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Mortgage Servicing Rights
6 Months Ended
Jun. 30, 2014
Mortgage Servicing Rights  
Mortgage Servicing Rights

7. Mortgage Servicing Rights

 

The following tables present the changes in fair value of the Company’s MSR and other information related to our serviced portfolio (dollars in thousands).

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

2014

 

2013

 

2014

 

2013

 

Balance, beginning of period

 

$

29,939

 

$

4,430

 

$

20,149

 

$

2,080

 

Additions

 

7,376

 

2,180

 

14,808

 

4,305

 

Sales

 

 

 

 

 

Changes in fair value:

 

 

 

 

 

 

 

 

 

Due to changes in model inputs or assumptions (1)

 

(1,113

)

608

 

1,651

 

907

 

Due to customer payments

 

(325

)

(107

)

(731

)

(181

)

Balance, end of period

 

$

35,877

 

$

7,111

 

$

35,877

 

$

7,111

 

 

 

 

June 30,

 

December 31,

 

 

 

2014

 

2013

 

Mortgage loans serviced for others

 

$

3,300,871

 

$

1,965,883

 

MSR as a percentage of serviced mortgage loans

 

1.09

%

1.02

%

 

(1)         Primarily represents changes in discount rates and prepayment speed assumptions, which are primarily affected by changes in interest rates and the refinement of other MSR model assumptions.

 

The key assumptions used in measuring the fair value of the Company’s MSR were as follows.

 

 

 

June 30,

 

December 31,

 

 

 

2014

 

2013

 

Weighted average constant prepayment rate

 

10.32

%

9.72

%

Weighted average discount rate

 

11.11

%

12.37

%

Weighted average life (in years)

 

7.2

 

7.6

 

 

A sensitivity analysis of the fair value of the Company’s MSR to certain key assumptions is presented in the following table (in thousands).

 

 

 

June 30,

 

December 31,

 

 

 

2014

 

2013

 

Constant prepayment rate:

 

 

 

 

 

Impact of 10% adverse change

 

$

(961

)

$

(601

)

Impact of 20% adverse change

 

(1,855

)

(1,170

)

Discount rate:

 

 

 

 

 

Impact of 100 basis point adverse change

 

(1,039

)

(631

)

Impact of 200 basis point adverse change

 

(1,994

)

(1,236

)

 

This sensitivity analysis presents the effect of hypothetical changes in key assumptions on the fair value of the MSR. The effect of such hypothetical change in assumptions generally cannot be extrapolated because the relationship of the change in one key assumption to the change in the fair value of the MSR is not linear. In addition, in the analysis, the impact of an adverse change in one key assumption is calculated independent of any impact on other assumptions. In reality, changes in one assumption may change another assumption.

 

Contractually specified servicing fees, late fees and ancillary fees earned of $2.8 million and $0.6 million during the three months ended June 30, 2014 and 2013, respectively, and $5.0 million and $0.9 million during the six months ended June 30, 2014 and 2013, respectively, were included in other noninterest income within the consolidated statements of operations.