UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-16577

(Exact name of registrant as specified in its charter).

Michigan		38-3150651
(State or other jurisdiction of		(I.R.S. Employer
Incorporation or organization)		Identification No.)
5151 Corporate Drive, Troy, Michigan		48098-2639
(Address of principal executive offices)		(Zip code)

(248) 312-2000

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past ninety days.

Yes þ No o.

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes þ No o.

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No þ.

     As of August 2, 2011, 554,295,603 shares of the registrant’s common stock, $0.01 par value, were issued and outstanding.

 

 

FORWARD—LOOKING STATEMENTS

     This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Forward-looking statements, by their nature, involve estimates, projections, goals, forecasts, assumptions, risks and uncertainties that could cause actual results or outcomes to differ materially from those expressed in a forward-looking statement. Examples of forward-looking statements include statements regarding our expectations, beliefs, plans, goals, objectives and future financial or other performance. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and variations of such words and similar expressions are intended to identify such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made. Except to fulfill our obligations under the U.S. securities laws, we undertake no obligation to update any such statement to reflect events or circumstances after the date on which it is made.

     There are a number of important factors that could cause future results to differ materially from historical performance and these forward-looking statements. Factors that might cause such a difference include:

	•		Volatile interest rates that impact, amongst other things, (i) the mortgage banking business, (ii) our ability to originate loans and sell assets at a profit, (iii) prepayment speeds and (iv) our cost of funds, could adversely affect earnings, growth opportunities and our ability to pay dividends to stockholders;
	•		Our ability to raise additional capital;
	•		Competitive factors for loans could negatively impact gain on loan sale margins;
	•		Competition from banking and non-banking companies for deposits and loans can affect our growth opportunities, earnings, gain on sale margins, market share and ability to transform business model;
	•		Changes in the regulation of financial services companies and government-sponsored housing enterprises, and in particular, declines in the liquidity of the mortgage loan secondary market, could adversely affect our business;
	•		Changes in regulatory capital requirements or an inability to achieve desired capital ratios could adversely affect our growth and earnings opportunities and our ability to originate certain types of loans, as well as our ability to sell certain types of assets for fair market value or to transform business model;
	•		General business and economic conditions, including unemployment rates, movements in interest rates, the slope of the yield curve, any increase in mortgage fraud and other criminal activity and the further decline of asset values in certain geographic markets, may significantly affect our business activities, loan losses, reserves, earnings and business prospects;
	•		Factors concerning the implementation of proposed enhancements and transformation of our business model could result in slower implementation times than we anticipate and negate any competitive advantage that we may enjoy;
	•		Actions of mortgage loan purchasers, guarantors and insurers regarding repurchases and indemnity demands and uncertainty related to foreclosure procedures could adversely affect our business activities and earnings;
	•		The Dodd-Frank Wall Street Reform and Consumer Protection Act has resulted in the elimination of the Office of Thrift Supervision, tightening of capital standards, and the creation of a new Bureau of Consumer Financial Protection and has resulted, or will result, in new laws, regulations and regulatory supervisors that are expected to increase our costs of operations. In addition, the change to the Office of the Comptroller of the Currency regulation may result in interpretations different than those of the Office of Thrift Supervision; and
	•		Both the volume and the nature of consumer actions and other forms of litigation against financial institutions has increased and to the extent that such actions are brought against us, the cost of defending such suits as well as potential exposure could increase our costs of operations.

     All of the above factors are difficult to predict, contain uncertainties that may materially affect actual results, and may be beyond our control. New factors emerge from time to time, and it is not possible for our management to predict all such factors or to assess the effect of each such factor on our business.

     Please also refer to Item 1A. Risk Factors to Part II of this report, Item 1A to Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, 2010 and Item 1A to Part II of this Quarterly Report on Form 10-Q, which are incorporated by reference herein, for further information on these and other factors affecting us.

     Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore any of these statements included herein may prove to be inaccurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements or our objectives and plans will be achieved.

FLAGSTAR BANCORP, INC.
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2011
TABLE OF CONTENTS

PART I. — FINANCIAL INFORMATION			4
Item 1. Financial Statements			4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			44
Item 3. Quantitative and Qualitative Disclosures about Market Risk			84
Item 4. Controls and Procedures			85
PART II. — OTHER INFORMATION			86
Item 1. Legal Proceedings			86
Item 1A. Risk Factors			86
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			86
Item 3. Defaults upon Senior Securities			86
Item 4. (Removed and Reserved)			86
Item 5. Other Information			86
Item 6. Exhibits			87
SIGNATURES			88
EX-18.0
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

		The consolidated financial statements of the Company are as follows:
		Consolidated Statements of Financial Condition — June 30, 2011 (unaudited) and December 31,
		Consolidated Statements of Operations — For the three and six months ended June 30, 2011 and 2010 (Unaudited)
		Consolidated Statements of Stockholders’ Equity and Comprehensive Loss — For the six months ended June 30, 2011 and 2010 (Unaudited)
		Consolidated Statements of Cash Flows — For the six months ended June 30, 2011 and 2010 (Unaudited)
		Notes to Consolidated Financial Statements (Unaudited)

Flagstar Bancorp, Inc.

