##### Table of Contents



FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

|         |  |                                                                                        
|-------- |  | ---------------------------------------------------------------------------------------
|Mark One |  |                                                                                        
|x        |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|         |  |                                                                                        
|         |  | For the quarterly period ended March 31, 2003                                          

OR

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

Commission File No.: 000-23821

|                                                                                    
|------------------------------------------------------------------------------------
|FLAGSTAR CAPITAL CORPORATION

(Exact name of registrant as specified in its charter)

|                                         |  |                    
|---------------------------------------- |  | -------------------
|Michigan                                 |  | 38-3386801         
|                                         |  |                    
|(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)         

Registrants telephone number, including area 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  X No   .

As of May 9, 2003, 1,000,000 shares of the registrants Common Stock,
$1.00 par value, were issued and outstanding and 2,300,000 shares of the
registrants Series A Preferred Shares, $25.00 par value, were issued and
outstanding.





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TABLE OF CONTENTS



|                                             |                                                   |  |  |  |  |  |  | 
|-------------------------------------------- | ------------------------------------------------- |  |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION               
|                                             | Statements of Financial Condition                
|                                             | Unaudited Statements of Earnings                 
|                                             | Unaudited Statements of Cash Flows               
|                                             | Condensed Notes to Financial Statements-unaudited
|Computation of Net Earnings Per Share       
|906 Certification of Chief Executive Officer
|906 Certification of Chief Financial Officer



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##### Table of Contents






PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

The condensed financial statements of the Registrant are as follows:



| |  | Statements of Financial Condition  March 31, 2003 (unaudited) and
December 31, 2002             
| |  | -------------------------------------------------------------------------------------------------
|
| |  | Unaudited Statements of Earnings  For the three months ended March 31,
2003 and March 31, 2002  
|
| |  | Unaudited Statements of Cash Flows  For the three months ended March 31,
2003 and March 31, 2002
|
| |  | Condensed Notes to Financial Statements  unaudited                                              

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Flagstar Capital Corporation
Statements of Financial Condition
(In thousands)

|                                                                                                                                    |                           |             |                                            |                            |   |           |         |         |              |         |         | 
|----------------------------------------------------------------------------------------------------------------------------------- | ------------------------- | ----------- | ------------------------------------------ | -------------------------- | - | --------- | ------- | ------- | ------------ | ------- | ------- | 
|                                                                                                                                    |                           |             |                                            |                            |   | March 31, |         |         | December 31, |        
|                                                                                                                                    |                           |             |                                            |                            |   | 2003      |         |         | 2002         |        
|                                                                                                                                    |                           |             |                                            |                            |   |           |         |         |              |        
|Assets                                                                                                                              |                           | (unaudited) |                                            |                            |   |           |        
|Cash                                                                                                                                |                           | $           | 27,042                                     |                            |   | $         | 10,658  |        
|                                                                                                                                    | Mortgage loans            |             |                                            | 90,883                     |   |           |         | 109,922 |             
|                                                                                                                                    | Allowance for loan losses |             |                                            | 250                        |   |           |         | 250     |             
|                                                                                                                                    |                           |             |                                            |                            |   |          
|                                                                                                                                    | Net mortgage loans        |             |                                            | 90,633                     |   |           |         | 109,672 |             
|Investment in mortgage securities                                                                                                   |                           |             | 132,232                                    |                            |   |           | 125,883 |        
|Other investments                                                                                                                   |                           |             | 17,768                                     |                            |   |           | 24,117  |        
|Accrued interest receivable                                                                                                         |                           |             | 424                                        |                            |   |           | 485     |        
|Loan payments in process  due from parent                                                                                          |                           |             | 11,100                                     |                            |   |           | 8,459   |        
|Other assets                                                                                                                        |                           |             | 496                                        |                            |   |           | 624     |        
|                                                                                                                                    |                           |             |                                            |                            |   |          
|                                                                                                                                    |                           |             | Total assets                               |                            | $ | 279,695   |         |         | $            | 279,898 |        
|                                                                                                                                    |                           |             |                                            |                            |   |          
|Liabilities and stockholders equity                                                                                                |                           |             |                                            |                            |   |           |         |        
|Liabilities                                                                                                                         |                           |             |                                            |                            |   |           |         |        
|Due to parent                                                                                                                       |                           | $           | 492                                        |                            |   | $         | 709     |        
|Other liabilities                                                                                                                   |                           |             | 126                                        |                            |   |           | 112     |        
|                                                                                                                                    |                           |             |                                            |                            |   |          
|                                                                                                                                    |                           |             |                                            | Total liabilities          |   |           | 618     |         |              |         | 821     | 
|Stockholders equity                                                                                                                |                           |             |                                            |                            |   |           |         |        
|Series A preferred stock  $25.00 liquidation value,
2,300,000 shares authorized and issued at
March 31, 2003 and December 31, 2002 |                           |             | 57,500                                     |                            |   |           | 57,500  |        
|Common stock  $1.00 par value, 1,000,000 shares
authorized and issued at March 31, 2003 and
December 31, 2002                      |                           |             | 1,000                                      |                            |   |           | 1,000   |        
|Additional paid in capital                                                                                                          |                           |             | 220,577                                    |                            |   |           | 220,577 |        
|Retained earnings                                                                                                                   |                           |             |                                           |                            |   |           |        |        
|                                                                                                                                    |                           |             |                                            |                            |   |          
|                                                                                                                                    |                           |             |                                            | Total stockholders equity |   |           | 279,077 |         |              |         | 279,077 | 
|                                                                                                                                    |                           |             |                                            |                            |   |          
|                                                                                                                                    |                           |             | Total liabilities and stockholders equity |                            | $ | 279,695   |         |         | $            | 279,898 |        
|                                                                                                                                    |                           |             |                                            |                            |   |          

