MORTGAGE BANKING ACTIVITIES

The Bank originates conforming single family residential mortgage loans and sells these loans in the secondary market. The amount of net revenue on mortgage banking activities is a function of mortgage loans originated for sale and the fair values of these loans and related derivatives. Net revenue 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, 2015, the Bank originated $1.13 billion and $3.40 billion, respectively, and sold $1.19 billion and $3.33 billion, respectively, of conforming single family residential mortgage loans in the secondary market. The net gain and margin were $32.9 million and 2.92 percent, respectively, and loan origination fees were $4.1 million for the three months ended September 30, 2015. For the nine months ended September 30, 2015, the net gain and margin were $102.1 million and 3.00 percent, respectively, and loan origination fees were $12.2 million. Included in the net gain is the initial capitalized value of our MSRs, which totaled $11.6 million and $35.1 million, on loans sold to Fannie Mae, Freddie Mac and Ginnie Mae for the three and nine months ended September 30, 2015, respectively.

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, respectively, of conforming single family residential mortgage loans in the secondary market. 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 and Freddie Mac for the three and nine months ended September 30, 2014, respectively.

Mortgage Loan Repurchase Obligations

In addition to net revenue 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 was $716 thousand and $1.6 million for the three months ended September 30, 2015 and 2014, respectively, and $3.6 million and $3.1 million for the nine months ended September 30, 2015 and 2014, respectively. Of these total provisions for loan repurchases, the Company recorded an initial provision for loan repurchases of $537 thousand and $402 thousand for the three months ended September 30, 2015 and 2014, respectively, and $1.6 million and $1.0 million for the nine months ended September 30, 2015 and 2014, respectively, against net revenue on mortgage banking activities.

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



	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
	(In thousands)
Balance at beginning of period	$	9,411		$	6,174		$	8,303		$	5,427
Provision for loan repurchases	716			1,556			3,617			3,094
Payments made for loss reimbursement on sold loans	(1,029		)	(685		)	(2,822		)	(1,476		)
Balance at end of period	$	9,098		$	7,045		$	9,098		$	7,045

In addition to the reserve for losses on repurchased loans at September 30, 2015, the Company may receive repurchase demands in future periods that could be material to the Company's financial position or results of operations. No such demands were received during the three or nine months ended September 30, 2015 that had not already been reserved for at September 30, 2015.