Certain Transfers of Financial Assets
 12 Months Ended
Dec. 31, 2014
Transfers and Servicing [Abstract]  
Certain Transfers of Financial Assets
Certain Transfers of Financial Assets
Mortgage Recourse Liability
During the last four calendar years, the Company has sold over 33,000 loans with a principal balance of approximately $7.7 billion. As seller, the Company has made various representations and warranties related to, among other things, the ownership of the loans, the validity of the liens, the loan selection and origination process, and the compliance with origination criteria established by the purchasers. In the event of a breach of these representations and warranties, the Company is obligated to repurchase loans with identified defects and/or to indemnify the purchasers. Some of these conditions include underwriting errors or emissions, fraud or material misstatements, and invalid collateral values. The contractual obligation arises only when the breach of representations and warranties is discovered and repurchase/indemnification is demanded. Generally, the maximum amount the Company would be required to make would be equal to the unpaid principal balance of such loans that are deemed to have defects that were sold to purchasers, plus accrued interest and certain expenses. To date, the claims to the Company from the purchasers to be reimbursed for realized losses have been de minimis. In addition, the Company’s loan sale contracts define a condition in which the borrower defaults during a short period of time as an early payment default (“EPD”). In the event of an EPD, the Company may be required to return the premium paid for the loan, pay certain administrative fees, and may be required to repurchase the loan or indemnify the purchaser unless an EPD waiver is obtained.
Management recognizes the potential risk from costs related to breaches of representations and warranties made in connection with residential loan sales and subsequent required repurchases, indemnifications, and EPD claims. As a result, the Company has established a liability to cover potential costs related to these events based on historical experience, adjusted for any risk factors not captured in the historical losses, current business volume, and known claims outstanding. The recourse liability totaled $1.4 million and $1.5 million at December 31, 2014 and 2013, respectively and management believes this is adequate for potential exposure related to loan sale indemnification, repurchase loans, and EPD claims. Management will continue to monitor the adequacy of the reserve level and may decide that further additions to the reserve are appropriate. However, there can be no assurance that the current balance of this reserve will prove sufficient to cover actual future losses. It should be noted that the Company’s loan sale activity began to increase at a time when underwriting requirements were strengthened from prior years and limited documentation conventional loans (i.e., non-government insured) were no longer eligible for purchase in the secondary market. Accordingly, the population of conventional loans the Company has sold has been underwritten based on fully documented information. While this does not eliminate all risk of repurchase or indemnification costs, management believes it significantly mitigates that risk.

Servicing rights
The carrying value of the servicing assets is shown in the table below:
 
 
December 31,
(in thousands)
 
2014
 
2013
Servicing rights




Residential mortgage

$
56,720


$
46,785

SBA

4,872


4,529

Indirect automobile

3,305


1,888

Total carrying value of servicing assets

$
64,897


$
53,202



Residential Mortgage Loans
The Company typically sells first-lien residential mortgage loans to third party investors, primarily Fannie Mae, Ginnie Mae, and Freddie Mac. The Company retains the related mortgage servicing rights (“MSRs”) and receives servicing fees on certain of these loans. During the years ended December 31, 2014 and 2013, the Company sold $1.6 billion and $2.2 billion in residential mortgage loans.
The net gain on loan sales, MSR impairment and amortization, and servicing fees are recorded in the Consolidated Statements of Comprehensive Income as part of noninterest income from mortgage banking activities. During the years ended December 31, 2014 and 2013, the Company recorded gains on sales of residential mortgage loans of $43.1 million and $48.0 million respectively. During the years ended December 31, 2014 and 2013, the Company recorded servicing fees of $12.7 million and $8.8 million, respectively. The table below is an analysis of the activity in the Company’s MSRs and impairment :
 
 
For the Years Ended December 31,
(in thousands)
 
2014
 
2013
Residential mortgage servicing rights
 
 
 
 
Beginning carrying value, net
 
$
46,785

 
$
23,085

Additions
 
20,593

 
27,823

Amortization
 
(7,335
)
 
(6,064
)
(Impairment) recovery, net
 
(3,323
)
 
1,941

Ending carrying value, net
 
$
56,720

 
$
46,785

 
 
For the Years Ended December 31,
(in thousands)
 
2014
 
2013
Residential mortgage servicing impairment
 
 
 
 
Beginning balance
 
$
3,129

 
$
5,070

  Additions
 
4,898

 
2,719

  Recoveries
 
(1,575
)
 
(4,660
)
Ending balance
 
$
6,452

 
$
3,129


The fair value of MSRs, key metrics, and the sensitivity of the fair value to adverse changes in key economic assumptions are summarized below:
($ in thousands)
 
