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NON-CONSOLIDATED VARIABLE INTEREST ENTITIES AND SERVICING ASSETS (Tables)
 6 Months Ended
Jun. 30, 2019
Transfers and Servicing [Abstract]  
Changes in Servicing Assets

The changes in servicing assets are shown below:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended

 

Six-Month Period Ended

 

 

 

June 30,

 

June 30,

 

(In thousands)

2019

 

2018

 

2019

 

2018

 

 

 

 

Balance at beginning of period

$

27,431

 

$

26,135

 

$

27,428

 

$

25,255

 

Capitalization of servicing assets

 

1,001

 

 

1,138

 

 

1,869

 

 

2,025

 

Amortization

 

(1,166)

 

 

(729)

 

 

(1,976)

 

 

(1,466)

 

Temporary impairment recoveries (charges), net

 

-

 

 

617

 

 

(20)

 

 

1,330

 

Other (1)

 

(35)

 

 

30

 

 

(70)

 

 

47

 

Balance at end of period

$

27,231

 

$

27,191

 

$

27,231

 

$

27,191

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Amount represents adjustments related to the repurchase of loans serviced for others.

 
Changes in Impairment Allowance

Changes in the impairment allowance were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended

 

Six-Month Period Ended

 

 

June 30,

 

June 30,

 

 

2019

 

2018

 

2019

 

2018

 

(In thousands)

 

Balance at beginning of period

$

50

 

$

673

 

$

30

 

$

1,451

 

Temporary impairment charges

 

-

 

 

20

 

 

24

 

 

37

 

OTTI of servicing assets

 

-

 

 

-

 

 

-

 

 

(65)

 

Recoveries

 

-

 

 

(637)

 

 

(4)

 

 

(1,367)

 

Balance at end of period

$

50

 

$

56

 

$

50

 

$

56

 

 

 
Components of Net Servicing Income

The components of net servicing income are shown below:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended

 

Six-Month Period Ended

 

 

 

June 30,

 

June 30,

 

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands)

 

Servicing fees

$

2,107

 

$

2,058

 

$

4,167

 

$

4,178

 

Late charges and prepayment penalties

 

157

 

 

146

 

 

311

 

 

266

 

Adjustment for loans repurchased

 

(35)

 

 

30

 

 

(70)

 

 

47

 

Other

 

-

 

 

-

 

 

(15)

 

 

-

 

Servicing income, gross

 

2,229

 

 

2,234

 

 

4,393

 

 

4,491

 

Amortization and impairment of servicing assets

 

(1,166)

 

 

(112)

 

 

(1,996)

 

 

(136)

 

Servicing income, net

$

1,063

 

$

2,122

 

$

2,397

 

$

4,355

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Key Economic Assumptions Used in Determining Fair Value at Time of Sale of Loans

The Corporation’s servicing assets are subject to prepayment and interest rate risks. Key economic assumptions used in determining the fair value at the time of sale of the related mortgages ranged as follows:

 

 

 

 

 

 

 

Maximum

 

Minimum

Six-Month Period Ended June 30, 2019:

 

 

 

 

 

Constant prepayment rate:

 

 

 

 

 

Government-guaranteed mortgage loans

6.3

%

 

6.2

%

Conventional conforming mortgage loans

6.8

%

 

6.7

%

Conventional non-conforming mortgage loans

9.3

%

 

9.0

%

Discount rate:

 

 

 

 

 

Government-guaranteed mortgage loans

12.0

%

 

12.0

%

Conventional conforming mortgage loans

10.0

%

 

10.0

%

Conventional non-conforming mortgage loans

14.3

%

 

14.3

%

 

 

 

 

 

 

Six-Month Period Ended June 30, 2018:

 

 

 

 

 

Constant prepayment rate:

 

 

 

 

 

Government-guaranteed mortgage loans

5.7

%

 

5.6

%

Conventional conforming mortgage loans

6.3

%

 

6.2

%

Conventional non-conforming mortgage loans

9.6

%

 

9.1

%

Discount rate:

 

 

 

 

 

Government-guaranteed mortgage loans

12.0

%

 

12.0

%

Conventional conforming mortgage loans

10.0

%

 

10.0

%

Conventional non-conforming mortgage loans

14.3

%

 

14.3

%

 

 

 

 

 

 
Weighted-Averages of Key Economic Assumptions in Valuation Model The weighted averages of the key economic assumptions that the Corporation used in its valuation model and the sensitivity of the current fair value to immediate 10% and 20% adverse changes in those assumptions for mortgage loans as of June 30, 2019 were as follows:

 

(Dollars in thousands)

Carrying amount of servicing assets

$

27,231

 

Fair value

$

30,396

 

Weighted-average expected life (in years)

 

8.32

 

 

 

 

 

Constant prepayment rate (weighted-average annual rate)

 

6.48

%

Decrease in fair value due to 10% adverse change

$

750

 

Decrease in fair value due to 20% adverse change

$

1,468

 

 

 

 

 

Discount rate (weighted-average annual rate)

 

11.26

%

Decrease in fair value due to 10% adverse change

$

1,427

 

Decrease in fair value due to 20% adverse change

$

2,739