Stock Based Compensation

12 Months Ended

Dec. 31, 2011

Stock Based Compensation [Abstract]

Stock Based Compensation

Note 25 — Stock-Based Compensation

In 1997, Flagstar’s Board of Directors adopted resolutions to implement various stock option and purchase plans and incentive compensation plans in conjunction with the public offering of Common Stock. On May 26, 2006, the Company’s stockholders approved the Flagstar Bancorp, Inc. 2006 Equity Incentive Plan (the “2006 Plan”). The 2006 Plan consolidates, amends and restates the Company’s 1997 Employees and Directors Stock Option Plan, its 2000 Stock Incentive Plan, and its 1997 Incentive Compensation Plan (each, a “Prior Plan”). Awards still outstanding under any of the Prior Plans will continue to be governed by their respective terms. Under the 2006 Plan, key employees, officers, directors and others expected to provide significant services to the Company and its affiliates are eligible to receive awards. Awards that may be granted under the 2006 Plan include stock options, incentive stock options, cash-settled stock appreciation rights, restricted stock units, performance shares and performance units and other awards.

Under the 2006 Plan, the exercise price of any award granted must be at least equal to the fair market value of Common Stock on the date of grant. Non-qualified stock options granted to directors expire five years from the date of grant. Grants other than non-qualified stock options have term limits set by the board of directors in the applicable agreement. Stock appreciation rights expire seven years from the date of grant unless otherwise provided by the compensation committee of the board of directors.

During 2011, 2010 and 2009, compensation expense recognized related to the 2006 Plan totaled $6.7 million, $8.3 million and $0.6 million, respectively. The Board of Directors approved a one-for-ten reverse stock split, which became effective May 27, 2010. All Common Stock and related per share amounts discussed below are reflected on an after-reverse-split basis for all periods presented.

Stock Option Plan

The following tables summarize the activity that occurred in the years ended December 31.

	Number of Shares
	2011			2010			2009
Options outstanding, beginning of year		1,269,344			96,454			237,496
Options granted		—			1,326,050			—
Options exercised		—			—			—
Options canceled, forfeited and expired		(156,619	)		(153,160	)		(141,042	)
Options outstanding, end of year		1,112,725			1,269,344			96,454
Options exercisable, end of year		261,174			76,526			96,454

The total intrinsic value of options exercised during the years ended December 31, 2011, 2010 and 2009, was zero. Additionally, there was no aggregate intrinsic value of options outstanding and exercised at December 31, 2011 and 2010.

	Weighted Average Exercise Price
	2011		2010		2009
Options outstanding, beginning of year	$	17.11	$	141.30	$	143.10
Options granted		—		8.00		—
Options exercised		—		—		—
Options canceled, forfeited and expired		10.07		16.43		144.40
Options outstanding, end of year	$	18.10	$	17.11	$	141.30
Options exercisable, end of year	$	51.05	$	159.15	$	141.30

The following information pertains to the stock options issued pursuant to the Prior Plans, but not exercised at December 31, 2011.

	Options Outstanding						Options Exercisable
Range of Grant Price	Number of Options Outstanding at December 31, 2011		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Number Exercisable at December 31, 2011		Weighted Average Exercise Price
$  8.00		1,041,136		8.06	$	8.00		189,585	$	8.00
118.00 - 152.30		41,558		0.71		119.60		41,558		119.60
193.51 - 247.15		30,031		2.17		227.92		30,031		227.92
		1,112,725						261,174

At December 31, 2011, options available for future grants were 1,853,413. Shares issued under the 2006 Plan may consist, in whole or in part, of authorized and unissued shares or treasury shares. The Company does not expect a material cash outlay relating to obtaining shares expected to be issued under the 2006 Plan during 2012.

Cash-settled Stock Appreciation Rights

The Company did not issue any cash-settled stock appreciation rights (“SAR”) during the years ended December 31, 2011 and 2010.

