XML 55 R16.htm IDEA: XBRL DOCUMENT v3.20.1
Mortgage Servicing Rights
 3 Months Ended
Mar. 31, 2020
Transfers and Servicing [Abstract]  
Mortgage Servicing Rights Mortgage Servicing Rights
(In Thousands)
The Company retains the right to service certain mortgage loans that it sells to secondary market investors. These mortgage servicing rights (“MSRs”) are recognized as a separate asset on the date the corresponding mortgage loan is sold. MSRs are amortized in proportion to and over the period of estimated net servicing income. These servicing rights are carried at the lower of amortized cost or fair value. Fair value is determined using an income approach with various assumptions including expected cash flows, prepayment speeds, market discount rates, servicing costs, and other factors. Servicing rights are evaluated for impairment based upon the fair value of the rights as compared to carrying amount. Impairment is recognized through a valuation allowance in the amount that unamortized cost exceeds fair value. If the Company later determines that all or a portion of the impairment no longer exists, a reduction of the valuation allowance may be recorded as an increase to income. Changes in valuation allowances related to servicing rights are reported in mortgage banking income on the Consolidated Statements of Income. The fair values of servicing rights are subject to significant fluctuations as a result of changes in estimated and actual prepayment speeds and default rates and losses. There were $9,571 of valuation adjustments on MSRs during the three months ended March 31, 2020, primarily arising on account of the difference between actual prepayment speeds and the Company’s assumptions with respect to prepayment speeds; no valuation adjustments were recognized during the three months ended March 31, 2019. A continued decline in mortgage interest rates and an increase in actual prepayment speeds may cause additional negative adjustments to the valuation of the Company’s MSRs.
Changes in the Company’s MSRs were as follows: 
Balance at January 1, 2020
$
53,208

Capitalization
4,945

Amortization
(2,217
)
Valuation adjustment
(9,571
)
Balance at March 31, 2020
$
46,365



Data and key economic assumptions related to the Company’s MSRs are as follows as of the dates presented:
 
 
March 31, 2020
 
December 31, 2019
 
Unpaid principal balance
$
5,051,174

 
$
4,871,155

 
 
 
 
 
 
Weighted-average prepayment speed (CPR)
13.51
%
 
11.48
%
 
Estimated impact of a 10% increase
$
(1,675
)
 
$
(2,469
)
 
Estimated impact of a 20% increase
(3,234
)
 
(4,774
)
 
 
 
 
 
 
Discount rate
9.73
%
 
9.69
%
 
Estimated impact of a 10% increase
$
(2,701
)
 
$
(2,027
)
 
Estimated impact of a 20% increase
(5,203
)
 
(3,908
)
 
 
 
 
 
 
Weighted-average coupon interest rate
4.01
%
 
4.04
%
 
Weighted-average servicing fee (basis points)
29.62

 
29.20

 
Weighted-average remaining maturity (in years)
5.65
 
6.35
 

The Company recorded servicing fees of $2,623 and $2,254 for the three months ended March 31, 2020 and 2019, respectively, which are included in “Mortgage banking income” in the Consolidated Statements of Income. The Company recorded servicing fees of $2,623 and $2,254 for the three months ended March 31, 2020 and 2019, respectively.