XML 68 R19.htm IDEA: XBRL DOCUMENT v3.24.0.1
LOAN SERVICING
 12 Months Ended
Dec. 31, 2023
Transfers and Servicing [Abstract]  
LOAN SERVICING LOAN SERVICING
Mortgage Loan Servicing
We retain the servicing rights on certain mortgage loans sold. The unpaid principal balance of mortgage loans serviced for others is listed below:
TABLE 8.1
December 3120232022
(in millions)
Mortgage loans sold with servicing retained$5,729 $5,242 
The following table summarizes activity relating to mortgage loans sold with servicing retained:
TABLE 8.2
Year Ended December 31202320222021
(in millions)
Mortgage loans sold with servicing retained$980 $1,056 $1,762 
Pre-tax net gains (losses) resulting from above loan sales (1)
3 (12)43 
Mortgage servicing fees (1)
14 13 12 
(1) Recorded in mortgage banking operations on the Consolidated Statements of Income.
Following is a summary of activity relating to MSRs:
TABLE 8.3
Year Ended December 31202320222021
(in millions)
Balance at beginning of period$52.8 $44.4 $35.6 
Additions11.3 13.0 19.2 
Payoffs and curtailments(2.2)(4.4)(12.8)
Impairment (charge) / recovery(0.2)2.5 4.8 
Amortization(2.2)(2.7)(2.4)
Balance at end of period$59.5 $52.8 $44.4 
Fair value, beginning of period$68.6 $46.0 $35.6 
Fair value, end of period71.8 68.6 46.0 
We had a $0.2 million valuation allowance for MSRs as of December 31, 2023 and no valuation allowance for MSRs as of December 31, 2022.
The fair value of MSRs is highly sensitive to changes in assumptions and is determined by estimating the present value of the asset’s future cash flows utilizing market-based prepayment rates, discount rates and other assumptions validated through comparison to trade information, industry surveys and the use of independent third-party valuations. Changes in prepayment speed assumptions have the most significant impact on the fair value of MSRs. Generally, as interest rates decline, mortgage loan prepayments accelerate due to increased refinance activity, which results in a decrease in the fair value of MSRs and as interest rates increase, mortgage loan prepayments decline, which results in an increase in the fair value of MSRs. Measurement of fair value is limited to the conditions existing and the assumptions utilized as of a particular point in time, and those assumptions may not be appropriate if they are applied at a different point in time.
Following is a summary of the sensitivity of the fair value of MSRs to changes in key assumptions:
TABLE 8.4
December 3120232022
(dollars in millions)
Weighted average life (months)9296
Constant prepayment rate (annualized)7.9 %7.3 %
Discount rate10.2 %10.0 %
Effect on fair value due to change in interest rates:
+2.00%$7 $9 
+1.00%5 4 
+0.50%3 2 
+0.25%2 1 
-0.25%(2)(1)
-0.50%(4)(3)
-1.00%(8)(6)
-2.00%(21)(15)
-3.00%(42)(29)
The sensitivity calculations above are hypothetical and should not be considered to be predictive of future performance. Changes in fair value based on adverse changes in assumptions generally cannot be extrapolated because the relationship of the changes in assumptions to fair value may not be linear. Also, in this table, the effects of an adverse variation in a particular assumption on the fair value of MSRs is calculated without changing any other assumptions, while in reality, changes in one factor may result in changing another, which may magnify or contract the effect of the change.
SBA-Guaranteed Loan Servicing
We retain the servicing rights on SBA-guaranteed loans sold to investors. The standard sale structure under the SBA Secondary Participation Guaranty Agreement provides for us to retain a portion of the cash flow from the interest payment received on the SBA guaranteed portion of the loan, which is commonly known as a servicing spread. The unpaid principal balance of SBA-guaranteed loans serviced for investors was as follows:
TABLE 8.5
December 3120232022
(in millions)
SBA loans sold to investors with servicing retained$142 $186 
The following table summarizes activity relating to SBA loans sold with servicing retained:
TABLE 8.6
Year Ended December 31202320222021
(in millions)
SBA loans sold with servicing retained$7 $15 $64 
Pretax gains resulting from above loan sales (1)
1 1 8 
SBA servicing fees (1)
2 2 2 
(1) Recorded in other non-interest income on the Consolidated Statements of Income.
Following is a summary of SBA servicing rights:
TABLE 8.7
Year Ended December 31202320222021
(in millions)
Balance at end of period$1 $2 $3 
Fair value, end of period1 2 3 
We had a valuation allowance for SBA servicing rights of $1.2 million as of December 31, 2023, compared to $1.6 million at December 31, 2022.