Flagstar Reports Lower Profits Amid Higher Costs

Despite a jump in mortgage origination activity, Flagstar Bancorp in Troy, Mich., reported lower fourth-quarter profits thanks to an uptick in expenses.

The $14.1 billion-asset bank's net income for the quarter totaled $28 million, or 49 cents per diluted share, down from $33 million a year earlier.

The company's full-year net income rose 8% from 2015, however, to $171 million, including a $24 million benefit from the decrease in the fair value of a legal settlement with the Justice Department recorded during the third quarter.

Including the provision for loan losses, net interest income rose 11.7% from the fourth quarter of 2015 to $86 million, despite a 2-basis-point decrease year over year in net interest margin to 2.67%.

Noninterest income increased 1% to $98 million. Noninterest expenses spiked 10.1% to $142 million, mostly on an 88% increase in commissions and a 12% jump in costs related to compensation and benefits.

Mortgage originations expanded 47% year over year to $8.57 billion. Flagstar also sold or securitized $8.42 billion in mortgage loans, up from $5.16 billion a year earlier.

Looking ahead to 2017, Flagstar CEO and President Alessandro DiNello said he expected continued positive momentum in the new year.

"We believe the economy will be a bit stronger and the interest rate curve a little steeper," he said in a news release. "Our business model is poised to continue to be successful."

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