 

		June 30,				December 31,
		2011				2010
		(Unaudited)
Assets
Cash and cash items		$	56,031			$	60,039
Interest-earning deposits			701,852				893,495
Cash and cash equivalents			757,883				953,534
Securities classified as trading			292,438				160,775
Securities classified as available-for-sale			551,173				475,225
Loans available-for-sale ($1,870,499 and $2,343,638 at fair value at June 30, 2011 and December 31, 2010, respectively)			2,002,888				2,585,200
Loans repurchased with government guarantees			1,711,591				1,674,752
Loans held-for-investment ($21,514 and $19,011 at fair value at June 30, 2011 and December 31, 2010, respectively)			5,975,134				6,305,483
Less: allowance for loan losses			(274,000	)			(274,000	)
Loans held-for-investment, net			5,701,134				6,031,483
Total interest-earning assets			10,961,076				11,820,930
Accrued interest receivable			91,527				83,893
Repossessed assets, net			110,050				151,085
Federal Home Loan Bank stock			301,737				337,190
Premises and equipment, net			244,565				232,203
Mortgage servicing rights at fair value			577,401				580,299
Other assets			320,425				377,865
Total assets		$	12,662,812			$	13,643,504
Liabilities and Stockholders’ Equity
Deposits		$	7,405,027			$	7,998,099
Federal Home Loan Bank advances			3,406,571				3,725,083
Long-term debt			248,610				248,610
Total interest-bearing liabilities			11,060,208				11,971,792
Accrued interest payable			10,935				12,965
Secondary market reserve			79,400				79,400
Other liabilities			337,829				319,684
Total liabilities			11,488,372				12,383,841
Commitments and contingencies — Note 20			—				—
Stockholders’ Equity
Preferred stock $0.01 par value, liquidation value $1,000 per share, 25,000,000 shares authorized; 266,657 issued and outstanding at June 30, 2011 and December 31, 2010, respectively			3				3
Common stock $0.01 par value, 700,000,000 shares authorized; 554,163,337 and 553,313,113 shares issued and outstanding at June 30, 2011 and December 31, 2010, respectively			5,542				5,533
Additional paid in capital — preferred			251,956				249,193
Additional paid in capital — common			1,464,131				1,461,373
Accumulated other comprehensive loss			(356	)			(16,165	)
Retained earnings (accumulated deficit)			(546,836	)			(440,274	)
Total stockholders’ equity			1,174,440				1,259,663
Total liabilities and stockholders’ equity		$	12,662,812			$	13,643,504

The accompanying notes are an integral part of these Consolidated Financial Statements.

Flagstar Bancorp, Inc.

Consolidated Statements of Operations
(In thousands, except per share data)

		For the Three Months Ended								For the Six Months Ended
		June 30,								June 30,
		2011				2010				2011				2010
						(Unaudited)
Interest Income
Loans		$	98,155			$	115,953			$	200,269			$	232,234
Securities classified as available-for-sale or trading			8,949				20,735				17,046				36,102
Interest-earning deposits and other			957				482				1,925				1,126
Total interest income			108,061				137,170				219,240				269,462
Interest Expense
Deposits			24,902				41,521				51,924				83,407
FHLB advances			30,218				42,151				60,196				83,938
Security repurchase agreements			—				1,597				—				2,750
Other			1,617				2,348				3,223				6,044
Total interest expense			56,737				87,617				115,343				176,139
Net interest income			51,324				49,553				103,897				93,323
Provision for loan losses			48,384				86,019				76,693				149,579
Net interest income (expense) after provision for loan losses			2,940				(36,466	)			27,204				(56,256	)
Non-Interest Income
Loan fees and charges			14,712				20,236				30,850				36,565
Deposit fees and charges			7,845				8,798				15,345				17,211
Loan administration			30,450				(54,665	)			69,786				(28,515	)
Gain on trading securities			102				69,660				28				66,348
Loss on transferors’ interest			(2,258	)			(4,312	)			(4,640	)			(6,994	)
Net gain on loan sales			39,827				64,257				90,012				116,823
Net loss on sales of mortgage servicing rights			(2,381	)			(1,266	)			(2,493	)			(3,479	)
Net gain on securities available-for-sale			—				4,523				—				6,689
Net gain on sale of assets			1,293				—				256				—
Total other-than-temporary impairment gain			39,725				11,274				39,725				36,796
Gain recognized in other comprehensive income before taxes			(55,309	)			(11,665	)			(55,309	)			(40,473	)
Net impairment losses recognized in earnings			(15,584	)			(391	)			(15,584	)			(3,677	)
Other fees and charges, net			(15,928	)			(6,509	)			(29,216	)			(28,642	)
Total non-interest income			58,078				100,331				154,344				172,329
Non-Interest Expense
Compensation, commissions and benefits			61,156				51,104				124,464				112,125
Occupancy and equipment			16,969				15,903				33,587				31,914
Asset resolution			23,282				52,587				61,391				75,246
Federal insurance premiums			10,789				10,640				19,515				20,688
Other taxes			667				841				1,533				1,696
Warrant income			(1,998	)			(3,486	)			(2,825	)			(2,259	)
Loss on extinguishment of debt			—				8,971				—				8,971
General and administrative			20,057				19,621				40,488				37,229
Total non-interest expense			130,922				156,181				278,153				285,610
Loss before federal income taxes			(69,904	)			(92,316	)			(96,605	)			(169,537	)
Provision for federal income taxes			264				—				528				—
Net Loss			(70,168	)			(92,316	)			(97,133	)			(169,537	)
Preferred stock dividend/accretion			(4,720	)			(4,690	)			(9,429	)			(9,369	)
Net loss applicable to common stock		$	(74,888	)		$	(97,006	)		$	(106,562	)		$	(178,906	)
Loss per share
Basic		$	(0.14	)		$	(0.63	)		$	(0.19	)		$	(1.55	)
Diluted		$	(0.14	)		$	(0.63	)		$	(0.19	)		$	(1.55	)

The accompanying notes are an integral part of these Consolidated Financial Statements.

Flagstar Bancorp, Inc.

