Banks Report Strong 1Q Originations and $6B in Buybacks

Retail single-family originations by FDIC-insured institutions held fairly steady in the first quarter compared to the prior quarter, but loan buybacks more than doubled in the first quarter, according to the Federal Deposit Insurance Corp.

The FDIC reported Wednesday that federally insured banks and thrifts made $7.8 billion in noninterest income in the first quarter from the sale, securitization and servicing of single-family loans, compared to $8.1 billion in the fourth quarter and $8 billion a year ago.

However, loan repurchases and indemnifications totaled $6.1 billion in the first quarter, up from $2.9 billion in the prior quarter. The FDIC call report data show that most of the loan buybacks fell on Bank of America NA, which paid $3.76 billion in representation and warranty claims on bad loans. Wells Fargo Bank NA was second in paying out $516 million in R&W claims in the first quarter.

But this didn’t stop the banking industry from reporting record earnings of $40 billion in the first quarter, up $5.5 billion from a year ago. The major banks maintain reserves for loan buybacks, so the $6.1 billion hit didn’t impact earnings directly. The banks held $10.6 billion in R&W reserves as of March 31.

Meanwhile, retail originations of single-family loans totaled $193.8 billion in the first quarter, down 4.5% from the prior quarter.

Wholesale originations fell by nearly 10% from the fourth quarter to $264.9 billion in the first quarter.

Reporting banks and thrifts sold $482.6 billion in single-family loans to investors and secondary market agencies during the first quarter.

The FDIC only requires insured depositories that originate more than $10 million of residential loans in the quarter or have $1 billion or more in assets to report mortgage origination data. In the first quarter, 1,178 banks and thrifts reported origination data compared to 1,143 in the fourth quarter.

There are over 7,000 FDIC-insured institutions.