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PNC Originations Worse, Earnings Better

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Although mortgage production tumbled at The PNC Financial Services Group Inc., quarterly mortgage earnings were vastly improved and annual company-wide income was at an all-time high. Loan performance was also better.

In its quarterly earnings report, PNC said that residential loan originations tumbled to $2.5 billion from the third quarter’s $3.7 billion.

Business sank compared to the fourth-quarter 2012, when $4.4 billion in home loans were funded.

Full-year 2013 volume of $15.1 billion was barely changed from 2012, when $15.2 billion in mortgages were originated.

Refinance share declined to 59 percent from 62 percent and was 80 percent in the year-earlier quarter. Home Affordable Refinance Program transactions accounted for 28 percent of fourth-quarter business.

PNC serviced $114 billion in residential loans for third parties. The servicing portfolio slipped from $115 billion at the end of the previous quarter and $119 billion at the close of the previous year.

Residential loans on the balance sheet fell to $14.418 billion from $14.709 billion at the end of the third quarter and $14.430 billion at the end of 2012.

Delinquency of at least 30 days on the non-government portion of the mortgage investment portfolio slipped to 1.17 percent from 1.20 percent. Performance has improved even more compared to the 1.61 percent rate in place as of Dec. 31, 2012.

On government mortgages, the 30-day rate fell to 7.88 percent from 8.79 percent and plummeted from 13.64 percent at the end of 2012.

The Pittsburgh-based company owned $36.447 billion in home-equity assets as of the end of last month, off from the $36.591 billion owned at the end of September and the $35.920 billion owned at the end of 2012. Last month’s total included $21.696 billion in home-equity lines of credit and $14.751 billion in home-equity loans.

HEL delinquency was unchanged from the third quarter at 0.33 percent but has fallen from 0.49 percent at the end of the fourth-quarter 2012.

The investment portfolio included $0.647 billion in residential construction loans. PNC cut this category of holdings from $0.683 billion three months earlier and $0.810 billion a year earlier.

The commercial mortgage servicing portfolio was expanded to $308 billion from $298 billion and was $282 billion a year earlier.

Commercial real estate assets climbed to $21.191 billion from $20.131 billion three months earlier and $18.655 billion a year earlier. The most recent figure included $13.613 billion in real estate projects and $7.578 billion in commercial mortgages.

CRE delinquency fell 12 basis points from the end of September to 0.31 percent. The rate has plunged from Dec. 31, 2012, when it stood at 0.93 percent.

The residential mortgage banking business earned $55 million, nearly doubling from the prior period’s $28 million and swinging from a $192 million loss in the year-earlier period.

“Residential mortgage revenue increased due to a benefit from release of reserves for residential mortgage repurchase obligations of $124 million partially offset by a decrease in net hedging gains on servicing rights,” the report said.

Income before income taxes and non-controlling interests at the holding company crept up to $1.413 billion from $1.359 billion in the third quarter and rose from $0.922 billion in the final quarter of 2012.

After-tax full-year 2013 income was a record $4.2 billion.

PNC finished last year with 54,433 employees, fewer than the 54,934 people on staff as of Oct. 31 and 56,285 employees as of Dec. 31, 2012.

The bank trimmed its branch network to 2,714 locations from 2,724 at the end of the third quarter.

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