The accompanying notes are an integral part of these statements.

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Flagstar Capital Corporation
Unaudited Statements of Earnings
(in thousands, except per share data)

|                                              |                                       |   |           |       |  |           |       |       | 
|--------------------------------------------- | ------------------------------------- | - | --------- | ----- |  | --------- | ----- | ----- | 
|                                              |                                       |   | For the   |       |  | For the   |      
|                                              |                                       |   | quarter   |       |  | quarter   |      
|                                              |                                       |   | ended     |       |  | ended     |      
|                                              |                                       |   | March 31, |       |  | March 31, |      
|                                              |                                       |   | 2003      |       |  | 2002      |      
|                                              |                                       |   |           |       |  |           |      
|Income                                        |                                       |   |           |       |  |           |       |      
|                                              | Interest on loans                     |   | $         | 1,441 |  |           | $     | 1,819 | 
|                                              | Interest on investments               |   |           | 1,548 |  |           |       | 1,524 | 
|                                              |                                       |   |           |       |  |          
|                                              | Total income                          |   |           | 2,989 |  |           |       | 3,343 | 
|Expenses                                      |                                       |   |           |       |  |           |       |      
|                                              | Advisory fee expense  paid to parent |   |           | 62    |  |           |       | 63    | 
|                                              | General and administrative expenses   |   |           | 29    |  |           |       | 28    | 
|                                              |                                       |   |           |       |  |          
|                                              | Total expenses                        |   |           | 91    |  |           |       | 91    | 
|                                              |                                       |   |           |       |  |          
|Net earnings                                  |                                       | $ | 2,898     |       |  | $         | 3,252 |      
|                                              |                                       |   |           |       |  |          
|Preferred stock dividends                     |                                       | $ | 1,222     |       |  | $         | 1,222 |      
|                                              |                                       |   |           |       |  |          
|Net earnings available to common stockholders |                                       | $ | 1,676     |       |  | $         | 2,030 |      
|                                              |                                       |   |           |       |  |          
|Earnings per common share                     |                                       | $ | 1.68      |       |  | $         | 2.03  |      
|                                              |                                       |   |           |       |  |          

The accompanying notes are an integral part of these statements.