Consolidated Statements of Stockholders’ Equity and Comprehensive Loss
(In thousands)

										Additional				Additional				Accumulated
										Paid in				Paid in				Other				Retained Earnings				Total
		Preferred				Common				Capital				Capital				Comprehensive				(Accumulated				Stockholders'
		Stock				Stock				Preferred				Common				Income (Loss)				Deficit)				Equity
Balance at January 1, 2010		$	3			$	469			$	243,778			$	447,449			$	(48,263	)		$	(46,712	)		$	596,724
(Unaudited)
Net loss			—				—				—				—				—				(169,537	)			(169,537	)
Reclassification of gain on sale of securities available-for-sale			—				—				—				—				(6,278	)			—				(6,278	)
Reclassification of loss on securities available-for-sale due to other-than- temporary impairment			—				—				—				—				3,677				—				3,677
Change in net unrealized loss on securities available-for-sale			—				—				—				—				27,582				—				27,582
Total comprehensive loss			—																								(144,556	)
Issuance of common stock			—				1,061				—				625,852				—				—				626,913
Restricted stock issued			—				—				—				(12	)			—				—				(12	)
Dividends on preferred stock			—				—				—				—				—				(6,666	)			(6,666	)
Accretion of preferred stock			—				—				2,703				—				—				(2,703	)			—
Stock-based compensation			—				3				—				4,071				—				—				4,074
Tax effect from stock-based compensation			—				—				—				(116	)			—				—				(116	)
Balance at June 30, 2010		$	3			$	1,533			$	246,481			$	1,077,244			$	(23,282	)		$	(225,618	)		$	1,076,361
Balance at January 1, 2011		$	3			$	5,533			$	249,193			$	1,461,373			$	(16,165	)		$	(440,274	)		$	1,259,663
(Unaudited)
Net loss			—				—				—				—				—				(97,133	)			(97,133	)
Change in net unrealized loss on securities available-for-sale			—				—				—				—				15,809				—				15,809
Total comprehensive loss			—				—				—				—				—				—				(81,324	)
Restricted stock issued			—				2				—				(2	)			—				—				—
Dividends on preferred stock			—				—				—				—				—				(6,666	)			(6,666	)
Accretion of preferred stock			—				—				2,763				—				—				(2,763	)			—
Stock-based compensation			—				7				—				2,760				—				—				2,767
Balance at June 30, 2011		$	3			$	5,542			$	251,956			$	1,464,131			$	(356	)		$	(546,836	)		$	1,174,440

The accompanying notes are an integral part of these Consolidated Financial Statements.

Flagstar Bancorp, Inc.

Consolidated Statements of Cash Flows
(In thousands)

		For the Six Months Ended
		June 30,
		2011				2010
		(Unaudited)
Operating Activities
Net loss		$	(97,133	)		$	(169,537	)
Adjustments to net loss to net cash used in operating activities
Provision for loan losses			76,693				149,579
Depreciation and amortization			7,166				9,314
Increase in valuation allowance in mortgage servicing rights			—				(64	)
Loss on fair value of residential first mortgage servicing rights net of hedging gains			16,596				153,672
Stock-based compensation expense			2,767				4,074
Gain on interest rate swap			—				(484	)
Net loss on the sale of assets			585				6,436
Net gain on loan sales			(90,012	)			(116,823	)
Net loss on sales of mortgage servicing rights			2,493				3,479
Net gain on securities classified as available-for-sale			—				(6,689	)
Other than temporary impairment losses on securities classified as available-for-sale			15,584				3,677
Net gain on trading securities			(28	)			(66,348	)
Net loss on transferor interest			4,640				6,994
Proceeds from sales of loans available-for-sale			10,456,988				10,179,349
Origination and repurchase of mortgage loans available-for-sale, net of principal repayments			(9,820,042	)			(10,197,955	)
Increase in repurchase of mortgage loans with government guarantees, net of claims received			(36,839	)			(519,021	)
Purchase of trading securities			(131,754	)			(899,012	)
Increase in accrued interest receivable			(7,634	)			(14,048	)
Proceeds from sales of trading securities			—				806,496
Decrease (increase) in other assets			85,684				(29,522	)
Decrease in accrued interest payable			(2,030	)			(969	)
Net tax effect of stock grants issued			—				116
Increase (decrease) liability for checks issued			2,850				(4,657	)
Increase in federal income taxes payable			—				455
(Decrease) increase in payable for mortgage repurchase option			(7,862	)			121,235
Decrease in other liabilities			(6,406	)			(1,554	)
Net cash provided (used) in operating activities			472,306				(581,807	)
Investing Activities
Net change in other investments			—				13,650
Proceeds from the sale of investment securities available-for-sale			—				401,104
Net purchase of investment securities available-for-sale			(75,673	)			(153,071	)
Net proceeds from sales of portfolio loans			(20,366	)			(58,546	)
Origination of portfolio loans, net of principal repayments			191,947				127,234
Proceeds from the disposition of repossessed assets			63,797				108,799
Redemption of Federal Home Loan Bank Stock			35,453				—
Acquisitions of premises and equipment, net of proceeds			(19,457	)			(4,451	)
Proceeds from the sale of mortgage servicing rights			44,520				112,848
Net cash provided by investing activities			220,221				547,567

Flagstar Bancorp, Inc.
Consolidated Statements of Cash Flows , Continued
(In thousands)

		For the Six Months Ended
		June 30,
		2011				2010
		(Unaudited)
Financing Activities
Net decrease in deposit accounts			(593,072	)			(524,423	)
Net decrease in Federal Home Loan Bank advances			(318,512	)			(250,000	)
Net decrease in security repurchase agreements			—				(108,000	)
Net receipt of payments of loans serviced for others			10,726				11,738
Net receipt of escrow payments			19,346				7,423
Net tax benefit for stock grants issued			—				(116	)
Dividends paid to preferred stockholders			(6,666	)			(6,666	)
Issuance of common stock			—				576,913
Net cash used in financing activities			(888,178	)			(293,131	)
Net decrease in cash and cash equivalents			(195,651	)			(327,371	)
Beginning cash and cash equivalents			953,534				1,082,489
Ending cash and cash equivalents		$	757,883			$	755,118
Loans held-for-investment transferred to repossessed assets		$	100,298			$	279,955
Total interest payments made on deposits and other borrowings		$	117,374			$	177,108
Federal income taxes paid		$	—			$	341
Reclassification of mortgage loans originated for portfolio to mortgage loans available-for-sale		$	32,886			$	58,546
Reclassification of mortgage loans originated available-for-sale then transferred to portfolio loans		$	12,520			$	—
Mortgage servicing rights resulting from sale or securitization of loans		$	88,954			$	93,392

The accompanying notes are an integral part of these Consolidated Financial Statements.

Flagstar Bancorp, Inc.
Notes to the Consolidated Financial Statements (Unaudited)

Note 1 — Nature of Business

     Flagstar Bancorp, Inc. (“Flagstar” or the “Company”), is the holding company for Flagstar Bank, FSB (the “Bank”), a federally chartered stock savings bank founded in 1987. Flagstar is the largest insured depository institution headquartered in Michigan, and is the largest publicly held savings bank headquartered in the Midwest. At June 30, 2011, Flagstar had $12.7 billion in total assets, $7.4 billion in deposits and $1.2 billion in stockholders’ equity.

     The Company offers a full array of banking and lending products and services to meet the needs of both consumers and businesses. Consumer products include deposit accounts, standard and jumbo home loans, home equity lines of credit, and personal loans, including auto and boat loans. Business products include deposit and sweep accounts, telephone banking, term loans and lines of credit, lease financing, government banking products and treasury management services such as remote deposit and merchant services.

     The Company sells or securitizes most of the mortgage loans that it originates and generally retains the right to service the mortgage loans that it sells. These mortgage-servicing rights (“MSRs”) are occasionally sold by the Company in transactions separate from the sale of the underlying mortgages. The Company may also invest in its loan originations to enhance the Company’s leverage ability and to receive the interest spread between earning assets and paying liabilities.

     The Bank is a member of the Federal Home Loan Bank (“FHLB”) of Indianapolis and is subject to regulation, examination and supervision by the Office of Thrift Supervision (“OTS”) through July 21, 2011 and the Office of the Comptroller of the Currency (“OCC”) thereafter. The Bank is also subject to regulation, examination and supervision by the Federal Deposit Insurance Corporation (“FDIC”). The Bank’s deposits are insured by the FDIC through the Deposit Insurance Fund (“DIF”).

Note 2 — Basis of Presentation, Recent Developments and Accounting Policies

     The unaudited consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles for interim information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America (“U.S. GAAP”) for complete financial statements. The accompanying interim financial statements are unaudited; however, in the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The results of operations for the six month period ended June 30, 2011, are not necessarily indicative of the results that may be expected for the year ending December 31, 2011. In addition, certain prior period amounts have been reclassified to conform to the current period presentation. For further information, reference should be made to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010, which are available on the Company’s Investor Relations web page, at www.flagstar.com, and on the SEC website, at www.sec.gov.

Recent Developments

     On July 26, 2011, the Bank entered into an agreement for the sale or lease of its 27-branch Georgia retail bank branch franchise to PNC Bank, N.A., part of The PNC Financial Services Group, Inc (“PNC”). Management believes the transaction is consistent with its strategic focus on its core Midwest banking markets, and on its deployment of capital towards its continuing growth in commercial and consumer banking in those markets, as well as the emerging Northeast market.

     Under the agreement, PNC is to purchase the facilities or assume the leases associated with the branches and is to purchase associated business and retail deposits (approximately $240 million at June 30, 2011). PNC has agreed to pay the net book value of the acquired real estate and fixed and other personal assets (approximately $42 million at June 30, 2011) associated with the branches, and to assume all current lease obligations with respect to the branches. No loans are to be sold in connection with the transaction. In addition, PNC will be assuming certain liabilities associated with the Georgia retail bank branch franchise. PNC expects to offer employment to substantially all of the current Flagstar employees in the region (approximately 120 full-time employees at June 30, 2011). Flagstar’s Georgia retail bank franchise incurred a net loss from operations of approximately $4 million for the six months ended June 30, 2011. The Bank’s average deposit size of the branches was approximately $9 million, 41.6 percent of which were comprised of certificates of deposits. The Georgia retail bank franchise held approximately 0.3 percent of the total deposits in the Atlanta, Georgia Metropolitan area, while operating approximately 3.0 percent of all branches in that area.

     The agreement includes customary representations, warranties, and covenants and customary indemnification, non-compete, non-solicitation and termination provisions. The agreement also includes customary closing conditions and is subject

to regulatory approval. The transaction is anticipated to close during December 2011 and may be terminated by either party if the closing has not occurred by June 15, 2012. In addition, the Company agreed to be subject to the agreement’s restrictions on competition, solicitation and exclusive dealing.

     The 27 affected branches will operate in accordance with the prior course of business through closing of the transaction, including transactions involving customer ATM cards, checks and accounts.

Recently Adopted Accounting Standards

     On January 1, 2010, the Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 860, “Transfers and Servicing.” New authoritative accounting guidance under ASC Topic 860, “Transfers and Servicing,” amends prior accounting guidance to enhance reporting about transfers of financial assets, including securitizations, and where companies have continuing exposure to the risks related to transferred financial assets. The new authoritative accounting guidance eliminates the concept of a “qualifying special-purpose entity” and changes the requirements for derecognizing financial assets. The new authoritative accounting guidance also requires additional disclosures about all continuing involvements with transferred financial assets including information about gains and losses resulting from transfers during the period. The adoption of the new authoritative accounting guidance did not have an effect on the Company’s Consolidated Financial Statements.

     As of and for the year ended December 31, 2010, the Company adopted Accounting Standards Update (“ASU”) No. 2010-20, “Receivables (Topic 310): Disclosure about Credit Quality of Financing Receivables and Allowance For Credit Losses.” This guidance requires disclosures that facilitate the evaluation of the nature of credit risk inherent in its portfolio of financing receivables; how that risk is analyzed and assessed in determining the allowance for credit losses; and the changes and reasons for those changes in the allowance for credit losses. To achieve those objectives, disclosures on a disaggregated basis are provided on two defined levels: (1) portfolio segment; and (2) class of financing receivable. This guidance updates existing disclosure requirements and includes additional disclosure requirements relating to financing receivables. Short-term accounts receivable, receivables measured at fair value or lower of cost or fair value and debt securities are exempt from this guidance. For further information concerning credit quality, refer to Note 6 — Loans Held-for-Investment.

     As of and for the year ended December 31, 2010, the Company adopted the provisions of ASU No. 2010-06, “Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements. The guidance requires separate disclosures of significant transfers in and out of Level 1 and Level 2 fair value measurements and the reasons for the transfers and requires disclosure on purchases, sales, issuances and settlement activity on gross (rather than net) basis in the Level 3 reconciliation of fair value measurement for assets and liabilities measured at fair value on a recurring basis. In addition, the guidance clarifies that fair value measurement disclosures should be provided for each class of assets and liabilities and that disclosures of inputs and valuation techniques should be provided for both recurring and non-recurring Level 2 and Level 3 fair value measurements. For further information concerning the fair value measurements, refer to Note 3 — Fair Value Accounting.

Pending Accounting Pronouncements

     In April 2011, the FASB issued ASU No. 2011-02, “Receivables (Topic 310) — A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring.” The troubled debt restructuring (“TDR”) guidance clarifies whether loan modifications constitute TDRs, include factors and examples for creditors to consider in evaluating whether a restructuring results in a delay in payment that is insignificant, prohibit creditors from using the borrower’s effective rate test to evaluate whether a concession has been granted to the borrower, and add factors for creditors to use in determining whether a borrower is experiencing financial difficulties. A provision in the guidance also ends the FASB’s deferral of the additional disclosures about TDRs. The provisions of this guidance are effective for the first interim and annual period beginning on or after June 15, 2011, and should be applied retrospectively to the beginning of the annual period of adoption. The adoption of the guidance is not expected to have a material impact on the Company’s Consolidated Financial Statements or the Notes thereto.

     In April 2011, the FASB issued ASU No. 2011-03, “Transfers and Servicing (Topic 860) — Reconsideration of Effective Control for Repurchase Agreements.” Under the amended guidance, a transferor maintains effective control over transferred financial assets if there is an agreement that both entitles and obligates the transferor to repurchase the financial assets before maturity. In addition, the following requirements must be met: (a) the financial asset to be repurchased or redeemed are the same or substantially the same as those transferred, (b) the agreement is to repurchase or redeem the transferred financial asset before maturity at a fixed or determinable price, and (c) the agreement is entered into contemporaneously with, or in contemplation of the transfer. This guidance is effective prospectively for transactions, or modifications of existing transactions, that occur on or after the first interim or annual period beginning on or after December 15, 2011. The adoption of the guidance is not expected to have a material impact on the Company’s Consolidated Financial Statements or the Notes thereto.

     In May 2011, the FASB issued ASU No. 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.” The amended guidance does not modify the requirements for when fair value measurements apply, rather it generally represents clarifications on how to measure and disclose fair value under Topic 820, Fair Value Measurement. Some of the amendments the application of existing fair value measurement requirements and other amendments change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. ASU No. 2011-04 improves the comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and International Financial Reporting Standards (“IFRS”), by ensuring that fair value has the same meaning in U.S. GAAP and IFRSs and respective disclosure requirements are the same except for inconsequential differences in wording and style. This guidance is effective prospectively for annual and interim periods beginning after December 15, 2011. The adoption of the guidance is not expected to have a material impact on the Company’s Consolidated Financial Statements or the Notes thereto.

     In June 2011, the FASB issued ASU No. 2011-05, “Presentation of Comprehensive Income.” The guidance improves the comparability of financial reporting and facilitates the convergence of U.S. GAAP and IFRS be amending the guidance in ASC 220, Comprehensive Income. Under the amended guidance, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, the entity is required to present on the face of the financial statements reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statement(s) where the components of net income and the components of other comprehensive income are presented. This guidance is effective retrospectively for annual and interim periods beginning after December 15, 2011. The adoption of the guidance is not expected to have a material impact on the Company’s Consolidated Financial Statements or the Notes thereto.

Note 3 — Fair Value Accounting

     The Company utilizes fair value measurements to record certain assets and liabilities at fair value and to determine fair value disclosures.

Valuation Hierarchy

     The accounting guidance for fair value measurements and disclosures establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy favors the transparency of inputs used for the valuation of an asset or liability as of the measurement date and therefore favors use of Level 1 measurements if appropriate information is available, and otherwise Level 2, and finally Level 3 if Level 2 input is not available. The three levels are defined as follows:

	•		Level 1 — Fair value is based upon quoted prices (unadjusted) for identical assets or liabilities in active markets in which the Company can participate.
	•		Level 2 — Fair value is based upon quoted prices for similar (i.e., not identical) assets and liabilities in active markets, and other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
	•		Level 3 — Fair value is based upon financial models using primarily unobservable inputs.

     A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input within the valuation hierarchy that is significant to the fair value measurement.

The following is a description of the valuation methodologies used by the Company for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy.

Assets

     Securities classified as trading. These securities are comprised of United States Department of the Treasury (“U.S. Treasury”) bonds. The U.S. Treasury bonds trade in an active, open market with readily observable prices and are therefore classified within the Level 1 valuation hierarchy.

     Securities classified as available-for-sale. These securities are comprised of U.S. government sponsored agency mortgage-backed securities and collateralized mortgage obligations (“CMOs”). Where quoted prices for securities are available in an active market, those securities are classified within Level 1 of the valuation hierarchy. If such quoted market prices are not available, then fair values are estimated using pricing models, quoted prices of securities with similar characteristics, or discounted cash flows. Due to illiquidity in the markets, the Company determined the fair value of certain non-agency securities using internal valuation models and therefore classified them within the Level 3 valuation hierarchy as these models utilize significant inputs which are unobservable.

