Deposit growth and loan sales gave Flagstar Bancorp's second-quarter profit a lift.

The $13.7 billion-asset company said its net income in the three months rose 2.1% to $47 million, or 66 cents a share, compared with last year's second quarter.

Deposits at the Troy, Mich., company rose 12% to $8.6 billion.

Net interest income rose 5.4% to $77 million, while noninterest income rose 1.5% to $128 million on an uptick in loan sales.

Noninterest expense rose 1% to $139 million.

The net interest margin fell 16 basis points to 2.63% as loan interest income fell.

Flagstar will redeem all Troubled Asset Relief Program preferred shares by the end of July and replace "this high-cost funding with senior notes and other bank-level sources of funds that cost, on average, only one-third of the TARP preferred on an after-tax basis," it said in a press release Tuesday.

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