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Commission File No.: 0-22353

FLAGSTAR CAPITAL CORPORATION

Registrant’s telephone number, including area code:

Securities registered pursuant to Section 12(b) of the Act: None.

Securities registered pursuant to Section 12(g) of the Act: None.

     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.

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this form 10-K. x

     As of March 19, 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.

DOCUMENTS INCORPORATED BY REFERENCE

     NONE.

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      When used in this Form 10-K or future filings by the Company with the Securities and Exchange Commission, in the Company’s press releases or other public or stockholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases “would be”, “will allow”, “intends to”, “will likely result”, “are expected to”, “will continue”, “is anticipated”, “estimate”, “project”, or similar expressions are intended to identify “forward looking statement” within the meaning of the Private Securities Litigation Reform Act of 1995.

      The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made, and to advise readers that various factors, including regional and national economic conditions, substantial changes in levels of market interest rates, credit and other risks of lending and investment activities and competitive and regulatory factors, could affect the Company’s financial performance and could cause the Company’s actual results for future periods to differ materially from those anticipated or projected.

      The Company does not undertake, and specifically disclaims any obligation, to update any forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements.

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General

      Flagstar Capital Corporation (the “Company”) was incorporated in Michigan in June 1995 and remained dormant until reorganized in December 1997. The Company was formed by Flagstar Bank, FSB (the “Bank”), a federally chartered savings bank, to provide the Bank and its parent holding company and sole stockholder, Flagstar Bancorp, Inc. (“Flagstar”), with a means of raising capital for bank regulatory purposes in a cost-effective manner.

      The principal business of the Company is to acquire and hold residential mortgage loans (“Mortgage Loans”) that will generate net income for distribution to stockholders. The Company intends to acquire all its Mortgage Loans from the Bank, consisting of whole loans secured by first mortgages on single-family residential real estate properties. The residential mortgage loans consist of Adjustable Rate Mortgages (“ARMs”) and Fixed Rate Mortgages (“FRMs”).

      On February 24, 1998, the Company offered to the public and sold 2,000,000 shares of the Company’s 8.50%, noncumulative, Series A Preferred Shares, $25 par value per share, providing gross proceeds totaling $50.0 million (the “Series A Preferred Shares”), and sold to the Bank, 499,900 shares of the Company’s common stock, $1.00 par value providing proceeds totaling $65.5 million (the “Common Stock”).

      On May 24, 1998, in response to the underwriters exercising their over-allotment option, the Company issued an additional 300,000 shares of its Series A Preferred Shares to the public and 500,000 shares of Common Stock to the Bank, providing additional gross proceeds totaling $17.0 million.

      The Company used the net proceeds raised from the initial public offering of the Series A Preferred Shares and the sale of the Common Stock to the Bank to purchase from the Bank the Company’s initial portfolio of $113.5 million of Mortgage Loans (“Initial Portfolio”). The Company’s Initial Portfolio consisted of ARMs and FRMs. Reinvestments made in Mortgage Loans have been and will continue to be made with a composition of Mortgage Loans that will allow the Company to maintain the original composition of approximately 70% ARMs and 30% FRMs. Mortgage Loans are purchased from the Bank on a fair value basis.

      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, the Bank contributed its common stock investment in the Company to Flagstar Intermediate Holding Company (“IHC”), a newly formed, wholly-owned subsidiary. The purpose of the transaction was to allow the Bank greater flexibility in the manner in which the common stock of the Company is held. The change also increased 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 that are owned by Flagstar LLC.

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

      In order to preserve its status as a real estate investment trust (“REIT”) under the Internal Revenue Service Code (“Code”), the Company must distribute annually at least 90% (95% in taxable years prior to January 1, 2001) of its “REIT taxable income” (excluding capital gains) to stockholders and meet certain capital ownership and administrative tests as defined by the Code. The Company must also annually satisfy three gross income requirements. First, at least 75% of the Company’s gross income for each taxable year must be derived directly or indirectly from investments relating to real property or mortgages on real property or from certain types of temporary investments. Second, at least 95% of the Company’s gross income for each taxable year must be derived from the above described real property investments and from dividends, interest,

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      The Company must also satisfy three tests relating to the nature of its assets at the close of each quarter of its taxable year. First, real estate assets must represent at least 75% of the value of the Company’s total assets. Second, not more than 25% of the Company’s total assets may be represented by securities other than those in the 75% asset class. Third, of the investments included in the 25% asset class, the value of any one issuer’s securities owned by the Company may not exceed 5% of the value of the Company’s total assets and the Company may not own more than 10% of any one issuer’s outstanding voting securities.

