MORTGAGE SERVICING RIGHTS

3 Months Ended

Mar. 31, 2020

MSRs

Mortgage Servicing Rights

Mortgage Servicing Rights

NOTE 3—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 March 31, 2020 and December 31, 2019 were $868.4 million and $910.5 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 March 31, 2020 is a decrease in the fair value of $25.8 million.

The impact of a 200-basis point increase in the discount rate at March 31, 2020 is a decrease in the fair value of $50.0 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 months ended March 31, 2020 and 2019 is shown in the table below:

	For the three months ended
	March 31,
Roll Forward of MSRs (in thousands)	2020		2019
Beginning balance	$	718,799	$	670,146
Additions, following the sale of loan		44,214		47,102
Amortization		(35,218)		(34,203)
Pre-payments and write-offs		(5,309)		(5,099)
Ending balance	$	722,486	$	677,946

The following table summarizes the gross value, accumulated amortization, and net carrying value of the Company’s MSRs as of March 31, 2020 and December 31, 2019:

Components of MSRs (in thousands)	March 31, 2020		December 31, 2019
Gross Value	$	1,221,877	$	1,201,542
Accumulated amortization		(499,391)		(482,743)
Net carrying value	$	722,486	$	718,799

The expected amortization of MSRs recorded as of March 31, 2020 is shown in the table below. Actual amortization may vary from these estimates.

	Expected
(in thousands)	Amortization
Nine Months Ending December 31,
2020	$	101,336
Year Ending December 31,
2021	$	124,191
2022		109,526
2023		96,770
2024		83,594
2025		69,674
Thereafter		137,395
Total	$	722,486