MORTGAGE BANKING ACTIVITIES

The Bank originates conforming single family residential mortgage loans and sells these loans in the secondary market. The amount of net gain on mortgage banking activities is a function of mortgage loans originated for sale and the fair values of these loans and derivatives. Net gain on mortgage banking activities includes mark to market pricing adjustments on loan commitments and forward sales contracts, and initial capitalized value of mortgage servicing rights (MSRs).

During the three and nine months ended September 30, 2014, the Bank originated $801.5 million and $2.03 billion, respectively, and sold $798.3 million and $1.98 billion of conforming single family residential mortgage loans in the secondary market, respectively. The net gain and margin were $23.8 million and 2.97 percent, respectively, and loan origination fees were $3.1 million for the three months ended September 30, 2014. For the nine months ended September 30, 2014, the net gain and margin were $62.2 million and 3.07 percent, respectively, and loan origination fees were $8.2 million. Included in the net gain is the initial capitalized value of our MSRs, which totaled $7.3 million and $17.9 million, on loans sold to Fannie Mae, Freddie Mac and Ginnie Mae for the three and nine months ended September 30, 2014, respectively.

During the three and nine months ended September 30, 2013, the Bank originated $521.0 million and $1.39 billion, respectively, and sold $517.5 million and $1.25 billion of conforming single family residential mortgage loans in the secondary market, respectively. The net gain and margin were $12.5 million and 2.39 percent, respectively, and loan origination fees were $3.8 million for the three months ended September 30, 2013. For the nine months ended September 30, 2013, the net gain and margin were $44.1 million and 3.18 percent, respectively, and loan origination fees were $8.8 million. Included in the net gain is the initial capitalized value of our MSRs, which totaled $2.8 million and $5.4 million, on loans sold to Fannie Mae and Freddie Mac for the three and nine months ended September 30, 2013, respectively.

Mortgage Loan Repurchase Obligations

In addition to net gain on mortgage banking activities, the Company records provisions to the representation and warranty reserve representing our initial estimate of losses on probable mortgage repurchases or loss reimbursements. Total provision for loan repurchases totaled $1.6 million and $375 thousand for the three months ended September 30, 2014 and 2013, respectively, and $3.1 million and $1.4 million for the nine months ended September 30, 2014 and 2013, respectively. Of these total provision for loan repurchases, the Company provided initial provision for loan repurchases of $402 thousand and $1.0 million against net gain on mortgage banking activities during the three and nine months ended September 30, 2014.

The following table presents a summary of activity in the reserve for loss on repurchased loans for the periods indicated:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
	(In thousands)
Balance at beginning of period	$	6,174		$	3,974		$	5,427		$	3,485
Provision for loan repurchases	1,556			375			3,094			1,363
Payments made for loss reimbursement on sold loans	(685		)	(67		)	(1,476		)	(566		)
Balance at end of period	$	7,045		$	4,282		$	7,045		$	4,282