Capitalized servicing assets

12 Months Ended

Dec. 31, 2022

Transfers and Servicing [Abstract]

Capitalized servicing assets

7. Capitalized servicing assets

Changes in capitalized servicing assets were as follows:

	Residential Mortgage Loans									Commercial Mortgage Loans
For the Year Ended December 31,	2022			2021			2020			2022			2021			2020
	(In thousands)
Beginning balance	$	241,053		$	231,204		$	244,411		$	132,604		$	133,429		$	130,636
Originations		6,998			65,723			45,101			24,401			33,068			29,306
Acquired in business    combination		12,133			—			—			—			—			—
Amortization		(65,849	)		(55,874	)		(58,308	)		(30,614	)		(33,893	)		(26,513	)
		194,335			241,053			231,204			126,391			132,604			133,429
Valuation allowance		—			(24,000	)		(30,000	)		—			—			—
Ending balance, net	$	194,335		$	217,053		$	201,204		$	126,391		$	132,604		$	133,429

Residential mortgage loans serviced for others were $22.4 billion at December 31, 2022, $23.2 billion at December 31, 2021 and $26.3 billion at December 31, 2020. Excluded from residential mortgage loans serviced for others were loans sub-serviced for others of $96.0 billion, $74.7 billion and $68.1 billion at December 31, 2022, 2021, and 2020, respectively. In conjunction with the acquisition of People's United on April 1, 2022, the Company acquired servicing rights for residential real estate loans that had outstanding principal balances at that date of $1.1 billion. The fair value of such servicing rights at that date was $12 million. Commercial mortgage loans serviced for others were $22.2 billion at December 31, 2022, $20.2 billion at December 31, 2021 and $18.9 billion at December 31, 2020. Excluded from commercial mortgage loans serviced for others were loans sub-serviced for others of $3.8 billion at December 31, 2022, $3.5 billion at December 31, 2021 and $3.3 billion at December 31, 2020.

The estimated fair value of capitalized residential mortgage loan servicing assets was approximately $336 million at December 31, 2022 and $257 million at December 31, 2021. The fair value of capitalized residential mortgage loan servicing assets was estimated using weighted-average discount rates of 12.29% and 9.8% at December 31, 2022 and 2021, respectively, and contemporaneous prepayment assumptions that vary by loan type. At December 31, 2022 and 2021, the discount rate represented a weighted-average option-adjusted spread (“OAS”) of 881 basis points (hundredths of one percent) and 894 basis points, respectively, over market implied forward London Interbank Offered Rates (“LIBOR”). The estimated fair value of capitalized residential mortgage loan servicing rights may vary significantly in subsequent periods due to changing interest rates and the effect thereof on prepayment speeds. The estimated fair value of capitalized commercial mortgage loan servicing assets was approximately $156 million at December 31, 2022 and $160 million at December 31, 2021. An 18% discount rate was used to estimate the fair value of capitalized commercial mortgage loan servicing rights at December 31, 2022 and 2021 with no prepayment assumptions because, in general, the servicing agreements allow the Company to share in customer loan prepayment fees and thereby recover the remaining carrying value of the capitalized servicing rights associated with such loan. The Company’s ability to realize the carrying value of capitalized commercial mortgage servicing rights is more dependent on the borrowers’ abilities to repay the underlying loans than on prepayments or changes in interest rates.

The key economic assumptions used to determine the fair value of significant portfolios of capitalized servicing rights at December 31, 2022 and the sensitivity of such value to changes in those assumptions are summarized in the table that follows. Those calculated sensitivities are hypothetical and actual changes in the fair value of capitalized servicing rights may differ significantly from the amounts presented herein. The effect of a variation in a particular assumption on the fair value of the servicing rights is calculated without changing any other assumption. In reality, changes in one factor may result in changes in another which may magnify or counteract the sensitivities. The changes in assumptions are presumed to be instantaneous.

	Residential			Commercial
	(Dollars in thousands)
Weighted-average prepayment speeds		7.27	%
Impact on fair value of 10% adverse change	$	(8,471	)
Impact on fair value of 20% adverse change		(16,417	)
Weighted-average OAS		8.81	%
Impact on fair value of 10% adverse change	$	(10,226	)
Impact on fair value of 20% adverse change		(19,830	)
Weighted-average discount rate					18.00	%
Impact on fair value of 10% adverse change				$	(6,467	)
Impact on fair value of 20% adverse change					(12,498	)