Notes to Consolidated Financial Statements
for the Three Years in the Period Ended June 30, 1999
4. MORTGAGE BANKING ACTIVITIES
At June 30, 1999, 1998 and 1997, the Bank was servicing loans
for others amounting to $461.5 million, $385.2 million and
$298.0 million, respectively. Gain on sales of loans, net of originated
mortgage servicing rights, was $2.1 million, $2.3 million and
$1.3 million, for the years ended June 30, 1999, 1998 and 1997.
Servicing loans for others generally consists of collecting mortgage
payments, maintaining escrow accounts, disbursing payments to
investors and foreclosure processing. Loan servicing income includes
servicing fees from investors and certain charges collected from
borrowers, such as late payment fees.
The Bank is obligated to repurchase certain loans sold to and
serviced for others which become delinquent as defined by the
various agreements. At June 30, 1999 and 1998, these obligations
were limited to approximately $160,000 and $539,000, respectively.
The following analysis reflects the changes in mortgage servicing
rights (MSRs) acquired: (in thousands)
The carrying value approximates fair value at June 30, 1999 and 1998.
Fair value is estimated by discounting the net servicing income to be
received over the estimated servicing term using a current market
rate. The significant risk characteristics of the underlying loans used
to stratify MSRs for impairment measurement were term and rate of
note. The valuation allowance as of June 30, 1999 and 1998, was
$137,000 and $244,000 respectively.
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