Flagstar Bancorp (FBC) in Troy, Mich., reported that it turned a profit for the first time in four years as noninterest income rose.
The $14.4 billion-asset company reported late Tuesday that it earned $86 million in the second quarter compared with a loss of $74.9 million a year earlier. Its earnings per share totaled 15 cents, beating estimates of analysts polled by Thomson Reuters by 14 cents. For the six months that ended June 30, Flagstar earned $77.3 million, compared with a loss of $106.6 million for the same period a year earlier.
Flagstar's shares surged on the news. In heavy trading, its shares were up more than 10% early Wednesday, to $1.02.
Flagstar last earned a profit in the second quarter of 2008. The company has lost nearly $1.4 billion since 2007 as it faced waves of defaults on mortgage loans. Additionally, in February, Flagstar agreed to pay up to $133 million to settle a dispute regarding underwriting practices associated with loans
Still, Chairman, President and Chief Executive Joseph Campanelli had vowed that Flagstar would return to profitability this year and in a news release he attributed its second-quarter turnaround to growth in mortgage banking and improved risk management.
Noninterest income totaled $240.3 million, more than four times higher than a year earlier, thanks largely to an increased net gain on loan sales from refinancing residential mortgages. Net gain on loan sales increased to $212.7 million, five times higher than a year ago.
Net interest income before provision for loan losses totaled $75.5 million, up roughly 47% from a year earlier.
Flagstar's provision for loan losses totaled $58.4 million, up almost 21% from a year earlier. Total delinquent loans fell 2%, to $522.5 million, from the prior quarter primarily due to declines in past due loans.
Nonperforming loans totaled $431.6 million, up almost 7% from a year earlier and 6% higher than the previous quarter. The quarter-over-quarter increase related to a rise in nonperforming commercial loans related mostly to commercial real estate loans originated before 2009.
