Mortgage Banking Activities

9 Months Ended

Sep. 30, 2021

MORTGAGE BANKING ACTIVITIES

The following table presents the components of residential loan fee income for the three and nine months ended September 30, 2021 and 2020:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net gain realized on sale of residential loans held for sale	$	22,761	$	29,771	$	74,604	$	59,328
Net change in fair value recognized on residential loans held for sale	(1,381)		1,300		(6,168)		3,190
Net change in fair value recognized on interest rate lock commitments	(1,288)		1,149		(6,356)		4,788
Net change in fair value recognized on mandatory and best efforts forward sales contracts	(1,017)		(3,717)		6,847		(11,167)
Mortgage banking fees	2,248		2,723		7,777		5,749
Residential loan fee income	$	21,323	$	31,226	$	76,704	$	61,888

As part of its mortgage banking activities, the Company enters into interest rate lock commitments, which are commitments to originate loans where the interest rate on the loan is determined prior to funding and the clients have locked into that interest rate. The Company then locks in the loan and interest rate with an investor and commits to deliver the loan if settlement occurs (“best efforts”) or commits to deliver the locked loan in a binding (“mandatory”) delivery program with an investor. It is the Company’s practice to enter into forward commitments for the future delivery of residential mortgage loans when interest rate lock commitments are entered into in order to economically hedge the effect of changes in interest rates resulting from its commitments to fund the loans. Interest rate lock commitments and mandatory commitments to deliver loans to investors are considered derivatives.

At September 30, 2021 and December 31, 2020, the Company had interest rate lock commitments of $178,202 and $398,722, mandatory forwards contracts of $204,500 and $514,000, and forward sales contracts of $17,447 and $19,803, respectively. The fair value of these mortgage banking derivatives was reflected by a total derivative asset of $2,613 and $7,620 and a total derivative liability of $379 and $4,467 at September 30, 2021 and December 31, 2020, respectively. Fair values were estimated based on changes in mortgage interest rates from the date of the commitments. Changes in the fair values of these mortgage banking derivatives are included in residential loan fee income in the Consolidated Statements of Income.

The net gains (losses) relating to free-standing derivative instruments used for risk management at September 30, 2021 and December 31, 2020 are summarized below:


	September 30, 2021		December 31, 2020
Mandatory forward sales contracts	$	960	$	(4,455)
Best efforts forward sales contracts	30		55
Interest rate lock commitments	1,244		7,553

The following table reflects the amount and fair value of mortgage banking derivatives included in the Consolidated Balance Sheets at September 30, 2021 and December 31, 2020:


	September 30, 2021				December 31, 2020
	Notional Amount		Fair Value		Notional Amount		Fair Value
Included in other assets:
Interest rate lock commitments	$	128,915	$	1,579	$	390,676	$	7,565
Mandatory forward sales contracts	181,000		1,004		—		—
Best efforts forward sales contracts	17,447		30		19,803		55
Included in other liabilities:
Interest rate lock commitments	49,287		335		8,046		12
Mandatory forward sales contracts	23,500		44		514,000		4,455