Mortgage servicing rights

6 Months Ended

Jun. 30, 2020

Transfers and Servicing of Financial Assets [Abstract]

Mortgage servicing rights

Mortgage servicing rights:

Changes in the Company’s mortgage servicing rights were as follows for the three and six months ended June 30, 2020 and 2019:

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Carrying value at beginning of period	$	62,581	$	64,031	$	75,521	$	88,829
Capitalization	12,267		11,212		20,063		19,932
Sales	—		—		—		(29,160)
Change in fair value:
Due to pay-offs/pay-downs	(7,277)		(3,305)		(11,920)		(5,100)
Due to change in valuation inputs or assumptions	(7,063)		(5,558)		(23,156)		(8,121)
Carrying value at end of period	$	60,508	$	66,380	$	60,508	$	66,380

The following table summarizes servicing income and expense, which are included in mortgage banking income and other noninterest expense, respectively, within the Mortgage Segment operating results for the three and six months ended June 30, 2020 and 2019: 

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Servicing income:
Servicing income	$	5,113	$	4,052	$	10,131	$	8,803
Change in fair value of mortgage servicing rights	(14,340)		(8,863)		(35,076)		(13,221)
Change in fair value of derivative hedging instruments	1,102		5,063		15,970		7,540
Servicing income	(8,125)		252		(8,975)		3,122
Servicing expenses	1,992		1,485		3,393		3,229
Net servicing (loss) income(1)	$	(10,117)	$	(1,233)	$	(12,368)	$	(107)

(1) Excludes benefit of custodial service related noninterest-bearing deposits held by the Bank.

Data and key economic assumptions related to the Company’s mortgage servicing rights as of June 30, 2020 and December 31, 2019 are as follows: 

	June 30,			December 31,
	2020			2019
Unpaid principal balance	$	7,700,862		$	6,734,496
Weighted-average prepayment speed (CPR)	15.60		%	10.05		%
Estimated impact on fair value of a 10% increase	$	(3,755)		$	(2,839)
Estimated impact on fair value of a 20% increase	$	(7,170)		$	(5,474)
Discount rate	10.75		%	9.68		%
Estimated impact on fair value of a 100 bp increase	$	(2,230)		$	(3,086)
Estimated impact on fair value of a 200 bp increase	$	(4,300)		$	(5,932)
Weighted-average coupon interest rate	3.94		%	4.20		%
Weighted-average servicing fee (basis points)	28			29
Weighted-average remaining maturity (in months)	332			335

The Company hedges the mortgage servicing rights portfolio with various derivative instruments to offset changes in the fair value of the related mortgage servicing rights. See Note 11, "Derivatives" for additional information on these hedging instruments.

From time to time, the Company enters agreements to sell certain tranches of mortgage servicing rights. Upon consummation of the sale, the Company generally continues to subservice the underlying mortgage loans until they can be transferred to the purchaser. During the six months ended June 30, 2019, the Company sold $29,160 of mortgage servicing rights on $2,034,374 of serviced mortgage loans. There was not a significant gain or loss recognized in connection with the sale. During the six months ended June 30, 2020, there were no such transactions. As of June 30, 2020 and 2019, there were no loans being serviced that related to the bulk sale of mortgage servicing rights. As of June 30, 2020 and December 31, 2019, mortgage escrow deposits totaled to $149,053 and $92,610, respectively.