Huntington's first-quarter mortgage banking income totaled $45.2 million, declining from $61.7 million in the fourth quarter, and $46.4 million in the first quarter of 2012. Lower mortgage income was expected, after it peaked during the fourth quarter, in line with the overall industry. During the first quarter, most banks saw a significant reduction in mortgage application flow, and a decline in gain-on-sale margins.
A Long-Term Wallet-Share Play
Steinour said Huntington's "theme is customer growth, with annualized growth in consumer deposits of 11.8% in the first quarter. We continue to take market share. In this low-rate environment it has not translated to significant revenue yet, but it will." The Federal Reserve has kept the short-term federal funds rate in a range of zero to 0.25% since late 2008. The central bank also continues to expand its balance sheet with monthly purchases of $85 billion in long-term securities, in an effort to hold long-term rates down. This means most banks have already enjoyed all the benefit of lower funding costs, while seeing their net interest margins continue to narrow as assets reprice. According to Steinour, a focus at this time on deposit customer growth "is like building a revenue annuity that has much better economics in the medium and long term, than it does in the short term." "This is compounding double-digit growth year in and year out," he said, adding that "our business activities are based on our local footprint. The more market share we get, the stronger our revenue foundation." When discussing the local economic recovery, Steinour said "the natural gas play is continuing to build our economic growth both directly and indirectly. There is a lot of housing activity here. Our forecast for 2013 does not have a strong recovery in housing, but this first quarter has been a positive surprise." Despite the industry-wide decline in mortgage activity in the first quarter, Steinour remains upbeat on this revenue source, saying "the combination of the housing recovery, combined with the extension of HARP, should make mortgage business stronger over the next couple of years than we had thought a quarter ago."