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MORTGAGE BANKING OPERATIONS (Tables) | 9 Months Ended
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Sep. 30, 2024
Mortgage Banking [Abstract] |
Mortgage Loans on Real Estate, by Loan | LHFS consisted of the following:
(in thousands) | At September 30, 2024 |  | At December 31, 2023
Single family | $ | 38,863 |  |  | $ | 12,849 |
CRE, multifamily and SBA | — |  |  | 6,788 |
Total | $ | 38,863 |  |  | $ | 19,637 |
Loans sold consisted of the following for the periods indicated:
| Quarter Ended September 30, |  | Nine Months Ended September 30,
(in thousands) | 2024 |  | 2023 |  | 2024 |  | 2023
Single family | $ | 109,091 |  |  | $ | 101,575 |  |  | $ | 277,551 |  |  | $ | 257,835 |
CRE, multifamily and SBA | 7,602 |  |  | 2,821 |  |  | 29,337 |  |  | 16,220 |
Total | $ | 116,693 |  |  | $ | 104,396 |  |  | $ | 306,888 |  |  | $ | 274,055 |
Net Gain on Loan Origination and Sale Activity | Gain on loan origination and sale activities, including the effects of derivative risk management instruments, consisted of the following:
| Quarter Ended September 30, |  | Nine Months Ended September 30,
(in thousands) | 2024 |  | 2023 |  | 2024 |  | 2023
Single family | $ | 2,779 |  |  | $ | 2,267 |  |  | $ | 7,483 |  |  | $ | 6,656 |
CRE, multifamily and SBA | (19) |  |  | 105 |  |  | 619 |  |  | 582 |
Total | $ | 2,760 |  |  | $ | 2,372 |  |  | $ | 8,102 |  |  | $ | 7,238 |
Company's Portfolio of Loans Serviced for Others | The Company's portfolio of loans serviced for others is primarily comprised of loans held in U.S. government and agency MBS issued by Fannie Mae, Freddie Mac and Ginnie Mae. The unpaid principal balance of loans serviced for others is as follows:
(in thousands) | At September 30, 2024 |  | At December 31, 2023
Single family | $ | 5,198,826 |  |  | $ | 5,316,304 |
CRE, multifamily and SBA | 1,849,679 |  |  | 1,900,039 |
Total | $ | 7,048,505 |  |  | $ | 7,216,343 |
Mortgage Repurchase Losses | The following is a summary of changes in the Company's liability for estimated single-family mortgage repurchase losses:
| Quarter Ended September 30, |  | Nine Months Ended September 30,
(in thousands) | 2024 |  | 2023 |  | 2024 |  | 2023
Balance, beginning of period | $ | 1,202 |  |  | $ | 1,728 |  |  | $ | 1,481 |  |  | $ | 2,232 |
Additions, net of adjustments (1) | 31 |  |  | (73) |  |  | (117) |  |  | (184) |
Realized (losses) recoveries, net (2) | (93) |  |  | (10) |  |  | (224) |  |  | (403) |
Balance, end of period | $ | 1,140 |  |  | $ | 1,645 |  |  | $ | 1,140 |  |  | $ | 1,645 |
(1) Includes additions for new loan sales and changes in estimated probable future repurchase losses on previously sold loans. (2) Includes principal losses and accrued interest on repurchased loans, "make-whole" settlements, settlements with claimants and certain related expenses.
Revenue from Mortgage Servicing, Including the Effects of Derivative Risk Management Instruments | Revenue from mortgage servicing, including the effects of derivative risk management instruments, consisted of the following:
| Quarter Ended September 30, |  | Nine Months Ended September 30,
(in thousands) | 2024 |  | 2023 |  | 2024 |  | 2023
Servicing income, net: |  |  |  |  |  |  |
Servicing fees and other | $ | 6,695 |  |  | $ | 6,405 |  |  | $ | 19,611 |  |  | $ | 19,666 |
Amortization of single family MSRs (1) | (1,669) |  |  | (1,564) |  |  | (4,810) |  |  | (4,874) |
Amortization of multifamily and SBA MSRs | (1,423) |  |  | (1,374) |  |  | (4,284) |  |  | (4,363) |
Total | 3,603 |  |  | 3,467 |  |  | 10,517 |  |  | 10,429 |
Risk management, single family MSRs: |  |  |  |  |  |  |
Changes in fair value of MSRs due to assumptions (2) | (1,963) |  |  | 785 |  |  | (816) |  |  | 1,794 |
Net gain (loss) from economic hedging (3) | 1,418 |  |  | (1,160) |  |  | (201) |  |  | (2,833) |
Total | (545) |  |  | (375) |  |  | (1,017) |  |  | (1,039) |
Loan servicing income | $ | 3,058 |  |  | $ | 3,092 |  |  | $ | 9,500 |  |  | $ | 9,390 |
(1) Represents changes due to collection/realization of expected cash flows and curtailments. (2) Principally reflects changes in model assumptions, including prepayment speed assumptions, which are primarily affected by changes in mortgage interest rates. (3) The interest income from US Treasury notes securities used for hedging purposes, which is included in interest income on the consolidated income statements, was $0.3 million for both quarters ended September 30, 2024 and 2023, and was $0.9 million and $1.1 million for the nine months ended September 30, 2024 and 2023, respectively.
