Quarterly report [Sections 13 or 15(d)]

MORTGAGE BANKING ACTIVITIES

v3.25.3
MORTGAGE BANKING ACTIVITIES
 9 Months Ended
Sep. 30, 2025
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 to-be announced
securities, or 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,
 
such as interest rate lock commitments (“IRLC’s”)
 
and forward contract sales and their related fair
values are set forth below.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
September 30, 2025
December 31, 2024
Unpaid Principal
Unpaid Principal
(Dollars in Thousands)
Balance/Notional
Fair Value
Balance/Notional
Fair Value
Residential Mortgage Loans Held for Sale
$
23,481
24,204
$
28,117
$
28,672
Residential Mortgage Loan Commitments ("IRLCs")
(1)
29,911
607
15,000
248
Forward Sales Contracts
(1)
27,000
11
16,000
96
(1)
 
Recorded in other assets at fair value.
At September 30, 2025, the Company had
no
 
residential mortgage loans held for sale 30-89 days past due or on nonaccrual
 
status. At
December 31, 2024, the Company had
no
 
residential mortgage loans held for sale 30-89 days past due or on nonaccrual
 
status.
 
Mortgage banking revenue was as follows:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
September 30,
Nine Months Ended
September 30,
(Dollars in Thousands)
2025
2024
2025
2024
Net realized gains on sales of mortgage loans
$
3,871
$
3,664
$
10,356
$
8,499
Net change in unrealized gain on mortgage loans held for sale
130
143
302
312
Net change in the fair value of IRLC's
(45)
(135)
359
32
Net change in the fair value of forward sales contracts
199
(52)
(85)
212
Pair-Offs on net settlement of forward
 
sales contracts
(234)
(383)
(404)
(173)
Mortgage servicing rights additions
40
50
84
292
Net origination fees
833
679
2,192
2,051
Total mortgage banking
 
revenues
$
4,794
$
3,966
$
12,804
$
11,225
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)
September 30, 2025
December 31, 2024
Number of residential mortgage loans serviced for others
464
504
Outstanding principal balance of residential mortgage loans serviced
 
for others
$
121,767
$
135,416
Weighted average
 
interest rate
5.74%
5.86%
Remaining contractual term (in months)
353
348
Conforming conventional loans serviced by the Company are sold to Federal
 
National Mortgage Association (“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 Government National
 
Mortgage Association (“GNMA”), whereby the Company is
insured against loss by the Federal Housing Administration or partially
 
guaranteed against loss by the Veterans
 
Administration.
 
At
September 30, 2025, the servicing portfolio balance consisted of
 
the following loan types: FNMA (
61.4
%), GNMA (
4.3
%), and
private investor (
34.3
%).
 
FNMA and private investor loans are structured as actual/actual payment remittance.
 
At September 30, 2025 and December 31, 2024, the Company did
no
t have delinquent residential mortgage loans 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 three
months ended September 30, 2025 and 2024, and $
0.3
 
million and
no
 
repurchases in the nine months ended September 30, 2025 and
2024, respectively, 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 was as follows:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
September 30,
Nine Months Ended
 
September 30,
(Dollars in Thousands)
2025
2024
2025
2024
Beginning balance
$
889
$
965
$
933
$
831
Additions due to loans sold with servicing retained
40
50
84
292
Deletions and amortization
(44)
(46)
(132)
(154)
Ending balance
$
885
$
969
$
885
$
969
The Company did
no
t record any permanent impairment losses on mortgage servicing rights for the
 
three or nine months ended
September 30, 2025 or 2024.
 
The key unobservable inputs used in determining the fair value of
 
the Company’s mortgage servicing rights were
 
as follows:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
September 30, 2025
December 31, 2024
Minimum
Maximum
Minimum
Maximum
Discount rates
9.50%
12.00%
9.50%
12.00%
Annual prepayment speeds
9.83%
18.89%
9.14%
18.88%
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
13.09
% at September 30, 2025 and
13.44
% at December 31, 2024.
 
Warehouse
 
Line Borrowings
The Company has the following warehouse lines of credit and master
 
repurchase agreements with various financial institutions at
September 30, 2025.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amounts
(Dollars in Thousands)
Outstanding
$
20
 
million master repurchase agreement without defined expiration.
 
Interest is at the SOFR rate plus
2.25%
 
to
3.25%
, with a floor rate of
3.25%
 
to
4.25%
.
 
A cash pledge deposit of $
0.1
 
million is required by the lender.
$
326
$
25
 
million warehouse line of credit agreement expiring in
June 2026
.
 
Interest is at the SOFR plus
2.50%
 
to
3.00%
.
14,289
Total Warehouse
 
Borrowings
$
14,615
Warehouse
 
line borrowings are classified as short-term borrowings.
 
At December 31, 2024, warehouse line borrowings totaled $
1.9
million. At September 30, 2025, the Company had residential 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 September 30, 2025.