Gain (loss) on sale of loans		136,416			6,555			—			142,971			7,726			(13,307	)		137,390			—			137,390
Service fee income		3,767			20,104			—			23,871			1,662			(6,819	)		18,714			—			18,714
Gain (loss) on securities		—			4,823			—			4,823			591			519			5,933			—			5,933
Other income		278			694			502			1,474			9,493			(46	)		10,921			192			11,113
Net revenues (expense)		174,344			41,074			(784	)		214,634			76,313			(8,676	)		282,271			(1,275	)		280,996
Operating expenses		128,109			10,920			11,394			150,423			27,967			10,360			188,750			34,437			223,187
Deferred expense under SFAS 91		(53,186	)		(605	)		—			(53,791	)		(4,839	)		(645	)		(59,275	)		—			(59,275	)
Pretax income (loss)		99,421			30,759			(12,178	)		118,002			53,185			(18,391	)		152,796			(35,712	)		117,084
Net income (loss)	$	60,115		$	18,609		$	(7,368	)	$	71,356		$	32,177		$	(11,126	)	$	92,407		$	(21,969	)	$	70,438
Relevant Financial and Performance Data
Average interest-earning assets	$	7,670,179		$	578,921		$	(546	)	$	8,248,554		$	12,571,207		$	(81,156	)	$	20,738,605		$	875,121		$	21,613,726
Allocated capital		442,917			225,999			10,273			679,189			583,091			1,696			1,263,976			236,671			1,500,647
Loans produced		16,845,128			353,180			—			17,198,308			1,279,499			—			18,477,807			—			18,477,807
Loans sold		16,256,493			378,474			—			16,634,967			814,811			(1,879,599	)		15,570,179			—			15,570,179
MBR margin		1.05	%		1.73	%		N/A			1.06	%		0.95	%		N/A			N/A			N/A			1.10	%
ROE		54	%		33	%		N/A			42	%		22	%		N/A			29	%		N/A			19	%
ROA		3.04	%		4.32	%		N/A			2.93	%		1.01	%		N/A			1.65	%		N/A			1.18	%
Net interest margin, thrift.		N/A			N/A			N/A			N/A			1.84	%		N/A			N/A			N/A			2.02	%
Average FTE		3,751			166			877			4,794			639			263			5,696			1,037			6,733

(1)	Included production division overhead and servicing overhead of $5.9 million and $2.8 million, respectively, for the fourth quarter of 2006. For the fourth quarter of 2005, the production division overhead and servicing overhead were $4.9 million and $2.5 million, respectively.
(2)	Included are eliminations, deposits, and treasury items, the details of which are provided on page 12.

9

The following tables provide additional detail on the results for the production divisions of our mortgage banking segment for the three months ended December 31, 2006 and 2005:

	Mortgage Banking Production Divisions
																Financial
																Freedom			Total
	Mortgage Professionals Group												Consumer			(Reverse			Production
	Wholesale			Correspondent			Conduit			Total			Direct			Mortgage)			Divisions
	(Dollars in thousands)
Three Months Ended December 31, 2006
Operating Results
Net interest income	$	17,026		$	4,576		$	22,383		$	43,985		$	587		$	4,095		$	48,667
Provision for loan losses		—			—			—			—			—			—			—
Gain (loss) on sale of loans		81,936			3,396			13,975			99,307			6,961			48,885			155,153
Service fee income		—			—			—			—			—			6,455			6,455
Gain (loss) on securities		—			—			—			—			—			—			—
Other income		—			—			(136	)		(136	)		443			188			495
Net revenues (expense)		98,962			7,972			36,222			143,156			7,991			59,623			210,770
Operating expenses		87,127			12,621			8,606			108,354			11,690			37,775			157,819
Deferral of expenses under SFAS 91		(41,791	)		(7,411	)		—			(49,202	)		(4,675	)		(9,285	)		(63,162	)
Pretax income (loss)		53,626			2,762			27,616			84,004			976			31,133			116,113
Net income (loss)	$	32,658		$	1,682		$	16,818		$	51,158		$	594		$	18,748		$	70,500
Relevant Financial and Performance Data
Average interest-earning assets	$	4,522,275		$	1,210,104		$	5,555,975		$	11,288,354		$	186,901		$	940,067		$	12,415,322
Allocated capital		235,845			64,863			230,960			531,668			9,377			127,205			668,250
Loans produced		9,972,068			2,956,718			9,416,480			22,345,266			425,125			1,440,515			24,210,906
Loans sold		9,725,597			2,857,739			9,124,889			21,708,225			446,699			1,180,667			23,335,591
MBR margin		1.02	%		0.28	%		0.40	%		0.66	%		1.69	%		4.49	%		0.87	%
Pretax income/loan sold		0.55	%		0.10	%		0.30	%		0.39	%		0.22	%		2.64	%		0.50	%
ROE		55	%		10	%		29	%		38	%		25	%		58	%		42	%
ROA		2.86	%		0.55	%		1.19	%		1.79	%		1.23	%		6.41	%		2.20	%
Net interest margin		1.49	%		1.50	%		1.60	%		1.55	%		1.25	%		1.73	%		1.56	%
Average FTE		2,616			274			161			3,051			358			1,398			4,807
Three Months Ended December 31, 2005
Operating Results
Net interest income	$	12,747		$	3,041		$	15,871		$	31,659		$	1,043		$	1,181		$	33,883
Provision for loan losses		—			—			—			—			—			—			—
Gain (loss) on sale of loans		84,928			6,359			7,635			98,922			12,234			25,260			136,416
Service fee income		—			—			—			—			—			3,767			3,767
Gain (loss) on securities		—			—			—			—			—			—			—
Other income		—			—			1			1			95			182			278
Net revenues (expense)		97,675			9,400			23,507			130,582			13,372			30,390			174,344
Operating expenses		67,949			9,233			5,739			82,921			21,371			23,817			128,109
Deferral of expenses under SFAS 91		(33,552	)		(4,373	)		—			(37,925	)		(7,898	)		(7,363	)		(53,186	)
Pretax income (loss)		63,278			4,540			17,768			85,586			(101	)		13,936			99,421
Net income (loss)	$	38,283		$	2,747		$	10,750		$	51,780		$	(61	)	$	8,396		$	60,115
Relevant Financial and Performance Data
Average interest-earning assets	$	3,640,283		$	757,257		$	2,721,079		$	7,118,619		$	319,622		$	231,938		$	7,670,179
Allocated capital		185,391			37,931			132,836			356,158			16,969			69,790			442,917
Loans produced		8,187,773			1,754,304			5,281,008			15,223,085			667,407			954,636			16,845,128
Loans sold		8,107,509			1,771,113			4,752,684			14,631,306			710,596			914,591			16,256,493
MBR margin		1.20	%		0.53	%		0.49	%		0.89	%		1.87	%		2.89	%		1.05	%
Pretax income/loan sold		0.78	%		0.26	%		0.37	%		0.58	%		(0.01	)%		1.52	%		0.61	%
ROE		82	%		29	%		32	%		58	%		(1	)%		48	%		54	%
ROA		4.16	%		1.44	%		1.56	%		2.87	%		(0.07	)%		9.02	%		3.04	%
Net interest margin		1.39	%		1.59	%		2.31	%		1.76	%		1.29	%		2.02	%		1.75	%
Average FTE		1,991			188			123			2,302			530			919			3,751

10

The following tables provide additional detail on the results for the divisions of our thrift segment for the three months ended December 31, 2006 and 2005:

	Thrift
										Consumer
	Mortgage-			Prime SFR			Home			Construction			Builder
	Backed			Mortgage			Equity			and Lot			Construction			Warehouse			Discontinued
	Securities			Loans			Division			Loans			Financing			Lending			Products			Total Thrift
	(Dollars in thousands)
Three Months Ended December 31, 2006
Operating Results
Net interest income	$	4,981		$	14,555		$	8,600		$	11,586		$	15,460		$	1,312		$	406		$	56,900
Provision for loan losses		—			(4,500	)		(1,800	)		(1,036	)		(1,100	)		(92	)		(425	)		(8,953	)
Gain (loss) on sale of loans		—			2,068			6,474			8,853			—			—			—			17,395
Service fee income		—			—			(445	)		—			—			—			—			(445	)
Gain (loss) on securities		265			—			(6,017	)		(83	)		—			—			—			(5,835	)
Other income		—			447			2,078			4,593			552			531			—			8,201
Net revenues (expense)		5,246			12,570			8,890			23,913			14,912			1,751			(19	)		67,263
Operating expenses		302			1,700			4,420			17,069			5,832			1,042			52			30,417
Deferral of expenses under SFAS 91		—			—			(211	)		(1,924	)		(1,770	)		—			—			(3,905	)
Pretax income (loss)		4,944			10,870			4,681			8,768			10,850			709			(71	)		40,751
Net income (loss)	$	3,011		$	6,620		$	2,851		$	5,340		$	6,608		$	432		$	(43	)	$	24,819
Relevant Financial and Performance Data
Average interest-earning assets	$	3,806,347		$	6,548,868		$	1,794,929		$	2,605,291		$	1,141,871		$	187,876		$	37,129		$	16,122,311
Allocated capital		65,217			246,883			140,692			127,789			107,536			14,983			3,380			706,480
Loans produced		—			—			17,177			708,443			381,760			—			—			1,107,380
Loans sold		—			167,451			767,620			541,054			—			—			—			1,476,125
ROE		18	%		11	%		8	%		17	%		24	%		11	%		(5	)%		14	%
ROA		0.31	%		0.40	%		0.61	%		0.81	%		2.31	%		0.91	%		(0.52	)%		0.61	%
Net interest margin		0.52	%		0.88	%		1.90	%		1.76	%		5.37	%		2.77	%		4.34	%		1.40	%
Efficiency ratio		6	%		10	%		39	%		61	%		25	%		57	%		13	%		35	%
Average FTE		4			12			80			404			118			30			—			648
Three Months Ended December 31, 2005
Operating Results
Net interest income	$	6,989		$	18,416		$	8,724		$	9,354		$	13,999		$	328		$	584		$	58,394
Provision for loan losses		—			(300	)		—			(351	)		—			(2	)		(900	)		(1,553	)
Gain (loss) on sale of loans		92			1,350			602			5,482			—			—			200			7,726
Service fee income		—			331			1,331			—			—			—			—			1,662
Gain (loss) on securities		—			—			866			(275	)		—			—			—			591
Other income		—			—			2,528			6,565			253			147			—			9,493
Net revenues (expense)		7,081			19,797			14,051			20,775			14,252			473			(116	)		76,313
Operating expenses		230			984			4,595			16,826			4,609			837			(114	)		27,967
Deferral of expenses under SFAS 91		—			—			(500	)		(2,836	)		(1,503	)		—			—			(4,839	)
Pretax income (loss)		6,851			18,813			9,956			6,785			11,146			(364	)		(2	)		53,185
Net income (loss)	$	4,145		$	11,382		$	6,023		$	4,105		$	6,743		$	(220	)	$	(1	)	$	32,177
Relevant Financial and Performance Data
Average interest-earning assets	$	2,351,249		$	5,190,691		$	1,795,142		$	2,247,464		$	899,698		$	40,651		$	46,312		$	12,571,207
Allocated capital		43,861			216,044			109,808			111,183			94,105			3,986			4,104			583,091
Loans produced		—			—			52,584			773,782			453,133			—			—			1,279,499
Loans sold		—			74,537			98,867			641,407			—			—			—			814,811
ROE		37	%		21	%		22	%		15	%		28	%		(22	)%		—			22	%
ROA		0.69	%		0.87	%		1.30	%		0.73	%		3.00	%		(2.13	)%		(0.01	)%		1.01	%
Net interest margin		1.18	%		1.41	%		1.93	%		1.65	%		6.17	%		3.20	%		5.00	%		1.84	%
Efficiency ratio		3	%		5	%		29	%		66	%		22	%		176	%		(15	)%		30	%
Average FTE		5			12			52			445			98			23			4			639

11

The following tables provide additional detail on deposits, treasury and eliminations for the three months ended December 31, 2006 and 2005:

							Eliminations
							Interdivision			MSR Economic
	Deposits			Treasury			Loan Sales			Value			Other			Total
	(Dollars in thousands)
Three months ended December 31, 2006
Operating Results
Net interest income	$	—		$	(55	)	$	9,619		$	—		$	4,199		$	13,763
Provision for loan losses		—			—			—			—			—			—
Gain (loss) on sale of loans		—			—			(19,365	)		—			—			(19,365	)
Service fee income		—			—			1,097			—			—			1,097
Gain (loss) on securities		—			—			843			—			—			843
Other income		907			167			—			—			(1,568	)		(494	)
Net revenues (expense)		907			112			(7,806	)		—			2,631			(4,156	)
Operating expenses		7,361			2,465			—			—			3,782			13,608
Deferral of expenses under SFAS 91		—			—			—			—			(655	)		(655	)
Pretax income (loss)		(6,454	)		(2,353	)		(7,806	)		—			(496	)		(17,109	)
Net income (loss)	$	(3,930	)	$	(1,433	)	$	(4,754	)	$	—		$	6,217		$	(3,900	)
Relevant Financial and Performance Data
Average interest-earning assets	$	183		$	—		$	(90,254	)	$	—		$	—		$	(90,071	)
Allocated capital		2,541			—			—			—			—			2,541
Loans produced		N/A			N/A			N/A			—			—			N/A
Loans sold		N/A			N/A			(2,049,366	)		N/A			N/A			(2,049,366	)
ROE		N/A			N/A			N/A			N/A			N/A			N/A
ROA		N/A			N/A			N/A			N/A			N/A			N/A
Net interest margin		N/A			N/A			N/A			N/A			N/A			N/A
Efficiency ratio		N/A			N/A			N/A			N/A			N/A			N/A
Average FTE		277			47			—			—			—			324
Three months ended December 31, 2005
Operating Results
Net interest income	$	—		$	448		$	5,859		$	—		$	4,670		$	10,977
Provision for loan losses		—			—			—			—			—			—
Gain (loss) on sale of loans		—			—			(13,307	)		—			—			(13,307	)
Service fee income		—			—			2,901			(9,720	)		—			(6,819	)
Gain (loss) on securities		—			—			519			—			—			519
Other income		685			154			—			—			(885	)		(46	)
Net revenues (expense)		685			602			(4,028	)		(9,720	)		3,785			(8,676	)
Operating expenses		4,140			1,640			—			—			4,580			10,360
Deferral of expenses under SFAS 91		—			—			—			—			(645	)		(645	)
Pretax income (loss)		(3,455	)		(1,038	)		(4,028	)		(9,720	)		(150	)		(18,391	)
Net income (loss)	$	(2,090	)	$	(628	)	$	(2,437	)	$	(5,881	)	$	(90	)	$	(11,126	)
Relevant Financial and Performance Data
Average interest-earning assets	$	193		$	—		$	(81,349	)	$	—		$	—		$	(81,156	)
Allocated capital		1,696			—			—			—			—			1,696
Loans produced		—			—			—			—			—			—
Loans sold		N/A			N/A			(1,879,599	)		N/A			N/A			(1,879,599	)
ROE		N/A			N/A			N/A			N/A			N/A			N/A
ROA		N/A			N/A			N/A			N/A			N/A			N/A
Net interest margin		N/A			N/A			N/A			N/A			N/A			N/A
Efficiency ratio		N/A			N/A			N/A			N/A			N/A			N/A
Average FTE		230			33			—			—			—			263

12

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 risk-based 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 and Corporate Overhead, respectively. Trust preferred securities are allocated to the operating channels which results in higher interest expense at the operating channel level but reduces their capital charge. This is more reflective of our use of trust preferred securities as a component of capital.

The mortgage production divisions are credited with gain on sale of loans based on the actual amount realized for loans sold in the period for the divisions. Loans are occasionally transferred (“sold”) from the production divisions to the thrift divisions at a price based on the estimated fair value, which typically resulted in a premium. The premium for the loans is recorded as a gain in the production divisions and a premium on the asset in the thrift divisions and eliminated in consolidation. In subsequent periods, this premium is amortized as part of the thrift divisions’ net interest margin and the amortization is reversed in Eliminations.

Under 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. SFAS No. 91 fees and expenses are deferred at production and subsequently recognized at sale. This is reflected as a reclassification 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 in the detail segment tables on pages 9 to 12 to enable the computation of gross cost per funded loan.

The Company hedges the MSRs to protect their economic value. The results in the business segment tables above reflect the economic fair value of MSRs. Prior to the adoption of Statement of Financial Accounting Standards No. 156,“Accounting for Servicing of Financial Assets,”(“SFAS No. 156”) on January 1, 2006, the economic fair value may have varied from the generally accepted accounting principles (“GAAP”) value due to the lower of cost or market limitations of GAAP. Differences between the economic value and the GAAP value were eliminated in consolidation. Also during the second quarter of 2006, the Company revised its capital allocation on MSRs to conform to updated regulatory capital guidelines. Prior period segment data was revised accordingly.

The Company’s corporate overhead costs such as corporate salaries and related expenses, 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, specialty consumer home loans held for saleand/or investment, home loans and related investment, and specialty commercial loans held for investment. Please refer to the Company’s 200510-K, pages 31 to 37, for further discussion on the products included within each product group.

