Annual report [Section 13 and 15(d), not S-K Item 405]

MORTGAGE BANKING ACTIVITIES

v3.25.0.1
MORTGAGE BANKING ACTIVITIES
 12 Months Ended
Dec. 31, 2024
Mortgage Banking Activities [Abstract]  
MORTGAGE BANKING ACTIVITIES
Note 4
MORTGAGE BANKING ACTIVITIES
The Company’s mortgage
 
banking activities include mandatory delivery loan sales, forward sales contracts used to
 
manage
residential loan pipeline price risk, utilization of warehouse lines to fund
 
secondary market residential loan closings, and
residential mortgage servicing.
Residential Mortgage Loan Production
The Company originates, markets, and services conventional and
 
government-sponsored residential mortgage loans.
 
Generally,
conforming fixed rate residential mortgage loans are held for sale in the
 
secondary market and non-conforming and adjustable-
rate residential mortgage loans may be held for investment.
 
The volume of residential mortgage loans originated for sale and
secondary market prices are the primary drivers of origination revenue.
Residential mortgage loan commitments are generally outstanding for 30
 
to 90 days, which represents the typical period from
commitment to originate a residential mortgage loan to when the closed
 
loan is sold to an investor.
 
Residential mortgage loan
commitments are subject to both credit and price risk.
 
Credit risk is managed through underwriting policies and procedures,
including collateral requirements, which are generally accepted by
 
the secondary loan markets.
 
Price risk is primarily related to
interest rate fluctuations and is partially managed through forward sales of
 
residential mortgage-backed securities (primarily
TBAs) or mandatory delivery commitments with investors.
 
The unpaid principal balance of residential mortgage loans held for sale,
 
notional amounts of derivative contracts related to
residential mortgage loan commitments and forward contract sales and their
 
related fair values are set forth below.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2024
December 31, 2023
Unpaid Principal
Unpaid Principal
(Dollars in Thousands)
Balance/Notional
Fair Value
Balance/Notional
Fair Value
Residential Mortgage Loans Held for Sale
$
28,117
$
28,672
$
27,944
$
28,211
Residential Mortgage Loan Commitments
(1)
15,000
248
23,545
523
Forward Sales Contracts
(2)
16,000
96
24,500
209
$
29,016
$
28,943
(1)
Recorded in other assets at fair value
(2)
Recorded in other assets and other liabilities at fair value
 
at December 31, 2024 and 2023, respectively
At December 31, 2024, the Company had
no
 
residential mortgage loans held for sale 30-89 days past due or on nonaccrual status.
 
At December 31, 2023, the Company had
no
 
residential mortgage loans held for sale 30-89 days past due and $
0.7
 
million of
loans were on nonaccrual status.
 
Mortgage banking revenues for the year ended December 31, was as follows:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(Dollars in Thousands)
2024
2023
2022
Net realized gain on sales of mortgage loans
$
11,492
$
5,297
$
5,565
Net change in unrealized gain on mortgage loans held for sale
(384)
(252)
(1,164)
Net change in the fair value of mortgage loan commitments
(275)
(296)
(439)
Net change in the fair value of forward sales contracts
305
(395)
192
Pair-Offs on net settlement of forward
 
sales contracts
331
367
4,956
Mortgage servicing rights additions
303
651
565
Net origination fees
2,571
5,028
2,234
Total mortgage banking
 
revenues
$
14,343
$
10,400
$
11,909
Residential Mortgage Servicing
The Company may retain the right to service residential mortgage loans
 
sold.
 
The unpaid principal balance of loans serviced for
others is the primary driver of servicing revenue.
 
The following represents a summary of mortgage servicing rights.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(Dollars in Thousands)
2024
2023
Number of residential mortgage loans serviced for others
504
450
Outstanding principal balance of residential mortgage loans serviced
 
for others
$
135,416
$
108,897
Weighted average
 
interest rate
5.86%
5.37%
Remaining contractual term (in months)
348
309
Conforming conventional loans serviced by the Company are sold to the
 
FNMA on a non-recourse basis, whereby foreclosure
losses are generally the responsibility of FNMA and not the Company.
 
The government loans serviced by the Company are
secured through the GNMA, whereby the Company is insured against loss by
 
the Federal Housing Administration or partially
guaranteed against loss by the Veterans
 
Administration.
 
At December 31, 2024, the servicing portfolio balance consisted of the
following loan types: FNMA (
52.4
%), GNMA (
3.8
%), and private investor (
43.8
%).
 
