SunTrust mortgage banking income plummets in third quarter

Creates decrease in overall noninterest income

SunTrust Banks’ mortgage-related income sank in the third quarter this year, dragging the bank’s reported earnings down with it.

Mortgage production income increased 8.9% from $56 million in the second quarter to $61 million in the third. However, this is down a full 48.3% from $116 million in the third quarter last year. The bank explained the sharp drop was due primarily to less refinancing activity and lower gain-on-sale margins.

Mortgage application volume decreased 7% from the second quarter and 35% from the third quarter of 2016. Closed loan volume dropped 4% from the second quarter and 27% from last year.

Mortgage servicing income also decreased year-over-year, though not as drastically. Mortgage servicing income came in at $46 million in the third quarter, up from $44 million the previous quarter but down from $49 million the year before.

The increase from last quarter can be attributed to a higher net hedge performance, which was partially offset by higher servicing asset decay. However, the bank said drop from last year is also due to lower net hedge performance and higher servicing asset decay, partially offset by higher servicing fees.

This decrease in mortgage-related income from last year created a drag on the bank’s noninterest income, which decreased 4.8% from last year’s $889 million to $846 million in the third quarter. However, partially due to the increase in mortgage income from the second quarter, noninterest income increased 2.3% from $827 million in the second quarter.

SunTrust reported a total revenue of $2.28 billion in the third quarter. This is up 2.1% from $2.23 billion in the second quarter and up 3.6% from $2.2 billion in the third quarter last year.

Net income available to common shareholders increased 1.4% from last quarter’s $505 million and 12% from $457 million last year to $512 million in the third quarter. This is an earnings per average common diluted share of $1.06, up 2.9% from $1.03 in the second quarter and 16.5% from $0.91 in the third quarter last year.

“Our third quarter performance provides further validation of our successful execution against the company's strategies and purpose-oriented culture,” SunTrust Chairman and CEO William Rogers said. “Our wholesale segment delivered another record quarter, evidence that our differentiated value proposition continues to resonate with clients.”

“Our Consumer segment delivered strong loan growth and provided significant help to our clients in the wake of the recent catastrophic hurricanes in our markets,” Rogers said. “Our opportunity set remains robust and I am confident in our ability to deliver further growth for our clients, communities, teammates, and ultimately, our owners.”

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