Servicing Assets

12 Months Ended

Dec. 31, 2021

Transfers and Servicing [Abstract]

Servicing Assets

SERVICING ASSETSAt December 31, 2021, the fair value of mortgage servicing rights was $49.0 million ($47.3 million — December 31, 2020).

The following table presents the changes in servicing rights measured using the fair value method for the years ended December 31, 2021, 2020 and 2019:

	Year Ended December 31,
	2021		2020		2019
	(In thousands)
Fair value at beginning of year	$	47,295	$	50,779	$	10,716
Servicing from mortgage securitization or asset transfers	6,089		2,394		1,174
Additions from servicing portfolio acquired[1]	—		—		40,463
Changes due to payments on loans	(6,738)		(4,067)		(906)
Changes in fair value due to changes in valuation model inputs or assumptions	2,327		(1,811)		(668)
Fair value at end of year	$	48,973	$	47,295	$	50,779
[1] Represents servicing assets acquired in the Scotiabank Acquisition completed on December 31, 2019.

The following table presents key economic assumption ranges used in measuring the mortgage-related servicing asset fair value for the years ended December 31, 2021, 2020 and 2019:

	Year Ended December 31,
	2021	2020	2019
Constant prepayment rate	3.90% - 24.48%	5.02% - 35.22%	4.5% - 18.81%
Discount rate	10.00% - 15.50%	10.00% - 15.50%	10.00% - 15.00%

The sensitivity of the current fair value of servicing assets to immediate 10 percent and 20 percent adverse changes in the above key assumptions were as follows:

	December 31, 2021
	(In thousands)
Mortgage-related servicing asset
Carrying value of mortgage servicing asset	$	48,973
Constant prepayment rate
Decrease in fair value due to 10% adverse change	$	(1,020)
Decrease in fair value due to 20% adverse change	$	(2,004)
Discount rate
Decrease in fair value due to 10% adverse change	$	(2,175)
Decrease in fair value due to 20% adverse change	$	(4,183)

These sensitivities are hypothetical and should be used with caution. As the figures indicate, changes in fair value based on a 10% variation 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 on the fair value of the retained interest is calculated without changing any other assumption.

Changes in one factor may result in changes in another (for example, increases in market interest rates may result in lower prepayments), which may magnify or offset the sensitivities. Mortgage banking activities, a component of total banking and financial service revenue in the consolidated statements of operations, include the changes from period to period in the fair value of the mortgage loan servicing rights, which may result from changes in the valuation model inputs or assumptions (principally reflecting changes in discount rates and prepayment speed assumptions) and other changes, including changes due to collection/realization of expected cash flows.

Servicing fee income is based on a contractual percentage of the outstanding principal balance and is recorded as income when earned. Servicing fees on mortgage loans for the years ended December 31, 2021, 2020 and 2019 totaled $21.4 million, $17.2 million and $4.2 million, respectively.