NOTE 12 – MORTGAGE BANKING ACTIVITIES

The Bank originates conforming single family residential mortgage loans and sells these loans in the secondary market. This activity is conducted in the name of the Bank with certain retail channels operating under different DBA or trade names such as Banc Home Loans and CS Financial. As of March 31, 2014, the mortgage operations maintained 53 producing loan production offices. 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 months ended March 31, 2014, the Bank originated $511.5 million of conforming single family residential mortgage loans and sold $531.8 million of conforming single family residential mortgage loans in the secondary market. The net gain and margin were $15.2 million and 2.96 percent, respectively, and loan origination fees were $2.1 million for the three months ended March 31, 2014. Included in the net gain is the initial capitalized value of our MSRs, which totaled $4.8 million, on loans sold to Fannie Mae, Freddie Mac and Ginnie Mae for the three months ended March 31, 2014.

During the three months ended March 31, 2013, the Bank originated $332.8 million of conforming single family residential mortgage loans and sold $331.7 million of conforming single family residential mortgage loans in the secondary market. The net gain and margin were $15.4 million and 4.61 percent, respectively, and loan origination fees were $1.8 million for the three months ended March 31, 2013. Included in the net gain is the initial capitalized value of our MSRs, which totaled $783 thousand, on loans sold to Fannie Mae and Freddie Mac for the three months ended March 31, 2013.

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. Provision for loan repurchases totaled $571 thousand and $256 thousand for the three months ended March 31, 2014 and 2013, respectively.

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


	Three months ended March 31,
	2014			2013
	(In thousands)
Balance at beginning of period	$	5,427		$	3,485
Provision for loan repurchases		571			256
Payments made for loss reimbursement on sold loans		(132	)		(243	)

Balance at end of period	$	5,866		$	3,498