Flagstar Bancorp in Troy, Mich., reported lower profit because of higher expenses and a decline in fee income.

The $16 billion-asset company said in a press release Tuesday that its second-quarter earnings fell 13% from a year earlier, to $41 million, or 71 cents a share. Net income applicable to common shareholders, which took into account a preferred-stock dividend paid in 2016, rose by 5%.

"We felt the effect of TRID more than other bank originators," said Flagstar CEO Alessandro DiNello.
Flagstar Bancorp, led by CEO Alessandro DiNello, reported lower earnings that reflected lower gains from loan sales.

Net interest income rose 26% to $97 million. Loans held for investment increased by 16% to $6.8 billion, while the net interest margin expanded by 14 basis points to 2.77%. Flagstar also recorded a $1 million reserve release in the second quarter.

Noninterest income fell by 9.4% to $116 million. The net gain on loan sales decreased by 27% to $66 million.

Noninterest expenses increased by 11% to $154 million. Costs rose across most categories.

Flagstar recently made efforts to expand its mortgage portfolio with its purchase of Opes Advisors in California. The company also sold $191 million of mortgage servicing rights as it prepares for the full phase-in of Basel III.

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Allison Prang

Allison Prang

Allison Prang is a reporter for American Banker, where she writes about community banks.