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LOAN SERVICING RIGHTS | 3 Months Ended
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Mar. 31, 2024
Transfers and Servicing [Abstract] |
LOAN SERVICING RIGHTS | NOTE 11 – LOAN SERVICING RIGHTS The Company sells certain residential mortgage loans and SBA loans to third parties. All such transfers are accounted for as sales and the continuing involvement in the loans sold is limited to certain servicing responsibilities. The Company has also acquired servicing portfolios of residential mortgage and SBA loans. Loan servicing rights are initially recorded at fair value and subsequently recorded at the lower of cost or fair value and are amortized over the remaining service life of the loans, with consideration given to prepayment assumptions. Loan servicing rights are recorded in other assets on the consolidated balance sheets. The carrying value of the loan servicing rights assets is shown in the table below:
(dollars in thousands) | March 31, 2024 |  | December 31, 2023
Loan Servicing Rights |  |  |
Residential mortgage | $ | 171,968 |  |  | $ | 171,915 |
SBA | 2,301 |  |  | 2,737 |
Total loan servicing rights | $ | 174,269 |  |  | $ | 174,652 |
Residential Mortgage Loans The Company sells certain first-lien residential mortgage loans to third party investors, primarily the Federal National Mortgage Association (“FNMA”), the Government National Mortgage Association (“GNMA”) and the Federal Home Loan Mortgage Corporation (“FHLMC”). The Company retains the related mortgage servicing rights (“MSRs”) and receives servicing fees on certain of these loans. The net gain on loan sales, MSRs amortization and recoveries/impairment, and ongoing servicing fees on the portfolio of loans serviced for others are recorded in the consolidated statements of income and comprehensive income as part of mortgage banking activity. During the three-month period ended March 31, 2024, the Company recorded servicing fee income of $17.2 million. During the three-month period ended March 31, 2023, the Company recorded servicing fee income of $14.2 million. Servicing fee income includes servicing fees, late fees and ancillary fees earned for each period. The table below is an analysis of the activity in the Company’s MSRs and valuation allowance:
(dollars in thousands) | Three Months Ended March 31, |  |
Residential mortgage servicing rights | 2024 |  | 2023 |  |  |  |
Beginning carrying value, net | $ | 171,915 |  |  | $ | 147,014 |  |  |  |  |
Additions | 5,456 |  |  | 7,730 |  |  |  |  |
Amortization | (5,403) |  |  | (4,758) |  |  |  |  |
Ending carrying value, net | $ | 171,968 |  |  | $ | 149,986 |  |  |  |  |
The key metrics and the sensitivity of the fair value to adverse changes in model inputs and/or assumptions are summarized below:
(dollars in thousands) | March 31, 2024 |  | December 31, 2023
Residential mortgage servicing rights |  |  |
Unpaid principal balance of loans serviced for others | $ | 12,640,061 |  |  | $ | 12,454,454 |
Composition of residential loans serviced for others: |  |  |
FHLMC | 17.50 | % |  | 17.54 | %
FNMA | 50.48 | % |  | 50.51 | %
GNMA | 32.02 | % |  | 31.95 | %
Total | 100.00 | % |  | 100.00 | %
Weighted average term (months) | 355 |  | 355
Weighted average age (months) | 29 |  | 27
Modeled prepayment speed | 8.41 | % |  | 8.56 | %
Decline in fair value due to a 10% adverse change | (5,424) |  |  | (4,492) |
Decline in fair value due to a 20% adverse change | (11,079) |  |  | (9,444) |
Weighted average discount rate | 10.73 | % |  | 10.98 | %
Decline in fair value due to a 10% adverse change | (6,742) |  |  | (5,110) |
Decline in fair value due to a 20% adverse change | (13,926) |  |  | (11,181) |
The sensitivity calculations above are hypothetical and should not be considered to be predictive of future performance. As indicated, changes in fair value based on adverse changes in model inputs and/or assumptions generally cannot be extrapolated because the relationship of a change in input or assumption to the change in fair value may not be linear. In addition, the effect of an adverse variation in a particular input or assumption on the value of the residential mortgage servicing rights is calculated without changing any other input or assumption. In reality, a change in another factor may magnify or counteract the effect of the change in the first. SBA Loans All sales of SBA loans, consisting of the guaranteed portion, are executed on a servicing retained basis. These loans, which are partially guaranteed by the SBA, are generally secured by business property such as real estate, inventory, equipment and accounts receivable. The net gain on SBA loan sales, amortization and impairment/recoveries of servicing rights, and ongoing servicing fees are recorded in the consolidated statements of income and comprehensive income as part of other noninterest income. During the three-month period ended March 31, 2024, the Company recorded servicing fee income of $592,000. During the three-month period ended March 31, 2023, the Company recorded servicing fee income of $752,000. Servicing fee income includes servicing fees, late fees and ancillary fees earned for each period. The table below is an analysis of the activity in the Company’s SBA loan servicing rights and valuation allowance:
(dollars in thousands) | Three Months Ended March 31, |  |
SBA servicing rights | 2024 |  | 2023 |  |  |  |
Beginning carrying value, net | $ | 2,737 |  |  | $ | 3,443 |  |  |  |  |
Additions | 19 |  |  | 44 |  |  |  |  |
Amortization | (455) |  |  | (321) |  |  |  |  |
Ending carrying value, net | $ | 2,301 |  |  | $ | 3,166 |  |  |  |  |
(dollars in thousands) | March 31, 2024 |  | December 31, 2023
SBA servicing rights |  |  |
Unpaid principal balance of loans serviced for others | $ | 252,465 |  |  | $ | 271,164 |
Weighted average life (in years) | 3.18 |  | 3.31
Modeled prepayment speed | 21.62 | % |  | 20.83 | %
Decline in fair value due to a 10% adverse change | (170) |  |  | (171) |
Decline in fair value due to a 20% adverse change | (324) |  |  | (327) |
Weighted average discount rate | 13.00 | % |  | 14.70 | %
Decline in fair value due to a 100 basis point adverse change | (66) |  |  | (69) |
Decline in fair value due to a 200 basis point adverse change | (128) |  |  | (135) |
The sensitivity calculations above are hypothetical and should not be considered to be predictive of future performance. As indicated, changes in fair value based on adverse changes in model inputs and/or assumptions generally cannot be extrapolated because the relationship of a change in input or assumption to the change in fair value may not be linear. In addition, the effect of an adverse variation in a particular input or assumption on the value of the SBA servicing rights is calculated without changing any other input or assumption. In reality, a change in another factor may magnify or counteract the effect of the change in the first.

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- Definition The entire disclosure for a transferor's continuing involvement in financial assets that it has transferred in a securitization or asset-backed financing arrangement, the nature of any restrictions on assets reported by an entity in its statement of financial position that relate to a transferred financial asset (including the carrying amounts of such assets), how servicing assets and servicing liabilities are reported, and (for securitization or asset-backed financing arrangements accounted for as sales) when a transferor has continuing involvement with the transferred financial assets and transfers of financial assets accounted for as secured borrowings, how the transfer of financial assets affects an entity's financial position, financial performance, and cash flows. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 860 -SubTopic 30 -Name Accounting Standards Codification -Section 50 -Paragraph 1A -Subparagraph (b)(2) -Publisher FASB -URI 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