     Loans available-for-sale. At June 30, 2011 and December 31, 2010, the majority of the Company’s loans originated and classified as available-for-sale were reported at fair value and classified as Level 2. The Company generally estimated the fair value of mortgage loans based on quoted market prices for securities backed by similar types of loans. Where quoted market prices were available, such market prices were utilized as estimates for fair values. Otherwise, the fair values of loans were estimated by discounting estimated cash flows using management’s best estimate of market interest rates, prepayment speeds and loss assumptions for similar collateral. At June 30, 2011 and December 31, 2010, the Company had $132.8 million and $241.6 million, respectively, of loans which were originated prior to the fair value election and accounted for at lower of cost or market. These loans had an aggregate fair value that exceeded the recorded amount. The $108.8 million decrease was primarily due to the reclassification of $19.7 million of Ginnie Mae loans, which are serviced for others but a unilateral right to repurchase exists, to loans held-for-investment upon purchase of those loans, and the sale of $80.3 million of non-performing residential first mortgage loans during the six months ended June 30, 2011. Loans as to which the Company has the unilateral right to repurchase from certain securitization transactions, but has not yet repurchased, are classified as available-for-sale and accounted for at historical cost, based on current unpaid principal balance.

     Loans held-for-investment. The Company generally does not record these loans at fair value on a recurring basis. However, from time to time, a loan is considered impaired and an allowance for loan losses is established. Loans are considered impaired if it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement. Once a loan is identified as impaired, the fair value of the impaired loan is estimated using one of several methods, including collateral value, market value of similar debt, enterprise value and liquidation value or discounted cash flows. Impaired loans do not require an allowance if the fair value of the expected repayments or collateral exceed the recorded investments in such loans. At June 30, 2011 and December 31, 2010, substantially all of the impaired loans were evaluated based on the fair value of the collateral rather than on discounted cash flows. If the fair value of collateral is used to establish an allowance, the underlying impaired loan must be assigned a classification in the fair value hierarchy. To the extent the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the impaired loan as a non-recurring Level 2 valuation.

     Repossessed assets. Loans on which the underlying collateral has been repossessed are adjusted to fair value less costs to sell upon transfer to repossessed assets. Subsequently, repossessed assets are carried at the lower of carrying value or fair value, less anticipated marketing and selling costs. Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the repossessed asset as a non-recurring Level 2 valuation.

     Residential mortgage servicing rights. The current market for residential mortgage servicing rights is not sufficiently liquid to provide participants with quoted market prices. Therefore, the Company uses an option-adjusted spread valuation approach to determine the fair value of residential MSRs. This approach consists of projecting servicing cash flows under multiple interest rate scenarios and discounting these cash flows using risk-adjusted discount rates. The key assumptions used in the valuation of residential MSRs include mortgage prepayment speeds, discount rates and delinquency rates with related servicing costs. Management periodically obtains third-party valuations of the residential MSR portfolio to assess the reasonableness of the fair value calculated by the internal valuation model. Due to the nature of the valuation inputs, residential MSRs are classified within Level 3 of the valuation hierarchy. See Note 10 — Mortgage Servicing Rights, for the key assumptions used in the residential MSR valuation process.

     Derivative financial instruments. Certain classes of derivative contracts are listed on an exchange and are actively traded, and they are therefore classified within Level 1 of the valuation hierarchy. These include U.S. Treasury futures, U.S. Treasury options and interest rate swaps. The Company’s forward loan sale commitments may be valued based on quoted prices for similar assets in an active market with inputs that are observable and are classified within Level 2 of the valuation hierarchy. Rate lock commitments are valued using internal models with significant unobservable market parameters and therefore are classified within Level 3 of the valuation hierarchy.

Liabilities

     Warrants. Warrant liabilities are valued using a binomial lattice model and are classified within Level 2 of the valuation hierarchy. Significant assumptions include expected volatility, a risk free rate and an expected life.

Assets and liabilities measured at fair value on a recurring basis

     The following tables present the financial instruments carried at fair value as of June 30, 2011 and December 31, 2010, by caption on the Consolidated Statement of Financial Condition and by the valuation hierarchy (as described above):

														Total Carrying
June 30, 2011		Level 1				Level 2				Level 3				Value
		(Dollars in thousands)
Securities classified as trading:
U.S. Treasury bonds		$	292,437			$	—			$	—			$	292,437
Securities classified as available-for-sale:
Non-agencies			—				—				418,765				418,765
U.S. government sponsored agencies			132,408				—				—				132,408
Loans available-for-sale:
Residential first mortgage loans			—				1,870,499				—				1,870,499
Loans held-for-investment:
Residential first mortgage loans			—				21,514				—				21,514
Residential mortgage servicing rights			—				—				577,401				577,401
Derivative assets:
Rate lock commitments			—				—				10,920				10,920
Total assets at fair value		$	424,845			$	1,892,013			$	1,007,086			$	3,323,944
Derivative liabilities:
U.S. Treasury futures		$	6,104			$	—			$	—			$	6,104
Agency forwards			4,686				—				—				4,686
Forward agency and loan sales			—				8,198				—				8,198
Total derivative liabilities			10,790				8,198				—				18,988
Warrant liabilities			—				6,476				—				6,476
Total liabilities at fair value		$	10,790			$	14,674			$	—			$	25,464

														Total Carrying
December 31, 2010		Level 1				Level 2				Level 3				Value
		(Dollars in thousands)
Securities classified as trading:
U.S. Treasury bonds		$	160,775			$	—			$	—			$	160,775
Securities classified as available-for-sale:
Non-agencies			—				—				467,488				467,488
U.S. government sponsored agencies			7,737				—				—				7,737
Loans available-for-sale:
Residential first mortgage loans			—				2,343,638				—				2,343,638
Loans held-for-investment:
Residential first mortgage loans			—				19,011				—				19,011
Residential mortgage servicing rights			—				—				580,299				580,299
Derivative assets:
Forward agency and loan sales			—				35,820				—				35,820
Rate lock commitments			—				—				14,396				14,396
Agency forwards			4,088				—				—				4,088
Total derivative assets			4,088				35,820				14,396				54,304
Total assets at fair value		$	172,600			$	2,398,469			$	1,062,183			$	3,633,252
Derivative liabilities:
U.S. Treasury futures		$	(13,176	)		$	—			$	—			$	(13,176	)
Warrant liabilities			—				(9,300	)			—				(9,300	)
Total liabilities at fair value		$	(13,176	)		$	(9,300	)		$	—			$	(22,476	)

     There were no transfers of assets or liabilities recorded at fair value on a recurring basis into or out of Level 3 fair value measurements during the three and six month periods ended June 30, 2011 and 2010. The derivatives are reported in other assets on the Consolidated Statements of Financial Condition and warrant liabilities are reported in other liabilities on the Consolidated Statements of Financial Condition.