13

The following tables summarize the profitability for the four product groups for the three months ended December 31, 2006 and 2005:

							Home
	Standard			Specialty			Loans &			Specialty
	Consumer			Consumer			Related			Commercial									Total
	Home Loans			Home Loans			Investments			Loans			Treasury			Overhead			Company
	(Dollars in thousands)
Three Months Ended December 31, 2006
Operating Results
Net interest income	$	37,533		$	39,062		$	34,190		$	19,765		$	(55	)	$	2,151		$	132,646
Provision for loan losses		—			(3,196	)		(4,500	)		(1,257	)		—			—			(8,953	)
Gain (loss) on sale of loans		85,957			65,158			13,856			—			—			—			164,971
Service fee income		—			8,479			13,093			—			—			551			22,123
Gain (loss) on securities		—			(7,331	)		3,202			—			—			—			(4,129	)
Other income		—			7,012			2,299			2,351			167			1,017			12,846
Net revenue (expense)		123,490			109,184			62,140			20,859			112			3,719			319,504
Variable expenses		59,897			43,164			4,635			2,501			—			—			110,197
Deferral of expenses under SFAS 91		(47,036	)		(19,447	)		(2,326	)		(1,838	)		—			—			(70,647	)
Fixed expenses		50,626			26,106			15,603			5,579			2,465			71,312			171,691
Pretax income (loss)		60,003			59,361			44,228			14,617			(2,353	)		(67,593	)		108,263
Net income (loss)	$	36,541		$	35,939		$	26,935		$	8,902		$	(1,433	)	$	(34,643	)	$	72,241
Balance Sheet Data
Average interest-earning assets	$	10,881,478		$	5,800,889		$	11,264,360		$	1,564,671		$	—		$	356,716		$	29,868,114
Allocated capital	$	493,217		$	398,601		$	687,865		$	140,025		$	—		$	248,875		$	1,968,583
Performance Ratios
ROE		29	%		36	%		16	%		25	%		N/A			N/A			15	%
Net interest margin		1.37	%		2.67	%		1.20	%		5.01	%		N/A			N/A			1.76	%
MBR margin		0.64	%		2.29	%		1.68	%		N/A			N/A			N/A			0.91	%
Efficiency ratio		51	%		44	%		27	%		28	%		N/A			N/A			64	%
Operating Data
Loan production	$	20,506,295		$	4,499,878		$	895,800		$	426,043		$	—		$	—		$	26,328,016
Loans sold	$	19,214,483		$	3,380,416		$	822,536		$	—		$	—		$	—		$	23,417,435
Three Months Ended December 31, 2005
Operating Results
Net interest income	$	25,115		$	29,047		$	35,827		$	17,850		$	448		$	1,112		$	109,399
Provision for loan losses		—			(1,144	)		(300	)		(109	)		—			—			(1,553	)
Gain (loss) on sale of loans		95,069			34,324			7,997			—			—			—			137,390
Service fee income		—			5,098			20,021			—			—			(6,405	)		18,714
Gain (loss) on securities		—			591			5,342			—			—			—			5,933
Other income		—			8,564			694			1,111			154			590			11,113
Net revenue (expense)		120,184			76,480			69,581			18,852			602			(4,703	)		280,996
Variable expenses		56,084			35,846			704			3,757			—			—			96,391
Deferral of expenses under SFAS 91		(40,989	)		(16,027	)		(605	)		(1,654	)		—			—			(59,275	)
Fixed expenses		40,618			16,183			10,791			3,013			1,640			54,551			126,796
Pretax income (loss)		64,471			40,478			58,691			13,736			(1,038	)		(59,254	)		117,084
Net income (loss)	$	39,005		$	24,455		$	35,508		$	8,310		$	(628	)	$	(36,212	)	$	70,438
Balance Sheet Data
Average interest-earning assets	$	6,888,588		$	4,622,341		$	8,100,298		$	1,158,549		$	—		$	843,950		$	21,613,726
Allocated capital	$	326,307		$	272,609		$	484,876		$	115,747		$	—		$	301,108		$	1,500,647
Performance Ratios
ROE		47	%		36	%		29	%		28	%		N/A			N/A			19	%
Net interest margin		1.45	%		2.49	%		1.75	%		6.11	%		N/A			N/A			2.01	%
MBR margin		0.90	%		2.54	%		1.77	%		N/A			N/A			N/A			1.10	%
Efficiency ratio		46	%		46	%		16	%		27	%		N/A			N/A			58	%
Operating Data
Loan production	$	14,268,829		$	3,430,254		$	254,646		$	524,078		$	—		$	—		$	18,477,807
Loans sold	$	13,418,141		$	1,699,027		$	453,011		$	—		$	—		$	—		$	15,570,179

14

The following tables provide additional detail on the profitability for the standard consumer home loans held for sale group for the three months ended December 31, 2006 and 2005:

	Standard Consumer Home Loans Held for Sale
	Agency
	Conforming			Alt-A			Subprime			Total
	(Dollars in thousands)
Three Months Ended December 31, 2006
Operating Results
Net interest income	$	476		$	30,153		$	6,904		$	37,533
Provision for loan losses		—			—			—			—
Gain (loss) on sale of loans		402			79,617			5,938			85,957
Service fee income		—			—			—			—
Gain (loss) on securities		—			—			—			—
Other income		—			—			—			—
Net revenues (expense)		878			109,770			12,842			123,490
Variable expenses		2,523			49,447			7,927			59,897
Deferral of expenses under SFAS 91		(1,983	)		(38,822	)		(6,231	)		(47,036	)
Fixed expenses		1,740			43,700			5,186			50,626
Pretax income (loss)		(1,402	)		55,445			5,960			60,003
Net income (loss)	$	(854	)	$	33,766		$	3,629		$	36,541
Balance Sheet Data
Average interest-earning assets	$	174,065		$	9,266,919		$	1,440,494		$	10,881,478
Allocated capital	$	7,058		$	398,939		$	87,220		$	493,217
Performance Ratios
ROE		(48	)%		34	%		17	%		29	%
Net interest margin		1.08	%		1.29	%		1.90	%		1.37	%
MBR margin		0.26	%		0.61	%		1.57	%		0.64	%
Efficiency ratio		260	%		49	%		54	%		51	%
Operating Data
Loan production	$	337,930		$	19,314,008		$	854,357		$	20,506,295
Loans sold	$	334,845		$	18,062,672		$	816,966		$	19,214,483
Three Months Ended December 31, 2005
Operating Results
Net interest income	$	587		$	17,690		$	6,838		$	25,115
Provision for loan losses		—			—			—			—
Gain (loss) on sale of loans		1,213			88,714			5,142			95,069
Service fee income		—			—			—			—
Gain (loss) on securities		—			—			—			—
Other income		—			—			—			—
Net revenues (expense)		1,800			106,404			11,980			120,184
Variable expenses		2,471			46,380			7,233			56,084
Deferral of expenses under SFAS 91		(1,810	)		(33,882	)		(5,297	)		(40,989	)
Fixed expenses		1,418			35,028			4,172			40,618
Pretax income (loss)		(279	)		58,878			5,872			64,471
Net income (loss)	$	(169	)	$	35,621		$	3,553		$	39,005
Balance Sheet Data
Average interest-earning assets	$	134,268		$	5,914,502		$	839,818		$	6,888,588
Allocated capital	$	5,825		$	277,028		$	43,454		$	326,307
Performance Ratios
ROE		(12	)%		51	%		32	%		47	%
Net interest margin		1.73	%		1.19	%		3.23	%		1.45	%
MBR margin		0.58	%		0.85	%		1.98	%		0.90	%
Efficiency ratio		116	%		45	%		51	%		46	%
Operating Data
Loan production	$	220,352		$	13,359,065		$	689,412		$	14,268,829
Loans sold	$	312,365		$	12,500,427		$	605,349		$	13,418,141

15

The following tables provide additional detail on the profitability for the specialty consumer home loans held for saleand/or investment group for the three months ended December 31, 2006 and 2005:

	Specialty Consumer Home Loans Held for Saleand/or Investment
	HELOCs/			Reverse
	Seconds			Mortgages			CTP/Lot			Discontinued			Total
	(Dollars in thousands)
Three Months Ended December 31, 2006
Operating Results
Net interest income	$	21,845		$	4,095		$	12,716		$	406		$	39,062
Provision for loan losses		(1,800	)		—			(971	)		(425	)		(3,196	)
Gain (loss) on sale of loans		5,800			48,885			10,473			—			65,158
Service fee income		2,024			6,455			—			—			8,479
Gain (loss) on securities		(7,248	)		—			(83	)		—			(7,331	)
Other income		3,499			188			3,325			—			7,012
Net revenues (expense)		24,120			59,623			25,460			(19	)		109,184
Variable expenses		12,592			22,424			8,148			—			43,164
Deferral of expenses under SFAS 91		(8,306	)		(9,285	)		(1,856	)		—			(19,447	)
Fixed expenses		2,988			15,351			7,715			52			26,106
Pretax income (loss)		16,846			31,133			11,453			(71	)		59,361
Net income (loss)	$	10,259		$	18,748		$	6,975		$	(43	)	$	35,939
Balance Sheet Data
Average interest-earning assets	$	2,462,131		$	940,067		$	2,361,562		$	37,129		$	5,800,889
Allocated capital	$	239,344		$	46,298		$	109,579		$	3,380		$	398,601
Performance Ratios
ROE		17	%		161	%		25	%		(5	)%		36	%
Net interest margin		3.52	%		1.73	%		2.14	%		4.34	%		2.67	%
MBR margin		0.84	%		4.49	%		1.94	%		N/A			2.29	%
Efficiency ratio		28	%		48	%		53	%		13	%		44	%
Operating Data
Loan production	$	1,856,621		$	1,440,515		$	1,202,742		$	—		$	4,499,878
Loans sold	$	1,658,695		$	1,180,667		$	541,054		$	—		$	3,380,416
Three Months Ended December 31, 2005
Operating Results
Net interest income	$	17,833		$	1,181		$	9,449		$	584		$	29,047
Provision for loan losses		—			—			(244	)		(900	)		(1,144	)
Gain (loss) on sale of loans		49			25,260			8,815			200			34,324
Service fee income		1,331			3,767			—			—			5,098
Gain (loss) on securities		866			—			(275	)		—			591
Other income		2,528			182			5,854			—			8,564
Net revenues (expense)		22,607			30,390			23,599			(116	)		76,480
Variable expenses		11,133			15,492			9,221			—			35,846
Deferral of expenses under SFAS 91		(5,979	)		(7,363	)		(2,685	)		—			(16,027	)
Fixed expenses		1,690			8,325			6,282			(114	)		16,183
Pretax income (loss)		15,763			13,936			10,781			(2	)		40,478
Net income (loss)	$	9,537		$	8,396		$	6,523		$	(1	)	$	24,455
Balance Sheet Data
Average interest-earning assets	$	2,322,757		$	231,938		$	2,021,334		$	46,312		$	4,622,341
Allocated capital	$	154,424		$	21,347		$	92,734		$	4,104		$	272,609
Performance Ratios
ROE		25	%		156	%		28	%		—			36	%
Net interest margin		3.05	%		2.02	%		1.85	%		5.00	%		2.49	%
MBR margin		5.33	%		2.89	%		1.37	%		N/A			2.54	%
Efficiency ratio		30	%		54	%		54	%		(15	)%		46	%
Operating Data
Loan production	$	1,218,301		$	954,636		$	1,257,317		$	—		$	3,430,254
Loans sold	$	143,241		$	914,591		$	641,195		$	—		$	1,699,027

16

The following tables provide additional detail on the profitability for the home loans and related investments group for the three months ended December 31, 2006 and 2005:

	Home Loans and Related Investments
	Retained Assets						SFR Loans
	and Retention						Held for
	Activities			MBS			Investment			Total
	(Dollars in thousands)
Three Months Ended December 31, 2006
Operating Results
Net interest income	$	12,519		$	4,981		$	16,690		$	34,190
Provision for loan losses		—			—			(4,500	)		(4,500	)
Gain (loss) on sale of loans		11,788			—			2,068			13,856
Service fee income		13,093			—			—			13,093
Gain (loss) on securities		2,937			265			—			3,202
Other income		1,852			—			447			2,299
Net revenues (expense)		42,189			5,246			14,705			62,140
Variable expenses		4,635			—			—			4,635
Deferral of expenses under SFAS 91		(2,326	)		—			—			(2,326	)
Fixed expenses		13,601			302			1,700			15,603
Pretax income (loss)		26,279			4,944			13,005			44,228
Net income (loss)	$	16,004		$	3,011		$	7,920		$	26,935
Balance Sheet Data
Average interest-earning assets	$	934,701		$	3,806,347		$	6,523,312		$	11,264,360
Allocated capital	$	376,787		$	65,217		$	245,861		$	687,865
Performance Ratios
ROE		17	%		18	%		13	%		16	%
Net interest margin		5.31	%		0.52	%		1.02	%		1.20	%
MBR margin		1.80	%		N/A			N/A			1.68	%
Efficiency ratio		38	%		6	%		9	%		27	%
Operating Data
Loan production	$	895,800		$	—		$	—		$	895,800
Loans sold	$	655,085		$	—		$	167,451		$	822,536
Three Months Ended December 31, 2005
Operating Results
Net interest income	$	8,898		$	6,989		$	19,940		$	35,827
Provision for loan losses		—			—			(300	)		(300	)
Gain (loss) on sale of loans		6,555			92			1,350			7,997
Service fee income		19,690			—			331			20,021
Gain (loss) on securities		5,342			—			—			5,342
Other income		694			—			—			694
Net revenues (expense)		41,179			7,081			21,321			69,581
Variable expenses		704			—			—			704
Deferral of expenses under SFAS 91		(605	)		—			—			(605	)
Fixed expenses		9,577			230			984			10,791
Pretax income (loss)		31,503			6,851			20,337			58,691
Net income (loss)	$	19,059		$	4,145		$	12,304		$	35,508
Balance Sheet Data
Average interest-earning assets	$	578,921		$	2,351,249		$	5,170,128		$	8,100,298
Allocated capital	$	225,999		$	43,861		$	215,016		$	484,876
Performance Ratios
ROE		33	%		37	%		23	%		29	%
Net interest margin		6.10	%		1.18	%		1.53	%		1.75	%
MBR margin		1.73	%		N/A			N/A			1.77	%
Efficiency ratio		23	%		3	%		5	%		16	%
Operating Data
Loan production	$	254,646		$	—		$	—		$	254,646
Loans sold	$	378,474		$	—		$	74,537		$	453,011

17

The following tables provide additional detail on the profitability for the specialty commercial loans held for investment group for the three months ended December 31, 2006 and 2005:

	Specialty Commercial Loans Held for Investment
	Single						Warehouse
	Spec			Subdivision			Lending			Total
	(Dollars in thousands)
Three Months Ended December 31, 2006
Operating Results
Net interest income	$	2,993		$	15,460		$	1,312		$	19,765
Provision for loan losses		(65	)		(1,100	)		(92	)		(1,257	)
Gain (loss) on sale of loans		—			—			—			—
Service fee income		—			—			—			—
Gain (loss) on securities		—			—			—			—
Other income		1,268			552			531			2,351
Net revenues (expense)		4,196			14,912			1,751			20,859
Variable expenses		667			1,834			—			2,501
Deferral of expenses under SFAS 91		(68	)		(1,770	)		—			(1,838	)
Fixed expenses		539			3,998			1,042			5,579
Pretax income (loss)		3,058			10,850			709			14,617
Net income (loss)	$	1,862		$	6,608		$	432		$	8,902
Balance Sheet Data
Average interest-earning assets	$	234,924		$	1,141,871		$	187,876		$	1,564,671
Allocated capital	$	17,506		$	107,536		$	14,983		$	140,025
Performance Ratios
ROE		42	%		24	%		N/A			25	%
Net interest margin		5.05	%		5.37	%		N/A			5.01	%
Efficiency ratio		27	%		25	%		N/A			28	%
Operating Data
Loan production	$	44,283		$	381,760		$	—		$	426,043
Loans sold	$	—		$	—		$	—		$	—
Three Months Ended December 31, 2005
Operating Results
Net interest income	$	3,523		$	13,999		$	328		$	17,850
Provision for loan losses		(107	)		—			(2	)		(109	)
Gain (loss) on sale of loans		—			—			—			—
Service fee income		—			—			—			—
Gain (loss) on securities		—			—			—			—
Other income		711			253			147			1,111
Net revenues (expense)		4,127			14,252			473			18,852
Variable expenses		832			2,925			—			3,757
Deferral of expenses under SFAS 91		(151	)		(1,503	)		—			(1,654	)
Fixed expenses		492			1,684			837			3,013
Pretax income (loss)		2,954			11,146			(364	)		13,736
Net income (loss)	$	1,787		$	6,743		$	(220	)	$	8,310
Balance Sheet Data
Average interest-earning assets	$	218,200		$	899,698		$	40,651		$	1,158,549
Allocated capital	$	17,656		$	94,105		$	3,986		$	115,747
Performance Ratios
ROE		40	%		28	%		N/A			28	%
Net interest margin		6.41	%		6.17	%		N/A			6.11	%
Efficiency ratio		28	%		22	%		N/A			27	%
Operating Data
Loan production	$	70,945		$	453,133		$	—		$	524,078
Loans sold	$	—		$	—		$	—		$	—

18

The following tables provide additional detail on the overhead costs for the three months ended December 31, 2006 and 2005:

													Total
	Servicing OH			MB OH			Deposit OH			Corporate OH			Overhead
				(Dollars in thousands)
Three Months Ended December 31, 2006
Operating Results
Net interest income	$	(60	)	$	488		$	4,199		$	(2,476	)	$	2,151
Provision for loan losses		—			—			—			—			—
Gain (loss) on sale of loans		—			—			—			—			—
Service fee income		—			—			—			551			551
Gain (loss) on securities		—			—			—			—			—
Other income		773			85			907			(748	)		1,017
Net revenues (expense)		713			573			5,106			(2,673	)		3,719
Variable expenses		—			—			—			—			—
Deferral of expenses under SFAS 91		—			—			—			—			—
Fixed expenses		5,269			10,277			11,560			44,206			71,312
Pretax income (loss)		(4,556	)		(9,704	)		(6,454	)		(46,879	)		(67,593	)
Net income (loss)	$	(2,775	)	$	(5,910	)	$	(3,930	)	$	(22,028	)	$	(34,643	)
Balance Sheet Data
Average interest-earning assets	$	8		$	2,966		$	183		$	353,559		$	356,716
Allocated capital	$	359		$	16,887		$	2,541		$	229,088		$	248,875
Performance Ratios
ROE		N/A			N/A			N/A			N/A			N/A
Net interest margin		N/A			N/A			N/A			N/A			N/A
Efficiency ratio		N/A			N/A			N/A			N/A			N/A
Operating Data
Loan production	$	—		$	—		$	—		$	—		$	—
Loans sold	$	—		$	—		$	—		$	—		$	—
Three Months Ended December 31, 2005
Operating Results
Net interest income	$	(44	)	$	(1,242	)	$	4,346		$	(1,948	)	$	1,112
Provision for loan losses		—			—			—			—			—
Gain (loss) on sale of loans		—			—			—			—			—
Service fee income		—			—			—			(6,405	)		(6,405	)
Gain (loss) on securities		—			—			—			—			—
Other income		507			(5	)		685			(597	)		590
Net revenues (expense)		463			(1,247	)		5,031			(8,950	)		(4,703	)
Variable expenses		—			—			—			—			—
Deferral of expenses under SFAS 91		—			—			—			—			—
Fixed expenses		4,506			6,888			8,486			34,671			54,551
Pretax income (loss)		(4,043	)		(8,135	)		(3,455	)		(43,621	)		(59,254	)
Net income (loss)	$	(2,446	)	$	(4,922	)	$	(2,090	)	$	(26,754	)	$	(36,212	)
Balance Sheet Data
Average interest-earning assets	$	—		$	(546	)	$	193		$	844,303		$	843,950
Allocated capital	$	728		$	9,545		$	1,696		$	289,139		$	301,108
Performance Ratios
ROE		N/A			N/A			N/A			N/A			N/A
Net interest margin		N/A			N/A			N/A			N/A			N/A
Efficiency ratio		N/A			N/A			N/A			N/A			N/A
Operating Data
Loan production	$	—		$	—		$	—		$	—		$	—
Loans sold	$	—		$	—		$	—		$	—		$	—

19

LOAN PRODUCTION

The Company’s total mortgage production of $25.9 billion for the fourth quarter of 2006 reflects a record high, up 8% compared to the third quarter of 2006, and up 44% from the fourth quarter of 2005. However, the total pipeline on December 31, 2006, decreased 19% from September 30, 2006, to $11.8 billion, although up 13% from December 31, 2005. The production growth was accomplished through our continued drive to leverage our mortgage banking platform. The mortgage professionals group, including conduit, increased its volume by 47% over the fourth quarter of 2005, contributing 90% of our production growth. Total loan production, including subdivision construction, reached $26.3 billion for the fourth quarter of 2006, also a record for the Company. During 2006, we opened three new operations centers. We expect to continue our growth by expanding into new regions, hiring new salespeople, and rolling out new products.

