Mortgage Revenue Falls at U.S. Bancorp

Despite a substantial reduction in mortgage banking revenue during the third quarter, U.S. Bancorp’s overall net income remained flat on a yearly basis.

On Wednesday, the Minneapolis-based financial institution reported net income of $1.468 billion for 3Q13, or $0.76 per diluted common share, which is only 0.4% lower than the $1.474 billion recorded a year ago.

This occurred in spite of mortgage banking revenue falling 37% from a year earlier (a $68 million drop) and 17% from the second quarter (down $191 million), U.S. Bancorp president and CEO Richard Davis said during a conference call.

U.S. Bancorp’s mortgage banking revenue fell on a year-over-year and quarterly basis due to lower origination and sales revenue, Davis stated, but was also partially offset by higher servicing income and a favorable change in the valuation of mortgage servicing rights.  

“The third quarter earnings reflect our continuing ability to manage through the current uncertain and slow-growing economy,” Davis said.

Through the end of the third quarter, U.S. Bancorp’s nonperforming asset portfolio decreased by 2.1% from the second quarter. As of Sept. 30, the bank held more than $1.8 billion in nonperforming assets, compared with $1.9 billion at June 30 and $2.1 billion through the end of September 2012.

On a quarterly basis, U.S. Bancorp reported that net charge-offs decreased $64 million. Total net charge-offs in the third quarter were $328 million, compared with $392 million the previous quarter and $538 million a year ago. The decrease, U.S. Bancorp said, occurred primarily due to improvement in the commercial, commercial real estate, residential mortgages and home equity and second mortgage portfolios.

Meanwhile, average total loans at the bank rose 5.7%, or $12.4 billion, from 2Q12 amid growth in the commercial real estate sector, which was up 9.4% ($5.9 billion) year-over-year.

Origination activity for U.S. Bancorp totaled $63.1 billion during the third quarter, including $37.8 billion committed towards commercial real estate. Additionally, there was $22.5 billion of mortgage and other retail loan originations.

“Given reported industry trends, these results would indicate that U.S. Bancorp continues to gain market share,” Davis said. “Our capital position is strong and we will continue to grow.”