A weakening mortgage business didn't slow down Wells Fargo & Co. (WFC) during the third quarter, with the banking and mortgage lending giant reporting record net income of $5.6 billion, or 99 cents per share.

The bank's third-quarter earnings represented a 13% increase from the year-ago period, and surpassed most Wall Street estimates. The stock rose in pre-market trading after the earnings were announced, but fell back soon after that.

$900 million of the quarter's earnings came as credit quality continued to improve and the bank released reserves held for losses, as Wells saw net charge-offs down a whopping $1.4 billion versus the year ago period. Wells Fargo's annualized net charge off rate of 0.48% is a far cry from the 1.21% the bank booked in the third quarter of 2012.

While earnings improved, revenues fell to $20.5 billion in Q3, down 4.2% from $21.4 billion one year ago.

Mortgage banking revenue at the bank, the largest U.S. lender according to HousingWire records, is one reason revenues are softening. Mortgage banking noninterest income fell to $1.6 billion, down from $2.8 billion a year ago, as residential mortgage origination volume fell from $112 billion to $80 billion during the quarter.

Net mortgage servicing rights at Wells also took a dive, falling 61.7% from the year ago period to $26 million during the third quarter. The bank said its residential mortgage servicing portfolio stood at $1.8 trillion at the end of Q3.

Nonperforming residential mortgages continued to improve as the nation's housing market has pushed forward with recovery this year, as well. First mortgages foreclosed an in non-accrual status fell to 4.1% of loans outstanding, down from 4.5% in the third quarter of 2012.

While the mortgage business dragged on revenues in Q3, the bank's mortgage business appears set to decline further during the fourth quarter. Wells Fargo reported an application pipeline of $35 billion at quarter end, compaed to $63 billion one year ago.