On January 8, 2007, the MBA issued an estimate of the industry volume for 2006 of $2.5 trillion, which represents a 17% decline from 2005. The fourth quarter of 2006 estimate of $575 billion represents an 8% decrease from the third quarter of 2006, and a 20% decline from the fourth quarter of 2005. Based on this forecast, our market share is 4.51% this quarter, up from 3.83% in the third quarter of 2006 and 2.51% in the fourth quarter of 2005 in spite of overall industry volume decline.

Total mortgage production for the year ended December 31, 2006 increased 48% to $90.0 billion. Strong production from conduit and Financial Freedom, which increased 90% and 71%, respectively, contributed to this overall growth. The Company has also improved its retention activities with volume from servicing retention increasing 150% during the same period. As a result, Indymac’s market share increased from 2.01% in 2005 to 3.59% in 2006.

The following summarizes our loan production and pipeline by purpose, interest rate type, product type, S&P lifetime loss estimate, geographic distribution, and channels as of and for the quarters ended December 31, 2006 and 2005 and September 30, 2006:

	As of and for the Three Months Ended
	December 31,			December 31,			%			September 30,			%
	2006			2005			Change			2006			Change
	(Dollars in millions)
Production and Pipeline by Purpose:
Mortgage loan production:
Purchase transactions	$	9,445		$	6,917			37	%	$	9,682			(2	)%
Cash-out refinance transactions		11,956			8,745			37	%		10,656			12	%
Rate/term refinance transactions		4,545			2,363			92	%		3,630			25	%
Total mortgage loan production	$	25,946		$	18,025			44	%	$	23,968			8	%
% purchase and cash-out refinance transactions		82	%		87	%					85	%
Mortgage industry market share		4.51	%		2.51	%		80	%		3.83	%		18	%
Mortgage pipeline:
Purchase transactions	$	3,914		$	3,617			8	%	$	4,595			(15	)%
Cash-out refinance transactions		4,193			4,332			(3	)%		5,210			(20	)%
Rate/term refinance transactions		1,792			1,237			45	%		1,930			(7	)%
Total specific rate locks		9,899			9,186			8	%		11,735			(16	)%
Non-specific rate locks on bulk purchases		1,922			1,302			48	%		2,821			(32	)%
Total pipeline at period end(1)	$	11,821		$	10,488			13	%	$	14,556			(19	)%

(1) Total pipeline of loans in process includes rate lock commitment the Company has provided on loans that are specifically identified or non-specific bulk packages, and loan applications we have received for which the borrower has not yet locked in the interest rate commitment. Non-specific bulk packages represent pools of loans the Company has committed to purchase, where the pool characteristics are specified but the actual loans are not.

20

	Three Months Ended
	December 31,		December 31,		September 30,
	2006		2005		2006
Production by Interest Rate Type as a Percentage of Mortgage Production:
Fixed-rate mortgages		22%		21%		20%
Intermediate term fixed-rate loans		7%		8%		7%
Interest-only loans		39%		32%		39%
Pay option ARMs		21%		26%		23%
Other ARMs		11%		13%		11%
		100%		100%		100%

	Three Months Ended												Year Ended
	December 31,		December 31,		%			September 30,		%			December 31,		December 31,		%
	2006		2005		Change			2006		Change			2006		2005		Change
	(Dollars in millions)
Production by Product Type:
Standard First Mortgage Products:
Alt-A	$	20,504	$	13,947		47	%	$	19,103		7	%	$	70,146	$	47,223		49	%
Agency conforming		474		249		90	%		260		82	%		1,257		1,092		15	%
Subprime		886		700		27	%		729		22	%		2,674		2,276		17	%
Total standard first mortgage products (S&P evaluated)(1)		21,864		14,896		47	%		20,092		9	%		74,077		50,591		46	%
Specialty Consumer Home Mortgage Products:
Home equity line of credit(2) /Seconds		1,856		1,234		50	%		1,840		1	%		7,199		3,653		97	%
Reverse mortgages		1,441		955		51	%		1,128		28	%		5,024		2,935		71	%
Consumer construction(2)		785		940		(16	)%		908		(14	)%		3,651		3,595		2	%
Subtotal mortgage production		25,946		18,025		44	%		23,968		8	%		89,951		60,774		48	%
Builder construction commitments(2)		382		453		(16	)%		471		(19	)%		1,747		1,940		(10	)%
Total production	$	26,328	$	18,478		42	%	$	24,439		8	%	$	91,698	$	62,714		46	%

21

The following summarizes the estimated lifetime losses for mortgage production using the S&P Levels model for the three months ended December 31, 2006 and 2005, and September 30, 2006:

	Three Months Ended
	December 31, 2006						December 31, 2005						September 30, 2006
	Average						Average						Average
	Lifetime			% of			Lifetime			% of			Lifetime			% of
	Loss Rate			Total			Loss Rate			Total			Loss Rate			Total
	(Dollars in millions)
Production by S&P Lifetime Loss Estimate(1):
Agency conforming equivalent (<48 bps)		0.23	%		48	%		0.21	%		51	%		0.23	%		48	%
Prime Alt-A equivalent(48-135 bps)		0.75	%		44	%		0.77	%		42	%		0.76	%		44	%
Subprime equivalent (>135 bps)		5.12	%		8	%		4.45	%		7	%		4.82	%		8	%
Total S&P lifetime loss estimate		0.84	%		100	%		0.74	%		100	%		0.82	%		100	%
Total S&P evaluated production				$	21,864					$	14,896					$	20,092

(1) While Indymac production is evaluated using the S&P Levels model, the data are not audited or endorsed by S&P. S&P evaluated production excludes second liens, HELOC, reverse mortgages, and construction loans. In the third quarter of 2006, Indymac adopted version 5.7 of the S&P Levels model. The numbers for the fourth quarter of 2005 have been restated utilizing the new model.

Total average lifetime loss rate for the fourth quarter of 2006 increased 10 basis points from 0.74% for the fourth quarter of 2005 to 0.84%, driven by an increase in loans with subordinate financing and subprime loans originated during the period. The loss estimates are shown to describe the relative level of credit risk in our loan production at time of origination. Because the Company routinely sells the vast majority of loans produced, these estimates do not reflect the amount of credit risk retained by the Company. Total average lifetime loss rate for the portion of production that is ultimately retained by Indymac actually declined from 0.72% for the fourth quarter of 2005 to 0.57% for the fourth quarter of 2006.

22

The following table shows the reconciliation from total production to total S&P evaluated production for the three months ended December 31, 2006 and 2005 and September 30, 2006:

	Three Months Ended
	December 31, 2006							December 31, 2005							September 30, 2006
	Production		FICO		CLTV(2)			Production		FICO		CLTV(2)			Production		FICO		CLTV(2)
Total production	$	26,328		N/A		N/A		$	18,478		N/A		N/A		$	24,439		N/A		N/A
Less:
Home equity line of credit(1)/Seconds		1,856		709		90	%		1,234		705		86	%		1,840		716		87	%
Reverse mortgages		1,441		N/A		54	%		955		N/A		53	%		1,128		N/A		53	%
Consumer construction(1)		785		718		74	%		940		722		76	%		908		722		76	%
Builder construction commitments		382		N/A		77	%		453		N/A		71	%		471		N/A		74	%
Total S&P evaluated production	$	21,864		703		81	%	$	14,896		700		78	%	$	20,092		702		81	%

(1)	Amount represents total commitments.
(2)	Combinedloan-to-value ratio for loans in the second lien position is used to calculate weighted average originalloan-to-value ratio for the portfolio.

The following indicates the geographic distribution of our production for the three months ended December 31, 2006 and 2005 and September 30, 2006:

	Three Months Ended
	December 31,			December 31,			September 30,
	2006			2005			2006
Production by Geographic Distribution:
California		47	%		44	%		45	%
Florida		7	%		8	%		8	%
New York		6	%		6	%		6	%
New Jersey		4	%		4	%		4	%
Virginia		3	%		4	%		4	%
Other		33	%		34	%		33	%
Total		100	%		100	%		100	%

23

The following summarizes our loan production by divisions for the three months and years ended December 31, 2006 and 2005, and three months ended September 30, 2006:

	Three Months Ended												Year Ended
	December 31,		December 31,		%			September 30,		%			December 31,		December 31,		%
	2006		2005		Change			2006		Change			2006		2005		Change
	(Dollars in millions)
Production by Divisions:
Mortgage Loan Production:
Mortgage Professionals Group Wholesale(1)	$	9,972	$	8,188		22	%	$	9,281		7	%	$	36,859	$	29,145		26	%
Correspondent		2,957		1,754		69	%		2,503		18	%		10,264		5,719		79	%
Conduit		9,416		5,281		78	%		9,078		4	%		30,101		15,811		90	%
Consumer Direct		425		667		(36	)%		456		(7	)%		1,958		2,883		(32	)%
Financial Freedom		1,441		955		51	%		1,128		28	%		5,024		2,935		71	%
Servicing Retention		1,010		353		186	%		721		40	%		2,698		1,079		150	%
Home Equity Division		17		53		(68	)%		30		(43	)%		110		208		(47	)%
Consumer Construction and Lot		708		774		(9	)%		771		(8	)%		2,937		2,994		(2	)%
Total Mortgage Loan Production		25,946		18,025		44	%		23,968		8	%		89,951		60,774		48	%
Commercial Loan Production:
Builder Construction		382		453		(16	)%		471		(19	)%		1,747		1,940		(10	)%
Total Production	$	26,328	$	18,478		42	%	$	24,439		8	%	$	91,698	$	62,714		46	%

(1) Wholesale channel includes $1.1 billion, $481 million, and $898 million of production from wholesale inside sales for the quarters ended December 31, 2006 and 2005 and September 30, 2006. The wholesale inside sales force focuses on small and geographically remote mortgage brokers through centralized in-house sales personnel instead of field sales personnel.

Key production drivers for the mortgage professionals group’s wholesale and correspondent channels for the three months ended December 31, 2006 and 2005 and September 30, 2006 follow:

	Three Months Ended
	December 31,		December 31,		%			September 30,		%
	2006		2005		Change			2006		Change
Key Production Drivers:
Active customers during the quarter(1)		7,927		6,728		18	%		7,686		3	%
Sales personnel		1,025		712		44	%		992		3	%
Number of regional offices		16		13		23	%		16		—

(1) Active customers are defined as customers who funded at least one loan during the most recent90-day period.

24

LOAN SALES

The following table summarizes loans sold and the relevant performance ratios on loan sales during the three months and years ended December 31, 2006 and 2005 and the three months ended September 30, 2006:

	Three Months Ended															Year Ended
	December 31,			December 31,			%			September 30,			%			December 31,			December 31,			%
	2006			2005			Change			2006			Change			2006			2005			Change
	(Dollars in millions)
Total loans sold	$	23,417		$	15,570			50	%	$	19,508			20	%	$	79,049		$	52,297			51	%
Ratios:
Gross MBR margin before hedging		0.88	%		0.97	%		(9	)%		1.44	%		(39	)%		1.04	%		1.26	%		(17	)%
Net MBR margin after hedging		0.91	%		1.10	%		(17	)%		1.03	%		(12	)%		1.06	%		1.36	%		(22	)%

The MBR margin is calculated using mortgage banking revenue divided by total loans sold. The mortgage banking revenue includes total consolidated gain on sale of loans company-wide and the net interest income earned on mortgage loans held for sale by mortgage banking production divisions. While most of the gain on sale of loans results from the loan sale activities in our mortgage banking segment, we do occasionally sell loans held by our thrift segment, primarily lot loans and home equity products. The gain on sale recognized in the thrift segment is included in the MBR margin calculation.

Included in the gain on sale of loans in the second quarter of 2006 were $9.7 million of losses related to the establishment of a reserve for fraud losses on certain lot loans. The Company discovered that 45 lot loans related to two developments in Michigan and Florida were the subject of criminal fraud on the part of the developers, brokers, appraisers and closing agents. These loans had outstanding principal balances of approximately $13.9 million before the reserve for fraud losses. At December 31, 2006, these loans are non-accrual and have an aggregate book value of $5.3 million. We have since performed a full portfolio review and implemented a series of product guideline changes, operational changes and fraud prevention measures to mitigate future occurrences of this kind. We believe there are no further incidences of fraud in its existing book of lot loans of similar size or scope.

25

The following tables summarize MBR margin by channel and product for the three months ended December 31, 2006 and 2005 and September 30, 2006:

	Three Months Ended
	December 31,			December 31,			September 30,
	2006			2005			2006
MBR Margin by Channel:
Wholesale		1.02	%		1.20	%		1.06	%
Correspondent		0.28	%		0.53	%		0.48	%
Conduit		0.40	%		0.49	%		0.48	%
Consumer Direct		1.69	%		1.87	%		1.43	%
Financial Freedom		4.49	%		2.89	%		4.52	%
Other		1.18	%		0.95	%		1.29	%
Total MBR margin		0.91	%		1.10	%		1.03	%
MBR Margin by Product:
Agency Conforming		0.26	%		0.50	%		0.48	%
Alt-A		0.61	%		0.87	%		0.70	%
Subprime		1.57	%		1.98	%		2.30	%
HELOC/Seconds		0.84	%		5.33	%		0.83	%
Reverse Mortgages		4.49	%		2.89	%		4.52	%
CTP/Lot		1.94	%		1.37	%		1.96	%
Other		1.68	%		1.81	%		1.55	%
Total MBR margin		0.91	%		1.10	%		1.03	%

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 optimize 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.

In addition to mortgage loans held for sale, the hedging activities also include 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 No. 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 to manage this risk. These forward and futures contracts are also accounted for as derivatives and recorded at fair value.

26

The following shows the various channels through which loans were distributed:

	Three Months Ended									Year Ended
	December 31,			December 31,			September 30,			December 31,			December 31,
	2006			2005			2006			2006			2005
	(Dollars in millions)
Distribution of Loan Sales by Channel
Sales of government-sponsored enterprises (“GSEs”) equivalent loans		23	%		17	%		16	%		19	%		17	%
Private-label securitizations		32	%		44	%		38	%		38	%		57	%
Whole loan sales, servicing retained		40	%		33	%		38	%		37	%		19	%
Whole loan sales, servicing released		2	%		1	%		1	%		2	%		2	%
Subtotal sales		97	%		95	%		93	%		96	%		95	%
Investment portfolio acquisitions		3	%		5	%		7	%		4	%		5	%
Total loan distribution percentage		100	%		100	%		100	%		100	%		100	%
Total loan distribution	$	24,098		$	16,222		$	20,914		$	81,968		$	54,921

We maintain multiple channels for loan dispositions to achieve sustainable liquidity and develop a deep and diverse investor base. Also, through multiple channels, Indymac endeavors to consistently sell investment and non-investment grade bonds, AAA-rated and agency interest-only securities, and whole loans for cash.

In conjunction with the sale of mortgage loans, 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 $165.0 million in gain on sale of loans earned during the three months ended December 31, 2006 included the retention of $318.9 million in MSRs and $87.1 million of other retained assets. During the three months ended December 31, 2006, assets previously retained generated cash flows of $187.3 million. More information on the valuation assumptions related to the Company’s retained assets can be found at page 34, under the heading “Valuation of MSRs, Interest-Only, Prepayment Penalty, and Residual Securities.”

27

MORTGAGE SERVICING AND OTHER RETAINED ASSETS

MORTGAGE SERVICING AND MORTGAGE SERVICING RIGHTS

Indymac’s total loans serviced for others reached $139.8 billion (including reverse mortgages and HELOCs) at December 31, 2006, with a weighted average coupon of 7.05%. In comparison, Indymac serviced $124.4 billion of mortgage loans owned by others at September 30, 2006, with a weighted average coupon of 6.96%; and $84.5 billion at December 31, 2005, with a weighted average coupon of 6.19%. The activity in the servicing portfolios for the quarters and years ended December 31, 2006 and 2005 and for the quarter ended September 30, 2006 follows:

	Three Months Ended									Year Ended
	December 31,			December 31,			September 30,			December 31,			December 31,
	2006			2005			2006			2006			2005
	(Dollars in millions)
Unpaid principal balance at beginning of period	$	124,395		$	73,787		$	109,989		$	84,495		$	50,219
Additions		23,415			15,815			20,709			80,237			52,382
Clean-up calls exercised		—			(27	)		—			(31	)		(140	)
Loan payments and prepayments		(7,993	)		(5,080	)		(6,303	)		(24,884	)		(17,966	)
Unpaid principal balance at end of period	$	139,817		$	84,495		$	124,395		$	139,817		$	84,495

The following tables provide additional information related to the servicing portfolio:

	As of
	December 31,			December 31,			September 30,
	2006			2005			2006
By Product Type:
Fixed-rate mortgages		35	%		35	%		34	%
Intermediate term fixed-rate loans		30	%		27	%		29	%
Pay option ARMs		23	%		26	%		25	%
Reverse mortgages (all ARMs)		9	%		9	%		9	%
HELOCs		2	%		2	%		2	%
Other		1	%		1	%		1	%
Total		100	%		100	%		100	%
Additional Information, Excluding Reverse Mortgages:
Weighted average FICO		703			699			703
Weighted average original LTV(1)		73	%		73	%		73	%
Average original loan size (in thousands)		232			221			228
Percentage of portfolio with prepayment penalty		42	%		37	%		42	%
By Geographic Distribution:
California		43	%		42	%		42	%
Florida		8	%		7	%		8	%
New York		8	%		9	%		8	%
New Jersey		4	%		5	%		4	%
Virginia		4	%		4	%		4	%
Other		33	%		33	%		34	%
Total		100	%		100	%		100	%

(1) Combinedloan-to-value ratio for loans in the second lien position is used to calculate weighted average originalloan-to-value ratio for the portfolio.

28

Capitalized MSRs totaled $1.8 billion as of December 31, 2006 and $1.6 billion as of September 30, 2006, an increase of $191.1 million. The activities in MSRs follow:

	Three Months Ended									Year Ended
	December 31,			December 31,			September 30,			December 31,			December 31,
	2006			2005			2006			2006			2005
	(Dollars in thousands)
Balance at beginning of period	$	1,631,316		$	940,606		$	1,598,821		$	1,094,490		$	640,794
Cumulative-effect adjustment due to change in accounting for MSRs		—			—			—			17,561			—
Additions from loan sale or securitization		318,919			211,357			258,249			1,075,740			701,178
Purchase or assumption		—			—			8,631			8,658			5,463
Reduction in MSR due to loan repurchases		(1,763	)		—			—			(1,763	)		—
Transfers to other retained assets		(2,122	)		—			(2,601	)		(4,723	)		(8,491	)
Clean-up calls exercised		—			(1,314	)		—			(274	)		(3,911	)
Change in fair value due to run-off		(120,822	)		—			(97,714	)		(374,955	)		—
Change in fair value due to market changes		(3,073	)		—			(133,471	)		24,180			—
Change in fair value due to application of external benchmarking policies		—			—			(599	)		(16,459	)		—
Amortization		—			(68,298	)		—			—			(227,084	)
Valuation/impairment		—			12,139			—			—			(13,459	)
Balance at end of period	$	1,822,455		$	1,094,490		$	1,631,316		$	1,822,455		$	1,094,490
MSRs fair value as a percentage of unpaid principal balance (in bps)		130			130			131			130			130

The fair value of MSRs is determined using discounted cash flow techniques benchmarked against third party opinions of value. Estimates of fair value involve several assumptions, including assumptions about future prepayment rates, market expectations of future interest rates and discount rates. Prepayment rates are projected using a prepayment model developed by a third party vendor and calibrated for the Company’s collateral. 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. Refer to “Valuation of MSRs, Interest-Only, Prepayment Penalty, and Residual Securities” on page 34 for further detail on the valuation assumptions.

29

Effective January 1, 2006, SFAS No. 156 allowed us to elect to measure MSRs using the fair value method instead of the amortization method. Therefore, change in value due to run-off of the portfolio is recorded as valuation adjustment instead of the amortization for periods beginning in 2006. The components of service fee income are as follows:

	Three Months Ended
	December 31,			BPS			December 31,			BPS			September 30,			BPS
	2006			UPB			2005			UPB			2006			UPB
	(Dollars in thousands)
Service fee income:
Gross service fee income	$	151,106			46		$	87,826			45		$	133,818			46
Change in value due to portfolio run-off/Amortization		(120,822	)		(37	)		(68,298	)		(35	)		(97,714	)		(33	)
Service fee income, net of change in value due to portfolio run-off/amortization		30,284			9			19,528			10			36,104			13
Change in value due to application of external benchmarking policies		—			—			—			—			(599	)		—
Valuation adjustment due to market changes		(3,073	)		(1	)		12,139			6			(133,471	)		(46	)
Hedge (loss) gain on MSRs		(5,088	)		(2	)		(12,953	)		(7	)		119,024			41
Total service fee income	$	22,123			6		$	18,714			9		$	21,058			8

	Year Ended
	December 31,			BPS			December 31,			BPS
	2006			UPB			2005			UPB
	(Dollars in thousands)
Service fee income:
Gross service fee income	$	500,904			45		$	282,420			44
Change in value due to portfolio run-off/Amortization		(374,955	)		(34	)		(227,085	)		(35	)
Service income, net of change in value due to portfolio run-off/Amortization		125,949			11			55,335			9
Change in value due to application of external benchmarking policies		(16,459	)		(1	)		—			—
Valuation adjustment due to market changes		24,180			2			(13,460	)		(2	)
Hedge (loss) gain on MSRs		(32,353	)		(3	)		2,360			—
Total service fee income	$	101,317			9		$	44,235			7

30

In addition to the hedging gain (loss) on MSRs, the Company also uses other hedging strategies to manage its economic risks associated with MSRs. A summary of the performance on MSRs, including AAA-rated and agency interest-only securities, and hedges for the respective periods follows:

	Three Months Ended									Year Ended
	December 31,			December 31,			September 30,			December 31,			December 31,
	2006			2005			2006			2006			2005
	(Dollars in thousands)
Valuation adjustment due to market changes and external benchmarking	$	(3,073	)	$	12,139		$	(134,070	)	$	7,721		$	(13,459	)
Hedge (loss) gain on MSRs		(5,088	)		(12,953	)		119,024			(32,353	)		2,360
Unrealized (loss) gain on AAA-rated and agency interest-only securities		(1,002	)		930			(8,629	)		3,136			(13,864	)
Unrealized gain (loss) on principal-only securities		689			(613	)		5,008			(811	)		(704	)
Unrealized gain on prepayment penalty securities		5,718			3,211			13,250			23,625			21,694
Other		—			2,541			1,343			1,780			2,933
Net (loss) gain on MSRs, AAA-rated and agency interest-only securities, and hedges	$	(2,756	)	$	5,255		$	(4,074	)	$	3,098		$	(1,040	)

During the fourth quarter of 2006, we had a net loss on MSRs, AAA-rated and agency interest-only securities, and related hedges of $2.8 million compared to a net gain of $5.3 million for the fourth quarter of 2005. However, we recorded a net gain of $3.1 million and a net loss of $1.0 million for the years ended December 31, 2006 and 2005, respectively.

OTHER RETAINED ASSETS

The carrying value of AAA-rated and agency interest-only, principal-only, prepayment penalty, residual and non-investment grade securities is evaluated 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. The models used for estimation are periodically tested against historical prepayment speeds and our valuations are benchmarked to external sources, where available. We also may retain certain other investment grade securities from our securitizations and to a lesser extent purchase them from third parties to serve as hedges for our AAA-rated and agency interest-only securities.

31

A summary of the activity of the retained assets follows:

	Three Months Ended									Year Ended
	December 31,			December 31,			September 30,			December 31,			December 31,
	2006			2005			2006			2006			2005
	(Dollars in thousands)
AAA-rated and agency interest-only securities:
Beginning balance	$	68,440		$	74,005		$	64,373		$	78,731		$	90,658
Retained investments from securitizations		9,323			9,504			15,057			29,576			25,168
Sales		—			—			—			(22,939	)		—
Clean-up calls exercised		—			—			—			(107	)		(171	)
Cash received, net of accretion		(3,191	)		(5,708	)		(2,361	)		(14,827	)		(23,060	)
Valuation gains (losses) before hedges		(1,002	)		930			(8,629	)		3,136			(13,864	)
Ending balance	$	73,570		$	78,731		$	68,440		$	73,570		$	78,731
Principal-only securities:
Beginning balance	$	35,158		$	2,351		$	129,951		$	9,483		$	18,598
Retained investments from securitizations		2,955			9,303			3,238			13,862			13,073
Purchases		—			123,048			—			121,281			123,048
Sales		—			(122,684	)		(100,761	)		(100,761	)		(142,132	)
Cash received, net of accretion		(324	)		(1,922	)		(2,278	)		(4,576	)		(2,400	)
Valuation gains (losses) before hedges		689			(613	)		5,008			(811	)		(704	)
Ending balance	$	38,478		$	9,483		$	35,158		$	38,478		$	9,483
Prepayment penalty securities:
Beginning balance	$	98,422		$	76,178		$	80,036		$	75,741		$	33,451
Retained investments from securitizations		7,236			7,602			13,801			43,094			38,742
Transfer from MSRs/residual securities		881			—			3,642			4,523			8,491
Sales		(2,078	)		—			—			(2,078	)		—
Cash received, net of accretion		(12,603	)		(11,250	)		(12,307	)		(47,329	)		(26,637	)
Valuation gains before hedges		5,718			3,211			13,250			23,625			21,694
Ending balance	$	97,576		$	75,741		$	98,422		$	97,576		$	75,741
Residual securities(1):
Beginning balance	$	261,658		$	154,334		$	240,522		$	167,771		$	135,386
Retained investments from securitizations		67,586			22,812			23,608			224,014			58,396
Transfer from (to) MSRs/prepayment penalty securities		1,241			—			(1,041	)		200			—
Impairments		(4,283	)		—			(3,626	)		(9,209	)		—
Sales		(60,349	)		—			—			(107,360	)		—
Cash received, net of accretion		(6,627	)		(8,619	)		(6,431	)		(22,362	)		(23,941	)
Valuation (losses) gains before hedges		(8,653	)		(756	)		8,626			(2,481	)		(2,070	)
Ending balance	$	250,573		$	167,771		$	261,658		$	250,573		$	167,771
Investment-grade securities:
Beginning balance	$	193,195		$	93,440		$	187,945		$	92,120		$	146,822
Retained investments from securitizations		—			4,317			3,092			43,701			38,241
Purchases		—			—			7,369			72,366			—
Impairment		—			(33	)		—			(183	)		(361	)
Sales		(2,757	)		—			(7,039	)		(9,796	)		(83,629	)
Cash received, net of accretion		(1,342	)		(5,027	)		(1,142	)		(8,780	)		(7,376	)
Valuation gains (losses) before hedges		157			(577	)		2,970			(175	)		(1,577	)
Ending balance	$	189,253		$	92,120		$	193,195		$	189,253		$	92,120
Non-Investment grade securities:
Beginning balance	$	78,278		$	53,041		$	88,045		$	57,712		$	83,052
Retained investments from securitizations		—			4,496			3,324			34,205			14,224
Purchases		3,697			—			—			3,697			1,523
Impairment		(236	)		(22	)		(156	)		(846	)		(247	)
Sales		(1,141	)		—			(12,401	)		(13,542	)		(37,330	)
Cash received, net of accretion		(23	)		20			296			369			(325	)
Valuation (losses) gains before hedges		(401	)		177			(830	)		(1,421	)		(3,185	)
Ending balance	$	80,174		$	57,712		$	78,278		$	80,174		$	57,712

(1) Included in the residual securities balance at December 31, 2006 were $31.8 million of HELOC residuals retained from two separate guaranteed mortgage securitization transactions. There was no gain on sale of loans recognized in connection with these transactions.

32

The fair value of other investment grade and non-investment grade securities by credit rating follows:

	December 31, 2006
			Premium
	Current		(Discount)							December 31,
	Face		to Face			Amortized				2005
	Value		Value			Cost		Fair Value		Fair Value
	(Dollars in thousands)
Other investment grade mortgage-backed securities:
AA+	$	7,445	$	(69	)	$	7,376	$	7,513	$	—
AA		87,044		(1,127	)		85,917		86,311		21,787
AA−		14,038		(348	)		13,690		14,138		—
A		2,273		(81	)		2,192		2,160		239
BBB		21,747		(1,209	)		20,538		20,734		29,848
BBB−		64,902		(5,340	)		59,562		58,397		40,246
Total other investment grade mortgage-backed securities	$	197,449	$	(8,174	)	$	189,275	$	189,253	$	92,120
Non-investment grade mortgage-backed securities:
BB+	$	8,456	$	(1,157	)	$	7,299	$	7,299	$	—
BB		57,986		(8,405	)		49,581		49,856		36,873
BB−		22,022		(901	)		21,121		21,170		13,523
B		6,619		(5,569	)		1,050		1,442		6,458
Other		5,240		(4,998	)		242		407		858
Total other non-investment grade mortgage-backed securities	$	100,323	$	(21,030	)	$	79,293	$	80,174	$	57,712

At December 31, 2006, other investment grade and non-investment grade mortgage-backed securities totaled $269.4 million, of which 86% were collateralized by prime loans and 14% were collateralized by subprime loans.

The components of the net (loss) gain on mortgage-backed securities are as follows:

	Three Months Ended									Year Ended
	December 31,			December 31,			September 30,			December 31,			December 31,
	2006			2005			2006			2006			2005
	(Dollars in thousands)
Net gain (loss) on securities:
Realized gain on available for sale securities	$	195		$	—		$	3,520		$	3,715		$	6,054
Impairment on available for sale securities		(4,520	)		(54	)		(3,782	)		(10,238	)		(607	)
Unrealized gain on prepayment penalty securities		5,718			3,211			13,250			23,625			21,694
Unrealized (loss) gain on AAA-rated and agency interest-only and residual securities		(9,654	)		642			(504	)		1,692			(16,970	)
Net gain (loss) on trading securities and other instruments used to hedge AAA-rated and agency interest-only and residual securities		4,132			2,134			6,484			1,688			7,695
Total (loss) gain on securities, net	$	(4,129	)	$	5,933		$	18,968		$	20,482		$	17,866

33

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. Prior to January 1, 2006, MSRs were subject to the lower of cost or market limitations. Relevant information and assumptions used to value these securities at December 31, 2006 and 2005 and September 30, 2006 follow:

	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)
December 31, 2006
MSRs	$	1,822,455	$	139,816,763		7.05	%		0.37	%		20.2	%		3.57		25.8	%		19.8	%		8.8	%		N/A
AAA-rated interest-only securities	$	73,570	$	5,957,550		6.93	%		0.51	%		19.5	%		2.41		16.4	%		19.7	%		15.4	%		N/A
Prepayment penalty securities	$	97,576	$	20,282,718		7.40	%		N/A			18.1	%		N/A		28.2	%		20.6	%		26.3	%		N/A
Lot loan residual securities		57,640	$	2,246,833		9.24	%		3.54	%		35.6	%		0.73		39.8	%		37.9	%		23.5	%		0.61	%
HELOC residual securities		98,697	$	3,039,555		9.59	%		2.71	%		43.7	%		1.20		50.3	%		47.6	%		20.7	%		1.11	%
Closed-end seconds residual securities		14,572	$	1,737,859		10.44	%		3.69	%		17.5	%		0.23		37.1	%		24.8	%		24.1	%		8.08	%
Subprime residual securities		79,664	$	4,848,859		7.74	%		1.68	%		33.0	%		0.98		39.5	%		38.1	%		23.4	%		5.85	%
Total non-investment grade residual securities	$	250,573
December 31, 2005
MSRs	$	1,094,490	$	84,495,133		6.19	%		0.37	%		21.7	%		3.54		21.4	%		16.2	%		10.7	%		N/A
AAA-rated and agency interest-only securities	$	78,731	$	7,583,643		6.63	%		0.38	%		27.5	%		2.73		20.3	%		22.7	%		8.0	%		N/A
Prepayment penalty securities	$	75,741	$	13,657,946		6.30	%		N/A			22.7	%		N/A		23.7	%		20.3	%		9.0	%		N/A
Prime residual securities	$	2,438	$	1,183,361		5.85	%		0.61	%		60.0	%		0.34		46.3	%		51.4	%		15.0	%		1.34	%
Lot loan residual securities		41,066	$	939,005		7.55	%		2.90	%		33.2	%		1.51		43.1	%		41.4	%		21.6	%		0.48	%
HELOC residual securities		66,041	$	1,430,473		8.26	%		3.18	%		55.8	%		1.45		44.0	%		49.6	%		19.0	%		0.82	%
Subprime residual securities		58,226	$	4,831,675		7.40	%		2.17	%		28.9	%		0.55		37.1	%		29.4	%		24.9	%		4.76	%
Total non-investment grade residual securities	$	167,771
September 30, 2006
MSRs	$	1,631,316	$	124,394,943		6.96	%		0.37	%		18.2	%		3.59		24.8	%		18.2	%		9.6	%		N/A
AAA-rated interest-only securities	$	68,440	$	4,424,080		6.68	%		0.52	%		12.7	%		2.95		16.7	%		17.2	%		13.6	%		N/A
Prepayment penalty securities	$	98,422	$	19,441,542		7.17	%		N/A			23.0	%		N/A		25.3	%		18.8	%		22.9	%		N/A
Lot loan residual securities	$	66,133	$	2,262,810		8.95	%		3.50	%		34.9	%		0.83		39.8	%		38.6	%		23.7	%		0.56	%
HELOC residual securities		95,745	$	2,661,610		9.65	%		3.21	%		44.5	%		1.12		50.0	%		48.7	%		20.3	%		0.81	%
Closed-end seconds residual securities		14,841	$	1,222,620		10.43	%		4.14	%		18.7	%		0.29		36.7	%		22.5	%		25.1	%		7.65	%
Subprime residual securities		84,939	$	5,427,460		7.68	%		1.70	%		28.0	%		0.92		39.4	%		35.8	%		23.2	%		5.47	%
Total non-investment grade residual securities	$	261,658

(1) As a percentage of the original pool balance, the actual cumulative loss rate to date totaled 0.34%, 0.06% and 0.42% for HELOC, closed-end seconds and subprime loans, respectively, at December 31, 2006. No loss has been incurred on lot loans as of December 31, 2006.

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The lifetime prepayment speeds represent the annual constant prepayment rate (“CPR”) estimated for the remaining life of the collateral supporting the asset. For MSRs and AAA-rated and agency interest-only securities, prepayment rates are projected using a prepayment model developed by a third party vendor and calibrated for the Company’s collateral. 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 the Company’s MSR multiples incomparable to peer multiples whose product mix is substantially different.

Beginning in the fourth quarter of 2006, the calculation of remaining cumulative loss rate is changed to using remaining lifetime loss projection divided by current collateral balance. All prior periods have been adjusted to reflect such change.

The prepayment penalty securities are used as hedges of MSRs. The value of prepayment penalty securities generally rises in a declining rate environment due to higher prepayment activities, which typically mitigates a decline in MSR value attendant with faster prepayments. As of December 31, 2006, as a percentage of the underlying collateral, the value of prepayment penalty securities was 48 basis points, down from 51 basis points at September 30, 2006.

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. The MSRs and Other Retained Assets 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”), Enterprise Risk Management (“ERM”) group, and our Board of Directors-level ERM Committee.

The objective of our hedging strategy is to maintain a stable range of returns in all interest rate environments and not to speculate on interest rates. As such, we manage the comprehensive interest rate risk of our servicing-related assets using financial instruments. Historically, we have hedged servicing-related assets using a variety of derivative instruments and on-balance sheet securities. As there are no hedge instruments that would be perfectly correlated with these hedged assets, we use a mix of the instruments designed to correlate well with the hedged servicing assets.

We use avalue-at-risk (“VAR”) measure to monitor our interest rate risk on our assets. The measure incorporates a range of market factors that can impact the value of these assets, and supplements other risk measures such as Duration Gap and stress testing. VAR estimates the exposure to loss over a specified period at a specified confidence level. We have chosen a historical approach that uses 500 days of market conditions along with current portfolio data to estimate the potentialone-day loss at a 95% confidence level. This means that actual losses are estimated to exceed the VAR measure about five times every 100 days.

In modeling of the VAR, we have made a number of assumptions and approximations. As there is no standardized methodology for estimating VAR, different assumptions and approximations could result in materially different VAR estimates.

As of December 31, 2006, the portfolio of MSRs and interest-only securities was valued at $1.8 billion. The average VAR (after the effect of hedging transactions) for the quarter was $2.9 million, or 16 bps of the recorded

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value, down from 17 bps for the quarter ended September 30, 2006. During the quarter, the VAR measure ranged from $2.3 million to $3.7 million. We also performed the VAR analysis on the mortgage-backed securities portfolio. See page 37 for additional discussion.

