U.S. Bancorp's first-quarter earnings dived 51% from last quarter, due largely to affirmed losses tied to loans and securities, the bank said Tuesday. However, activity in the mortgage sector is helping the medicine go down. In its fourth consecutive profit decline, the Minneapolis-based bank earned $529m, or 42 cents per share, down from a $1.1bn, or 62 cents per share, profit in the last quarter. The company increased its allowance for credit losses by recording $530m of provision for credit losses in excess of net charge-offs.  Additional items included $198m of net securities losses, believed to be tied to the Bancorp's deteriorating investment of preferred stock in a large domestic bank, though the bank is vague on this point, as it was with a $92m posted gain coming from a corporate real estate transaction. In total, these items reduced first quarter of 2009 earnings per diluted common share by about 28 cents. But CEO Richard Davis told investors on a conference call this morning that he didn’t see credit problems tempering yet.  “We’re probably in the middle of this whole cycle,” Davis said. The CEO said he was "very proud" of U.S. Bancorp's first quarter results. "The results clearly demonstrated our company's ability to produce strong core operating earnings despite a very challenging economic environment." Davis said the bank's earnings are aided by record-setting activity in its mortgage banking division, including both loan production and fee revenue. The presence of lower interest rates spurred a refinancing boom in the sector. And when combined with sharply lower home values, the bank says more new buyers entered the market. The bank posted record loan application volume of $25bn, from which it produced $13.4bn in mortgage loans. Offsetting these positive results were, as expected, higher credit costs and additional market-related write-downs, as well as lower fee revenue in certain line items that are closely linked to the slower economy and current equity market conditions. Bancorp's Davis said Tuesday he expects the bank to pass the government's stress test, and added he is ready to quickly repay the $6.6bn of bailout funds the bank received last fall. Write to Kelly Curran at kelly.curran@housingwire.com. Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments.