The Washington Post

Mortgage lending revenue boost profits at local banks

Washington area banks had a healthy start to the year. Nine locally based institutions that reported first-quarter earnings in recent weeks posted a median 46 percent bump in profits.

As in previous quarters, many tracked gains from a decline in money set aside to cover problem loans, commonly known as loan loss provisions. Some banks also benefited from an uptick in revenue tied to mortgage lending activity.

Take Virginia Heritage Bank in Tysons Corner, where after-tax earnings jumped 88 percent to $1.4 million in part because of $1.2 million in mortgage lending income. Reston-based Access National Bank also credited mortgage banking earning for lifting profits 50.3 percent to $3.4 million.

Bankers are seeing the most activity from homeowners refinancing existing mortgages to lock in low interest rates, not as much from buyers in the market for new homes, according to data from the Mortgage Bankers Association.

A combination of strong refinancing activity and a pickup in local home buying boosted revenue in Cardinal Bank’s mortgage banking operations. The McLean bank reported $6.9 million in gains from that business in the first three months of the year, up from $3.1 million the same period a year earlier. All told, Cardinal took in $7.7 million, or 26 cents a share, in profit.

President Obama holds up a simplified loan form. Bankers are seeing the most activity from homeowners refinancing existing mortgages to lock in low interest rates, according to data from the Mortgage Bankers Association. (Saul Loeb/AFP/Getty Images)

Meanwhile, Bethesda-based EagleBank, which reported its 13th consecutive quarter of profit, logged $2.3 million in gains from the sales of residential mortgage loans. The bank pulled in $7.5 million in earnings, or 36 cents a share, a 56 percent hike over first quarter 2011.

There were some marginal declines. Net interest margins — the difference between what banks earn on loans and pay out on deposits — slipped from 4.2 percent to 4.1 at EagleBank in the last quarter.

The same was true at Sandy Spring Bank, where net interest margins dipped to 3.5 percent in the first three months, compared to 3.6 percent during the same span in 2011.

“While our net interest margin declined ... it showed an increase over the previous quarter as we continued to improve our deposit mix with continued growth in lower cost transaction accounts,” Sandy Spring chief executive Daniel J. Schrider said.

Through the three-month period ending March, the Olney-based reported robust earnings of $8.5 million, or 30 cents a share, a 16 percent increase from a year ago. Deposits climbed 3 percent to $2.6 billion, while assets rose 3 to $3.7 billion.

“The overall economy has begun to show modestly improving indicators,” Schrider said, “and our results mirror these positives as we meet the challenges of intense competition for quality loans in this extended low interest rate environment.”

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