A key performance measure for the MSRs and Other Retained Assets division is the return on equity of the deployed capital. The segment as a whole reported an ROE of 17% and 33%, for the quarters ended December 31, 2006 and 2005, respectively. The tables below provide a detail by major asset class of the ROE for the quarters and years ended December 31, 2006 and 2005:

	For the Three Months Ended
	December 31, 2006												December 31, 2005
	Servicing			AAA IO			Credit Risk						Servicing			AAA IO			Credit Risk
	Portfolio			Portfolio			Portfolio			Total			Portfolio			Portfolio			Portfolio			Total
	(Dollars in thousands)
Net earnings	$	14,571			248			3,298			18,117		$	14,008			1,465			3,136			18,609
Average capital deployed	$	282,957			8,284			139,026			430,267		$	154,496			9,210			62,293			225,999
Return on equity		20	%		12	%		9	%		17	%		36	%		63	%		20	%		33	%

	For the Year Ended
	December 31, 2006												December 31, 2005
	Servicing			AAA IO			Credit Risk						Servicing			AAA IO			Credit Risk
	Portfolio			Portfolio			Portfolio			Total			Portfolio			Portfolio			Portfolio			Total
	(Dollars in thousands)
Net earnings	$	65,596			623			25,027			91,246		$	32,807			(2,766	)		13,872			43,913
Average capital deployed	$	243,232			10,002			117,217			370,451		$	125,477			8,252			60,230			193,959
Return on equity		27	%		6	%		21	%		25	%		26	%		(34	)%		23	%		23	%

MORTGAGE-BACKED SECURITIES AND LOANS HELD FOR INVESTMENT

In addition to the securities retained from our securitizations, the Company also invests in non-agency senior and agency securities and loans held for investment to generate core interest income, stabilize company-wide earnings, and provide a consistent return on equity. These securities are generally classified as available for sale and fair value adjustments are excluded from earnings and reported as a separate component in shareholders’ equity.

At December 31, 2006, mortgage-backed securities totaled $5.4 billion, of which 89% were AAA-rated securities. At December 31, 2005, mortgage-backed securities totaled $4.1 billion, of which 90% were AAA-rated securities. Our AAA-rated mortgage-backed securities had an expected weighted-average life of 2.9 years and 2.6 years at December 31, 2006 and 2005, respectively.

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Details of loans held for investment and AAA-rated non-agency and agency securities as of December 31, 2006 and December 31, 2005 follow:

	December 31,		December 31,
	2006		2005
	(Dollars in thousands)
Loans held for investment:
SFR mortgage	$	6,519,340	$	5,441,521
Consumer construction		2,009,461		1,656,963
Builder construction		1,002,797		838,772
HELOC		23,618		31,882
Land and other mortgage		375,215		260,615
Revolving warehouse lines of credit		246,778		48,616
Total — loans held for investment	$	10,177,209	$	8,278,369
AAA-rated mortgage-backed securities:
AAA-rated non-agency securities, trading	$	43,957	$	52,633
AAA-rated non-agency securities, available for sale		4,604,489		3,524,952
AAA-rated agency securities, available for sale		65,175		43,014
Total AAA-rated mortgage-backed securities	$	4,713,621	$	3,620,599

As of December 31, 2006, the portfolio of the mortgage-backed securities on which we performed the VAR analysis was valued at $4.2 billion. The average VAR (after the effect of hedging transactions) for the quarter was $1.1 million, or 3 bps of the recorded value. During the quarter, the VAR measure ranged from $0.7 million to $1.4 million.

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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 intermediate term fixed-rate mortgage loans to mitigate interest rate risk. The Company plans to grow its thrift portfolio opportunistically depending on external market demand, always seeking the best execution of the mortgage loans produced. During the fourth quarter of 2006, the Company added $0.7 billion of mortgage loans to the held for investment portfolio in accordance with this strategy.

A composition of the portfolio and the relevant credit quality characteristics as of December 31, 2006, September 30, 2006, and December 31, 2005 follow:

	December 31,			September 30,			December 31,
	2006			2006			2005
	(Dollars in thousands)
SFR mortgage loans held for investment (book value)	$	6,519,340		$	6,462,610		$	5,441,521
Average loan size	$	310		$	304		$	292
Non-performing loans as a percentage of SFR loans		1.02	%		0.90	%		0.62	%
Estimated average life in years(1)		2.6			2.4			2.4
Estimated average net duration in months(2)		(3.5	)		(1.0	)		0.1
Annualized yield		6.01	%		6.00	%		5.06	%
Percentage of loans with active prepayment penalty		34	%		34	%		35	%
Fixed-rate mortgages		5	%		5	%		6	%
Intermediate term fixed-rate loans		15	%		14	%		16	%
Interest-only loans		60	%		61	%		49	%
Pay option ARMs		18	%		18	%		25	%
Other ARMs		2	%		2	%		4	%
Additional Information:
Average FICO score(3)		716			716			715
Original average loan to value ratio		73	%		73	%		72	%
Current average loan to value ratio(4)		61	%		59	%		58	%
Geographic distribution of top five states:
Southern California		32	%		32	%		32	%
Northern California		20	%		20	%		21	%
Total California		52	%		52	%		53	%
Florida		6	%		6	%		5	%
New York		4	%		4	%		4	%
Virginia		3	%		3	%		3	%
Michigan		3	%		3	%		4	%
Other		32	%		32	%		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 net duration measures the expected change in the value of a financial instrument in response to changes in interest rates, taking into consideration the impact of the related hedges. The negative net duration implies an increase in value as rates rise while the positive net duration implies a decrease in value.
(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)	Current averageloan-to-value ratio is estimated based on the Office of the Federal Housing Enterprise Oversight House Price Index Metropolitan Statistical Area data on a loan level basis.

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Included in our loans held for investment portfolio at December 31, 2006 were $1.2 billion in pay option ARM loans, or 18% of the portfolio, as compared to $1.3 billion, or 25% of the portfolio, at December 31, 2005. As of December 31, 2006, approximately 83% (based on loan count) of our pay option ARM loans had negatively amortized, resulting in an increase of $26.8 million to their original loan balance. This is an increase from 80% and 56% at September 30, 2006 and December 31, 2005, respectively. The net increase in unpaid principal balance due to negative amortization was $6.1 million and $21.4 million for the three months and year ended December 31, 2006, respectively, which approximated the deferred interest recognized for the periods. The original weighted average combinedloan-to-value (“CLTV”) on our pay option ARM loans was 76%, while the estimated current LTV is 64%, calculated based on the Office of the Federal Housing Enterprise Oversight House Price Index Metropolitan Statistical Areas data on a loan level basis. The decline in the currentloan-to-value was due to estimated appreciation of the underlying property value. The original weighted average FICO score on our pay option ARM loans was 708 at December 31, 2006, slightly lower than the average FICO for the entire SFR mortgage loans held for investment portfolio.

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 is aconstruction-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. When the loan converts to permanent status, the interest rate may be adjusted based on the underlying permanent note. As of December 31, 2006, based on the underlying note agreements, 69% of the construction loans will be converted to adjustable-rate permanent loans, 21% to intermediate term fixed-rate loans, and 10% to fixed-rate loans. The consumer construction division also provides financing to builders who are building single-family residences without a guaranteed sale at inception of project, or on a speculative basis. The single-spec portfolio is included in the builder construction portfolio on the balance sheet. See additional discussion in the Builder Construction section.

Total new consumer construction commitments decreased 14% as compared to the third quarter of 2006 and decreased 16% as compared to the fourth quarter of 2005 to $785.1 million. This decline reflects the Bank’s effort to tighten controls in light of current market conditions and a general slow down of the market. About 71% of new commitments are generated through mortgage broker customers of the mortgage bank and the remaining 29% of new commitments are retail originations. Once each 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 our SFR mortgage loan portfolio. The amount of construction loans that were converted to permanent status was $462.0 million for the fourth quarter of 2006, an increase of 2% over the third quarter of 2006 and an increase of 19% over the fourth quarter of 2005. Overall, the Company is one of the largest custom residential construction lenders in the nation. Consumer construction loans outstanding at December 31, 2006 increased 21% from December 31, 2005.

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Information on our consumer construction portfolio follows:

	As of
	December 31,			September 30,			December 31,
	2006			2006			2005
	(Dollars in thousands)
Consumer construction loans (book value)	$	2,009,461		$	1,985,738		$	1,656,963
Lot, land and other mortgage loans (book value)		50,154			41,201			107,164
Total commitments		3,294,139			3,342,008			2,949,430
Average loan commitment		480			484			442
Non-performing loans		1.05	%		0.75	%		0.51	%
Fixed-rate loans		79	%		89	%		96	%
Adjustable-rate loans		21	%		11	%		4	%
Additional Information:
Averageloan-to-value ratio(1)		73	%		73	%		72	%
Average FICO score		713			714			713
Geographic distribution of top five states:
Southern California		27	%		27	%		29	%
Northern California		15	%		16	%		18	%
Total California		42	%		43	%		47	%
Florida		9	%		9	%		8	%
Washington		4	%		4	%		3	%
Colorado		4	%		3	%		3	%
Arizona		3	%		3	%		3	%
Other		38	%		38	%		36	%
Total Consumer Construction		100	%		100	%		100	%

(1) The averageloan-to-value ratio is based on the estimated appraised value of the completed project compared to the commitment amount at the date indicated.

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. We also purchase HELOC and closed-end second mortgages through our conduit channel. At December 31, 2006, our total HELOC servicing portfolio totaled $3.6 billion, an increase of approximately $1.5 billion from the portfolio size at December 31, 2005. The increase in the portfolio is primarily due to new HELOC commitments originated during the period of $3.9 billion. We plan to sell or securitize a majority of the loans in our HELOC portfolio and as a result, they are classified as held for sale on our balance sheet.

We produced $0.8 billion of new HELOC commitments through our mortgage banking segment and internal channels during the fourth quarter of 2006, and sold $753.6 million of HELOC loans, realizing $6.2 million of gain on sale. During the same period in 2005, the amount of HELOC loans produced and sold were $0.7 billion and $98.9 million, respectively, with a total gain on sale of $0.9 million.

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All HELOC loans are adjustable-rate loans and indexed to the prime rate. Information on the combined HELOC portfolio, including both held for sale and held for investment loans, as of and for the three months ended December 31, 2006, September 30, 2006, and December 31, 2005 follows:

	December 31,			September 30,			December 31,
	2006			2006			2005
	(Dollars in thousands)
Outstanding balance (book value)	$	656,714		$	765,760		$	786,922
Total commitments(1)		2,211,298			2,115,407			1,493,415
Average spread over prime		1.39	%		1.17	%		1.47	%
Average FICO score		737			736			728
Average original CLTV ratio(2)		77	%		77	%		78	%

Additional Information

	December 31, 2006
			Average Loan							30+ Days
	Outstanding		Commitment		Average Spread			Average		Delinquency
CLTV	Balance		Balance		Over Prime			FICO		Percentage
	(Dollars in thousands)
96% to 100%	$	87,718	$	141		2.14	%		728		4.16	%
91% to 95%		115,868		124		2.17	%		715		0.62	%
81% to 90%		226,440		114		1.58	%		719		2.34	%
71% to 80%		129,441		198		0.63	%		746		0.77	%
70% or less		97,247		200		0.35	%		754		0.90	%
Total	$	656,714	$	156		1.39	%		737		1.76	%

	December 31, 2005
96% to 100%	$	118,995	$	83	2.63	%	730	0.15	%
91% to 95%		78,909		77	2.20	%	721	0.11	%
81% to 90%		278,304		74	1.86	%	713	0.24	%
71% to 80%		162,560		99	0.63	%	729	0.24	%
70% or less		148,154		97	0.33	%	745	0.22	%
Total	$	786,922	$	86	1.47	%	728	0.21	%

(1)	On funded loans.
(2)	The CLTV combines theloan-to-value on both the first mortgage loan and the HELOC.

BUILDER CONSTRUCTION

Indymac’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 Company earns net interest income on these loans. The homebuilder division has central operations in Pasadena, California with 17 satellite sales offices in Arizona, California, Colorado, Florida, Illinois, Massachusetts, North Carolina, Oregon, Tennessee, Texas, and Washington, D.C. Our typical customer is a mid-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 five to 25 unit projects, and who typically build five to 100 homes per year.

During the fourth quarter of 2006, the homebuilder division entered into new commitments of $381.8 million, down 19%, or $89 million, from the third quarter of 2006 and down 16%, or $71 million, from the fourth quarter of

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2005. The decline in volume was mainly due to a slowing of new home projects as new home starts declined over the past several months. As a result of the near term decline in new home starts, the homebuilder division is being more selective about new commitments; and consequently its pipeline has reduced. Builder loans outstanding at December 31, 2006, including tract construction, single-spec, and land and other mortgage loans, totaled $1.4 billion, a $270 million, or 25%, increase compared to December 31, 2005 with the increase primarily resulting from advances under existing commitments. Total commitments at December 31, 2006 consisted of 87% of construction and land/model loans and 13% of single-spec loans.

At December 31, 2006, non-performing loans for the builder construction portfolio are at 0.98%. Although this has increased from 0.25% at September 30, 2006 and 0.04% at December 31, 2005, it is still considered low in comparison to the portfolio’s historical performance. Although this represents a low point for the portfolio, the current softening of the housing market makes the prospect of increased non-performing assets and future losses likely. Moreover, due to the size of certain credits in this heterogeneous portfolio, the deterioration of a single credit may significantly increase the builder construction and the Company non-performing ratios. We manage this credit risk by implementing strong underwriting guidelines and risk-based pricing. Our current weighted averageloan-to-value ratio is 72%. Additionally, 98% of our builder construction loans are secured by corporate or personal guarantees of the builders as well as the underlying real estate.

Information on our builder construction portfolio follows:

	As of
	December 31,			September 30,			December 31,
	2006			2006			2005
	(Dollars in thousands)
Construction loans (book value)	$	1,002,797		$	1,018,891		$	838,772
Land and other mortgage loans (book value)		358,556			350,496			252,427
Total commitments		2,317,042			2,445,632			2,181,698
Average loan commitments(1)		10,810			11,135			10,824
Percentage of homes under construction or completed — pre-sold(2)		49	%		55	%		66	%
Median sales price of homes(2)		420			403			377
Non-performing loans		0.98	%		0.25	%		0.04	%
Additional Information:
Averageloan-to-value ratio(3)		72	%		72	%		71	%
Geographic distribution of top five states:
Southern California		40	%		37	%		40	%
Northern California		18	%		17	%		17	%
Total California		58	%		54	%		57	%
Florida		10	%		11	%		9	%
Illinois		7	%		8	%		9	%
Oregon		5	%		5	%		3	%
New York		4	%		4	%		4	%
Other		16	%		18	%		18	%
Total Builder Construction		100	%		100	%		100	%

(1)	In calculating the average loan commitments, total commitments of $306.3 million, $352.3 million, and $385.0 million of single-spec loans at December 31, 2006, September 30, 2006 and December 31, 2005, are excluded. Average loan commitments for the single-spec portfolio are $415 thousand, $418 thousand and $387 thousand at December 31, 2006, September 30, 2006 and December 31, 2005, respectively.
(2)	Amounts are for construction loans from homebuilder division only.
(3)	The averageloan-to-value ratio is based on the estimated appraised value of the completed project compared to the commitment amount at the date indicated.

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WAREHOUSE LENDING DIVISION

Our warehouse lending division 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. The warehouse lending operation relies mainly on the sale or liquidation of the mortgages as a source of repayment. Receivables under warehouse facilities are presented on our balance sheet as loan receivables. Terms of warehouse lines, including the commitment amount, are determined based upon the financial strength, historical performance and other qualifications of the borrower. Information on our warehouse lending portfolio follows:

	As of
	December 31,		September 30,		December 31,
	2006		2006		2005
	(Dollars in thousands)
Outstanding balance (book value)	$	246,778	$	166,948	$	48,616
Total commitments		712,000		637,000		201,000

Since the reentering of the warehouse lending business in first quarter of 2005, we have experienced a significant growth. Total commitments increased 254% from $201 million at December 31, 2005 to $712 million at December 31, 2006.

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 49.

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NET INTEREST MARGIN

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, follows:

	Three Months Ended
	December 31, 2006							December 31, 2005							September 30, 2006
	Average				Yield/			Average				Yield/			Average				Yield/
	Balance		Interest		Rate			Balance		Interest		Rate			Balance		Interest		Rate
	(Dollars in thousands)
Assets
Securities	$	5,005,888	$	86,153		6.83	%	$	3,798,159	$	56,911		5.94	%	$	4,889,155	$	86,212		7.00	%
Loans held for sale		13,975,255		245,896		6.98	%		9,029,154		137,749		6.05	%		10,825,266		196,924		7.22	%
Mortgage loans held for investment		6,922,638		104,882		6.01	%		5,534,897		70,634		5.06	%		6,079,803		92,005		6.00	%
Builder construction and income property		999,458		26,143		10.38	%		854,451		21,562		10.01	%		1,023,421		27,396		10.62	%
Consumer construction		1,918,456		35,868		7.42	%		1,550,080		22,155		5.67	%		1,835,164		32,087		6.94	%
Investment in Federal Home Loan Bank stock and other		1,046,419		15,266		5.79	%		846,985		9,549		4.47	%		854,208		12,127		5.63	%
Total interest-earning assets		29,868,114		514,208		6.83	%		21,613,726		318,560		5.85	%		25,507,017		446,751		6.95	%
Mortgage servicing assets		1,612,215							978,603							1,552,295
Other		2,285,160							1,087,238							2,080,669
Total assets	$	33,765,489						$	23,679,567						$	29,139,981
Liabilities and shareholders’ equity
Interest-bearing deposits	$	9,876,612		127,367		5.12	%	$	6,693,009		63,049		3.74	%	$	9,208,481		113,758		4.90	%
Advances from Federal Home Loan Bank		12,700,996		161,454		5.04	%		9,181,222		88,218		3.81	%		9,783,887		115,769		4.69	%
Other borrowings		6,403,620		92,741		5.75	%		4,905,885		57,894		4.68	%		5,682,601		80,513		5.62	%
Total interest-bearing liabilities		28,981,228		381,562		5.22	%		20,780,116		209,161		3.99	%		24,674,969		310,040		4.99	%
Other		2,815,678			��				1,398,804							2,593,633
Total liabilities		31,796,906							22,178,920							27,268,602
Shareholders’ equity		1,968,583							1,500,647							1,871,379
Total liabilities and shareholders’ equity	$	33,765,489						$	23,679,567						$	29,139,981
Net interest income			$	132,646						$	109,399						$	136,711
Net interest spread						1.61	%						1.86	%						1.96	%
Net interest margin						1.76	%						2.01	%						2.13	%

44

	Year Ended
	December 31, 2006							December 31, 2005
	Average				Yield			Average				Yield
	Balance		Interest		Rate			Balance		Interest		Rate
	(Dollars in thousands)
Assets
Securities	$	4,658,402	$	319,846		6.87	%	$	3,652,102	$	208,560		5.71	%
Loans held for sale		11,488,630		797,460		6.94	%		7,746,762		430,857		5.56	%
Mortgage loans held for investment		6,243,353		365,158		5.85	%		5,282,342		256,427		4.85	%
Builder construction and income property		980,164		100,103		10.21	%		759,011		68,176		8.98	%
Consumer construction		1,769,890		120,477		6.81	%		1,447,135		81,252		5.61	%
Investment in Federal Home Loan Bank stock and other		887,837		47,972		5.40	%		757,659		29,083		3.84	%
Total interest-earning assets		26,028,276		1,751,016		6.73	%		19,645,011		1,074,355		5.47	%
	��
Mortgage servicing assets		1,436,725							786,622
Other		1,843,873							846,260
Total assets	$	29,308,874						$	21,277,893
Liabilities and shareholders’ equity
Interest-bearing deposits	$	8,663,777		408,208		4.71	%	$	5,938,147		195,528		3.29	%
Advances from Federal Home Loan Bank		10,560,896		491,300		4.65	%		8,439,903		281,929		3.34	%
Other borrowings		5,985,486		324,787		5.43	%		4,235,298		172,187		4.07	%
Total interest-bearing liabilities		25,210,159		1,224,295		4.86	%		18,613,348		649,644		3.49	%
Other		2,302,455							1,283,678
Total liabilities		27,512,614							19,897,026
Shareholders’ equity		1,796,260							1,380,867
Total liabilities and shareholders’ equity	$	29,308,874						$	21,277,893
Net interest income			$	526,721						$	424,711
Net interest spread						1.87	%						1.98	%
Net interest margin						2.02	%						2.16	%

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.

