Declines in the residential mortgage and home equity portfolios offset the growth in the indirect auto, credit card and other consumer portfolios as consumers continue to pay down real estate debt. However, loan originations for new home purchases were up for the quarter, accounting for almost 53 percent of all mortgage applications, compared to 35 percent last quarter.
Improved funding mix continues to drive deposit costs lower
Average low-cost deposits increased slightly linked quarter, while higher cost time deposits declined 11 percent. This mix shift drove continued improvement in the company’s funding composition, as low-cost deposits as a percentage of total deposits rose to 88 percent, compared to 83 percent last year. This positive mix shift resulted in deposit costs declining to 15 basis points for the quarter, down 3 basis points from first quarter and down 17 basis points from last year. As a result, total funding costs declined to 40 basis points, down 20 basis points from the same period one year ago.
Net interest income increased and net interest margin expandedTaxable-equivalent net interest income was $821 million, a $10 million or 1 percent increase linked quarter. This was driven by growth in loans, an additional day count, as well as the continued decline in deposit costs. The resulting net interest margin expanded 3 basis points linked quarter to 3.16 percent, primarily attributable to lower deposit costs and a reduction in cash holdings at the Federal Reserve. Non-interest revenue impacted by lower mortgage revenue Non-interest revenue totaled $497 million, down 1 percent linked quarter. Mortgage income for the quarter totaled $69 million, a decline of 4 percent linked quarter. Mortgage production for the quarter was approximately $1.9 billion, a 6 percent increase from the prior quarter. The increase in market rates impacted the pipeline as well as the mortgage servicing rights (MSR) hedge, resulting in the net decrease in mortgage income. Service charges income was down 2 percent linked quarter, driven by lower non-sufficient fund (NSF) fees.