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 insured by the Federal Housing Administration

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.

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