The gain on sale of loans increased to $17.88 million for the quarter ended December 31, 2012 from $5.90 million in the comparable quarter last year, reflecting the impact of a higher loan sale volume and a higher average loan sale margin. Total loan sale volume, which includes the net change in commitments to extend credit on loans to be held for sale, was $931.6 million in the quarter ended December 31, 2012, up 63 percent from $570.3 million in the comparable quarter last year. The average loan sale margin for mortgage banking was 192 basis points for the quarter ended December 31, 2012, compared to 114 basis points in the comparable quarter last year. The gain on sale of loans includes an unfavorable fair-value adjustment on loans held for sale and derivative financial instruments (commitments to extend credit, commitments to sell loans, commitments to sell mortgage-backed securities, and option contracts) that amounted to a net loss of $(5.07) million in the second quarter of fiscal 2013, compared to an unfavorable fair-value adjustment that amounted to a net loss of $(4.72) million in the same period last year. The gain on sale of loans for the second quarter of fiscal 2013 was reduced by a $1.28 million recourse provision for loans sold that are subject to repurchase, compared to a $672,000 recourse provision for loans sold that are subject to repurchase in the comparable quarter of fiscal 2012. This increase in the recourse provision includes the December 2012 accrual for a global settlement with the Bank's largest legacy loan investor, which will eliminate all past, current and future repurchase claims from this particular investor. This investor purchased approximately 39 percent of the Company's total loan sale volume from January 1, 2005 through December 31, 2011 and has accounted for approximately 64 percent of all recourse claims paid. The Company expects to execute the agreement and remit the settlement on or before January 31, 2013. As of December 31, 2012, the recourse reserve for loans sold that are subject to repurchase was $7.8 million (inclusive of the global settlement), an increase from $5.3 million at December 31, 2011 and $6.2 million at June 30, 2012.
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