Changes in Single Family MSRs Measured at Fair Value | The changes in single family MSRs measured at fair value are as follows:
| Quarter Ended September 30, |  | Nine Months Ended September 30,
(in thousands) | 2024 |  | 2023 |  | 2024 |  | 2023
Beginning balance | $ | 73,725 |  |  | $ | 76,314 |  |  | $ | 74,249 |  |  | $ | 76,617 |
Additions and amortization: |  |  |  |  |  |  |
Originations | 707 |  |  | 935 |  |  | 2,177 |  |  | 2,473 |
Purchases | — |  |  | — |  |  | — |  |  | 460 |
Amortization (1) | (1,669) |  |  | (1,564) |  |  | (4,810) |  |  | (4,874) |
Net additions and amortization | (962) |  |  | (629) |  |  | (2,633) |  |  | (1,941) |
Changes in fair value assumptions (2) | (1,963) |  |  | 785 |  |  | (816) |  |  | 1,794 |
Ending balance | $ | 70,800 |  |  | $ | 76,470 |  |  | $ | 70,800 |  |  | $ | 76,470 |
(1) Represents changes due to collection/realization of expected cash flows and curtailments. (2) Principally reflects changes in model assumptions, including prepayment speed assumptions, which are primarily affected by changes in mortgage interest rates.
Key Economic Assumptions Used in Measuring Initial FV of Capitalized Single Family MSRs | Key economic assumptions used in measuring the initial fair value of capitalized single family MSRs were as follows:
| Quarter Ended September 30, |  | Nine Months Ended September 30,
(rates per annum) (1) | 2024 |  | 2023 |  | 2024 |  | 2023
Constant prepayment rate ("CPR") (2) | 22.61 | % |  | 15.13 | % |  | 19.87 | % |  | 14.20 | %
Discount rate | 9.88 | % |  | 11.70 | % |  | 10.17 | % |  | 10.83 | %
(1) Based on a weighted average. (2) Represents an expected lifetime average CPR used in the model.
Schedule of Sensitivity Analysis of Fair Value, Transferor's Interests in Transferred Financial Assets | For single family MSRs, we use a discounted cash flow valuation technique which utilizes CPRs and discount rates as significant unobservable inputs as noted in the table below:
| At September 30, 2024 |  | At December 31, 2023
| Range of Inputs |  | Average (1) |  | Range of Inputs |  | Average (1)
CPRs (2) | 6.17% - 13.10% |  | 7.47 | % |  | 6.80% - 32.50% |  | 7.00 | %
Discount Rates | 9.63% - 15.09% |  | 10.12 | % |  | 10.00% - 17.00% |  | 10.00 | %
(1) Weighted averages of all the inputs within the range. (2) Represents the expected lifetime average CPR used in the model. To compute hypothetical sensitivities of the value of our single family MSRs to immediate adverse changes in key assumptions, we computed the impact of changes to CPRs and in discount rates as outlined below:
(dollars in thousands) | At September 30, 2024
Fair value of single family MSR | $ | 70,800 |
Expected weighted-average life (in years) | 8.15
CPR |
Impact on fair value of 25 basis points adverse change in interest rates | $ | (995) |
Impact on fair value of 50 basis points adverse change in interest rates | $ | (2,158) |
Discount rate |
Impact on fair value of 100 basis points increase | $ | (2,380) |
Impact on fair value of 200 basis points increase | $ | (5,005) |
Changes in Multifamily MSRs Measured at the Lower of Amortized Cost or Fair Value | The changes in multifamily and SBA MSRs measured at the lower of amortized cost or fair value were as follows:
| Quarter Ended September 30, |  | Nine Months Ended September 30,
(in thousands) | 2024 |  | 2023 |  | 2024 |  | 2023
Beginning balance | $ | 27,583 |  |  | $ | 32,477 |  |  | $ | 29,987 |  |  | $ | 35,256 |
Originations | 162 |  |  | 38 |  |  | 619 |  |  | 248 |
Amortization | (1,423) |  |  | (1,374) |  |  | (4,284) |  |  | (4,363) |
Ending balance | $ | 26,322 |  |  | $ | 31,141 |  |  | $ | 26,322 |  |  | $ | 31,141 |
Key economic assumptions used in measuring the initial fair value of capitalized multifamily MSRs were as follows:
| Quarter Ended September 30, |  | Nine Months Ended September 30,
(rates per annum) (1) | 2024 |  | 2023 |  | 2024 |  | 2023
Discount rate | 13.00 | % |  | 13.00 | % |  | 13.00 | % |  | 13.00 | %
(1)Based on a weighted average. For multifamily MSRs, we use a discounted cash flow valuation technique which utilizes CPRs and discount rates as significant unobservable inputs as noted in the table below. Multifamily DUS loans typically contain yield maintenance features that significantly reduce loan prepayments, resulting in a CPR of zero for valuation purposes.
| At September 30, 2024 |  | At December 31, 2023
| Range of Inputs |  | Average (1) |  | Range of Inputs |  | Average (1)
Discount Rates | 13.00% - 15.00% |  | 13.00 | % |  | 13.00% - 15.00% |  | 13.00 | %
(1) Weighted averages of all the inputs within the range.

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