FNMA and private investor loans are
structured as actual/actual payment remittance.
At December 31, 2024 and 2023, the Company did
no
t have delinquent residential mortgage loans currently in GNMA pools
serviced by the Company.
 
The right to repurchase these loans and the corresponding liability has been recorded in other assets
and other liabilities, respectively,
 
in the Consolidated Statements of Financial Condition.
 
The Company had
no
 
repurchases for
the 12 months ended December 31, 2024, and $
0.3
 
million for the 12 months ended December 31, 2023, of GNMA delinquent or
defaulted mortgage loans with the intention to modify their terms and
 
include the loans in new GNMA pools.
 
 
Activity in the capitalized mortgage servicing rights for the year ended
 
December 31, was as follows:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(Dollars in Thousands)
2024
2023
2022
Beginning balance
$
831
$
2,599
$
3,774
Additions due to loans sold with servicing retained
303
651
565
Deletions and amortization
(201)
(232)
(1,291)
Sale of Servicing Rights
(1)
-
(2,187)
(449)
Ending balance
$
933
$
831
$
2,599
(1)
In 2023, the Company sold an MSR portfolio with an unpaid principal balance of
 
$
334
 
million for a sales price of $
4.0
 
million,
recognizing a $
1.38
 
million gain on sale, recorded
 
in other noninterest income on the Consolidated
 
Statement of Income.
 
In
2022, the Company sold an MSR portfolio with an unpaid principal balance
 
of $
50
 
million for a sales price of $
0.6
 
million
recognizing a $
0.2
 
million gain on sale, recorded
 
in other noninterest income on the Consolidated Statement
 
of Income.
The Company did
no
t record any permanent impairment losses on mortgage servicing rights for the
 
years ended December 31,
2024
 
and 2023.
 
The key unobservable inputs used in determining the fair value of the Company’s
 
mortgage servicing rights at December 31, was
as follows:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2024
2023
Minimum
Maximum
Minimum
Maximum
Discount rates
9.50%
12.00%
9.50%
12.00%
Annual prepayment speeds
9.14%
18.88%
11.23%
17.79%
Cost of servicing (per loan)
$
85
95
$
85
95
Changes in residential mortgage interest rates directly affect
 
the prepayment speeds used in valuing the Company’s
 
mortgage
servicing rights.
 
A separate third-party model is used to estimate prepayment speeds based on interest rates, housing
 
turnover
rates, estimated loan curtailment, anticipated defaults, and other relevant
 
factors.
 
The weighted average annual prepayment speed
was
13.44
% at December 31, 2024 and
14.22
% at December 31, 2023.
 
Warehouse
 
Line Borrowings
The Company has the following warehouse lines of credit and master repurchase
 
agreements with various financial institutions at
December 31, 2024:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amounts
(Dollars in Thousands)
Outstanding
$
25
 
million master repurchase agreement without defined expiration.
 
Interest is at the SOFR rate plus
2.00%
 
to plus
3.00%
, with a floor rate of
3.25%
 
to
4.25%
.
 
A cash pledge deposit of $
0.1
 
million is
required by the lender.
$
1,948
$
25
 
million warehouse line of credit agreement expiring in
March 2025
.
 
Interest is at the SOFR plus
2.75%
 
to
3.25%
.
-
$
1,948
Warehouse
 
line borrowings are classified as short-term borrowings.
 
At December 31, 2023, warehouse line borrowings totaled
$
8.4
 
million.
 
At December 31, 2024, the Company had mortgage loans held for sale pledged as collateral
 
under the above
warehouse lines of credit and master repurchase agreements.
 
The above agreements also contain covenants which include certain
financial requirements, including maintenance of minimum tangible
 
net worth, minimum liquid assets and maximum debt to net
worth ratio, as defined in the agreements.
 
The Company was in compliance with all significant debt covenants at December
 
31,
2024.
 
The Company intends to renew the warehouse lines of credit and master repurchase
 
agreements when they mature.
The Company has extended a $
50
 
million warehouse line of credit to CCHL.
 
Balances and transactions under this line of credit
are eliminated in the Company’s consolidated
 
financial statements and thus not included in the total short-term borrowings noted
on the Consolidated Statement of Financial Condition.
 
The balance of this line of credit at December 31, 2024 and December 31,
2023 was $
32.8
 
million and $
31.4
 
million, respectively.