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Flagstar Capital Corporation
Unaudited Statements of Cash Flows
(in thousands)

|                                          |                                                                                    |                                                 |                                           |       |               |        |       |               |         |        |  
|----------------------------------------- | ---------------------------------------------------------------------------------- | ----------------------------------------------- | ----------------------------------------- | ----- | ------------- | ------ | ----- | ------------- | ------- | ------ | -
|                                          |                                                                                    |                                                 |                                           |       | For the three |        |       | For the three |        
|                                          |                                                                                    |                                                 |                                           |       | months ended  |        |       | months ended  |        
|                                          |                                                                                    |                                                 |                                           |       | March 31,     |        |       | March 31,     |        
|                                          |                                                                                    |                                                 |                                           |       | 2003          |        |       | 2002          |        
|                                          |                                                                                    |                                                 |                                           |       |               |        |       |               |        
|Operating Activities                      |                                                                                    |                                                 |                                           |       |               |        |       |              
|                                          | Net earnings                                                                       |                                                 | $                                         | 2,898 |               |        | $     | 3,252         |        
|                                          | Adjustments to reconcile net earnings to net cash
provided
by operating activities |                                                 |                                           |       |               |        |       |               |        
|                                          | Decrease (increase) in accrued interest receivable                                 |                                                 |                                           | 61    |               |        |       | (33           | )      
|                                          | Decrease in other assets                                                           |                                                 |                                           | 127   |               |        |       | 258           |        
|                                          | Increase (decrease) in other liabilities                                           |                                                 |                                           | 14    |               |        |       | (1,195        | )      
|                                          |                                                                                    |                                                 |                                           |       |               |        |      
|                                          |                                                                                    |                                                 | Net cash provided by operating activities |       |               | 3,100  |       |               |         | 2,282  |  
|Investing Activities                      |                                                                                    |                                                 |                                           |       |               |        |       |              
|                                          |                                                                                    | Net change in investment in mortgage securities |                                           |       | (6,349        | )      |       |               | (22,302 | )     
|                                          |                                                                                    | Net change in other investments                 |                                           |       | 6,349         |        |       |               | 22,302  |       
|                                          |                                                                                    | Purchase of mortgage loans                      |                                           |       | (17,611       | )      |       |               | (17,977 | )     
|                                          |                                                                                    | Principal repayments received on mortgage loans |                                           |       | 34,009        |        |       |               | 24,211  |       
|                                          |                                                                                    |                                                 |                                           |       |               |        |      
|                                          |                                                                                    |                                                 | Net cash provided by investing activities |       |               | 16,398 |       |               |         | 6,234  |  
|Financing Activities                      |                                                                                    |                                                 |                                           |       |               |        |       |              
|                                          |                                                                                    | Dividends paid to common stockholder            |                                           |       | (1,892        | )      |       |               | (4,177  | )     
|                                          |                                                                                    | Dividends paid to preferred stockholders        |                                           |       | (1,222        | )      |       |               | (1,222  | )     
|                                          |                                                                                    |                                                 |                                           |       |               |        |      
|                                          |                                                                                    |                                                 | Net cash used in financing activities     |       |               | (3,114 | )     |               |         | (5,399 | )
|                                          |                                                                                    |                                                 |                                           |       |               |        |      
|Net increase in cash and cash equivalents |                                                                                    |                                                 | 16,384                                    |       |               |        | 3,117 |              
|Beginning cash and cash equivalents       |                                                                                    |                                                 | 10,658                                    |       |               |        | 2,022 |              
|                                          |                                                                                    |                                                 |                                           |       |               |        |      
|Ending cash and cash equivalents          |                                                                                    | $                                               | 27,042                                    |       |               | $      | 5,139 |              
|                                          |                                                                                    |                                                 |                                           |       |               |        |      

The accompanying notes are an integral part of these statements.

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Flagstar Capital Corporation
Condensed Notes to Financial Statements-unaudited

Note 1  Nature of Business

Flagstar Capital Corporation (the Company) is a subsidiary of Flagstar
Intermediate Holding Company (IHC), a wholly owned operating subsidiary of
Flagstar Bank, FSB (the Bank), a federally chartered stock savings bank
founded in 1987. The primary business of the Company is to acquire, hold, and
manage residential mortgage loans that will generate net earnings that can be
distributed to stockholders. The Company has elected to be treated as a Real
Estate Investment Trust (REIT) for federal tax purposes and must satisfy
various requirements as discussed herein.

On March 20, 2003, the Company notified the public in a press release that they
would redeem all of the Series A Preferred Shares on June 30, 2003.

