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UNITED STATES

Form 10-Q

Commission file number 1-8972

IndyMac Bancorp, Inc.

Registrant’s telephone number, including area code:

          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 requirements for the past 90 days.     Yes þ          No o

      Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).     Yes þ          No o

          Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common stock outstanding as of October 22, 2004: 61,965,568 shares

FORM 10-Q QUARTERLY REPORT

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FORWARD-LOOKING STATEMENTS

      This Form 10-Q contains statements that may be deemed to be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements include statements regarding our projected financial condition and results of operations, plans, objectives, future performance and business. Forward-looking statements typically include the words “anticipate,” “believe,” “estimate,” “expect,” “project,” “plan,” “forecast,” “intend,” “goal,” “target” and other similar expressions. These statements reflect our current views with respect to future events and financial performance. They are subject to risks and uncertainties that could cause future results to differ materially from historical results or from the results anticipated. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates or as of the date hereof if no other date is identified. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. For further information on our key operating risks, refer to “Key Operating Risks” beginning on page 62 and to IndyMac’s annual report on Form 10-K for the year ended December 31, 2003.

      References to “IndyMac Bancorp” or the “Parent Company” refer to the parent company alone while references to “IndyMac,” the “Company,” or “we” refer to IndyMac Bancorp, Inc. and its consolidated subsidiaries. References to “IndyMac Bank” or the “Bank” refer to our subsidiary IndyMac Bank, F.S.B. and its consolidated subsidiaries. The following discussion addresses the Company’s financial condition and results of operations for the three and nine months ended September 30, 2004.

HIGHLIGHTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2004

      On March 9, 2004, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin No. 105, “Application of Accounting Principles to Loan Commitments” (“SAB No. 105”). In SAB No. 105, the SEC determined that an interest rate lock commitment should generally be valued at zero at inception. Profits inherent in the rate lock will be recognized at the time of the sale of the underlying loan. The Company adopted this standard effective April 1, 2004, which affected the second quarter 2004 gain on sale of loans with a negative impact of $52.2 million before-tax, or $31.6 million after-tax, and impacted the third quarter of 2004 by $5.1 million before-tax, or $3.1 million after-tax. Once all loans that were rate locked prior to April 1, 2004, are sold, SAB No. 105 will no longer have a negative impact on earnings. We currently expect all remaining loans to be sold in the fourth quarter of 2004 with carryover SAB No. 105 impact of $2.2 million, before-tax, on earnings.

      Additionally, on July 16, 2004, the Company completed the acquisition of 93.75% of the outstanding shares of common stock of Financial Freedom Holdings Inc. (“Financial Freedom”), the leading provider of reverse mortgages in the United States of America, and the related assets from Lehman Brothers Bank, F.S.B. and its affiliates for an aggregate cash purchase price of approximately $83.8 million. The remaining shares (6.25%) of the common stock of Financial Freedom are held by its Chief Executive Officer. The acquisition was accounted for using the purchase accounting method and accordingly the results of operations for the period from July 16, 2004, to September 30, 2004, which were insignificant, have been included in the consolidated financial statements for the three months and nine months ended September 30, 2004. As part of the allocation of the purchase price, we recorded loans held for sale and the loan application pipeline at their fair values at the acquisition date. By allocating a portion of the purchase price these assets, we increased the cost basis of loans that are subsequently sold. This increased cost basis decreases the gain on sale when the related loans are sold. We allocated a total of $8.1 million in purchase price to the loan portfolio and loan application pipeline. Of this amount, $6.0 million was recognized as the related loans were sold during the third quarter of 2004. We expect the remaining $2.1 million will be recognized during the fourth quarter of 2004 which will reduce gain on sale of loans by the same amount. The Financial Freedom acquisition has added $71.0 million in loans held for sale and $41.8 million in mortgage servicing rights (“MSRs”) related to the $4.0 billion portfolio of loans serviced for others to our consolidated balance sheets. The acquisition

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      In the table below, in addition to the financial information presented in accordance with generally accepted accounting principles (“GAAP”), we have presented certain pro forma non-GAAP financial measures that are marked with footnote (1). These pro forma non-GAAP financial measures are calculated based on the GAAP gain on sale of loans but adjusted to exclude the effect of the SAB No. 105 change in accounting principle related to rate lock commitments as well as the impact of the purchase accounting adjustments for the Financial Freedom acquisition described above. For the quarter ended June 30, 2004, the pro forma financial measures were calculated excluding the effect of the SAB No. 105 only. We believe these pro forma non-GAAP financial measures provide useful information to investors in evaluating and comparing our financial condition and results of operations on a consistent basis from period to period, and it is on this basis that our management internally assesses our performance.

