SunTrust Bank experienced a 40 percent spike in mortgage servicing income in the midst of what Chairman and CEO William H. Rogers, Jr., deemed a “solid performance” for both the fourth quarter and full year 2015, according to the bank’s earnings statement released Friday.
The Atlanta-based bank reported a net income of $484 million as of the end of Q4 ($0.91 per average common diluted share), an increase of 23 percent from the year-ago quarter. For the full year 2015, SunTrust reported a net income of $1.93 billion ($3.58 per average common diluted share), which was 11 percent higher than 2014’s net income of $1.77 billion.
The year-over-year spike in income was driven primarily by improved efficiency and credit quality, according to SunTrust. The bank’s income for 2014 was negatively impacted by legal matters; in June 2014, SunTrust reached a settlement for nearly $1 billion with federal regulators and 49 states plus the District of Columbia for “systemic mortgage servicing misconduct,” including failing to promptly and accurately apply borrower payments, robo-signing, and other illegal foreclosure practices. Largely free from those legal costs, SunTrust reported increased earnings for both the fourth quarter and the full year 2015.
“Our solid performance in the fourth quarter and strong 11 percent earnings growth for the year are the result of consistent execution of our strategies and the diversity of our business model,” said William H. Rogers, Jr., chairman and CEO of SunTrust Banks, Inc. “Looking ahead, we will further advance our purpose of improving the financial well-being of our clients and communities, thus driving long-term value for our shareholders.”
One area in particular that experienced health growth at SunTrust was mortgage servicing income, which increased by 40 percent year-over-year and 6 percent quarter-over-quarter up to $56 million. SunTrust attributes the large over-the-quarter increase to higher servicing fees, improved net hedge performance, and a decline in the servicing asset decay expense. The over-the-year increase was largely driven by higher servicing fees as a result of a larger servicing portfolio, according to SunTrust.
At the end of 2015, the value of SunTrust’s mortgage servicing portfolio was reported at $148 billion, an increase of $6 billion from the previous year, driven by portfolio acquisitions.
Meanwhile, mortgage production-related income for Q4 declined to $53 million from $58 million in Q3 and $61 million in Q4 2014. A modest decline in gain-on-sale margins drove the $8 million year-over-year decline, while a decline in production drove the $5 million over-the-quarter decline. A typical seasonal decline in new purchase activity resulted in a 20 percent over-the-quarter decline in mortgage production volume in Q4.