Servicing Assets and Liabilities

12 Months Ended

Dec. 31, 2021

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).

	2021		2020		2019
Beginning of period	$	6,462	$	6,794	$	7,510
Acquired servicing rights	581		—		—
Originated servicing rights capitalized upon sale of loans	2,005		1,114		1,835
Disposals	(1,430)		(624)		(1,258)
Changes in fair value due to change in inputs or assumptions used in the valuation	(1,105)		(822)		(1,293)
End of period	$	6,513	$	6,462	$	6,794

The portfolio of SBA/USDA loans serviced for others, which is not included in the accompanying balance sheets, was $428 million and $402 million, respectively, at December 31, 2021 and 2020. The amount of contractually specified servicing fees earned by United on these servicing rights during the years ended December 31, 2021, 2020 and 2019 was $3.90 million, $3.77 million and $3.82 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,
	2021			2020
Fair value of retained servicing assets	$	6,513		$	6,462
Prepayment rate assumption:
Weighted average	16.3		%	17.8		%
Range	3.2% - 31.3%			2.7% - 33.6%
10% adverse change	$	(309)		$	(358)
20% adverse change	(591)			(680)
Discount rate:
Weighted average	10.3		%	8.9		%
Range	0.0% - 45.4%			1.6% - 44.1%
100 bps adverse change	$	(166)		$	(171)
200 bps adverse change	(323)			(333)

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).

	2021		2020		2019
Beginning of period	$	16,216	$	13,565	$	11,877
Originated servicing rights capitalized upon sale of loans	12,510		11,911		5,783
Disposals	(4,275)		(2,868)		(1,098)
Changes in fair value due to change in inputs or assumptions used in the valuation	710		(6,392)		(2,997)
End of period	$	25,161	$	16,216	$	13,565

The portfolio of residential mortgage loans serviced for others, which is not included in the consolidated balance sheets, was $2.82 billion and $2.31 billion, respectively, at December 31, 2021 and 2020. The amount of contractually specified servicing

fees earned by United on these servicing rights during the years ended December 31, 2021, 2020 and 2019 was $6.48 million, $4.82 million and $3.67 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,
	2021			2020
Fair value of retained servicing assets	$	25,161		$	16,216
Prepayment rate assumption:
Weighted average	12.6		%	17.7		%
Range	7.0% - 77.6%			8.7% - 19.5%
10% adverse change	$	(1,229)		$	(999)
20% adverse change	(2,367)			(1,912)
Discount rate:
Weighted average	9.5		%	10.0		%
Range	9.5% - 10.5%			10.0% - 11.0%
100 bps adverse change	$	(877)		$	(518)
200 bps adverse change	(1,693)			(1,001)

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 Liabilities for Equipment Financing Loans

United accounts for servicing liabilities 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 $78.8 million and $45.5 million at December 31, 2021 and 2020, respectively. The servicing liabilities related to these loans totaled $675,000 and $357,000 at December 31, 2021 and 2020, respectively.