Despite witnessing signs of strong new lending activity, mortgage growth still came up short in U.S. Bancorp’s (USB) first quarter earnings, offsetting any potential growth.

The lender recorded a net income of $1.39 billion, or 73 cents per diluted share, for the first quarter of 2014, compared with $1.428 billion, or 73 cents per diluted share, in the first quarter of 2013.

U.S. Bancorp reported $41 billion in new lending activity, with $11.5 billion in mortgage and other retail loan origination.

Net income attributable to U.S. Bancorp for the first quarter of 2014 dipped to $31 million, 2.2% lower than the first quarter of 2013, and $59 million 4.1% lower than the fourth quarter of 2013.

However, the decrease in net income year-over-year was principally due to a decrease in mortgage banking revenue, partially offset by a favorable variance in the provision for credit losses, U.S. Bancorp Chairman, president and CEO Richard Davis said.

While average total loans hit $13.4 billion, 6% higher in the first quarter of 2014 than a year ago, driven by residential mortgages, which grew 14.4%. But this uptick was partially offset by declines in home equity and second mortgages, lease financing and covered loans.

But that trend could change soon. Acccording to CoreLogic (CLGX), as borrowers regain their equity and interest rates continue to rise over the next few years, more homeowners will start utilizing home equity lines of credit, creating an incentive to finance home improvements through home equity lines of credit.

As a whole, U.S. Bancorp’s mortgage banking revenue fell to $236 million, a drastic decline from $401 million a year ago, but falling right in line with industry trends. 

In M&T Bank Corporation's (MTB) earnings on Monday, its earnings per share for the first quarter of 2014 dropped to $1.61, from $1.98 a year prior and $1.56 in the fourth quarter of 2013, as mortgage banking revenue recorded a heavy drop.'

Even Bank of America (BAC) reported that its first mortgage originations fell 65% year-on-year in its earnings report Wednesday morning.