Transfers of Financial Assets

12 Months Ended

Dec. 31, 2019

The Company sells financial assets in the normal course of business, primarily residential mortgage loans sold to government-sponsored enterprises through established programs and securitization. Residential mortgage origination fees, adjustments for changes in fair value, and gain or loss on loans sold are included as mortgage banking activities in the consolidated statement of income.

The Company may be required to repurchase a loan in the event of certain breaches of the representations and warranties, or in the event of default of the borrower within 90 days of sale, as provided for in the sale agreements. A reserve for loan repurchases provides for estimated losses pertaining to the potential repurchase of loans associated with the Company's mortgage banking activities. The reserve reflects loan repurchase requests received by the Company for which management evaluates the identity of counterparty, the vintage of the loans sold, the amount of open repurchase requests, specific loss estimates for each open request, the current level of loan losses in similar vintages held in the residential loan portfolio, and estimated recoveries on the underlying collateral. The reserve also reflects management’s expectation of losses from loan repurchase requests for which the Company has not yet been notified. The provision recorded at the time of the loan sale is netted from the gain or loss recorded in mortgage banking activities, while any incremental provision, post loan sale, is recorded in other non-interest expense in the consolidated statement of income.

The following table provides a summary of activity in the reserve for loan repurchases:


	Years ended December 31,
(In thousands)	2019		2018		2017
Beginning balance	$	674	$	872	$	790
Provision (benefit) charged to expense	1,865		(160)		100
Repurchased loans and settlements charged off	(2,031)		(38)		(18)
Ending balance	$	508	$	674	$	872

The increase to the provision and corresponding charge-off during 2019 was related to a discrete legal settlement in connection with previously sold loans.

The following table provides information for mortgage banking activities:


	Years ended December 31,
(In thousands)	2019		2018		2017
Residential mortgage loans held for sale:
Proceeds from sale	$	216,239	$	188,025	$	335,656
Loans sold with servicing rights retained	199,114		166,909		304,788

Net gain on sale	4,031		3,146		6,211
Ancillary fees	1,614		1,544		2,629
Fair value option adjustment	470		(266)		1,097

Additionally, loans not originated for sale were sold approximately at carrying value, except as noted, for cash proceeds of: $17.0 million for certain commercial loans, resulting in a gain of $0.7 million, and $4.0 million for certain residential loans for the year ended December 31, 2019; $1.3 million for certain commercial loans and $0.4 million for certain residential loans for the year ended December 31, 2018; and $7.2 million for certain commercial loans and $7.4 for certain residential loans for the year ended December 31, 2017.

The Company has retained servicing rights on residential mortgage loans totaling $2.4 billion and $2.5 billion at December 31, 2019 and 2018, respectively.

The following table presents the changes in carrying value for mortgage servicing assets:


	Years ended December 31,
(In thousands)	2019		2018		2017
Beginning balance	$	21,215	$	25,139	$	24,466
Additions	3,587		4,459		9,249
Amortization	(7,318)		(8,383)		(8,576)
Ending balance	$	17,484	$	21,215	$	25,139

Loan servicing fees, net of mortgage servicing rights amortization, were $1.9 million, $1.2 million, and $0.8 million, for the years ended December 31, 2019, 2018, and 2017, respectively, and are included as a component of loan and lease related fees in the consolidated statement of income.

Refer to Note 17: Fair Value Measurements for additional information on loans held for sale and mortgage servicing assets.