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): August 6, 2007
Flagstar Bancorp, Inc.
(Exact name of registrant as specified in its charter)
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| Michigan
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1-16577
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38-3150651 |
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(Commission File
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(I.R.S. Employer |
| incorporation)
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Number)
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Identification No.) |
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| 5151 Corporate Drive, Troy, Michigan
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48098 |
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(248) 312-2000
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c)) |
Item 4.02(a) Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or
Completed Interim Review
In connection with a review of Flagstar Bancorp, Inc.’s (“Flagstar” or the “Company”)
Annual Report on Form 10-K for the fiscal year ended December 31, 2006 (“Form 10-K”) and Quarterly
Report on Form 10-Q for the quarter ended March 31, 2007 (“First Quarter Form 10-Q”), the staff of
the Division of Corporation Finance of the Securities and Exchange Commission’s (“SEC”) issued a
letter of comments dated July 19, 2007 (the “SEC Comments”) that, among other things, commented on
the presentation of certain items in Flagstar’s Consolidated Statements of Cash Flows for the years
ended December 31, 2006, 2005 and 2004 and quarter ended March 31, 2007 (collectively, the “Cash
Flow Statements”). Following its review of the SEC comments, Flagstar’s management recommended to the
Audit Committee of Flagstar’s Board of Directors that the Cash Flow Statements should be restated
and the previously issued Consolidated Financial Statements for such periods should no longer be
relied upon. On August 6, 2007, following discussions with Flagstar’s management and with
Flagstar’s independent registered public accounting firm, the Audit Committee agreed with
management’s recommendation.
The restatement results from the misclassification of cash flows from the sale of certain
mortgage loans originally held for investment, which had been inappropriately classified as
operating activities, and cash flows from certain mortgage loans originated as available for sale,
which had been inappropriately classified as investing activities. In accordance with SFAS 102,
“Statement of Cash Flows-Exemption of Certain Enterprises and Classification of Cash Flows from
Certain Securities Acquired for Resale,” cash flows from the sale of mortgage loans originally held
for investment should have been classified as investing activities rather than as operating
activities, and cash flows from mortgage loans originated to be sold should have been classified as
operating activities rather than as investing activities.
The restatement also results from the treatment of capitalized mortgage servicing rights and
residual interests retained from the sale or securitization of loans. Previously, the Company had
treated the retention of such interests as cash activities. In accordance with SFAS 140, “Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,” the mortgage
servicing rights and residual interests do not exist until they are separated from the associated
loans when the loans are sold. Specifically, upon the sale of loans, the amounts related to the
mortgage servicing rights or residual interests are reclassified on the consolidated statement of
financial condition from loans held for sale and are, therefore, a
non-cash transaction. As a result, we will show these mortgage
servicing rights and residual interests as non-cash transactions in
the supplemental disclosures within the Cash Flow Statements.
As a result of the errors described above, the restatement affects the classification of these
activities and the subtotals of cash flows from operating and investing activities presented in the
Cash Flow Statements, but they do not have any impact on the total cash and cash equivalents
presented therein.
Flagstar’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007 (“Second Quarter
Form 10-Q”) filed concurrently with this Current Report on Form 8-K includes Consolidated Financial
Statements that reflect the above mentioned changes to the Consolidated Statement of Cash Flows, as well as certain other
disclosures in response to the SEC’s comments. Included in Note 10 of the Notes to Consolidated
Financial Statements in the Second Quarter Form 10-Q is disclosure regarding the restatement of the
Cash Flow Statements.
The Company is continuing discussions with the SEC, the Company’s current independent
registered public accounting firm (for the years ended
December 31, 2006 and 2005), its predecessor independent registered public accounting
firm (for the year ended December 31, 2004), and the Company’s Audit Committee regarding the SEC
Comments. As soon as practicable following resolution of the SEC Comments, we will file an amended
Form 10-K and an amended First Quarter Form 10-Q with the SEC to specifically incorporate the
restatement of the Cash Flow Statements and any other changes that may result. At the current
time, the Company cannot predict when the SEC Comments will be resolved, the results of the SEC
staff review, or the effect, if any, that the resolution might have
on our consolidated financial statements or
other disclosures contained in our filings with the SEC.