45

The following tables summarize net interest margin by segment for the three months and years ended December 31, 2006 and 2005, and the three months ended September 30, 2006:

	Three Months Ended
	December 31, 2006							December 31, 2005							September 30, 2006
	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	$	16,408	$	68		1.64	%	$	13,365	$	68		2.02	%	$	15,390	$	78		2.02	%
Mortgage banking segment		13,460		65		1.91	%		8,249		41		2.00	%		10,117		59		2.29	%
Total Company	$	29,868	$	133		1.76	%	$	21,614	$	109		2.01	%	$	25,507	$	137		2.13	%

	Year Ended
	December 31, 2006							December 31, 2005
	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	$	15,307	$	295		1.93	%	$	12,527	$	263		2.10	%
Mortgage banking segment		10,721		232		2.16	%		7,118		162		2.27	%
Total Company	$	26,028	$	527		2.02	%	$	19,645	$	425		2.16	%

The net interest margin during the fourth quarter of 2006 was 1.76%, a decline from 2.01% for the fourth quarter of 2005 and 2.13% for the third quarter of 2006. Net interest margin was compressed as the Company experienced the negative impact from the inverted yield curve on loans held for sale. In addition, funding costs in our thrift segment were negatively impacted by the expiration of $1.5 billion of low fixed-rate liabilities and the resultant repricing to current rates.

The net interest margin during the year ended December 31, 2006 was 2.02%, a decline from 2.16% for the year ended December 31, 2005, primarily as a result of the factors above.

46

Interest income and interest expense fluctuations depend upon changes in the average balances and interest rates of interest-earning assets and interest-bearing liabilities. The following table details changes attributable to:

	Increase/(Decrease) Due to
	Volume(1)		Rate(2)			Mix(3)			Total Change
	(Dollars in thousands)
Three Months Ended December 31, 2006 vs. 2005
Interest income:
Mortgage-backed securities	$	18,096	$	8,457		$	2,689		$	29,242
Loans held for sale		75,458		21,120			11,569			108,147
Mortgage loans held for investment		17,710		13,223			3,315			34,248
Builder construction and income property		3,659		788			134			4,581
Consumer construction		5,265		6,826			1,622			13,713
Investment in Federal Home Loan Bank stock and other		2,249		2,806			662			5,717
Total interest income		122,437		53,220			19,991			195,648
Interest expense:
Interest-bearing deposits		29,990		23,263			11,065			64,318
Advances from Federal Home Loan Bank		33,820		28,493			10,923			73,236
Other borrowings		17,675		13,156			4,016			34,847
Total interest expense		81,485		64,912			26,004			172,401
Net interest income	$	40,952	$	(11,692	)	$	(6,013	)	$	23,247
Year Ended December 31, 2006 vs. 2005
Interest income:
Mortgage-backed securities	$	57,467	$	42,193		$	11,626		$	111,286
Loans held for sale		208,114		106,869			51,620			366,603
Mortgage loans held for investment		46,651		52,524			9,556			108,731
Builder construction and income property		19,864		9,341			2,722			31,927
Consumer construction		18,122		17,255			3,848			39,225
Investment in Federal Home Loan Bank stock and other		4,997		11,855			2,037			18,889
Total interest income		355,215		240,037			81,409			676,661
Interest expense:
Interest-bearing deposits		89,748		84,257			38,675			212,680
Advances from Federal Home Loan Bank		70,850		110,701			27,820			209,371
Other borrowings		71,154		57,631			23,815			152,600
Total interest expense		231,752		252,589			90,310			574,651
Net interest income	$	123,463	$	(12,552	)	$	(8,901	)	$	102,010

(1)	Changes in volume are calculated by taking changes in average outstanding balances multiplied by the prior period’s rate.
(2)	Changes in the rate are calculated by taking changes in the average interest rate multiplied by the prior period’s volume.
(3)	Changes in rate/volume (“mix”) are calculated by taking changes in rates times the changes in volume.

47

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 management. Our primary measurement tool used to evaluate interest rate risk over the comprehensive balance sheet is net portfolio value (“NPV”) analysis. The NPV analysis and duration gap estimate the exposure of the fair value of net assets attributable to shareholders’ equity to changes in interest rates.

The following sets forth the NPV and change in NPV that we estimate might result from a 100 basis point change in interest rates as of December 31, 2006, and December 31, 2005:

	December 31, 2006								December 31, 2005							��
			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	$	541,545	$	541,545		$	541,545		$	442,059	$	442,059		$	442,059
Trading securities		541,175		573,028			522,503			342,545		348,982			323,577
Available for sale securities		4,183,629		4,272,980			4,064,097			2,680,955		2,727,144			2,613,690
Loans held for sale		9,546,301		9,625,467			9,421,411			6,057,556		6,111,131			5,972,194
Loans held for investment		10,193,276		10,268,685			10,083,369			8,213,754		8,279,424			8,119,628
MSRs		1,822,455		1,393,979			2,142,276			1,114,630		930,932			1,239,189
Other assets		1,882,732		2,219,807			1,692,256			1,372,896		1,436,900			1,391,549
Total assets	$	28,711,113	$	28,895,491		$	28,467,457		$	20,224,395	$	20,276,572		$	20,101,886
Deposits	$	10,936,012	$	10,978,982		$	10,894,553		$	7,629,227	$	7,665,078		$	7,594,015
Advances from Federal Home Loan Bank		10,409,767		10,565,054			10,256,128			6,966,946		6,993,439			6,940,884
Other borrowings		3,464,290		3,466,577			3,462,006			2,990,570		2,992,630			2,988,513
Other liabilities		775,455		775,455			775,455			433,995		434,287			433,705
Total liabilities		25,585,524		25,786,068			25,388,142			18,020,738		18,085,434			17,957,117
Shareholders’ equity (NPV)	$	3,125,589	$	3,109,423		$	3,079,315		$	2,203,657	$	2,191,138		$	2,144,769
% Change from base case				(0.52	)%		(1.48	)%				(0.57	)%		(2.67	)%

Our NPV model has been built to focus on the Bank alone as the $0.8 billion of assets at the Parent Company and its non-bank subsidiaries have little interest rate risk exposure.

The increase in the net present value of equity from December 31, 2005 to December 31, 2006 is partly due to: (i) an increase in our balance sheet; (ii) an increase in retained earnings of Indymac Bank in the amount of $357.6 million; (iii) a capital contribution of $360.0 million from the Parent Company to Indymac Bank; and (iv) offset by a dividend payment of $178.1 million to the Parent Company. This analysis is based on instantaneous change in interest rates and does not reflect the impact of changes in hedging activities as interest rates change and changes in volumes and profits from our mortgage banking operations that would be expected to result from the interest rate environment.

In conjunction with the NPV analysis, we also estimate the net sensitivity of the fair value of our financial instruments to movements in interest rates using duration gap. This calculation is performed by estimating the change in dollar value due to an instantaneous parallel change in the interest rate curve. The resulting change in dollar value per one basis point change in interest rates is used to estimate the sensitivity of our portfolio. The dollar values per one basis point change are then aggregated to estimate the portfolio’s net sensitivity. To calculate duration gap, the net sensitivity is divided by the fair value of total interest-earning assets and expressed in months. A duration gap of zero implies that the change in value of assets from an instantaneous rate move will be accompanied by an equal and offsetting move in the value of debt and derivatives thus leaving the net fair value of equity unchanged.

48

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.

At December 31, 2006, net duration gap for our mortgage banking and thrift segments was positive 1.5 month and negative 1.6 month, respectively, with the overall net duration gap of negative 0.4 month. Although our duration risk has been maintained at relatively low levels as indicated by our duration gap measures, fair value gains and losses will generally occur as market conditions change. We actively manage duration risk through asset selection by appropriate funding and hedging to within the duration limits approved by senior management and the Board of Directors.

The duration gap measures are estimated on a daily basis for the mortgage servicing rights and on a monthly basis for the assets in our thrift portfolio and pipeline.

CREDIT RISK AND RESERVES

The allowance for loan losses is allocated to various loan products for segment reporting purposes, and represents 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. The entire allowance for loan losses is available to cover losses in any of the loan portfolios. The following summarizes the Company’s allowance for loan losses/credit discounts and non-performing assets as of December 31, 2006:

							Total
							Reserves						QTD			YTD
							as a						Net			Net
			Allowance				Percentage						Charge			Charge
			For				of			Non-			Offs/Net			Offs/Net
			Loan		Credit		Book			Performing			REO			REO
Type of Loan	Book Value		Losses		Discounts(1)		Value			Assets			(Gains)			(Gains)
	(Dollars in thousands)
Held for sale portfolio	$	9,491,734			$	39,191		0.41	%	$	54,347		$	—		$	—
Held for investment portfolio
SFR mortgage loans and HELOCs		6,507,221	$	23,992				0.37	%		68,699			5,632			7,324
Land and other mortgage loans		375,215		6,479				1.73	%		5,959			210			210
Builder construction and income property loans		1,002,797		15,340				1.53	%		13,313			231			534
Consumer construction loans		2,009,461		10,408				0.52	%		15,666			1,103			2,574
Revolving warehouse lines of credit		246,778		298				0.12	%		—			—			—
Total core held for investment loans		10,141,472		56,517				0.56	%		103,637			7,176			10,642
Discontinued product lines(2)		35,737		5,869				16.42	%		4,846			426			2,133
Total held for investment portfolio		10,177,209	$	62,386				0.61	%		108,483			7,602			12,775
Total loans	$	19,668,943								$	162,830		$	7,602		$	12,775
Foreclosed assets
Core portfolios										$	20,918		$	586		$	(2,230	)
Discontinued product lines											720			(15	)		(5	)
Total foreclosed assets										$	21,638		$	571		$	(2,235	)
Total non-performing assets										$	184,468
Total non-performing assets as a percentage of total assets											0.63	%

(1)	The amount represents the lower of cost or market adjustments on non-performing loans in the held for sale portfolio.
(2)	Discontinued product lines include manufactured home loans and home improvement loans, which were discontinued in 1999.

49

The following provides additional comparative data on non-performing assets:

	December 31,			December 31,			September 30,
	2006			2005			2006
	(Dollars in thousands)
Loans held for sale before market valuation reserves	$	78,238		$	31,050		$	63,422
Market valuation reserves		(23,891	)		(10,245	)		(20,705	)
Net non-performing loans held for sale	$	54,347		$	20,805		$	42,717
Loans held for investment:
Portfolio loans
SFR mortgage loans	$	68,699		$	28,335		$	56,256
Land and other mortgage loans		5,959			197			5,810
Builder construction and income property loans		13,313			430			3,462
Consumer construction loans		15,666			8,819			9,421
Total portfolio non-performing loans		103,637			37,781			74,949
Discontinued product lines		4,846			5,623			3,882
Total non-performing loans held for investment	$	108,483		$	43,404		$	78,831
Total non-performing loans		162,830			64,209			121,548
Foreclosed assets		21,638			8,817			18,498
Total non-performing assets	$	184,468		$	73,026		$	140,046
Allowance for loan losses to non-performing loans held for investment		58	%		127	%		77	%
Total non-performing assets to total assets		0.63	%		0.34	%		0.51	%

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

	Three Months Ended						Year Ended
	December 31,			December 31,			December 31,			December 31,
	2006			2005			2006			2005
	(Dollars in thousands)
Balance, beginning of period	$	61,035		$	55,533		$	55,168		$	52,891
Provision for loan losses		8,953			1,553			19,993			9,978
Charge-offs net of recoveries:
SFR mortgage loans		(5,632	)		(208	)		(7,324	)		(1,428	)
Land and other mortgage loans		(210	)		—			(210	)		(168	)
Builder construction		(231	)		(33	)		(534	)		(105	)
Consumer construction		(1,103	)		(585	)		(2,574	)		(2,022	)
Discontinued product lines		(426	)		(1,092	)		(2,133	)		(3,978	)
Charge-offs net of recoveries		(7,602	)		(1,918	)		(12,775	)		(7,701	)
Balance, end of period	$	62,386		$	55,168		$	62,386		$	55,168
Annualized charge-offs to average loans held for investment		0.31	%		0.10	%		0.14	%		0.10	%
Charge-offs to quarterly production		0.03	%		0.01	%		0.01	%		0.01	%

Total credit-related reserves, including the allowance for loan losses and the market valuation reserves, totaled $86.3 million at December 31, 2006, compared to $65.4 million at December 31, 2005. As of December 31, 2006, the allowance for loan losses of $62.4 million for loans held for investment represented 0.61% of total loans held for investment, declining from 0.67% at December 31, 2005.

50

At December 31, 2006, non-performing assets as a percentage of total assets was 0.63%, increasing from 0.34% at December 31, 2005. The non-performing loans increased $65.1 million and $33.5 million in loans held for investment and loans held for sale, respectively. As a result of the increased delinquencies in these portfolios, foreclosure activities rose during the period, leading to increased foreclosed assets at December 31, 2006 to $21.6 million. At December 31, 2006, the allowance for loan losses to non-performing loans held for investment was 58%, down from 127% at December 31, 2005. The increase in non-performing loans held for investment is primarily due to the seasoning and the growth of the SFR mortgage loan portfolio. The increase in non-performing loans in the builder construction portfolio is mainly attributable to a loan of $9.0 million that was placed on non-accrual in the fourth quarter of 2006.

In the fourth quarter of 2006, net charge-offs increased to $7.6 million from $1.9 million in the fourth quarter of 2005. The increase is a direct result of loan delinquencies and non-performing loans trending up. Included in the charge-offs this quarter were $2.3 million of charge-offs related to the sale of non-performing loans.

The increase in non-performing loans held for sale is attributable to our growth in mortgage production and an increase in early payment defaults on certain products. A substantial number of these non-performing loans are covered by the early default provision in the purchase agreements and are subject to repurchase by the sellers.

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.

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. Management continually evaluates these assumptions to reflect its judgments regarding these economic conditions and various relevant factors impacting credit quality and inherent losses. In assessing the adequacy of the allowance for loan losses in its entirety, 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. A component of the overall allowance for loan losses is not specifically allocated to the loan portfolios (“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 December 31, 2006, the unallocated component of the total allowance for loan losses was $17.2 million, compared to $18.7 million at December 31, 2005.

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 allowance for loan losses is also subject to review by our primary federal regulator, the Office of Thrift Supervision (“OTS”). The OTS may require the 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 $39.2 million at December 31, 2006, up from $10.2 million at December 31, 2005, primarily due to the lower of cost or market adjustments on the loans repurchased during 2006 and increased delinquencies in the portfolio.

51

SECONDARY MARKET RESERVE

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 to 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 small number of loans from its securitization trusts. The increase in repurchase activity in recent years has been primarily a function of Indymac’s increased loan sale volume to GSEs and whole loan sales. As a percentage of total loans sold, repurchases have remained relatively flat at 21 basis points for the year ended December 31, 2006 as compared to December 31, 2005. The following reflects the repurchase activities during the years ended December 31, 2006 and 2005:

	Year Ended
	December 31,			December 31,
	2006			2005
	(Dollars in millions)
Loans sold:
GSEs and whole loans	$	47,878		$	20,924
Securitization trusts		31,171			31,373
Total	$	79,049		$	52,297
Total repurchases(1)	$	167		$	106
Repurchases as a percentage of total loans sold during the period		0.21	%		0.20	%
Repurchase losses to loans sold during the period		0.025	%		0.027	%

(1) Amounts exclude repurchases that are administrative in nature and generally are re-sold immediately at little or no loss.

The Company maintains a secondary market reserve for losses that arise in connection with loans that it may be required to repurchase from whole loan sales, sales to the GSEs, and securitizations. The reserve has two general components: reserves for repurchases arising from representation and warranty claims and reserves for repurchases arising from early payment defaults. Also included in the reserve was a $1.3 million charge provided in the third quarter of 2005 (reduction of gain on sale of loans) for potential investor claims from early payment defaults on loans that we previously sold and which were collateralized by properties in the areas affected by the Gulf Coast Hurricanes. This reserve was reversed to gain on sale in the second quarter of 2006.

The following reflects the activity in the reserve during the three months and year ended December 31, 2006:

	Three
	Months			Year
	(Dollars in thousands)
Balance, beginning of period	$	30,190		$	27,638
Additions/provisions		13,186			37,333
Actuallosses/mark-to-market		(10,394	)		(32,817	)
Recoveries on previous claims		950			1,778
Balance, December 31, 2006	$	33,932		$	33,932
Secondary market reserve to loans sold — UPB outstanding(1)		0.025	%		0.025	%

(1) Loans sold — UPB outstanding represents current outstanding principal balances on loans sold after January 1, 2004, excluding HELOCs and reverse mortgages.

In the second quarter of 2006, we repurchased $22.8 million of closed-end second loans from an investor due to an early payment default provision. In connection with this repurchase, we recorded an additional $5.2 million of

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provision. Our credit guidelines have subsequently been revised that will significantly reduce the origination of the lower credit quality closed-end second loans that gave rise to these repurchases. We relieved the reserve for $9.3 million through September 30, 2006, to establish discounts on these repurchased loans.

