IndyMac Bancorp, Inc. 2003 Annual Report

<1:2:3:4:5 >

Business Model

During 2003, the mortgage industry produced $3.8 trillion of mortgage loans, an all-time high, as interest rates touched 40-year lows. A transition back to more normal mortgage production levels began late in 2003 as interest rates began to rise. The Mortgage Bankers Association of America forecasts that industry-wide mortgage production will decline 47% in 2004
to $2 trillion.

The table below illustrates IndyMac’s strategy to allocate capital to its investing and mortgage banking activities to achieve balanced results in the face of a very significant transition in the industry. Our outlook currently anticipates relatively stable results through the transition in 2004. We would then expect to continue to grow our EPS at our targeted 15% or better annual rate after this transition is completed.

products by segment and activity

ACTIVITIES	Relationship Businesses IndyMac Mortgage Bank	Consumer-direct Businesses IndyMac Consumer Bank	Investment Portfolio Group
Mortgage Banking	Mortgage loans held for sale produced via relationships with mortgage brokers, mortgage bankers, Realtors, homebuilders, and financial institutions	Mortgage loans held for sale produced directly with consumers via the Internet, over the phone or through our Southern California retail branch network	Mortgage loans held for sale produced via relationships with existing mortgage customers whose loans we service
Investing	Commercial loans to homebuilders to finance the subdivision development of single- family homes and consumer construction loans that are sourced through all of IndyMac’s channels, both relationship and consumer direct	Home equity lines of credit—this product focused division supports the production of HELOCs through all of IndyMac’s channels, both relationship and consumer direct	Mortgage loans held for investment, mortgage securities, mortgage servicing rights and the related derivative investments used to hedge such items
Financing		Retail deposit products including checking, savings, certificates of deposit, IRAs and online bill payment services


($ in millions except per share amounts)	2003 Actual			2004 Forecast (1)
($ in millions except per share amounts)	Earnings	Average Capital	ROE	Earnings	Average Capital	ROE
Pre-tax Earnings, Capital and ROE by Business Activity
Mortgage banking	$ 405	$ 213	115%	$ 245	$ 201	74%
Investing	26	517	3%	175	712	15%
Corporate and other net items	(148)	206	—	(121)	164	—
Total Pre-tax Income, Capital and ROE	283	$ 936	18%	299	$ 1,077	17%
Net income	$ 171	—	—	$ 181	—	—

EPS	$ 3.01	—	—	$ 3.07	—	—

(1) Range for 2004 is $2.90 to $3.25 per share. This range does not yet take into account the potential SEC change in accounting discussed in a speech by an SEC staff member in December 2003 which could impact timing of income recognition. Please refer to IndyMac’s Form 10-K for additional information.

<1:2:3:4:5 >