      The Company does not anticipate that it will engage in the business of originating Mortgage Loans and does not expect to compete with mortgage conduit programs, investment banking firms, savings and loan associations, banks, thrift and loan associations, finance companies, mortgage bankers or insurance companies in acquiring its Mortgage Loans. As noted above, the Company has purchased all of its Mortgage Loans from the Bank and intends on making all of its future purchases from the Bank.

      The Company has entered into an Advisory Agreement (the “Advisory Agreement”) with the Bank (the “Advisor”) requiring an annual payment of $250,000. The Bank provides advice to the Board of Directors and manages the operations of the Company as defined in the Advisory Agreement. The Advisory Agreement has an initial term of five years which commenced on February 24, 1998 and will automatically renew for additional five year periods, unless the Company delivers prior notice to the Advisor as defined in the Advisory Agreement.

      The Company also entered into a Servicing Agreement (the “Servicing Agreement”) with the Bank for the servicing of the Mortgage Loans. Pursuant to the Servicing Agreement, the Bank services the Mortgage Loans held by the Company, in accordance with normal industry practices. The Servicing Agreement can be terminated without cause upon a thirty-day advance notice and payment of a termination fee equal to 2% of the aggregate outstanding principal amount of the loans then serviced under the Servicing Agreement. The servicing fee is 0.375% per annum of the outstanding principal balance of the Mortgage Loans.

      The Company operations are conducted in a manner that will not subject it to regulation under the Investment Company Act of 1940. The Company may, under certain circumstances, purchase the Series A Preferred Shares and other shares of its capital stock in the open market or otherwise, provided, however, that the Company will not redeem or repurchase any shares of its Common Stock for so long as any Series A Preferred Shares are outstanding without the approval of a majority of the Independent Directors. The Company has no present intention of repurchasing any shares of its capital stock, and any such action would be taken only in conformity with applicable federal and state laws and the regulations and the requirements for qualifying as a REIT.

      The Company has no foreign operations.

      The principal executive offices of the Company are located at 5151 Corporate Drive, Troy, Michigan 48098 and its telephone number is (248) 312-2000.

      The Company is not the subject to any litigation. The Company is not currently involved in or, to the Company’s knowledge, currently threatened with any litigation with respect to the Mortgage Loans included in the portfolio.

      None

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      The Company is authorized to issue up to 1,000,000 shares of Common Stock and 2,300,000 shares of Preferred Stock, $25 par value per share (“Preferred Stock”). All of the 1,000,000 shares of Common Stock and all of the 2,300,000 shares of Preferred Stock have been issued. IHC owns 100% of the Company’s 1,000,000 shares of Common Stock outstanding at December 31, 2002 and, accordingly, there is no trading market for the Company’s Common Stock. In addition, IHC intends that, as long as any Series A Preferred Shares are outstanding, it will maintain ownership of the outstanding Common Stock of the Company. All voting rights are vested in the Common Stock. The holder of Common Stock is entitled to one vote per share. Holders of Common Stock are entitled to receive dividends when, and if declared by the Board of Directors of the Company out of funds legally available. No dividends or other distributions may be made with respect to the Common Stock as long as any shares of Preferred Stock are outstanding and the full dividends on those shares have been paid. The Company must distribute annually at least 90% (95% in taxable years prior to January 1, 2001) of its annual “REIT taxable income” to stockholders. In the event of the liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, after there have been set aside for the holders of Preferred Stock the full preferential amounts to which such holders are entitled, the holders of Common Stock will be entitled to any assets remaining after the payment of all debts and liabilities.

Restrictions on Ownership and Transfer:

      The Company’s Certificate of Incorporation contains certain restrictions on the number of shares of Common Stock and Preferred Stock that individual stockholders may own. For the Company to qualify as a REIT under the Code, no more than 50% in number or value of its outstanding shares of capital stock may be owned, directly or indirectly, by five or fewer individuals during the last half of a taxable year or during a proportionate part of a shorter taxable year (the “Five or Fewer Test”). The capital stock of the Company must also be beneficially owned by 100 or more persons during at least 335 days of a taxable year or during a proportionate part of a shorter taxable year (the “One Hundred Person Test”). IHC’s ownership of 100% of the shares of Common Stock of the REIT will not adversely affect the Company’s REIT qualification because each stockholder of Flagstar Bancorp, Inc. (the sole stockholder of the Bank, IHC’s parent) counts as a separate beneficial owner for purposes of the Five or Fewer Test and the capital stock of Flagstar Bancorp, Inc. is widely held. Further, the Certificate of Incorporation of the Company contains restrictions on the acquisition of Preferred Stock intended to ensure compliance with the One Hundred Persons Test. Such provisions include a restriction that if any transfer of shares of capital stock of the Company would cause the Company to be beneficially owned by fewer than 100 persons, such transfer shall be null and void and the intended transferee will acquire no rights to the stock.

