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Servicing Assets and Liabilities
 12 Months Ended
Dec. 31, 2019
Transfers and Servicing [Abstract]  
Servicing Assets and Liabilities Servicing Assets and Liabilities

Servicing Rights for SBA/USDA Loans
United accounts for servicing rights for SBA/USDA loans at fair value. The following table summarizes the changes in SBA/USDA servicing rights for the years indicated (in thousands)
 
2019
 
2018
 
2017
Servicing rights for SBA/USDA loans, beginning of period
$
7,510

 
$
7,740

 
$
5,752

Additions:
 
 
 
 
 
Acquired servicing rights(1)
—

 
(354
)
 
419

Originated servicing rights capitalized upon sale of loans
1,835

 
2,573

 
2,737

Subtractions:
 
 
 
 
 
Disposals
(1,258
)
 
(810
)
 
(621
)
Changes in fair value:
 
 
 
 
 
Due to change in inputs or assumptions used in the valuation model
(1,293
)
 
(1,639
)
 
(547
)
Servicing rights for SBA/USDA loans, end of period
$
6,794

 
$
7,510

 
$
7,740

 (1) Includes measurement period adjustments further discussed in Note 3.

The portfolio of SBA/USDA loans serviced for others, which is not included in the accompanying balance sheets, was $411 million and $386 million, respectively, at December 31, 2019 and 2018. The amount of contractually specified servicing fees earned by United on these servicing rights during the years ended December 31, 2019, 2018 and 2017 was $3.82 million, $3.44 million and $2.60 million, respectively.
 
A summary of the key characteristics, inputs, and economic assumptions used in the discounted cash flow method utilized to estimate the fair value of the servicing asset for SBA/USDA loans and the sensitivity of the fair values to immediate adverse changes in those assumptions are shown in the table below as of the dates indicated (dollars in thousands):
 
 
December 31,
 
 
 
2019
 
2018
 
 
Fair value of retained servicing assets
$
6,794

 
$
7,510

 
 
Prepayment rate assumption
16.5
%
 
12.1
%
 
 
10% adverse change
$
(352
)
 
$
(267
)
 
 
20% adverse change
$
(671
)
 
$
(515
)
 
 
Discount rate
12.3
%
 
14.5
%
 
 
100 bps adverse change
$
(184
)
 
$
(196
)
 
 
200 bps adverse change
$
(358
)
 
$
(381
)
 
 
Weighted-average life (years)
3.9

 
5.0

 
 
Weighted-average gross margin
1.9
%
 
1.9
%
 

 
The above sensitivities are hypothetical and changes in fair value based on variations in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, in this table, the effect of a variation in a particular assumption is calculated without changing any other assumption. In reality, changes in one factor may result in changes in another, which might magnify or counteract the sensitivities.
 
Residential Mortgage Servicing Rights
United accounts for residential mortgage servicing rights at fair value. The following table summarizes the changes in residential mortgage servicing rights for the years indicated (in thousands).
 
2019
 
2018
 
2017
Residential mortgage servicing rights, beginning of period
$
11,877

 
$
8,262

 
$
4,372

Additions:
 
 
 
 
 
Originated servicing rights capitalized upon sale of loans
5,783

 
4,587

 
3,602

Subtractions:
 
 
 
 
 
Disposals
(1,098
)
 
(537
)
 
(328
)
Changes in fair value:
 
 
 
 
 
Initial election to carry at fair value on January 1, 2017
—

 
—

 
698

Due to change in inputs or assumptions used in the valuation
(2,997
)
 
(435
)
 
(82
)
Residential mortgage servicing rights, end of period
$
13,565

 
$
11,877

 
$
8,262



The portfolio of residential mortgage loans serviced for others, which is not included in the consolidated balance sheets, was $1.60 billion and $1.21 billion, respectively, at December 31, 2019 and 2018. The amount of contractually specified servicing fees earned by United on these servicing rights during the year ended December 31, 2019, 2018 and 2017 was $3.67 million, $2.37 million and $1.72 million, respectively.
 
A summary of the key characteristics, inputs, and economic assumptions used to estimate the fair value of the servicing asset for residential mortgage loans and the sensitivity of the fair values to immediate adverse changes in those assumptions are shown in the table below as of the dates indicated (in thousands):
 
 
December 31,
 
 
 
2019
 
2018
 
 
Fair value of retained servicing assets
$
13,565

 
$
11,877

 
 
Prepayment rate assumption
14.1
%
 
10.6
%
 
 
10% adverse change
$
(662
)
 
$
(466
)
 
 
20% adverse change
$
(1,270
)
 
$
(898
)
 
 
Discount rate
10.0
%
 
10.0
%
 
 
100 bps adverse change
$
(467
)
 
$
(448
)
 
 
200 bps adverse change
$
(900
)
 
$
(863
)
 

 
The above sensitivities are hypothetical and changes in fair value based on variations in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, in this table, the effect of a variation in a particular assumption is calculated without changing any other assumption. In reality, changes in one factor may result in changes in another, which might magnify or counteract the sensitivities.

Servicing Liability for Equipment Financing Loans
United accounts for the servicing liability associated with sold equipment finance loans using the amortization method. The portfolio of equipment financing loans serviced for others, which is not included in the accompanying balance sheets, was $42.4 million and $28.4 million at December 31, 2019 and 2018, respectively. The servicing liability related to these loans totaled $363,000 and $207,000 at December 31, 2019 and 2018, respectively.