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 investor claims. While the ultimate amount of repurchases and claims is uncertain, management believes that the reserve is adequate. We will continue to evaluate the adequacy of our reserve and allocate a portion of our gain on sale proceeds to the reserve going forward. The entire balance of our secondary market reserve is included on the consolidated balance sheets as a component of other liabilities.

EXPENSES

GENERAL

A summary of expenses follows:

	Three Months Ended									Year Ended
	December 31,			December 31,			September 30,			December 31,			December 31,
	2006			2005			2006			2006			2005
				(Dollars in thousands)
Salaries and related	$	180,340		$	144,754		$	177,564		$	689,742		$	552,550
Premises and equipment		22,063			15,291			19,955			79,102			55,424
Loan purchase and servicing costs		14,754			11,713			14,246			55,055			42,739
Professional services		11,309			8,320			8,263			35,838			29,237
Data processing		17,962			12,850			16,831			64,826			45,341
Office and related		18,610			14,937			17,423			68,730			50,891
Advertising and promotion		10,001			11,553			10,742			44,369			44,959
Operations and sale of foreclosed assets		2,474			425			557			3,958			2,364
Litigation settlement		—			—			—			—			9,000
Other		3,946			2,708			3,315			13,586			10,391
Deferral of expenses under SFAS 91		(70,647	)		(59,275	)		(66,198	)		(266,246	)		(224,399	)
Total operating expenses		210,812			163,276			202,698			788,960			618,497
Amortization of other intangible assets		429			139			430			1,123			591
Total expenses	$	211,241		$	163,415		$	203,128		$	790,083		$	619,088

Our operating expenses increased 29% from $163.3 million for the three months ended December 31, 2005 to $210.8 million for the three months ended December 31, 2006. The increase is attributable to the Company’s operational growth and geographic expansions to execute on its strategy to increase production and revenue. Since the fourth quarter of 2005, we opened three new regional operations centers and a number of sales offices for the mortgage banking group and increased our consumer bank network to 29 branches, resulting in higher salaries and related, premises, data processing and office related expenses. The Company’s average FTE employees increased 26% from 6,733 for the three months ended December 31, 2005 to 8,477 for the three months ended December 31, 2006, including 620 FTE off-shore as part of our Global Resources program. We utilize the off-shore workforce predominantly in non-customer-facing back office functions to enhance service levels and improve efficiencies. Our operating expenses increased 4% compared to the third quarter of 2006 consistent with the 4% increase in average FTE employees.

As a result of the adoption and retrospective application of SFAS No. 123(R), total stock option expenses of $2.2 million and $2.9 million, for the quarters ended December 31, 2006 and 2005, respectively, have been

53

recognized and included in the salaries and related expenses. For the years ended December 31, 2006 and 2005, the stock option expenses were $9.6 million and $12.1 million, respectively.

Operating expenses of $789.0 million for the year ended December 31, 2006 reflected an increase of 28% from the year ended December 31, 2005, consistent with the growth in our revenues and operations.

SHARE REPURCHASE ACTIVITIES

The following summarizes share repurchase activities during the three months ended December 31, 2006:

							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 Plans or		Purchased Under the
Calendar Month:	Purchased(1)		Paid per Share		Programs		Program(2)
October 2006		—		N/A		—	$	63.6
November 2006		—		N/A		—		63.6
December 2006		—		N/A		—		63.6
Total		—		N/A		—		63.6

(1)	All shares purchased during the periods indicated represent withholding of a portion of shares to cover taxes in connection with vesting of restricted stocks or exercise of stock options.
(2)	Our Board of Directors previously approved a $500 million share repurchase program. Since its inception in 1999, we have repurchased a total of 28.0 million shares through this program. In January 2007, we have obtained an authorization from the Board of Directors to repurchase an additional $236.4 million of common stock.

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. Based on our confidence in our employees, hybrid thrift/mortgage banking business model, capital strength and ability to gain market share, Indymac aims to be among the top six lenders in the nation, while maintaining annualized earnings per share growth of at least 15%. Our annualized total return under current management for the period 1992 through December 31, 2006 was 23%. This performance exceeds the annualized returns of 12% for the Dow Jones Industrial Average and 11% for the S&P 500 Index over the same period.

The MBA is currently forecasting that mortgage industry volumes will decline a further 5% in 2007. We expect that competition in our industry will be tough and likely to intensify and that the housing market will be challenging. As a result, we believe that our revenue margins will remain under pressure and credit quality will continue to worsen to more normal levels. In light of these conditions, we are only providing broad guidance for 2007 results. We currently anticipate that our return on equity for 2007 will range from a low of 12.5% to a high of 17.5% with 15% as the base case. This base case ROE equates to estimated earnings per share of approximately $4.15. This guidance does not include any incremental impact to our returns that may result from initiatives to reduce cost, repurchase our common stock or further deploy capital through asset growth. We have not yet completed our updated forecast and plan to provide updated guidance during the year as the operating environment for our business becomes clearer.

This “Future Outlook” section contains certain forward-looking statements. See the section of thisForm 8-K entitled “Forward-Looking Statements” for a description of factors which may cause our actual results to differ from those anticipated.

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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 December 31, 2006, we had average total liquidity of $2.4 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 December 31, 2006, we sold $23.4 billion of mortgage loans, which represented approximately 90% of our funded mortgage loans during the period, 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 acquired $0.7 billion 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.

Our liquidity could be negatively impacted if any of our sales channels were disrupted. Disruptions in our whole loan sales and mortgage securitization transactions could 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. The FHLB offers several credit programs, each with its own fixed or floating interest rate, and a range of maturities.

On March 15, 2006, the Federal Housing Finance Board published a proposed rule aimed at bolstering capital for the Federal Home Loan Banks (FHLBs). Among other things, this proposal would result in the respective FHLB reducing dividends paid to its members until such time as the respective FHLB capital reaches a specified level. In response to this proposal, the FHLB San Francisco had planned to cut dividends paid to be based on approximately 80% of its net income from previous 95% of net income until the retained earnings target was reached. The implementation of this proposal has been deferred indefinitely to allow more time for the FHLB to evaluate other alternatives.

Currently, Indymac Bank is approved for collateralized advances of up to $15.6 billion. At December 31, 2006, advances from FHLB totaled $10.4 billion, of which $7.0 billion were collateralized by mortgage loans and $3.4 billion were collateralized by mortgage-backed securities.

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Deposits/Retail Bank

We solicit deposits from the general public and institutions by offering a variety of accounts and rates through our network of 29 branches in Southern California, our telebanking, and Internet channels. Through our web site atwww.indymacbank.com, consumers can access theiraccounts 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 as follows:

	December 31,					September 30,					December 31,
	2006					2006					2005
Deposit Category	Amount		Rate			Amount		Rate			Amount		Rate
	(Dollars in thousands)
Non-interest-bearing checking	$	72,081		0.0	%	$	71,013		0.0	%	$	63,308		0.0	%
Interest-bearing checking		54,844		1.2	%		51,333		1.2	%		55,479		1.3	%
Savings		1,915,333		5.0	%		1,696,859		4.9	%		1,194,963		3.6	%
Custodial accounts		616,904		0.0	%		651,421		0.0	%		493,936		0.0	%
Total core deposits		2,659,162		3.6	%		2,470,626		3.4	%		1,807,686		2.4	%
Certificates of deposit		8,238,844		5.2	%		7,640,393		5.0	%		5,864,238		4.0	%
Total deposits	$	10,898,006		4.8	%	$	10,111,019		4.6	%	$	7,671,924		3.6	%

	December 31,					September 30,					December 31,
	2006					2006					2005
			% of					% of					% of
			Total					Total					Total
Deposit Channel	Amount		Deposits			Amount		Deposits			Amount		Deposits
						(Dollars in thousands)
Branch	$	5,211,365		48	%	$	4,729,699		47	%	$	3,322,752		43	%
Internet		1,185,423		11	%		1,121,653		11	%		798,518		10	%
Telebanking		1,290,595		12	%		1,249,974		12	%		934,572		12	%
Money desk		2,593,719		24	%		2,358,272		23	%		2,122,146		28	%
Custodial		616,904		5	%		651,421		7	%		493,936		7	%
Total deposits	$	10,898,006		100	%	$	10,111,019		100	%	$	7,671,924		100	%

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 growthand/or repurchases of Indymac Bancorp common stock under its share repurchase program (see “Share Repurchase Activities” on page 54). Also, we issued 3,500,000 warrants, each convertible into 1.5972 shares of Indymac Bancorp’s common stock as part of the WIRES offering. Beginning on November 14, 2006, Indymac has the option to redeem the warrants for cash equal to the warrant value (the difference between $50 and the exercise price of the warrant), subject to the conditions in the prospectus. During 2006, a total of 2.5 million warrants were exercised at an average exercise price of $35.09 per share to purchase 4.0 million shares of Indymac Bancorp’s common stock. To date, total warrants of 2.6 million have been exercised and converted into a total of 4.1 million shares of Indymac Bancorp’s common stock. Subordinated debentures redeemed in conjunction with the warrant exercises totaled $64.5 million as of December 31, 2006.

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In December 2006, we issued an additional $60 million in pooled trust preferred securities. To date, we have issued $368 million trust preferred securities (without warrants attached) as summarized below:

	Face Amount		Interest Rate
	(Dollars in thousands)
December 2006	$	20,000		6.74	%
December 2006		40,000		6.90	%
September 2006		38,000		6.96	%
June 2006		90,000		7.35	%
December 2005		90,000		6.31	%
December 2004		30,000		5.83	%
December 2003		30,000		6.30	%
July 2003		30,000		6.05	%

Interest rates on these securities are fixed for terms ranging from 5 to 10 years, after which the rates reset quarterly indexed to3-month LIBOR. The securities can be called at the option of Indymac Bancorp five or ten years after issuance. In each of these transactions, Indymac Bancorp issued subordinated debentures to, and purchased common securities from, each of the trusts. The rates on the subordinated debentures and the common securities in each of these transactions matches the rates 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. Book values of the subordinated debentures underlying the trust preferred securities, which represent the liabilities due from Indymac Bancorp to the trusts, totaled $456.7 million and $308.7 million at December 31, 2006, and December 31, 2005, 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, notes payable and asset-backed commercial paper. Total other borrowings increased to $4.2 billion at December 31, 2006, from $4.1 billion at December 31, 2005.

In April 2006, we established the Northlake Capital Funding Program, a single seller asset-backed commercial paper facility, which allows us to issue directly, secured liquidity notes backed by mortgage loans. Both the collateral pledged and secured liquidity notes are recorded on our balance sheet as assets and liabilities, respectively. The secured liquidity notes have been rated F-1+ by Fitch Ratings,P-1 by Moody’s Investors Service andA-1+ by Standard & Poor’s, and are supported by credit enhancements, such as overcollateralization, excess spread, and market value agreements provided by highly rated counterparties. We are authorized to issue up to $2.5 billion in short-term notes, with expected maturities not to exceed 180 days after issuance and final maturities of 60 days following the expected maturities. As of December 31, 2006, we had $1.1 billion in secured liquidity notes outstanding.

In November 2006, we established a multi-seller Asset-Backed Commercial Paper facility, structured as a repurchase facility to provide up to $1.5 billion dedicated financing for our Construction to Permanent, Lot, and Reverse Mortgage loans. This is an annually renewable364-day committed facility administered by Citicorp North America, Inc. As of December 31, 2006, we had outstanding totaling $1.1 billion under this facility.

At December 31, 2006, we had $8.4 billion in committed financing facilities ($8.0 billion whole loan facilities, $300 million bond facilities and $100 million in unsecured revolving line of credit). Of these committed financing facilities, $3.1 billion was utilized and $2.2 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

57

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 December 31, 2006, we believe we were in compliance with all representations, warranties, and financial covenants under our borrowing facilities.

Direct Stock Purchase Plan

Our direct stock purchase plan offers investors the ability to purchase shares of our common stock directly over the Internet. For those interested in investing over $10,000, investors can also participate in the waiver program administered by Mellon Investor Services LLC. During the quarter ended December 31, 2006, we raised $24.7 million of capital by issuing 563,195 shares common stock through this plan. For the year ended December 31, 2006, total capital raised amounted to $148.5 million through the issuance of 3,532,360 shares of common stock.

Capital Raising and Deployment Strategies

To optimize its capital structure and shareholders’ returns, the Company has obtained an authorization from the Indymac Bancorp Board of Directors to purchase an additional $236.4 million of Indymac Bancorp common stock pursuant to the stock repurchase program previously approved by the Board of Directors (see “Share Repurchase Activities” on page 54). Additionally, the Indymac Bank Board of Directors has approved the following capital raising initiatives: 1) issuing up to $500 million in non-cumulative perpetual preferred securities; and 2) issuing up to $200 million in senior subordinated debt.

PRINCIPAL USES OF CASH

In addition to the financing sources discussed above, our cash needs 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 $7.9 billion during the year ended December 31, 2006 and $4.8 billion during the year ended December 31, 2005. 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 $490.5 million and $222.9 million for the years ended December 31, 2006 and 2005, respectively.

REGULATORY CAPITAL REQUIREMENTS

Indymac Bank is subject to regulatory capital regulations administered by the federal banking agencies. As of December 31, 2006, Indymac Bank met all of the requirements of a “well-capitalized” institution under the general regulatory capital regulations.

The Company’s business is primarily centered on single-family lending and the related production and sale of loans. As such, the accumulation of MSRs is a large component of our strategy. As of December 31, 2006, the capitalized value of MSRs was $1.8 billion. OTS regulations generally impose higher capital requirements on MSRs that exceed total Tier 1 capital. These higher capital requirements could result in lowered returns on our retained assets and could limit our ability to retain servicing assets. We have flexibility to sell or retain MSRs and the ability to increase our capital base through retention of earnings and other capital raising activities. While management believes that compliance with the capital limits on MSRs will not materially impact future results, no assurance can be given that our plans and strategies will be successful.

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

58

subprime loans totaled $101.6 million at December 31, 2006. The impact of the additional risk-weighting criteria related to subprime loans had the effect of reducing Indymac’s total risk-based capital by 5 basis points.

In December 2006, the federal bank and thrift regulatory agencies issued an interim decision that any amounts reported in AOCI resulting from the adoption of SFAS No. 158 should be excluded from regulatory capital until the regulatory agencies determine otherwise. As a result, $6.2 million in AOCI was excluded from our regulatory capital.

The following presents Indymac Bank’s actual and required capital ratios and the minimum required capital ratios to be categorized as “well-capitalized” at December 31, 2006:

				Adjusted for
	As Reported			Additional Subprime
	Pre-Subprime Risk-Weighting			Risk-Weighting			Well-Capitalized Minimum
Capital Ratios:
Tier 1 core		7.39	%		7.39	%		5.00	%
Tier 1 risk-based		11.40	%		11.35	%		6.00	%
Total risk-based		11.77	%		11.72	%		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.

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ITEM 9.01.  FINANCIAL STATEMENTS AND EXHIBITS

INDYMAC BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	December 31,			December 31,
	2006			2005
	(Unaudited)
	(Dollars in thousands)
ASSETS
Cash and cash equivalents	$	541,725		$	442,525
Securities classified as trading ($152.9 million and $96.8 million pledged as collateral for borrowings at December 31, 2006 and December 31, 2005, respectively)		542,731			348,962
Securities classified as available for sale, amortized cost of $4.9 billion and $3.8 billion at December 31, 2006 and December 31, 2005, respectively ($4.1 billion and $2.7 billion pledged as collateral for borrowings at December 31, 2006 and December 31, 2005, respectively)		4,900,514			3,753,195
Loans receivable:
Loans held for sale
SFR mortgage		8,801,252			5,170,168
HELOC		633,096			755,040
Consumer lot loans		33,495			98,976
Total loans held for sale		9,467,843			6,024,184
Loans held for investment
SFR mortgage		6,519,340			5,441,521
Consumer construction		2,009,461			1,656,963
Builder construction		1,002,797			838,772
HELOC		23,618			31,882
Land and other mortgage		375,215			260,615
Revolving warehouse lines of credit		246,778			48,616
Allowance for loan losses		(62,386	)		(55,168	)
Total loans held for investment		10,114,823			8,223,201
Total loans receivable ($14.9 billion and $10.2 billion pledged as collateral for borrowings at December 31, 2006 and December 31, 2005, respectively)		19,582,666			14,247,385
Mortgage servicing rights		1,822,455			1,094,490
Investment in Federal Home Loan Bank stock		762,054			556,262
Interest receivable		217,667			131,644
Goodwill and other intangible assets		112,608			80,847
Foreclosed assets		21,638			8,817
Other assets		991,258			788,172
Total assets	$	29,495,316		$	21,452,299
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits	$	10,898,006		$	7,671,924
Advances from Federal Home Loan Bank		10,412,800			6,953,000
Other borrowings		4,637,000			4,367,270
Other liabilities		1,519,242			916,664
Total liabilities		27,467,048			19,908,858
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 102,258,939 shares (73,017,356 outstanding) at December 31, 2006, and issued 93,436,622 shares (64,246,767 outstanding) at December 31, 2005		1,023			934
Additionalpaid-in-capital		1,597,814			1,318,751
Accumulated other comprehensive loss		(31,439	)		(15,157	)
Retained earnings		983,348			759,330
Treasury stock, 29,241,538 shares and 29,189,855 shares at December 31, 2006 and December 31, 2005, respectively		(522,478	)		(520,417	)
Total shareholders’ equity		2,028,268			1,543,441
Total liabilities and shareholders’ equity	$	29,495,316		$	21,452,299

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INDYMAC BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

	For the Three Months					For the Year
	Ended December 31,					Ended December 31,
	2006			2005		2006		2005
	(Unaudited)
	(Dollars in thousands, except per share data)
Interest income
Mortgage-backed and other securities	$	86,153		$	56,911	$	319,846	$	208,560
Loans held for sale
SFR mortgage		222,992			123,054		708,932		387,993
HELOC		21,654			12,256		80,202		33,898
Consumer lot loans		1,250			2,439		8,326		8,966
Total loans held for sale		245,896			137,749		797,460		430,857
Loans held for investment
SFR mortgage		91,078			63,794		321,349		235,302
Consumer construction		35,868			22,155		120,477		81,252
Builder construction		26,143			21,562		100,103		68,176
Land and other mortgage		9,647			5,649		32,650		17,631
HELOC		573			538		2,436		2,197
Revolving warehouse lines of credit		3,584			653		8,723		1,297
Total loans held for investment		166,893			114,351		585,738		405,855
Other		15,266			9,549		47,972		29,083
Total interest income		514,208			318,560		1,751,016		1,074,355
Interest expense
Deposits		127,367			63,049		408,208		195,528
Advances from Federal Home Loan Bank		161,454			88,218		491,300		281,929
Other borrowings		92,741			57,894		324,787		172,187
Total interest expense		381,562			209,161		1,224,295		649,644
Net interest income		132,646			109,399		526,721		424,711
Provision for loan losses		8,953			1,553		19,993		9,978
Net interest income after provision for loan losses		123,693			107,846		506,728		414,733
Other income
Gain on sale of loans		164,971			137,390		668,054		592,175
Service fee income		22,123			18,714		101,317		44,235
(Loss) gain on mortgage-backed securities, net		(4,129	)		5,933		20,482		17,866
Fee and other income		12,846			11,113		50,122		36,701
Total other income		195,811			173,150		839,975		690,977
Net revenues		319,504			280,996		1,346,703		1,105,710
Other expense
Operating expenses		210,812			163,276		788,960		618,497
Amortization of other intangible assets		429			139		1,123		591
Total other expense		211,241			163,415		790,083		619,088
Earnings before provision for income taxes and minority interests		108,263			117,581		556,620		486,622
Provision for income taxes		36,022			46,646		212,567		191,989
Net earnings before minority interests		72,241			70,935		344,053		294,633
Minority interests		—			497		1,124		1,505
Net earnings	$	72,241		$	70,438	$	342,929	$	293,128
Earnings per share:
Basic	$	1.02		$	1.11	$	5.07	$	4.67
Diluted	$	0.97		$	1.06	$	4.82	$	4.43
Weighted-average shares outstanding:
Basic		71,059			63,650		67,701		62,760
Diluted		74,443			66,737		71,118		66,115
Dividends declared per share	$	0.50		$	0.42	$	1.88	$	1.56

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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, 2004		61,995,480			$	912	$	1,186,682	$	(20,304	)	$	616,516		$	—		$	(519,835	)	$	1,263,971
Cumulative-effect adjustment due to change in accounting for common stock options		—				—		68,111		—			(51,811	)		—			—			16,300
Balance at December 31, 2004, retrospectively adjusted		61,995,480				912		1,254,793		(20,304	)		564,705			—			(519,835	)		1,280,271
Exercises of common stock options		1,833,369				18		43,435		—			—			—			—			43,453
Exercises of warrants		138,794				1		3,035		—			—			—			—			3,036
Compensation expenses for common stock options		—				—		12,109		—			—			—			—			12,109
Net officers’ notes receivable payments		—				—		101		—			—			—			—			101
Deferred compensation, restricted stock, net of forfeitures and amortization		295,544				3		5,278		—			—			—			—			5,281
Net unrealized loss on mortgage-backed securities available for sale		—				—		—		(16,733	)		—			(16,733	)		—			(16,733	)
Net unrealized gain on derivatives used in cash flow hedges		—				—		—		21,880			—			21,880			—			21,880
Purchases of common stock		(16,420	)			—		—		—			—			—			(582	)		(582	)
Cash dividends		—				—		—		—			(98,503	)		—			—			(98,503	)
Net earnings, retrospectively adjusted		—				—		—		—			293,128			293,128			—			293,128
Total comprehensive income		—				—		—		—			—		$	298,275			—			—
Balance at December 31, 2005, retrospectively adjusted		64,246,767				934		1,318,751		(15,157	)		759,330			—			(520,417	)		1,543,441
Cumulative-effect adjustment due to change in accounting for MSRs		—				—		—		—			10,624			—			—			10,624
Adjustment on initial application of SFAS No. 158, net of tax		—				—		—		(6,168	)		—			(6,168	)		—			(6,168	)
Issuance of common stock		3,532,360				35		148,435		—			—			—			—			148,470
Exercises of common stock options		857,489				9		23,486		—			—			—			—			23,495
Exercises of warrants		3,957,000				40		86,883		—			—			—			—			86,923
Compensation expenses for common stock options		—				—		9,630		—			—			—			—			9,630
Net officers’ notes receivable payments		—				—		109		—			—			—			—			109
Deferred compensation, restricted stock, net of forfeitures and amortization		475,468		��		5		10,520		—			—			—			—			10,525
Net unrealized gain on mortgage-backed securities available for sale		—				—		—		5,921			—			5,921			—			5,921
Net unrealized loss on derivatives used in cash flow hedges		—				—		—		(16,035	)		—			(16,035	)		—			(16,035	)
Purchases of common stock		(51,728	)			—		—		—			—			—			(2,061	)		(2,061	)
Cash dividends		—				—		—		—			(129,535	)		—			—			(129,535	)
Net earnings		—				—		—		—			342,929			342,929			—			342,929
Total comprehensive income		—				—		—		—			—		$	326,647			—			—
Balance at December 31, 2006		73,017,356			$	1,023	$	1,597,814	$	(31,439	)	$	983,348					$	(522,478	)	$	2,028,268

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INDYMAC BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the Year
	Ended December 31,
	2006			2005
	(Unaudited)
	(Dollars in thousands)
Cash flows from operating activities:
Net earnings	$	342,929		$	293,128
Adjustments to reconcile net earnings to net cash used in operating activities:
Gain on sale of loans		(668,054	)		(592,175	)
Compensation expenses related to stock options and restricted stocks		20,155			17,389
Other amortization and depreciation		93,515			59,393
Change in valuation of mortgage servicing rights, including amortization		367,234			269,586
Gain on mortgage-backed securities, net		(20,482	)		(17,866	)
Provision for loan losses		19,993			9,978
Net increase in deferred tax liability		245,115			166,369
Net decrease in other assets and liabilities		90,121			17,110
Net cash provided by operating activities before activity for trading securities and loans held for sale		490,526			222,912
Net sales of trading securities		360,547			109,721
Net purchases and originations of loans held for sale		(8,253,670	)		(4,909,424	)
Net cash used in operating activities		(7,402,597	)		(4,576,791	)
Cash flows from investing activities:
Net sales of and payments from loans held for investment		989,919			1,109,017
Purchases of mortgage-backed securities available for sale		(599,675	)		(819,997	)
Proceeds from sales of and principal payments from mortgage-backed securities available for sale		426,739			822,748
Net increase in investment in Federal Home Loan Bank stock, at cost		(205,792	)		(165,546	)
Net decrease (increase) in real estate investment		10,780			(32,260	)
Net purchases of property, plant and equipment		(99,947	)		(109,076	)
Purchase of Financial Freedom minority interest		(40,000	)		—
Net cash provided by investing activities		482,024			804,886
Cash flows from financing activities:
Net increase in deposits		3,222,155			1,925,557
Net increase in advances from Federal Home Loan Bank		3,459,800			791,000
Net increase in borrowings		69,797			1,104,208
Net proceeds from issuance of common stock		148,470			—
Net proceeds from issuance of trust preferred securities		188,000			90,000
Redemption of trust preferred securities		(47,271	)		—
Net proceeds from stock options, warrants and notes receivable		110,418			46,591
Cash dividends paid		(129,535	)		(98,501	)
Purchases of common stock		(2,061	)		(582	)
Net cash provided by financing activities		7,019,773			3,858,273
Net increase in cash and cash equivalents		99,200			86,368
Cash and cash equivalents at beginning of period		442,525			356,157
Cash and cash equivalents at end of period	$	541,725		$	442,525
Supplemental cash flow information:
Cash paid for interest	$	1,168,615		$	600,683
Cash (received) paid for income taxes	$	(56,258	)	$	70,312
Supplemental disclosure of non-cash investing and financing activities:
Net transfer of loans held for sale to loans held for investment	$	2,951,131		$	2,691,949
Net transfer of mortgage servicing rights to trading securities	$	4,723		$	8,491

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ITEM 9.01.      FINANCIAL STATEMENTS AND EXHIBITS

(c) Exhibits

Exhibit
Number			Description
	3	.1	IndyMac Bancorp, Inc. Amended and Restated Bylaws.
	10	.1	Board Compensation Policy and Stock Ownership Requirements, revised January 23, 2007.
	99	.1	Press Release regarding IndyMac Bancorp, Inc. Earnings for the Three Months and Year Ended December 31, 2006.
	99	.2	Webcast Presentation regarding IndyMac Bancorp, Inc. Earnings Review.

ITEM 5.02.  DEPARTURE OF DIRECTORS OR PRINCIPAL OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF CERTAIN OFFICERS; COMPENSATORY ARRANGEMENTS OF CERTAIN OFFICERS

Election of Director

On January 23, 2007, the IndyMac Bancorp, Inc. (the “Company”) Board of Directors (the “Board”) appointed, effective as of January 23, 2007, Lydia H. Kennard to the Board, filling a vacancy on the Board created when the Board approved an increase in the size of the Board from 9 to 10 members. Ms. Kennard will serve on the Board’s Strategic and Financial Planning Committee and will also continue to serve on the Board of Directors of IndyMac Bank, F.S.B. (the “Bank”), and on the Bank’s Strategic and Financial Planning Committee and Compliance and Technology Committee.

Ms. Kennard will be compensated as a non-employee director under the Company’s Board Compensation Policy & Stock Ownership Requirements (the “Board Policy”), as described below. In addition, she will continue to participate in the Bank’s standard director compensation plans.

There is no arrangement or understanding between Ms. Kennard and any other person(s) pursuant to which she was selected as a director. Ms. Kennard is not a party to any related party transaction that would require disclosure under Item 404(a) of RegulationS-K.

Amendment of Board Compensation Policy

On January 23, 2007, the Board amended the Company’s Board Policy in connection with the Board’s adoption of certain amendments to the Company’s Amended and Restated Bylaws (the “Bylaws”) relating to the election of directors. The Board Policy provides for the following cash compensation to the Company’s non-employee directors:

•  $75,000 annual retainer (all non-employee directors);

•  $20,000 additional retainer for each non-employee member of the Audit Committee;

•  $3,000 additional retainer for the Presiding Director (reduced from $4,000 per the amendment to the Board policy on January 23, 2007);

•  $2,500 for Committee chairs for each meeting chaired in a calendar year;

•  $2,500 per meeting for Committee members after the fourth Committee meeting attended in a calendar year; and

•  $2,500 per day for attendance at other qualifying board-related functions (as determined by the Chair of the Corporate Governance Committee).

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Non-employee directors serving on both the Company and Bank boards will not receive duplicate retainers, and only one set of meeting fees will be paid with respect to attendance at meetings of parallel Company and Bank committees.

Each non-employee director will receive the following equity compensation, on an annual basis::

•  A non-qualified stock option to purchase a number of shares of the Company’s common stock equal to 0.0125% of the issued and outstanding shares of such common stock as of the end of the preceding fiscal year (excluding treasury shares), but in no event less than 3,750 shares, and

•  A number of restricted shares of the Company’s common stock having a fair market value equal to the value of such option, determined using the same valuation method as then used by the Company for financial reporting purposes.

Options and restricted shares will be granted automatically on the same date that annual grants of equity incentive awards are made to employees. Newly elected non-employee directors automatically will receive awards as follows: (i) if the non-employee director is elected within six months following the annual grant date, he or she will receive options for the number of shares covered by the most recent annual director grant; or (ii) if the non-employee director is elected more than six months following the most recent annual grant date, but before the next annual grant date, he or she will receive options for one-half the number of shares covered by the most recent annual director grant. The number of restricted shares granted will be determined according to the value of the option grant, as described above.

Options will have an exercise price equal to the fair market value of the Company’s common stock on the date of grant, will vest on the first anniversary of the grant date, and will expire on the latest date permitted under the IndyMac Bancorp, Inc. 2002 Incentive Plan, as amended and restated (presently the tenth anniversary of the grant date), or earlier in the event of a non-employee director’s termination of service. Restricted shares will vest in equal annual installments over a three-year period, and any dividends on such shares will accrue and vest at the same time. Prior to the amendment to the Board policy on January 23, 2007, vesting for options and restricted shares accelerated in full upon a change in control, a non-employee director’s death or disability, or a non-employee director’s failure to be renominated or reelected to the board after five years of service as a director, provided that the director remains on the board until his or her normal term expires.

The Board amended the Board Policy to provide that, in addition to the foregoing vesting accelerators, the options and restricted shares will become immediately vested in the event the recipient ceases to be a director pursuant to the Board’s acceptance of a director’s resignation as contemplated by Article II, Section 12 of the Bylaws after such director fails to receive a sufficient number of votes for re-election, in accordance with the Bylaws, at the next stockholders meeting. In the case of options, such director will have one year after termination to exercise such option(s).

The text of the Board Policy is filed as an exhibit to this Current Report onForm 8-K, and incorporated herein by reference.

In addition, the amendment reduced the annual retainer from $4,000 to $3,000 for directors serving as Presiding Director.

ITEM 5.03(A)  AMENDMENTS TO ARTICLES OF INCORPORATION OR BYLAWS; CHANGE IN FISCAL YEAR

Amendments to Bylaws

On January 23, 2007, the Board, in accordance with Article XIV of the Bylaws, amended the Bylaws, effective on such date, to revise the following: the provisions of the Bylaws relating to the existing majority voting standard for the election of directors; the director resignation provisions in order to conform to a new Delaware law recognizing advance, irrevocable contingent resignations; the advance notice provisions relating to stockholder

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nominations of persons for election to the Board; and certain other provisions relating to the Company’s officers, directors and procedural matters, in each case as described below.

The voting standard for the election of directors set forth in Section 6 of Article II was amended to clarify the majority vote standard previously in the Bylaws and to provide that a nominee for director will be elected to the Board if the votes cast for such nominee’s election exceed the votes cast against such nominee’s election, except in those instances where the number of director nominees that were nominated by (i) the Board, (ii) any stockholder, or (iii) a combination of nominees by the Board and any stockholder, exceeds the number of directors to be elected to the Board, in which case the directors will be elected by a plurality of the votes cast at the stockholders meeting. Section 6 of Article II was also amended to provide that voting at meetings of stockholders need not be by written ballot, to permit stockholders and proxyholders to participate in stockholders meetings by means of remote communication and to delete the provision requiring proxies to be executed in writing by the stockholder or by his duly authorizedattorney-in-fact.

In order to conform to a new Delaware law recognizing advance, irrevocable contingent resignations, Section 12 of Article II was amended to require incumbent directors to submit an irrevocable offer of resignation in order to become a nominee for re-election which offer of resignation becomes effective upon (a) (i) the nominee’s failure to receive the required majority stockholder vote for re-election or (ii) the determination by the Board not to nominate such person to stand for re-election and the failure of the candidate nominated to succeed such person, if any, to obtain the required majority stockholder vote, and (b) acceptance of such resignation by the Board. The revised provision also establishes a process for the Board’s consideration of such a resignation. The revised provision further provides that the Board will fill director vacancies and newly created directorships only with candidates who agree to tender, promptly following their appointment to the Board, the same form of resignation tendered by other directors.

In addition to the amendments relating to the majority vote standard and director resignations, the Board also adopted amendments to the advance notice provisions contained in Section 10 of Article II of the Bylaws which provide that:

•  in addition to the requirements previously specified in the Bylaws, a stockholder’s notice regarding nomination of directors must include (i) a statement as to whether the director nominee intends to submit an irrevocable form of resignation as described above, (ii) a description of all direct and indirect compensation and other material monetary arrangements during the past three years, and any other material relationships, between or among such stockholder and the proposed director nominee, and (iii) the names and addresses of any other stockholders or beneficial owners known to be supporting such nomination by the proposing stockholder, if any, on whose behalf the nomination is made. As amended, the Company may require any proposed nominee to furnish such other information as may reasonably be required by the Company to determine the independence of such proposed nominee; and

•  no person, other than a director nominated for election or re-election by the Board, will be eligible for election as a director unless the Company receives a written questionnaire with respect to the background and qualification of such person and a written representation and agreement that such person (a) is not and will not become a party to certain voting commitments, (b) is not and will not become a party to any agreement with any person or entity other than the Company with respect to any direct or indirect compensation, reimbursement or indemnification in connection with his or her service as a director that has not been disclosed to the Company, and (c) would be in compliance and will comply with all applicable publicly disclosed corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and guidelines of the Company and execute any agreement directors of the Company are requested to execute.

The Board’s Policy & Guidelines on Director Candidates Recommended by Stockholders has been revised in a similar manner.

The Bylaw provisions relating to meetings of the stockholders were further amended in Section 3 of Article II to permit the Chief Executive Officer to call a special meeting of the stockholders and to remove such authority from the President. Section 4 of Article II was amended to provide that notice of all stockholders meetings may be

66

given electronically (by email, facsimile or electronic network posting), in addition to the written notice method that was previously specified in the Bylaws, provided that the stockholder to whom the electronic notice is given consents to such form of electronic notice. Section 4 was further amended to provide that the adjournment of an annual meeting will not commence a new time period for purposes of the advance notice provisions of the Bylaws relating to stockholder nominations of persons for election as directors. The amendment also clarifies that once a share is represented for any purpose at a meeting, it will be present for quorum purposes for the remainder of the meeting and for any adjournment of that meeting unless a new record date is or must be set for the adjourned meeting. Section 8 of Article II was amended to provide that the chairman of any meeting of the stockholders has the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are appropriate for the proper conduct of the meeting.

The provisions of the Bylaws relating to meetings of the Board were also amended. In particular, Section 10 of Article III was amended to provide that the Chief Executive Officer may call a special meeting of the Board, in addition to those persons previously specified by the Bylaws, which include two or more directors of the Company, the Chairman of the Board, or the President. Section 11 of Article III was amended to revise the notice requirements relating to special meetings of the Board. Section 13 of Article III was amended to provide that in the absence or inability of the Chairman of the Board to preside at a Board meeting, another director chosen by a majority of the directors present will act as chairman. Prior to this amendment, the President would act as chairman in such an event.

Article IV of the Bylaws relating to committees of the Board was amended in Section 1 to reduce the number of directors required to be on a committee from two to one, as well as in Section 4 to delete the requirement that at least two members of a committee be present in person at any committee meeting in order to constitute a quorum for the transaction of business. As amended, the Bylaws require one-third of the members of a committee to be present in person.

The provisions of the Bylaws relating to the Company’s officers contained in Article V have been amended, consistent with Company practice, to clarify that the Chairman of the Board and the Chief Executive Officer will serve at the pleasure of the Board. As amended, the Board, or a committee thereof, will appoint the Secretary and Treasurer and may appoint such other officers as it deems necessary, including, without limitation, a President, a Chief Operating Officer, one or more Vice Presidents, one or more Assistant Secretaries and one or more Assistant Treasurers. Article V was further amended in Section 2 to provide that the Board may delegate to the Chief Executive Officer the power to determine compensation of officers of the Company, other than the Chief Executive Officer. In addition, Section 3 of Article V was amended to provide that the Board may delegate to a committee thereof the authority to remove an officer with or without cause. Additional sections of Article V were amended to clarify the role of each officer.

The Bylaws have also been amended to correct certain typographical errors, duplicative phrases and references to the Company’s Certificate of Incorporation. The text of the Amended and Restated Bylaws is filed as an exhibit to this Current Report onForm 8-K, and incorporated herein by reference.

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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.

Indymac Bancorp, Inc.
(Registrant)

By:  /s/  Michael W. Perry

Michael W. Perry

Chairman of the Board of Directors
and Chief Executive Officer

Date: January 25, 2007

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