The Company used the following weighted average assumptions in applying the Black-Scholes model to determine the fair value of the SAR it issued during the year ended December 31, 2011: dividend yield of 0.0 percent; expected volatility of 80.7 percent to 108.7 percent; a risk-free rate of 0.1 percent to 0.4 percent; and an expected life of 1.2 to 3.1 years.

The following table presents the status and changes in cash-settled stock appreciation rights issued under the 2006 Plan.

	Shares			Weighted Average Exercise Price		Weighted Average Grant Date Fair Value
Stock Appreciation Rights Awarded:
Non-vested balance at December 31, 2009		38,468		$	98.49	$	0.20
Granted		—			—		—
Vested		(16,667	)		110.13		0.16
Forfeited		(1,426	)		90.23		0.22
Non-vested balance at December 31, 2010		20,375			89.55		0.02
Granted		—			—		—
Vested		(13,350	)		100.57		0.02
Forfeited		(726	)		68.60		0.03
Non-vested balance at December 31, 2011		6,299

The Company recognized income of $8,000, $35,000 and $135,000 or $88,000 net of tax with respect to SARs during 2011, 2010 and 2009, respectively. At December 31, 2011, the non-vested SARs have no compensation cost expected to be recognized over the weighted average remaining vesting period of approximately one year.

Restricted Stock Units

The Company issues restricted stock units to officers, directors and key employees in connection with year-end compensation. Restricted stock generally will vest in 1/3 increments on each annual anniversary of the date of grant beginning with the first anniversary. At December 31, 2011, the maximum number of shares of Common Stock that may be issued under the 2006 Plan as the result of any grants is 14,832,951 shares. The Company incurred expenses of approximately $2.2 million, $1.7 million, and $0.4 million with respect to restricted stock units during 2011, 2010 and 2009, respectively. As of December 31, 2011, restricted stock units had a market value of $1.2 million.

	Shares			Weighted — Average Grant-Date Fair Value per Share
Restricted Stock:
Non-vested at December 31, 2009		5,236		$	68.60
Granted		2,031,413			6.30
Vested		(5,172	)		68.60
Canceled and forfeited		(92,054	)		6.34
Non-vested at December 31, 2011		1,939,423			6.30
Non-vested at December 31, 2010		1,939,423		$	3.19
Granted		994,288			1.49
Vested		(274,387	)		6.29
Canceled and forfeited		(384,846	)		2.43
Non-vested at December 31, 2011		2,274,478			2.20

On September 29, 2009, the Company offered a share purchase plan to one of its key executives. The plan calls for the executive to purchase 198,750 shares of Common Stock at a purchase price of $10.50 per share (the closing price of the Common Stock on September 28, 2009). In the plan, the key executive will purchase 37,500 shares of Common Stock after the effectiveness of the employment agreement dated September 29, 2009, will purchase 15,000 shares on December 31, 2009 and will purchase 24,375 shares on each of June 30 and December 31 in 2010, 2011 and 2012. As of December 31, 2011, 78,875 shares have been purchased through this plan. On January 24, 2012, the Company modified the share purchase plan and the key executive elected under the amended purchase agreement to terminate the amended purchase agreement. The key executive has no obligation to make any further purchases as of January 24, 2012.

Incentive Compensation Plans

The Incentive Compensation Plans (“Incentive Plans”) are administered by the compensation committee of the Board of Directors. The Incentive Plans include department specific plans, which include commercial lending, banking, underwriting and others, as well as a general incentive plan. Each year the committee decides which employees of the Company will be eligible to participate in the general incentive plan and the size of the bonus pool. During 2011, 2010 and 2009, all eligible members of the executive management team were included in the general incentive plan. The Company incurred a $6.0 million expense for the year ended December 31, 2011 and a $3.6 million reversal of prior years expense for the year ended December 31, 2010 and a $3.6 million expense for the year ended December 31, 2009. The Company incurred expenses of $16.7 million, $12.2 million and $19.9 million for the years ended December 31, 2011, 2010 and 2009, respectively, for all other incentive plans.