MORTGAGE SERVICING RIGHTS

9 Months Ended

Sep. 30, 2019

MSRs

Mortgage Servicing Rights

Mortgage Servicing Rights

NOTE 4—MORTGAGE SERVICING RIGHTS

Mortgage servicing rights (“MSRs”) represent the carrying value of the commercial servicing rights retained by the Company for mortgage loans originated and sold and MSRs acquired from third parties. The initial capitalized amount is equal to the estimated fair value of the expected net cash flows associated with the servicing rights. MSRs are amortized using the interest method over the period that servicing income is expected to be received. The Company has one class of MSRs.

The fair values of the MSRs at September 30, 2019 and December 31, 2018 were $884.4 million and $858.7 million, respectively. The Company uses a discounted static cash flow valuation approach, and the key economic assumption is the discount rate. For example, see the following sensitivities:

The impact of a 100-basis point increase in the discount rate at September 30, 2019 is a decrease in the fair value of $27.5 million.

The impact of a 200-basis point increase in the discount rate at September 30, 2019 is a decrease in the fair value of $53.0 million.

These sensitivities are hypothetical and should be used with caution. These hypothetical scenarios do not include interplay among assumptions and are estimated as a portfolio rather than for individual assets.

Activity related to capitalized MSRs for the three and nine months ended September 30, 2019 and 2018 is shown in the table below:

	For the three months ended				For the nine months ended
	September 30,				September 30,
Roll Forward of MSRs (in thousands)	2019		2018		2019		2018
Beginning balance	$	688,027	$	638,914	$	670,146	$	634,756
Additions, following the sale of loan		48,198		46,107		143,995		119,588
Purchases		—		—		—		1,814
Amortization		(34,531)		(33,157)		(103,001)		(98,119)
Pre-payments and write-offs		(4,344)		(4,676)		(13,790)		(10,851)
Ending balance	$	697,350	$	647,188	$	697,350	$	647,188

The following table summarizes the gross value, accumulated amortization, and net carrying value of the Company’s MSRs as of September 30, 2019 and December 31, 2018:

Components of MSRs (in thousands)	September 30, 2019		December 31, 2018
Gross Value	$	1,168,058	$	1,100,439
Accumulated amortization		(470,708)		(430,293)
Net carrying value	$	697,350	$	670,146

The expected amortization of MSRs recorded as of September 30, 2019 is shown in the table below. Actual amortization may vary from these estimates.

	Expected
(in thousands)	Amortization
Three Months Ending December 31,
2019	$	33,863
Year Ending December 31,
2020	$	127,477
2021		114,030
2022		98,590
2023		86,425
2024		72,868
Thereafter		164,097
Total	$	697,350