Note 2.  Basis of Presentation

The accompanying consolidated unaudited 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. Accordingly, they do not include all the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. All interim amounts are subject to year-end audit, the results
of operations for the interim period herein are not necessarily indicative of
the results that may be expected for the year ending December 31, 2003.

Note 3. Significant Events

The Company removed its preferred stock listing from the Nasdaq Stock Market on
July 12, 2001. On July 13, 2001, the Company moved those same shares to the New
York Stock Exchange. The securities, which formerly traded under the symbol
FLGSP, now trade under the symbol FBC-P.

In September, 2001, Flagstar Bank, FSB contributed its common stock investment
in the Company to Flagstar Intermediate Holding Company, a newly formed,
wholly-owned subsidiary. The purpose of the transaction is to allow the Bank
greater flexibility in the manner in which the common stock of the Company is
held. The change will also increase the mortgage investments the Company is
allowed to invest in while still complying with various federal tax
requirements. At the same time, IHC contributed $150 million of equity to the
Company. The Company then invested the proceeds in a 15% interest in mortgage
securities 100% owned by Flagstar LLC.

On March 20, 2003, the Company notified the public in a press release that they
would redeem all of the Series A Preferred Shares on June 30, 2003.

Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

The principal business of the Company is to acquire, hold, and manage
residential mortgage loans that will generate net earnings that can be
distributed to stockholders. The Company intends to acquire all its mortgage
loans from the Bank.

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Results of Operation

The Company recorded a 10.9% decrease in net earnings for the quarter ended
March 31, 2003 compared to the quarter ended March 31, 2002. This decrease was
the result of a smaller average investment in Mortgage Loans and mortgage
securities during the 2003 quarter. The Companys parent, IHC, contributed
$150 million of equity during September 2001 and the Company invested in
additional Mortgage Loans and mortgage securities.

The Company reported net earnings for the quarter ended March 31, 2003 of $2.9
million. Interest income from loans and investments was $3.0 million, which was
offset by $29,000 in administrative expenses and $62,000 in advisory fees. The
reported net earnings for the quarter ended March 31, 2002 were $3.3 million.
Interest income from loans was $3.3 million, which was offset by $28,000 in
administrative expenses and $63,000 in advisory fees during the 2002 period.

The Company reported net earnings per common share of $1.68 for the quarter
ended March 31, 2003 and $2.03 for the quarter ended March 31, 2002.

During the quarters ended March 31, 2003 and 2002, the Company declared and
paid $1,222,000 in preferred stock dividends.

The Company declared and paid or accrued common stock distributions of
$1,676,000 and $2,030,000 for the quarters ended March 31, 2003 and 2002,
respectively.

Mortgage Loans

The Companys residential mortgage loans (Mortgage Loans) consist of
adjustable rate mortgages (ARMs), and fixed rate mortgages (FRMs).
Reinvestments made in Mortgage Loans will be initiated in a manner to maintain
the original composition of approximately 70% ARMs and 30% FRMs. All Mortgage
Loans are expected to be purchased from the Bank.

The following table gives a breakdown of the Mortgage Loans at March 31, 2003.