      Although we believe these pro forma non-GAAP financial measures are useful to investors, they should not be considered a substitute for, or superior to, GAAP results.

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	(1)	For the quarters ended September 30, 2004, and June 30, 2004, and for the nine months ended September 30, 2004, the data is presented on a pro forma basis excluding the effect of change in

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		accounting principle for rate lock commitments under SAB No. 105 effective April 1, 2004, and for the impact of the purchase accounting adjustments for Financial Freedom. The SAB No. 105 impact for the quarters ended September 30, 2004 and June 30, 2004, was $5.1 million and $52.2 million before-tax, respectively. For the nine months ended September 30, 2004, the SAB No. 105 impact amounted to $57.3 million. Additionally, the impact of the purchase accounting adjustment for Financial Freedom totaled $6.0 million before-tax. A full reconciliation between the pro forma and GAAP amounts, with the relevant performance ratios, is included at page 6.

	(2)	Dividends declared per common share as a percentage of diluted earnings per share.
	(3)	Defined as operating expenses divided by net interest income and other income.
	(4)	Average equity divided by net interest income and other income.
	(5)	Efficiency ratio multiplied by the capital to net revenue ratio.
	(6)	Debt includes deposits.
	(7)	IndyMac Bank, F.S.B. (excludes unencumbered cash at the Parent Company available for investment in IndyMac Bank). Risk-based capital ratio is calculated based on the regulatory standard risk weighting adjusted for the additional risk weightings for subprime loans.
	(8)	Represents the total loan portfolio excluding amounts of loans from discontinued product lines.
	(9)	Represents the unpaid principal balance on loans sold with servicing retained by IndyMac.

(10)	Includes newly originated commitments on construction loans.

OVERALL RESULTS

      IndyMac Bancorp third quarter results reflect continued strong operating fundamentals. The Company achieved record mortgage production and pro forma earnings during the quarter while the overall mortgage industry, according to the October Mortgage Finance Forecast published by the Mortgage Bankers Association (“MBA”) was 46% below its mid-year 2003 peak level. Based on the MBA’s Mortgage Finance Forecast dated October 19, 2004, IndyMac’s mortgage market share was up 123% over the third quarter of 2003. IndyMac’s third quarter 2004 pro forma earnings of $56.4 million represents a new all-time record for the Company while the $0.88 pro forma earnings per share is our second highest quarter ever. On a GAAP basis, earnings per share for the third quarter of 2004 declined 10% year over year, to $0.78 per share on earnings of $49.7 million, in spite of the 46% decrease in the mortgage industry. In addition, the Company continued to deploy capital to facilitate balance sheet growth and achieved record production total assets of $16.1 billion as of September 30, 2004.

      For the nine months ended September 30, 2004, IndyMac earned $152.9 million, or $2.49 per share on a pro forma basis excluding the change in accounting for rate locks referred to above pursuant to SAB No. 105 and the purchase accounting adjustment for the acquisition of Financial Freedom, compared to $128.0 million, or $2.26 per share during the nine months ended September 30, 2003. On a GAAP basis, the Company earned $114.6 million, or $1.87 per share, during the nine months ended September 30, 2004. The following tables

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(1)

The pro forma results for the quarter ended June 30, 2004 were prepared by adding to GAAP earnings the amount of additional gain on sale revenue related to rate locks ($52.2 million) that the Company would have recognized had SAB No. 105 not been adopted as of April 1, 2004. The pro forma results for the quarter ended September 30, 2004 were prepared by adding to GAAP earnings the amount of additional gain on sale revenue ($5.1 million) that the Company would have recognized had the provisions of SAB No. 105 been in effect during all previous periods. In addition, the pro forma results for the quarter ended September 30, 2004 also reflect the amount of gain on sale revenue ($6.0 million) that was reduced for GAAP purposes by the higher cost basis in certain loans that were sold by Financial Freedom during the third quarter. This higher cost basis was created by the allocation at the closing of a portion of the purchase price paid for Financial Freedom to the acquired loans held for sale and the loan application pipeline. The pro forma results for the nine months ended September 30, 2004 reflect all of the above adjustments and are not necessarily indicative of the results that would have been reported had SAB No. 105 been applied to all previous periods.

