Mortgage Servicing Rights ("MSRs")

3 Months Ended

Mar. 31, 2020

Disclosures Pertaining to Servicing Assets and Servicing Liabilities [Abstract]

Mortgage Servicing Rights (MSRs)

Mortgage Servicing Rights (“MSRs”)

The following is a summary of the changes in the carrying value of MSRs, accounted for at fair value, for the periods indicated:

	Three Months Ended
	March 31,			March 31,
(In thousands)	2020			2019
Balance at beginning of the period	$	85,638		$	75,183
Additions from loans sold with servicing retained	9,447			6,580
Estimate of changes in fair value due to:
Payoffs and paydowns	(7,024		)	(1,997		)
Changes in valuation inputs or assumptions	(14,557		)	(8,744		)
Fair value at end of the period	$	73,504		$	71,022
Unpaid principal balance of mortgage loans serviced for others	$	8,314,634		$	7,014,269

The Company recognizes MSR assets upon the sale of residential real estate loans to external third parties when it retains the obligation to service the loans and the servicing fee is more than adequate compensation. The initial recognition of MSR assets from loans sold with servicing retained and subsequent changes in fair value of all MSRs are recognized in mortgage banking revenue. MSRs are subject to changes in value from actual and expected prepayment of the underlying loans. Starting in 2019, the Company periodically purchased options for the right to purchase securities not currently held within the banks' investment portfolios and entered into interest rate swaps in which the Company elected to not designate such derivatives as hedging instruments. These option and swap transactions are designed primarily to economically hedge a portion of the fair value adjustments related to MSRs. The Company did not specifically hedge the value of its MSRs during the first quarter of 2019. For more information regarding the hedges in 2020, see Note 15 - Derivative Financial Instruments in Item 1 of this report.

The MSR asset fair value is determined by using a discounted cash flow model that incorporates the objective characteristics of the portfolio as well as subjective valuation parameters that purchasers of servicing would apply to such portfolios sold into the secondary market. The subjective factors include loan prepayment speeds, discount rates, servicing costs and other economic factors. The Company uses a third party to assist in the valuation of MSRs.