|             |               |       |  |     |         |  |   |            |            |  |         |         |         |          |  |       |       |   |  |            |     |  |  |     |     |  |  |      |       |  
|------------ | ------------- | ----- |  | --- | ------- |  | - | ---------- | ---------- |  | ------- | ------- | ------- | -------- |  | ----- | ----- | - |  | ---------- | --- |  |  | --- | --- |  |  | ---- | ----- | -
|             |               |       |  |     |         |  |   | Principal  |            |  | Average |         |         | Interest |  |       |       |   |  |            |     |  |  |     |     |  | 
|Product Type |               | Loans |  |     | Balance |  |   | Balance    |            |  | Rate    |         |         | WAM      |  |       | WARM  |   |  | % of Total |    
|             |               |       |  |     |         |  |   |            |            |  |         |         |         |          |  |       |       |   |  |            |    
|             | 3 year ARM    |       |  | 109 |         |  | $ | 24,196,000 |            |  | $       | 221,981 |         |          |  | 5.845 | %     |   |  | 360        |     |  |  | 338 |     |  |  | 26.7 |      
|             | 5 year ARM    |       |  | 219 |         |  |   | 45,611,000 |            |  |         | 208,269 |         |          |  | 6.094 |       |   |  | 360        |     |  |  | 342 |     |  |  | 50.4 |      
|             | 7 year ARM    |       |  | 34  |         |  |   | 11,108,000 |            |  |         | 326,700 |         |          |  | 6.783 |       |   |  | 360        |     |  |  | 329 |     |  |  | 12.3 |      
|             | 15 year Fixed |       |  | 68  |         |  |   | 4,771,000  |            |  |         | 70,163  |         |          |  | 6.499 |       |   |  | 180        |     |  |  | 126 |     |  |  | 5.3  |      
|             | 30 year Fixed |       |  | 43  |         |  |   | 4,778,000  |            |  |         | 111,125 |         |          |  | 6.866 |       |   |  | 360        |     |  |  | 300 |     |  |  | 5.3  |      
|             |               |       |  |     |         |  |   |            |            |  |         |         |         |          |  |       |       |   |  |            |    
|             |               | Total |  |     | 473     |  |   | $          | 90,464,000 |  |         | $       | 191,256 |          |  |       | 6.174 | % |  |            | 351 |  |  |     | 326 |  |  |      | 100.0 | %
|             |               |       |  |     |         |  |   |            |            |  |         |         |         |          |  |       |       |   |  |            |    

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Allowance for Loan Losses

The Companys allowance for loan losses was $250,000 at March 31, 2003.
Management has based the allowance on assessments of relevant factors including
the types and amount of delinquent loans, historical loss experience on such
types of loans experienced by the Bank, and current economic conditions.
Management is of the opinion that the allowance for loan losses is adequate to
meet potential losses in the portfolio. The Companys non-performing assets
consisted of three mortgage loans totaling $790,000, or 0.87%, of the
portfolio, at March 31, 2003. The Company, in accordance with applicable
disclosure requirements, defines an asset as non-performing if it meets any of
the following criteria: 1) a loan more than 90 days past due; 2) real estate
acquired in a settlement of a loan; or 3) a restructured loan whose terms have
been modified due to the borrowers inability to pay as contractually specified
including loans the Company has classified as impaired. Loans are generally
placed into non-accrual status when they become 90 days delinquent.

The Company had a $250,000 allowance for loan losses at December 31, 2002. The
Companys non-performing loans were limited to three mortgage loans totaling
$790,000, or 0.8%, of the portfolio, at December 31, 2002. The Company has
certain representations and warranties from the Bank, which are related to the
performance of the Mortgage Loans.

The Bank, in its role as Advisor, has implemented comprehensive internal asset
review systems to provide for early detection of problem assets. Although this
system will not eliminate future losses due to unanticipated declines in the
real estate market or economic downturns, it should provide for timely
identification of any losses created from problem loans.

|                                              |                                |   |         |   | 
|--------------------------------------------- | ------------------------------ | - | ------- | - | 
|Activity within the Allowance for Loan Losses
|                                             
|Balance, December 31, 2002                    |                                | $ | 250,000 |  
|                                              | Provision for loan losses      |   |         |  | 
|                                              | Charge-offs, net of recoveries |   |         |  | 
|                                              |                                |   |        
|Balance, March 31, 2003                       |                                | $ | 250,000 |  
|                                              |                                |   |        

Investment in Mortgage Securities

During September 2001, the Company invested in mortgage securities owned by
Flagstar, LLC, a second-tier subsidiary of the Bank. The Company currently has
a 15% interest in these mortgage securities, which is equal to $132.2 million.
The mortgage securities currently have a yield of 5.626% and interest payments
are made monthly to the Company. The mortgage securities are managed and
serviced by the Bank.

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Liquidity

The objective of maintaining liquidity within the Company is to ensure the
availability of sufficient cash flows to meet all of the Companys financial
commitments. In managing liquidity, the Company takes into account various
legal limitations placed on a REIT.

On March 20, 2003, the Company notified the public in a press release that they
would redeem all of the Series A Preferred Shares on June 30, 2003.

