While larger American banks such as Citigroup (NYSE: C) and Bank of America (NYSE: BAC) have reported fruitful first-quarter results and revealed a movement toward long-term stability, Flagstar Bancorp (NYSE: FBC) couldn't manage to quite fall in line. The savings and loan bank, however, didn't completely fail to impress. Its first-quarter net loss showed substantial improvement on both sequential and year-on-year basis.

Quick recap
Flagstar has joined the larger group of American banks that have shown improvements in their first-quarter results owing to declining credit costs. Its net loss improved to $31.7 million, compared with $81.9 million in the year-ago quarter. This is the fourth straight quarter for which Flagstar reported a decline in its credit costs.

The quarter in detail
While the company reduced its net losses, it also focused on strengthening its balance sheet. Flagstar's non-performing assets declined to $546.9 million in the quarter from $1.3 billion in the corresponding quarter last year. The bank also sold $80.3 million of non-performing residential first mortgage loans. Fool colleague Sean Williams has pointed out that the bank has been struggling primarily because of the loans it made before the housing bubble burst. So getting rid of such risky loans makes a lot of sense, unquestionably.

One negative that I noticed: Flagstar's net interest income increased to $39.8 million in this quarter from $37.7 million in the first quarter of 2010. However, compared to the last sequential quarter, it decreased by $14.6 million, reflecting a decline in the average balances of interest-earning assets. But things on the whole are quite good.

The bank's core deposits went up to $2.8 billion in the quarter -- a jump of 10% from the prior quarter. Provision for loan losses improved significantly to $28.3 million, compared with $63.6 million in the first quarter of 2010 and $225.4 million in the preceding quarter.

The Foolish bottom line
Flagstar is one of the 15 most-watched thrifts and mortgage finance stocks. And if you are not one of those who already have their eyes peeled, I would suggest you to keep tabs on this one.

If you'd like to stay up-to-date on all the latest commentary and analysis of Flagstar, click here to add it to your watchlist.

Fool contributor Zeeshan Siddique does not own any of the stocks mentioned in the article. The Fool owns shares of Bank of America. Through a separate Rising Star portfolio, The Fool is also short Bank of America. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.