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Repurchase Provision Impacts PNC Results

JAN 17, 2013 12:40pm ET

Noninterest income in 4Q12 at PNC Financial Services Group was impacted by the previously announced $254 million provision related to mortgage loan repurchase requests. The company’s income for the quarter of $419 million was reduced by $0.47 per share because of residential mortgage issues.

PNC was one of the parties in the mortgage servicer settlement.

In addition, the 4Q12 noninterest expense included a noncash charge of $45 million for residential mortgage goodwill impairment and $91 million in expenses for residential foreclosure-related matters.

The provision was virtually equal to PNC’s residential mortgage banking revenue for the quarter.

The good news at PNC is that mortgage volume for 2012 increased by 33% over 2011 to $15.2 billion. Home Affordable Refinance Program loans made up 30% of the 4Q12 volume of $4.4 billion.

Residential mortgage banking posted a $192 million loss, compared with a profit of $36 million in 3Q12 and a $61 million loss in 4Q11. For the full year it lost $308 million; both the quarterly and annual loss is because of that $254 million provision.

Separately, BB&T chairman and CEO Kelly King said one of the reasons for the company’s 23% annual increase in noninterest income is record mortgage banking revenue for the year. The company had $231 million in mortgage banking revenue in 4Q12, up 71% over the same period last year.

But the company said for 1Q13, mortgage revenue should be affected by tighter margins, although it believes volume should be consistent with 4Q12.

BB&T originated a record $8.6 billion in the quarter of which $3.5 billion was retail and $5.1 billion was through the correspondent channel. Nearly 37% of the loans were for home purchases.

Net income from mortgage banking for the quarter was $86 million. BB&T had net income of $506 million for the quarter and record income of $1.9 billion for 2012.

BB&T is one of the top 10 mortgage warehouse lenders in the country, according to MortgageStats.com.