The Companys principal liquidity needs are to maintain the current portfolio
size through the acquisition of additional Mortgage Loans as Mortgage Loans
currently in the portfolio mature, or prepay, and to pay dividends on the
Series A Preferred Shares and common stock. The acquisition of additional
Mortgage Loans is intended to be funded with the proceeds obtained from the
repayment of principal balances by individual borrowers.

During September 2001, the Company received an additional capital investment
from its parent company, IHC, of $150 million. This additional capital was
used to purchase REIT qualifying mortgage securities from Flagstar LLC, a
second-tier subsidiary of the Bank.

During the quarter ended March 31, 2003, the Company purchased from the Bank
$17.5 million in principal balance of residential mortgage loans at a purchase
price of $17.6 million, their fair value. During the quarter ended March 31,
2002, the Company purchased from the Bank $18.0 million in principal balance of
residential mortgage loans at a purchase price of $18.2 million, their fair
value.

For the quarters ended March 31, 2003 and 2002, the Company received repayments
of principal from mortgage loans totaling approximately $34.0 million and $24.2
million, respectively.

At March 31, 2003 the Company had a liquidity coverage ratio (Projected
interest income divided by REIT dividends plus Advisory Fees plus Servicing
Fees) of 2.54 versus 2.85 at December 31, 2002 and 3.37 at March 31, 2002.

The Company does not anticipate any material capital expenditures other than
for the acquisition of additional residential mortgage loans.

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REIT Qualification

As of March 31, 2003, the Company believed that it was in compliance with the
REIT tax rules and that it will continue to qualify as a REIT under the
provision of the Internal Revenue Code (the Code). The Company calculates
that:



| |  | Its Qualified REIT Assets, as defined in the Code, are approximately 100%
of its total assets, as compared to the federal tax requirements that at
least 75% of its total assets must be Qualified REIT Assets.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | 100% of its revenues qualify for the 75% source of income test and 100%
of its revenues qualify for the 90% source of income test under the REIT
rules.                                                        
| 
| |  | None of the revenue was subject to the 30% income limitation under the REIT
rules.                                                                                                                             

The Company also met all REIT requirements regarding the ownership of its
common and preferred stocks and anticipates meeting the 2003 annual
distribution and administrative requirements.

Item 3. Market Risk

The Company considers that its primary business objective is to ensure the
availability of sufficient cash flows to meet the obligations mandated by the
Series A Preferred Shares. In managing its investments, the Company accepts a
certain credit risk posture and assumes some interest rate risk.

Interest rate risk generally refers to the potential volatility in net interest
income resulting from changes in interest rates. The Companys risk occurs when
it must replace amortized principal balances with new Mortgage Loans. These new
Mortgage Loans are chosen in a manner to maintain an interest rate risk posture
similar to the initial portfolio of Mortgage Loans. The Company must monitor
the ratio of fixed costs (the Series A Preferred Shares dividends, advisory
fees, and servicing costs) to the interest income potential of the Mortgage
Loans and mortgage securities. When, in managements opinion, the coverage
ratio is at risk of being depleted, the Company must look to its parent
company, IHC, for support or utilize the investment powers of the Company.

The Company will record higher levels of interest income in a rising interest
rate environment and will experience declining interest income during periods
of falling interest rates. This happens because the Companys assets reprice
while the Series A Preferred Shares have a fixed cost of 8.5%.

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ITEM 4. CONTROLS AND PROCEDURES

A review and evaluation was performed by the Companys management, including
the Companys Chief Executive Officer (the CEO) and Chief Financial Officer
(the CFO), of the effectiveness of the design and operation of the Companys
disclosure controls and procedures as of a date within 90 days prior to the
filing of this quarterly report pursuant to Rule 13a-14 of the Securities Act
of 1934. Based on that review and evaluation, the CEO and CFO have concluded
that the Companys current disclosure controls and procedures, as designed and
implemented, were effective. There have been no significant changes in the
Companys internal controls or in other factors that could significantly affect
the Companys internal controls subsequent to the date of their evaluation.
There were no significant material weaknesses identified in the course of such
review and evaluation and, therefore, no corrective measures were taken by the
Company.

