Flagstar Bancorp’s (FBC) substantial earnings power is expected to outearn legacy costs. The projected earnings should also offset the demand to raise any additional capital needed for its Troubled Asset Relief Program repayment, according to FBR Capital Markets.

Flagstar participated in a fireside chat at the FBR Fall Investor Conference this week, which was the company’s first public appearance since 2010.

Although risks including representations and warranties, credit cost and pending litigation still loom over Flagstar, the company is expected to earn $843 million in net income through 2014, excluding these expenses. Flagstar received $523 million under TARP.

"Even if capital becomes necessary, we believe Flagstar will have several quarters to further reduce investor concerns surrounding legacy expenses, which would likely provide the company access to capital at a multiple closer to tangible book value, limiting shareholder dilution," according to FBR Capital.

With gain-on-gain sale margins and a prolonged future of stable mortgage banking revenues in the industry, Flagstar’s goal to be primarily a mortgage bank is expected to pay off.

The reverse in Michigan’s auto industry has resulted in an increase of loan demands. As a result, Flagstar could become a community-banking player in the state as the market continues to improve.