Common Stock

      There is no established public trading market in the Common Stock of the Company. As of March 19, 2003, there were 1,000,000 issued and outstanding shares of Common Stock held by one stockholder, IHC. The following table reflects the distributions paid or payable by the Company on the Common Stock for each quarter during the years ended December 31, 2002, 2001, and 2000.

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Preferred Stock

      The Series A Preferred Shares are listed on the New York Stock Exchange, under the trading symbol “FBC-P”. As of March 19, 2003, there were 2,300,000 issued and outstanding Series A Preferred Shares held by approximately 133 shareholders. The following table reflects the respective high and low sales prices for the Series A Preferred Shares for each quarter of 2002, 2001, and 2000. The table also indicates the distributions paid by the Company for each quarter.

Overview

      Flagstar Capital Corporation was formed by Flagstar Bank, FSB, a federally chartered savings bank, to provide the Bank and its parent holding company and sole stockholder, Flagstar Bancorp, Inc., with a means of raising capital for bank regulatory purposes in a cost-effective manner.

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      The principal business of the Company is to acquire and hold residential mortgage loans that will generate net income for distribution to stockholders. The Company intends to acquire all its Mortgage Loans from the Bank, consisting of whole loans secured by first mortgages on single-family residential real estate properties. The residential mortgage loans consist of Adjustable Rate Mortgages (“ARMs”), and Fixed Rate Mortgages (“FRMs”).

      On February 24, 1998, the Company sold in a public offering 2,000,000 shares of the Company’s 8.50%, noncumulative, Series A Preferred Shares, $25 par value per share, providing gross proceeds totaling $50.0 million (the “Series A Preferred Shares”), and sold to the Bank, 499,900 shares of the Company’s common stock, $1.00 par value providing proceeds totaling $65.5 million (the “Common Stock”).

      On May 24, 1998, in response to the underwriters exercising their over-allotment option, the Company issued an additional 300,000 shares of its Series A Preferred Shares, to the public and 500,000 shares of Common Stock to the Bank, providing additional gross proceeds totaling $17.0 million, gross.

      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, the Bank contributed its 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, Flagstar notified the public that they would redeem all of the Series A Preferred Shares on June 30, 2003. The Series A Preferred Shares will be redeemed for cash, at a redemption price of $25.00 per share, plus the accrued and unpaid dividends for the most recent quarter, if any. The Series A Preferred Shares will not be convertible into any other securities of the Company or Flagstar. The Company will ensure sufficient cash flow, through the collection of payments on the Mortgage Loans and Investment Securities, to meet this financial commitment.

Results of Operations

      The Company reported net earnings for the year ended December 31, 2002 of $12.1 million, compared to $9.4 million and $7.2 million for the years ended December 31, 2001 and 2000, respectively. For the year ended December 31, 2002, interest income totaled $12.5 million of which $5.8 million was from mortgage loans and $6.7 million was from investments in mortgage securities. Offsetting expenses were comprised of $250,000 in advisory fees, $11,000 in outside director fees and $124,000 in administrative expenses. In comparison, interest income totaled $9.9 million of which $7.4 million was from mortgage loans and $2.5 million was from investments in mortgage securities for the year ended December 31, 2001, which was offset by $250,000 in advisory fees, $3,000 in outside director fees and $213,000 in other administrative expenses. For the year ended December 31, 2000, interest income from mortgage loans was $7.6 million, which was offset by $250,000 in advisory fees, $6,000 in outside director fees and $133,000 in other administrative expenses. The Company reported earnings per common share of $7.24, $4.53 and $2.29 per share for the years ended December 31, 2002, 2001 and 2000, respectively.

      The Company declared and paid $4,887,000 in preferred stock dividends for each of the years ended December 31, 2002, 2001 and 2000, respectively.

      The Company declared and paid or accrued common stock distributions of $7,237,000, $4,535,000, and $2,296,000 for the years ended December 31, 2002, 2001 and 2000, respectively.