Changes in Level 3 fair value measurements

     A determination to classify a financial instrument within Level 3 of the valuation hierarchy is based upon the significance of the unobservable factors to the overall fair value measurement. However, Level 3 financial instruments typically include, in addition to the unobservable or Level 3 components, observable components (that is, components that are actively quoted and can be validated to external sources). Accordingly, the gains and losses in the table below include changes in fair value due in part to observable factors that are included within the valuation methodology. Also, the Company manages the risk associated with the observable components of Level 3 financial instruments using securities and derivative positions that are classified within Level 1 or Level 2 of the valuation hierarchy; these Level 1 and Level 2 risk management instruments are not included below, and therefore the gains and losses in the tables do not reflect the effect of the Company’s risk management activities related to such Level 3 instruments.

Fair value measurements using significant unobservable inputs

     The tables below include a roll forward of the Consolidated Statement of Financial Condition amounts for the three and six month periods ended June 30, 2011 and 2010 (including the change in fair value) for financial instruments classified by the Company within Level 3 of the valuation hierarchy:

						Total
						Realized/
		Balance at				Unrealized												Transfers in
For the Three Months Ended		Beginning				Gains /												and/or Out of				Balance at				Held at End
June 30, 2011		of Period				(Losses)				Purchases				Settlements				Level 3				End of Period				of Period (5)
														(Dollars in thousands)
Securities classified as available-for-sale: (2)(3)
Non-agencies		$	444,957			$	(5,363	)		$	—			$	(20,829	)		$	—			$	418,765			$	10,221
Residential mortgage servicing rights			635,122				(95,976	)			38,255				—				—				577,401				—
Derivative financial instruments:
Rate lock commitments			13,780				44,792				48,215				(95,867	)			—				10,920				—
Totals		$	1,093,859			$	(56,547	)		$	86,470			$	(116,696	)		$	—			$	1,007,086			$	10,221
For the Three Months Ended June 30, 2010
Securities classified as trading:
Non-investment grade residual interests (1)		$	286			$	(286	)		$	—			$	—			$	—			$	—			$	—
Securities classified as available-for-sale: (2)(3)
Non-agencies			523,901				14,323				—				(20,818	)			—				517,406				25,914
Residential mortgage servicing rights			540,800				(111,715	)			44,639				—				—				473,724				—
Derivative financial instruments:
Rate lock commitments (4)			13,085				—				33,075				—				—				46,160				—
Totals		$	1,078,072			$	(97,678	)		$	77,714			$	(20,818	)		$	—			$	1,037,290			$	25,914
For the Six Months Ended June 30, 2011
Securities classified as available-for-sale: (2)(3) Non-agencies		$	467,488			$	2,359			$	—			$	(51,082	)		$	—			$	418,765			$	17,943
Residential mortgage servicing rights			580,299				(91,853	)			88,955				—				—				577,401				—
Derivative financial instruments:
Rate lock commitments			14,396				38,590				97,059				(139,125	)			—				10,920				—
Totals		$	1,062,183			$	(50,904	)		$	186,014			$	(190,207	)		$	—			$	1,007,086			$	17,943
For the Six Months Ended June 30, 2010
Securities classified as trading:
Non-investment grade residual interests (1)		$	2,057			$	(2,057	)		$	—			$	—			$	—			$	—			$	—
Securities classified as available-for-sale: (2)(3)
Non-agencies			538,376				22,237				—				(43,207	)			—				517,406				25,914
Residential mortgage servicing rights			649,133				(268,315	)			92,906				—				—				473,724				—
Derivative financial instruments:
Rate lock commitments (4)			10,061				—				36,099				—				—				46,160				—
Totals		$	1,199,627			$	(248,135	)		$	129,005			$	(43,207	)		$	—			$	1,037,290			$	25,914

     The Company also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis. These assets are measured at the lower of cost or market and had a fair value below cost at the end of the period as summarized below:

Assets Measured at Fair Value on a Non-recurring Basis

		Total				Level 1				Level 2				Level 3
		(Dollars in thousands)
June 30, 2011
Loans held-for-investment: (1)
Residential first mortgage loans		$	30,265			$	—			$	30,265			$	—
Commercial real estate loans			153,454				—				153,454				—
Repossessed assets (2)			110,050				—				110,050
Totals		$	293,769			$	—			$	293,769			$	—
December 31, 2010
Loans held-for-investment: (1)
Residential first mortgage loans		$	32,025			$	—			$	32,025			$	—
Commercial real estate loans			218,091				—				218,091				—
Repossessed assets (2)			151,085				—				151,085				—
Totals		$	401,201			$	—			$	401,201			$	—

Fair Value of Financial Instruments

     The accounting guidance for financial instruments requires disclosures of the estimated fair value of certain financial instruments and the methods and significant assumptions used to estimate their fair values. Certain financial instruments and all non-financial instruments are excluded from the scope of this guidance. Accordingly, the fair value disclosures required by this guidance are only indicative of the value of individual financial instruments as of the dates indicated and should not be considered an indication of the fair value of the Company.