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PART II  OTHER INFORMATION

Item 1.    Legal Proceedings



| |  | None.
| |  | -----

Item 2.    Changes in Securities



| |  | None.
| |  | -----

Item 3.    Defaults upon Senior Securities



| |  | None.
| |  | -----

Item 4.    Submission of Matters to a Vote of Security Holders



| |  | None.
| |  | -----

Item 5.    Other Information



| |  | None.
| |  | -----

Item 6.     Exhibits and Reports on Form 8-K

| |  |              |  |                                                                                                                                                  
| |  | ------------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------
| |  | (a) Exhibits |  |                                                                                                                                                  
| |  |              |  |                                                                                                                                                  
| |  | Exhibit 11   |  | Computation of Net Earnings per Share                                                                                                            
| |  |              |  |                                                                                                                                                  
| |  | Exhibit 99.1 |  | Certification of Chief Executive Officer
pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
| |  |              |  |                                                                                                                                                  
| |  | Exhibit 99.2 |  | Certification of Chief Financial Officer
pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

| |     |                                                                                                                                                                                       
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (b) | Reports on Form 8-K                                                                                                                                                                   
| |     |                                                                                                                                                                                       
| |     | The Company filed a Form 8-K on March 20, 2003 in connection with
the Companys filing of a press release announcing the redemption
of the Series A Preferred Shares on June 30, 2003.

12



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##### Table of Contents



SIGNATURES

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 thereunto duly authorized.

|      |             |  |  |                                             
|----- | ----------- |  |  | --------------------------------------------
|      |             |  |  | FLAGSTAR CAPITAL CORPORATION                
|      |             |  |  |                                             
|Date: | May 9, 2003 |  |  | /S/ Mark T. Hammond                         
|      |             |  |  | Mark T. Hammond                             
|      |             |  |  | Vice-Chairman of the Board and              
|      |             |  |  | Chief Executive Officer                     
|      |             |  |  | (Duly Authorized Officer)                   
|      |             |  |  |                                             
|      |             |  |  | /S/ Michael W. Carrie                       
|      |             |  |  | Michael W. Carrie                           
|      |             |  |  | Executive Vice President and                
|      |             |  |  | Chief Financial Officer                     
|      |             |  |  | (Principal Financial and Accounting Officer)

13



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##### Table of Contents



SECTION 302 CERTIFICATION

I, Mark T. Hammond certify that:



|1) |  | I have reviewed this quarterly report on Form 10-Q of Flagstar Capital
Corp;                                                                                                                                                                                                                                                  
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2) |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
|  
|3) |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;                   
|  
|4) |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:                                                                                                        



| | a) |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5) |  | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent functions):
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to
record, process, summarize and report financial data and have identified
for the registrants auditors any material weaknesses in internal
controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal
controls; and                                                                                                                                        



|6) |  | The registrants other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                  |  |                              
|----------------- |  | -----------------------------
|Date: May 9, 2003 |  | /s/ Mark T. Hammond          
|                  |  | Signature                    
|                  |  | Chairman of the Board and CEO
|                  |  | Title                        

14



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##### Table of Contents



SECTION 302 CERTIFICATION

I, Michael W. Carrie certify that:



|1) |  | I have reviewed this quarterly report on Form 10-Q of Flagstar Capital
Corp;                                                                                                                                                                                                                                                  
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2) |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
|  
|3) |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;                   
|  
|4) |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:                                                                                                     



| | a) |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5) |  | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of the registrants board of directors (or persons performing
the equivalent function):
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to
record, process, summarize and report financial data and have identified
for the registrants auditors any material weaknesses in internal
controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal
controls; and                                                                                                                                        



|6) |  | The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                  |  |                                
|----------------- |  | -------------------------------
|Date: May 9, 2003 |  | /s/ Michael W. Carrie          
|                  |  | Signature                      
|                  |  | Chief Financial Officer and EVP
|                  |  | Title                          

15



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##### Table of Contents





| | 10-Q EXHIBIT INDEX
| | ------------------

|            |  |                                                                                                                       
|----------- |  | ----------------------------------------------------------------------------------------------------------------------
|EXHIBIT NO. |  | DESCRIPTION                                                                                                           
|            |  |                                                                                                                       
|EX-11       |  | Computation of Net Earnings per share                                                                                 
|            |  |                                                                                                                       
|EX-99.1     |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|            |  |                                                                                                                       
|EX-99.2     |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

16