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Mortgage Servicing Rights (MSRs)
 12 Months Ended
Dec. 31, 2019
Disclosures Pertaining to Servicing Assets and Servicing Liabilities [Abstract]  
Mortgage Servicing Rights (MSRs) Mortgage Servicing Rights (“MSRs”)

Following is a summary of the changes in the carrying value of MSRs, accounted for at fair value, for the years ended December 31, 2019, 2018 and 2017:

 
 
December 31,
 
December 31,
 
December 31,
(Dollars in thousands)
 
2019
 
2018
 
2017
Balance at beginning of year
 
$
75,183

 
$
33,676

 
$
19,103

Additions from loans sold with servicing retained
 
44,943

 
33,071

 
18,341

Additions from acquisitions
 
408

 
13,806

 
—

Estimate of changes in fair value due to:
 
 
 
 
 
 
Payoffs and paydowns
 
(20,118
)
 
(5,039
)
 
(2,595
)
Changes in valuation inputs or assumptions
 
(14,778
)
 
(331
)
 
(1,173
)
Fair value at end of year
 
$
85,638

 
$
75,183

 
$
33,676

Unpaid principal balance of mortgage loans serviced for others
 
$
8,243,251

 
$
6,545,870

 
$
2,929,133



The Company recognizes MSR assets upon the sale of residential real estate loans to external third parties when it retains the obligation to service the loans and the servicing fee is more than adequate compensation. The initial recognition of MSR assets from loans sold with servicing retained and subsequent changes in fair value of all MSRs are recognized in mortgage banking revenue. MSRs are subject to changes in value from actual and expected prepayment of the underlying loans. The Company did not specifically hedge the value of its MSRs in 2018 or 2017. Starting in 2019, the Company periodically purchased options for the right to purchase securities not currently held within the banks' investment portfolio and entered into interest rate swaps in which the Company elected to not designate such derivatives as hedging instruments. These option and swap transactions are designed primarily to economically hedge a portion of the fair value adjustments related to MSRs. For more information regarding such economic hedges in 2019, see Note 21, "Derivative Financial Instruments" in Item 8 of this report.

Fair values are determined by using a discounted cash flow model that incorporates the objective characteristics of the portfolio as well as subjective valuation parameters that purchasers of servicing would apply to such portfolios sold into the secondary market. The subjective factors include loan prepayment speeds, discount rates, servicing costs and other economic factors. The Company uses a third party to assist in the valuation of MSRs.