     The following table presents the carrying amount and estimated fair value of certain financial instruments:

		June 30, 2011								December 31, 2010
		Carrying				Fair				Carrying				Fair
		Value				Value				Value				Value
						(Dollars in thousands)
Financial Instruments
Assets:
Cash and cash equivalents		$	757,883			$	757,883			$	953,534			$	953,534
Securities classified as trading			292,437				292,437				160,775				160,775
Securities classified as available-for-sale			551,173				551,173				475,225				475,225
Loans available-for-sale			2,002,888				2,008,273				2,585,200				2,513,239
Loans repurchased with government guarantees			1,711,591				1,711,591				1,674,752				1,674,752
Loans held-for-investment, net			5,701,134				5,651,358				6,031,483				5,976,623
Repossessed assets			110,050				110,050				151,085				151,085
FHLB stock			301,736				301,736				337,190				337,190
Mortgage servicing rights			577,401				577,401				580,299				580,299
Liabilities:
Retail deposits:
Demand deposits and savings accounts			(2,447,009	)			(2,323,499	)			(2,153,438	)			(2,075,898	)
Certificates of deposit			(2,764,782	)			(2,811,955	)			(3,230,972	)			(3,292,983	)
Government accounts			(674,869	)			(652,623	)			(663,976	)			(664,572	)
National certificates of deposit			(703,201	)			(720,330	)			(883,270	)			(906,699	)
Company controlled deposits			(815,166	)			(805,410	)			(1,066,443	)			(1,048,432	)
FHLB advances			(3,406,572	)			(3,611,611	)			(3,725,083	)			(3,901,385	)
Long-term debt			(248,610	)			(99,439	)			(248,610	)			(100,534	)
Warrant liabilities			(6,476	)			(6,476	)			(9,300	)			(9,300	)
Derivative Financial Instruments:
Forward delivery contracts			(8,198	)			(8,198	)			35,820				35,820
Commitments to extend credit			10,920				10,920				14,396				14,396
U.S. Treasury and agency futures/forwards			(10,790	)			(10,790	)			(9,088	)			(9,088	)

     The methods and assumptions that were used to estimate the fair value of financial assets and financial liabilities that are measured at fair value on a recurring or non-recurring basis are discussed above. The following methods and assumptions were used to estimate the fair value of other financial instruments for which it is practicable to estimate that value:

     Cash and cash equivalents. Due to their short-term nature, the carrying amount of cash and cash equivalents approximates fair value.

     Loans repurchased with government guarantees. The carrying value of loans repurchased with government guarantees approximates fair value.

     Loans held-for-investment. The fair value of loans is estimated by using internally developed discounted cash flow models using market interest rate inputs as well as management’s best estimate of spreads for similar collateral.

     FHLB stock. No secondary market exists for FHLB stock. The stock is bought and sold at par by the FHLB. Management believes that the recorded value is the fair value.

     Deposit accounts. The fair value of demand deposits and savings accounts approximates the carrying amount. The fair value of fixed-maturity certificates of deposit is estimated using the rates currently offered for certificates of deposit with similar remaining maturities.

     FHLB advances. Rates currently available to the Company for debt with similar terms and remaining maturities are used to estimate the fair value of the existing debt.

     Long-term debt. The fair value of the long-term debt is estimated based on a discounted cash flow model that incorporates the Company’s current borrowing rates for similar types of borrowing arrangements.

Note 4 — Investment Securities

     As of June 30, 2011 and December 31, 2010, investment securities were comprised of the following:

						Gross
		Amortized				Unrealized				Gross Unrealized
		Cost				Gains				Losses				Fair Value
						(Dollars in thousands)
June 30, 2011
Securities classified as trading:
U.S. Treasury bonds		$	291,923			$	851			$	(336	)		$	292,438
Securities classified as available-for-sale:
Non-agencies		$	446,020			$	492			$	(27,747	)		$	418,765
U.S. government sponsored agencies			131,497				985				(74	)			132,408
Total securities classified as available-for-sale		$	577,517			$	1,477			$	(27,821	)		$	551,173
December 31, 2010
Securities classified as trading:
U.S. Treasury bonds		$	160,289			$	486			$	—			$	160,775
Securities classified as available-for-sale:
Non-agencies		$	510,167			$	1,979			$	(44,658	)		$	467,488
U.S. government sponsored agencies			7,211				526				—				7,737
Total securities classified as available-for-sale		$	517,378			$	2,505			$	(44,658	)		$	475,225

Trading

     Securities classified as trading are comprised of AAA-rated U.S. Treasury bonds. U.S. Treasury bonds held in trading are distinguished from available-for-sale based upon the intent of the Company to use them as an economic offset against changes in the valuation of the MSR portfolio; however, these securities do not qualify as an accounting hedge as defined in current accounting guidance for derivatives and hedges.

     For U.S. Treasury bonds held, the Company recorded an unrealized gain of $0.1 million during both the three and six month periods ended June 30, 2011, respectively. For the three and six month periods ended June 30, 2010, the Company recorded a gain of $69.6 million and $66.3 million, respectively, of which $21.0 million was unrealized gain on U.S. Treasury bonds held at June 30, 2010.

Available-for-Sale

     Securities available-for-sale are carried at fair value, with unrealized gains and losses reported as a component of other comprehensive loss to the extent they are temporary in nature or “other-than-temporary impairments” (“OTTI”) as to non-credit related issues. If unrealized losses are, at any time, deemed to have arisen from OTTI, the credit related portion is reported as an expense for that period. At June 30, 2011 and December 31, 2010, the Company had $551.2 million and $475.2 million, respectively, in securities classified as available-for-sale which were comprised of U.S. government sponsored agency and non-agency collateralized mortgage obligations.

     The following table summarizes by duration the unrealized loss positions, at June 30, 2011 and December 31, 2010, on securities classified as available-for-sale:

		Unrealized Loss Position with												Unrealized Loss Position with
		Duration 12 Months and Over												Duration Under 12 Months
		Fair				Number of				Unrealized				Fair				Number of				Unrealized
Type of Security		Value				Securities				Loss				Value				Securities				Loss
		(Dollars in thousands)
June 30, 2011
U.S. government sponsored agency securities		$	—				—			$	—			$	132,408				24			$	(74	)
Collateralized mortgage obligations			387,884				11				(27,747	)			—				—				—
Total		$	387,884				11			$	(27,747	)		$	132,408				24			$	(74	)
December 31, 2010
Collateralized mortgage obligations		$	432,577				11			$	(44,658	)		$	—				—			$	—