MSRs Staging Big Comeback.

New York -- Higher rates may be bad news for the banking industry at large, but at least they can take some consolation in the performance of their mortgage subsidiaries.

Among firms reporting third-quarter results before MSN's deadline, many were able to recapture some previously recorded impairment to their mortgage servicing right valuations. Moreover, loan origination volume remained strong, in large measure because of strong pipelines of loan applications entering the third quarter.

Regions Financial Corp., for instance, recaptured $32 million in MSR value during the quarter. That helped offset some potential drags on the company's earnings report, including a $21 million loss on the sale of $1.4 billion of securities. Additionally, Regions recorded an $11 million loss on early retirement of $600 million of Federal Home Loan Bank advances. That sale and early retirement of FHLB debt should yield a benefit in net interest income of $13 million to $15 million over the next year, the bank said.

Overall, Regions said that its mortgage banking profit rose substantially, buoyed in large part by the strength of EquiFirst, its nonconforming mortgage subsidiary.

EquiFirst earned $17.3 million in the third quarter, up from $9.6 million in the second quarter. Origination volume was steady at $2.5 billion.

But that strength could weaken in the fourth quarter. While saying he is pleased by the bank's ability to take advantage of premium pricing, CEO Jackson Moore advised in the company's earnings release that market conditions are changing.

"As we move into the fourth quarter, we are beginning to see more normal pricing levels as well as industrywide competitive pressures," he said.