OUR BUSINESS

      IndyMac is the holding company for IndyMac Bank®, the largest savings and loan or savings bank in Los Angeles and the 9th largest thrift nationwide (based on assets). Through its hybrid thrift/mortgage bank

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      As a result of our strategic planning and the acquisition of Financial Freedom, we have recently enhanced our organizational structure to achieve better synergies, improve marketing executions and support our core strategies. We are now operating through four main segments, Mortgage Banking Divisions, IndyMac Consumer Bank, Specialty Product Divisions and Investing Divisions. The common denominator of the Company’s business is providing consumers with single-family residential mortgages through relationships with each segment’s core customers via the channel in which each operates. Mortgage Banking Divisions provide consumers with single-family permanent mortgage lending through relationships with mortgage professionals — mortgage brokers, mortgage bankers, as well as through community financial institutions, real estate professionals, and consumers. IndyMac Consumer Bank provides the platform for the mortgage and deposit services that IndyMac offers directly to consumers through its branch network. Specialty Product Divisions support the production of niche products including construction lending, home equity lines of credit (HELOCs), and reverse mortgages through all of IndyMac’s relationship and consumer direct production channels. The Investing Divisions serve as the main link to customers whose mortgages we service. Through its investments in single-family residential (“SFR”) mortgages, mortgage-backed securities (“MBS”) and MSRs, the Investing Divisions generate core spread and fee income and provides critical support to IndyMac’s mortgage lending operations.

      While our segments are structured to address specific target customer bases our operating activities primarily consist of three broad categories: mortgage banking activities, investing activities and HELOC activities. All of these activities are performed to varying degrees by each of our main segments as shown in the tables that follow. Mortgage banking activities are characterized by high asset turnover (the production and sale of mortgage loans) and efficient utilization of capital but can be cyclical in nature depending on interest rates. Revenues generated by mortgage banking activities include gain on sale of mortgage loans, fee income and net spread (interest) income during the period loans are held pending sale. Investing and HELOC activities tend to provide a source of revenues that is generally counter-cyclical to mortgage banking revenues, comprised primarily of net interest income and servicing fees. IndyMac is strategically focused on increasing the relative size of its portfolios of mortgage loans, securities, and mortgage servicing and investments in HELOC-related assets to achieve greater balance between its mortgage banking activities and its core investing activities. We believe that our investing activities will increasingly act to stabilize IndyMac’s core income. In addition to its revenue contribution, the Investing Divisions perform the mortgage servicing function, which includes payment processing, customer service, default management and reporting to investors in our securitizations. The mortgage servicing function creates added opportunities to retain customers when the interest rate environment makes it attractive for them to refinance and to cross-market customers with other Company products. Default management, which includes the processes of collections, loss mitigation, foreclosures, bankruptcies, and foreclosed assets management, enables IndyMac to proactively manage credit risk for the Company and its investors in its securities.

      The following tables summarize the Company’s financial results for the three months ended September 30, 2004, illustrating the revenues earned in its mortgage banking activities, investing and HELOC activities by each of its operating segments. The profitability of each operating segment is measured on a fully-leveraged basis after allocating capital based on regulatory capital rules. Operating segments that originate mortgage loans are credited with gain on sale at funding based on the estimated fair value. Any difference between the actual gain on sale realized and the estimate is credited or charged to the operating segment in the period the loan is sold or transferred to the held for investment portfolio. Differences between the gain on sale credited to the operating segments and the consolidated gain on sale due to timing of loan sales or

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      The following table summarizes the segment financial highlights for the three months ended September 30, 2004: