Independent Banker - December 2017 - 61

The more challenging market for
homebuyers is taking a toll on mortgage
originations. Glacier expects
to do about $1.2 billion in mortgage
originations this year, which is down
slightly compared with the nearly
$1.4 billion the company originated
in 2016.
" The consensus is that the market
is soft right now for new originations, "
agrees Joe Nelson, senior vice
president and mortgage division
manager at Chain Bridge Bank, N.A.,
a $500 million-asset bank based in
McLean, Va. The amount of inbound
activity Chain Bridge is seeing in
terms of phone calls and inquiries has
slowed. In fact, the community bank's
third-quarter origination volume is
the lowest it has experienced in three
years, Nelson says.
Easing credit standards?
The Fannie Mae survey also reported
a continued
uptick in
reports of
easing credit
standards
across all
loan types as
lenders work
harder to win
business. During
Q3 2017,
26 percent of
lenders reported that they had eased
standards on GSE-eligible loans, 22
percent on non-GSE eligible and 15
percent on government mortgages.
Not everyone agrees. " I don't think
we are seeing a big shift in easing of
credit standards, " says Peterson. " We
are certainly not easing our credit
standards. We do see super-aggressive
pricing, and I would anticipate
that will create some pressure on
margins. " While Glacier has not yet
dropped its pricing, Peterson says
it may be " forced " to do so at some
point if the more competitive rates
start to have an impact on business.
Certainly, there are always lenders
that relax underwriting or become
more aggressive when the market
slows in order to maintain loan production
volume, notes Nelson. " We
don't compromise on our margins or
on underwriting standards, whether
it is good times or bad, " he says.
One advantage for community
banks is that they are driven more by
the balance sheet, whereas mortgage
companies are driven solely by fees.
" So we are not prone to the stress
of a decline like a mortgage origination
shop, " says Nelson. " Our bank
has $125 million in residential loans
" We are certainly not easing our
credit standards. We do see superaggressive
pricing, and I would
anticipate that will create some
pressure on margins. "
-PAUL PETERSON, GLACIER BANCORP
on our books that are producing
interest every single day. So it is a different
formula. "
Customers first
Community banks are relying on
their existing customer base and
relationships with local brokers
74%
Among survey respondents
reporting declining profi t
margins, almost threequarters
cited increased
competition as a cause.
and developers to sustain their mortgage
business. " We have some very
loyal customers, and I do think we get
fi rst swing at a lot of transactions, "
says Nelson.
Chain Bridge Bank has been originating
mortgages since the bank fi rst
opened in 2007 and established a
mortgage division in 2012. The bank
currently produces about $70 million
in residential mortgages annually,
including both new purchases and
refi nancing activity. Chain Bridge
attempts to maintain full banking
relationships with all of its clients.
Another strategy for banks amid
fl at or lower origination activity is to
focus on managing costs as a means to
improve profi t margins. For example,
Glacier is continuing to grow by
acquiring smaller banks and is able to
leverage existing back-offi ce support
systems across that growing footprint.
" We are always looking at ways to continuously
improve our process, " says
Peterson, " and I think we have some
opportunities for process optimization
and ways that we can be more effi cient
and effective so that we can manage
our costs and our capacity. "
Beth Mattson-Teig is a business writer
in Minnesota.
independentbanker.org
ICBA Independent Banker 57
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Independent Banker - December 2017

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