Cole Taylor Mortgage retail banking presence in June through its addition of seven branches and part of the senior management team previously associated with Amera Mortgage.
The company, which had primarily been a third-party originator, should now have more focus on the retail side, company president Willie Newman said, adding it “is just trying to make sure we have all of our bases covered from a channel perspective.”
It also opened an office in Georgia during the quarter, giving it three there.
Cole Taylor Mortgage reported net income of $7.8 million for the quarter, up from $5 million in the first quarter. Parent company Taylor Capital Group Inc.’s net income for the second quarter was $14.2 million, compared to $9.5 million for the first quarter.
Cole Taylor added nearly $2 billion to its mortgage servicing rights portfolio between the first and second quarters, as the company not only has started to retain the MSRs on “substantially all” of its production, but since last fall it has been a buyer as well, said Newman.
In a three-month period, the MSR portfolio went to $4 billion from $2.4 billion.
The growth in MSRs is part of the diversification of income and sources of revenue theme that Taylor Capital has, as it looks to rely less on net interest income. That diversified business model contributed a record $65.2 million of revenue in the period. Mortgage banking revenue increased 31.3% compared to the first quarter.
“We found sufficient supply out there at reasonable prices,” Newman said, so it has taken the opportunity to grow the portfolio both ways.
Newman said gain on sale margins improved and the company is starting to deliver more loans into the secondary market for securitization.
Servicing revenues were also double from the first quarter, but that piece only makes up 10% of Cole Taylor mortgage’s revenue. The counter-cyclical nature of servicing versus production should be beneficial for the company, he said.
Loan volume was $960 million, up from $895 million for the first quarter. Purchase volume made up 35% of second quarter production, versus 21% in the first quarter.
Another reason why the company is bullish on keeping its own production in its MSR portfolio is the high credit score/low loan-to-value loans originated during the period, 75.8% and 73.9% respectively. Newman added the purchased MSRs are also of recent vintage.
As of June 30, it had a mortgage pipeline of $911 million.
Cole Taylor Mortgage will continue to grow its MSRs, but the company does not project what the rate of growth will be going forward.
It also would like to open more retail branches; right now it is making sure the people and offices which came from Amera are blending in to Cole Taylor Mortgage. But one of the objectives of bringing that management team in was to help Cole Taylor Mortgage grow its retail business, Newman said.
It is currently operating in 32 states, with retail offices in nine states.
