UPDATE 3-Flagstar Bancorp posts wider-than-expected Q2 loss

* Q2 loss/shr $0.63 vs est loss/shr $0.48

* Provision for loan losses up 35 pct sequentially

* Sees higher NIM in 2010

* Sees $200-$250 mln in provision expense for 2010

* Shares slump 16 percent

(Recasts; adds conference call details, background, updates shares)

BANGALORE, July 28 (Reuters) - U.S. regional bank Flagstar Bancorp (FBC.N) posted a wider-than-expected quarterly loss, as credit costs rose sequentially, and said it sees 2010 margin mostly higher that it is now.

Shares of the Troy, Michigan-based company fell 16 percent in early trade but pared some losses and were down 9 percent at $3.12 midday on the New York Stock Exchange.

On a post-earnings conference call, the lender said it sees 2010 net interest margin -- the difference between what it pays out on loans and earns on deposits-- of between 140 and 175 basis points.

Year-to-date the bank, which effected a one-for-ten reverse stock split in May, had a net interest margin of 148 basis points.

"As part of our transformation, we will focus on core deposits to lower funding costs. This will help our net interest margin even if the yield curve flattens going forward," the bank said on the call.

For the second quarter, provisions for loan losses rose 35 percent to $86 million sequentially.

Flagstar projects 2010 provision expense of between $200 million and $250 million, from $504 million in 2009.

The bank, which has operations in Michigan, Indiana and Georgia and originates residential mortgage loans throughout the United States, has been badly hit by the fall in U.S. home values and the recession.

Flagstar recently saw investment from Greenlight Capital, a hedge fund run by investor David Einhorn, which bought 33 million shares in the bank. [ID:nN1799949]

The holding company for Flagstar Bank FSB had non-performing assets of $1.2 billion on total assets of $13.7 billion as of June 30.

For the second-quarter, net loss attributable to common shareholders was $97 million, or 63 cents a share, compared with a loss of $76.6 million, or 3.20 cents a share, a year ago.

Analysts on average had expected a loss of 48 cents a share, excluding items, according to Thomson Reuters I/B/E/S.

(Reporting by Swati Chitnis and Jochelle Mendonca in Bangalore; Editing by Prem Udayabhanu, Unnikrishnan Nair)