Flagstar Bancorp (FBC) narrowed its third quarter loss 54% to $14.2 million, or 3 cents a share, from $22.6 million the year before. While it is the 13th straight quarter of losses for the Troy, Mich.-based bank, it is the smallest loss since it last reported a gain in the second quarter of 2008. In August of that year, one month after the last time Flagstar reported a profitable quarter, the bank announced it was going to present at a global financial services conference hosted by Lehman Bros. At the beginning of 2009, the Treasury Department put $266.6 million in Troubled Asset Relief Program funds into the bank, which has yet to be paid back. The widest loss came in the third quarter of 2009, when Flagstar reported more than $298 million in losses. Over the previous four years, the bank routinely landed in the top 20 mortgage originators in the country, but has unloaded more than $500 million in troubled loans since the crisis. It sold its 27 branches in Georgia to PNC Finance Services (PNC) and its 22 branches in Indiana to First Financial Bancorp. The New York Stock Exchange warned the bank in August of a possible delisting. It must push shares of its common stock above $1 by February 2012 in order to avoid action. Flagstar continues to work through its troubled legacy portfolio. It increased its loan-loss provision by 46% to $36.7 million from $25 million the previous quarter, but that's still down from more than $51 million in provisions held one year ago. Its reserve held for possibly buying back troubled mortgages from Fannie Mae and Freddie Mac totaled $85 million in the third quarter, up from $79.4 million at the end of the second quarter and $77.5 million held one year ago. Flagstar also had to pay $34.5 million in foreclosed property expenses, including claims from Ginnie Mae. That's up from $23.3 million in the previous three months. But Flagstar did increase its mortgage production in the quarter. The bank wrote nearly $7 billion in new mortgages, a 50% increase from the second quarter but still down 9.2% from one year ago. Since the end of last year, the bank added 28 loan officers and executives. "Overall, we were pleased with the improvement in fundamentals on our core revenue drivers, even though such fundamentals continue to be offset by legacy credit costs," said Flagstar CEO Joseph Campanelli. "Macroeconomic conditions and home prices remain challenging, however, we are confident we have the resources, including the capital, liquidity and leadership, necessary to support our business plan and continue our planned growth strategies." Write to Jon Prior. Follow him on Twitter @JonAPrior.