Refinancing Storm Takes a Toll on RBC.

Standard & Poor's has placed RBC Centura Bank, Rocky Mount, N.C., on "CreditWatch" with negative implications, citing "operational disruptions" at its mortgage banking subsidiary.

RBC Mortgage, which is based in Chicago, saw first-quarter production fall by 56% to $4.2 billion. Among the top-25 lenders in the U.S., RBC Mortgage had the second-largest production decline, according to figures compiled by this newspaper.

In a statement, S&P noted, "In the past three quarters RBC Centura has experienced poor earnings, reflecting operational disruptions at its mortgage banking subsidiary and lower returns on the investment portfolio, which has been shifted to lower risk instruments."

S&P analyst Tanya Azarchs told Mortgage Servicing News that the mortgage company's problems are "operational in nature," noting that it was caught by surprise by last year's fierce boom in refinancings.

"RBC was swamped," she said. "They were unable to handle the spike in volume. They had a huge backlog in loan documentation. They were unable to deliver loans in a timely and effective manner."

She added, "In particular they had hedging issues."

According to company documents, the mortgage unit's revenue peaked in the third quarter of last year at $61 million. In that quarter, RBC Mortgage funded a record $7.9 billion in home mortgages.