CSB Mortgage, a unit of the $534-million-asset Cortland, has already stopped accepting residential mortgage loans from brokers, the company disclosed in a regulatory filing last Friday. A group of employees will be retained to wind down the unit's operations and to process existing broker-originated loans, Cortland said.
Because of rising interest rates, "wholesale volume has dramatically declined during the third quarter and is not expected to substantially improve through year end," the filing said. Cortland is leaving the business "to streamline its mortgage operations and intensify its focus on its commercial and business banking lending channels and its retail banking offices in its local footprint."
Wholesale originations constituted up to 90% of the volume generated by CSB Mortgage at the peak of the business, the filing said. The wholesale mortgage operations brought Cortland gains of more than $1.3 million in the first half of this year and $1.8 million in 2012. Cortland's bank earned $1.7 million during the first half of 2013, according to the Federal Deposit Insurance Corp.
Cortland said it will incur less than $400,000 in costs associated with closing down its wholesale mortgage operations.
"By streamlining operations and moderating the volume of the mortgage business through the retail channel, the company expects to reduce the variability in quarterly operating results, thereby attaining consistency and predictability of earnings," James Gasior, Cortland's president and chief executive, said in a press release.