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Mortgage Loans

      As of December 31, 2002, the Company owned Mortgage Loans with a principal balance of $109,413,000. This amount represents the principal amount of mortgage loans purchased with the Initial Portfolio remaining plus the principal amount of mortgage loans purchased during the period beginning at February 24, 1998 to December 31, 1998 and for the years ended December 31, 1999, 2000, 2001 and 2002. Purchases were made to replace principal amortizations and payoffs in the portfolio. All Mortgage Loans were purchased from the Bank. In conjunction with the purchase of these Mortgage Loans the Company paid a premium amount equal to $475,000, $270,000 and $109,000 for the years ended December 31, 2002, 2001 and 2000, respectively. This premium amount is recorded by the Company as an adjustment to the basis of the Mortgage Loans.

      The following table reflects the composition of Mortgage Loans at December 31, 2002:

      The following table reflects the composition of Mortgage Loans at December 31, 2001:

Allowance for Loan Losses

      The Company’s allowance for loan losses remained the same at $250,000 at December 31, 2002. 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 0.8% of the portfolio, at December 31, 2002. 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. Gross interest income of approximately $52,000 would have been recorded in 2002 on non-accrual loans if the loans had performed in accordance with their original terms.

      The Company had a $250,000 allowance for loan losses at December 31, 2001. The Company’s non-performing assets consisted of three mortgage loans totaling $1,250,000, or 1.05% of the portfolio, at December 31, 2001. The Company has certain representations and warranties from the Bank, which are related to the performance of the Mortgage Loans. Gross interest income of approximately $32,000 would have been recorded in 2001 on non-accrual loans if the loans had performed in accordance with their original terms.

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      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.

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 $125.9 million. The mortgage securities currently have a yield of 6.136% and interest payments are made monthly to the Company. The mortgage securities are managed and serviced by the Bank.

Interest Rate Risk

      The Company’s income consists primarily of interest payments on Mortgage Loans and mortgage securities. Currently, the Company does not use any derivative products to manage interest rate risk. If there is a decline in interest rates (as measured by the indices upon which the interest rates of the ARMs are based), then the Company will experience a decrease in income available to be distributed to its stockholders. There can be no assurance that an interest rate environment in which there is a significant decline in interest rates, over an extended period of time, would not adversely affect the Company’s ability to pay dividends on the Series A Preferred Shares.

Significant Concentration of Credit Risk

      Concentration of credit risk arises when a number of customers engage in similar business activities, or activities in the same geographical region, or have similar economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic conditions. Concentration of credit risk indicates the relative sensitivity of the Company’s performance to both positive and negative developments affecting a particular industry. The geographic concentrations within the Mortgage Loans directly affects the overall credit risk of the Company.

      The following table shows Mortgage Loans by geographic area as of December 31, 2002:

      Approximately 44.9% of the Company’s total Mortgage Loans are secured by residential real estate properties located in Michigan, Washington, Colorado and Texas. Consequently, a high concentration of

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Liquidity Risk Management

      The objective of liquidity management 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 as discussed below in REIT QUALIFICATION.

      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 Shares issued. The Company does not have and does not anticipate having any material capital expenditures.

      To the extent that the Board of Directors determines that additional funding is required, the Company may raise such funds through additional equity offerings, debt financing or retention of cash flow (after consideration of provisions of the Code pertaining to a REIT), or a combination of these methods. The Company, however, may not, without the approval of a majority of the Independent Directors, incur debt in excess of 20% of the aggregate amount of the net proceeds received from the sale of the Series A Preferred Shares and Common Stock of the Company. This limitation includes intercompany advances made by the Bank to the Company.

      The Company may also issue additional series of Preferred Stock. However, the Company may not issue additional shares of Preferred Stock senior to the Series A Preferred Shares without the consent of holders of at least 66 2/3% of the shares of Preferred Stock outstanding at that time. The Company also may not issue additional shares of Preferred Stock on a parity with the Series A Preferred Shares without the approval of a majority of the Company’s Independent Directors.

      On March 20, 2003, Flagstar notified the public that they would redeem all of the Series A Preferred Shares on June 30, 2003. The Series A Preferred Shares will be redeemed for cash, at a redemption price of $25.00 per share, plus the accrued and unpaid dividends for the most recent quarter, if any. The Series A Preferred Shares will not be convertible into any other securities of the Company or Flagstar. The Company will ensure sufficient cash flow, through the collection of payments on the Mortgage Loans and Investment Securities, to meet this financial commitment.

      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 exposure and assumes some interest rate risk.

      Interest rate risk generally refers to the potential volatility in net interest