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LOAN SERVICING RIGHTS
 9 Months Ended
Sep. 30, 2020
Transfers and Servicing [Abstract]  
LOAN SERVICING RIGHTS
NOTE 13 – LOAN SERVICING RIGHTS

The Company sells certain residential mortgage loans and SBA loans to third parties. All such transfers are accounted for as sales and the continuing involvement in the loans sold is limited to certain servicing responsibilities. The Company has also acquired portfolios of residential mortgage, SBA and indirect automobile loans serviced for others. Loan servicing rights are initially recorded at fair value and subsequently recorded at the lower of cost or fair value and are amortized over the remaining service life of the loans, with consideration given to prepayment assumptions. Loan servicing rights are recorded in other assets on the consolidated balance sheets. The carrying value of the loan servicing rights assets is shown in the table below:
(dollars in thousands)September 30, 2020December 31, 2019
Loan Servicing Rights
Residential mortgage$114,396 $94,902 
SBA6,062 7,886 
Indirect automobile117 247 
Total loan servicing rights$120,575 $103,035 

Residential Mortgage Loans

The Company sells certain first-lien residential mortgage loans to third party investors, primarily Federal National Mortgage Association (“FNMA”), Government National Mortgage Association (“GNMA”), and Federal Home Loan Mortgage Corporation (“FHLMC”). The Company retains the related mortgage servicing rights (“MSRs”) and receives servicing fees on certain of these loans. The net gain on loan sales, MSRs amortization and recoveries/impairment, and ongoing servicing fees on the portfolio of loans serviced for others are recorded in the consolidated statements of income and comprehensive income as part of mortgage banking activity.

During the three- and nine-months ended September 30, 2020, the Company recorded servicing fee income of $8.3 million and $21.4 million, respectively. During the three- and nine-months ended September 30, 2019, the Company recorded servicing fee income of $5.9 million and $7.7 million, respectively. Servicing fee income includes servicing fees, late fees and ancillary fees earned for each period.
The table below is an analysis of the activity in the Company’s MSRs and impairment:

Three Months Ended September 30,Nine Months Ended September 30,
(dollars in thousands)2020201920202019
Residential mortgage servicing rights
Beginning carrying value, net$91,381 $11,185 $94,902 $11,814 
Additions30,376 4,962 65,735 6,661 
Addition due to acquisition— 78,855 — 78,855 
Amortization(6,231)(3,564)(16,084)(4,432)
(Impairment)/recoveries(1,130)1,460 (30,157)— 
Ending carrying value, net$114,396 $92,898 $114,396 $92,898 


Three Months Ended September 30,Nine Months Ended September 30,
(dollars in thousands)2020201920202019
Residential mortgage servicing impairment
Beginning balance$29,131 $1,460 $104 $— 
Additions1,130 — 30,157 — 
Recoveries— (1,460)— — 
Ending balance$30,261 $— $30,261 $— 

The fair value of MSRs, key metrics, and the sensitivity of the fair value to adverse changes in model inputs and/or assumptions are summarized below:

(dollars in thousands)September 30, 2020December 31, 2019
Residential mortgage servicing rights
Unpaid principal balance of loans serviced for others$12,185,383 $8,469,600 
Composition of residential loans serviced for others:
FHLMC21.97 %25.87 %
FNMA62.89 %65.35 %
GNMA15.14 %8.78 %
Total100.00 %100.00 %
Weighted average term (months)341341
Weighted average age (months)2333
Modeled prepayment speed21.03 %14.41 %
Decline in fair value due to a 10% adverse change(6,249)(4,455)
Decline in fair value due to a 20% adverse change(11,924)(8,520)
Weighted average discount rate9.67 %9.49 %
Decline in fair value due to a 10% adverse change(3,861)(3,557)
Decline in fair value due to a 20% adverse change(7,154)(6,810)

SBA Loans

All sales of SBA loans, consisting of the guaranteed portion, are executed on a servicing retained basis. These loans, which are partially guaranteed by the SBA, are generally secured by business property such as real estate, inventory, equipment and accounts receivable. The net gain on SBA loan sales, amortization and impairment/recoveries of servicing rights, and ongoing servicing fees are recorded in the consolidated statements of income and comprehensive income as part of other noninterest income.

During the three- and nine-months ended September 30, 2020, the Company recorded servicing fee income of $1.1 million and $3.3 million, respectively. During the three- and nine-months ended September 30, 2019, the Company recorded servicing fee income of $1.2 million and $2.4 million, respectively. Servicing fee income includes servicing fees, late fees and ancillary fees earned for each period.
The table below is an analysis of the activity in the Company’s SBA loan servicing rights and impairment:

Three Months Ended September 30,Nine Months Ended September 30,
(dollars in thousands)2020201920202019
SBA servicing rights
Beginning carrying value, net$5,241 $3,110 $7,886 $3,012 
Additions499 155 974 783 
Addition due to acquisition— 5,242 — 5,242 
Purchase accounting adjustment— — (1,214)— 
Amortization(396)(167)(1,175)(556)
(Impairment)/recovery718 — (409)(141)
Ending carrying value, net$6,062 $8,340 $6,062 $8,340 


Three Months Ended September 30,Nine Months Ended September 30,
(dollars in thousands)2020201920202019
SBA servicing impairment
Beginning balance$1,268 $— $141 $— 
Additions— 141 409 141 
Recoveries(718)— — — 
Ending balance$550 $141 $550 $141 


(dollars in thousands)September 30, 2020December 31, 2019
SBA servicing rights
Unpaid principal balance of loans serviced for others$347,964 $339,247 
Weighted average life (in years)3.373.81
Modeled prepayment speed19.68 %17.86 %
Decline in fair value due to a 10% adverse change(391)(299)
Decline in fair value due to a 20% adverse change(739)(570)
Weighted average discount rate6.61 %11.47 %
Decline in fair value due to a 100 basis point adverse change(169)(144)
Decline in fair value due to a 200 basis point adverse change(329)(280)

Indirect Automobile Loans

The Company acquired a portfolio of indirect automobile loans serviced for others. These loans, or portions of loans, were sold on a servicing retained basis. Amortization and impairment/recoveries of servicing rights, and ongoing servicing fees are recorded in the consolidated statements of income and comprehensive income as part of other noninterest income. The Company is not actively originating or selling indirect automobile loans.

Three Months Ended September 30,Nine Months Ended September 30,
(dollars in thousands)2020201920202019
Indirect automobile servicing rights
Beginning carrying value, net$162 $— $247 $— 
Addition due to acquisition— 777 — 777 
Amortization(45)(125)(130)(125)
Ending carrying value, net$117 $652 $117 $652 
During the three- and nine-months ended September 30, 2020, the Company recorded servicing fee income of $259,000 and $1.5 million, respectively. During the three- and nine-months ended September 30, 2019, the Company recorded servicing fee income of $1.1 million. Servicing fee income includes servicing fees, late fees and ancillary fees earned for each period.