Flagstar Bancorp Inc. in Troy, Mich., came up nearly $200 million shy of its capital-raising goal in a rights offering that expired Monday.

The $14 billion-asset company set out to raise $500 million but settled for $300.6 million, it announced late Monday.

Nearly all the money — $300 million — came from a capital injection by the company's controlling shareholder, MatlinPatterson Global Advisors LLC, a New York private-equity firm.

Terry McEvoy, an analyst at Oppenheimer & Co. in Washington, said Flagstar is the exception, that most financial services companies in the past six months — particularly those looking to repay Troubled Asset Relief Program funds — have been able to raise the needed capital through public offerings.

"I think with Flagstar, because a large percentage of the company is already owned by a private-equity firm, you have a small pool of institutional investors, and clearly there wasn't participation there," he said. The lack of interest "could reflect the continuing losses that the company has experienced and the regulatory issues that have popped up."

Flagstar has been rocked by credit-quality issues. At Dec. 31, its thrift was well-capitalized, with a total risk-based capital ratio of 11.68%, but nonperforming assets were $1.3 billion, or 8.44% of total assets.

Last week the company reported it lost $496.6 million in 2009, 80% more than a year earlier. Its fourth-quarter loss of $71.6 million, however, was an improvement of 67% on the year-earlier quarter.

The company also reported last week that, along with its Flagstar Bank thrift unit, it has entered into supervisory agreements with the Office of Thrift Supervision. The agreements call for Flagstar Bank to submit plans for increasing core deposits, improving asset quality, strengthening loan administration and reducing certain concentrations. The order also prohibits the bank from expanding any more than the amount of net interest credited on deposits during any quarter.

In an interview Tuesday, Flagstar CEO Joseph Campanelli acknowledged that the rights offering did not bring in as much capital as Flagstar desired. But he said the total was still in line with the capital level targeted in its business plan.

The $300.6 million, he said, "brings us north of 8% capital, which we believe is a good, solid number."

As part of a plan to diversify its portfolio this year, Campanelli said last week that Flagstar would seek to broaden its revenue stream with ventures outside its national mortgage banking model.

McEvoy said the inherent volatility in the mortgage business, as well as the underlying uncertainty about the health of Flagstar's loan portfolio, makes it difficult to judge whether $300 million is enough to tide over the company.

"Over the near term, management needs to focus on improving the nonmortgage component of their business, as well as minimizing losses to preserve capital while maintaining a healthy capital base," he said.

MatlinPatterson owns 80% of Flagstar. It sank $350 million into the company last year, $250 million early in the year in conjunction with Flagstar's getting $266.6 million in Tarp capital and another $100 million later in the year. The firm deferred questions about the recent capital raise to Flagstar executives.

McEvoy said MatlinPatterson has been instrumental in helping Flagstar through its credit problems and played an active role in bringing in Campanelli, who joined the company Oct. 1 from Sovereign Bank. Campanelli, in turn, has brought in many executives from other, larger institutions.

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