December 31, 2014
 
December 31, 2013
Residential Mortgage Servicing Rights
 
 
 
 
Fair Value
 
$
63,977

 
$
53,742

Composition of residential loans serviced for others:
 
 
 
 
  Fixed-rate
 
99.40
%
 
99.60
%
  Adjustable-rate
 
0.60
%
 
0.40
%
    Total
 
100.00
%
 
100.00
%
Weighted average remaining term (years)
 
26.0

 
26.0

Prepayment speed
 
9.24
%
 
7.33
%
  Decline in fair value due to a 10% adverse change
 
$
(2,149
)
 
$
(1,449
)
  Decline in fair value due to a 20% adverse change
 
(4,149
)
 
(2,830
)
Weighted average discount rate
 
9.73
%
 
10.14
%
  Decline in fair value due to a 10% adverse change
 
$
(2,231
)
 
$
(2,012
)
  Decline in fair value due to a 20% adverse change
 
(4,298
)
 
(3,880
)

The sensitivity calculations above are hypothetical and should not be considered to be predictive of future performance. As indicated, changes in value based on adverse changes in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in value may not be linear. In addition, the effect of an adverse variation in a particular assumption on the value of the MSRs is calculated without changing any other assumption. In reality, 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 counteract the effect of the change.
Information about the asset quality of residential mortgage loans serviced by the Company is shown in the table below:
Residential mortgage loans serviced
 
December 31, 2014
 
Net Charge-offs for the Year Ended December 31, 2014
 
Unpaid
Principal
Balance
 
 
 
 
 
Delinquent (days)
 
(In thousands)
30 to 89
 
90+
 
Serviced for others
 
$
5,413,781

 
$
30,097

 
$
1,831

 
$
—

Held-for-sale
 
177,314

 
115

 
—

 
—

Held-for-investment
 
155,782

 
349

 
1,796

 
71

  Total residential mortgage loans serviced
 
$
5,746,877

 
$
30,561

 
$
3,627

 
$
71


SBA Loans
The Company has executed certain transfers of SBA loans with third parties. These loans, which are typically partially guaranteed by the SBA or otherwise credit enhanced, are generally secured by business property such as real estate, inventory, equipment, and accounts receivable. During the years ended December 31, 2014 and 2013, the Company sold $64.2 million and $48.8 million in SBA loans.
The Company retains the loan servicing rights and receives servicing fees. The net gain on SBA loan sales, servicing rights impairment and amortization and servicing fees are recorded in the Consolidated Statements of Comprehensive Income as part of noninterest income from SBA lending activities. During the years ended December 31, 2014 and 2013, the Company recorded gains on sales of SBA loans of $4.3 million and $4.1 million, respectively. During the years ended December 31, 2014 and 2013, the Company recorded servicing fees of $2.0 million and $1.8 million, respectively. The table below is an analysis of the activity in the Company’s SBA loan servicing rights and impairment:
 
 
For the Years Ended December 31,
(in thousands)
 
2014
 
2013
SBA loan servicing rights
 
 
 
 
Beginning carrying value, net
 
$
4,529

 
$
6,192

Additions
 
1,687

 
1,834

Amortization
 
(1,744
)
 
(1,618
)
Recovery (impairment), net
 
400

 
(1,879
)
Ending carrying value, net
 
$
4,872

 
$
4,529

 
 
For the Years Ended December 31,
(in thousands)
 
2014
 
2013
SBA servicing rights impairment
 
 
 
 
Beginning balance
 
$
2,218

 
$
339

Additions
 
464

 
2,800

Recoveries
 
(864
)
 
(921
)
Ending balance
 
$
1,818

 
$
2,218


The fair value of the SBA loan servicing rights, key metrics, and the sensitivity of the fair value to adverse changes in key economic assumptions are summarized below:
($ in thousands)
 
December 31, 2014
 
December 31, 2013
SBA loan servicing rights
 
 
 
 
Fair value
 
$
4,931

 
$
4,691

Composition of loans serviced for others:
 
 
 
 
Fixed-rate
 
0.10
%
 
—
%
Adjustable-rate
 
99.90
%
 
100.00
%
Total
 
100.00
%
 
100.00
%
Weighted average remaining term (years)
 
20.4

 
20.8

Prepayment speed
 
7.64
%
 
5.94
%
  Decline in fair value due to a 10% adverse change
 
$
(97
)
 
$
(92
)
  Decline in fair value due to a 20% adverse change
 
(191
)
 
(181
)
Weighted average discount rate
 
13.50
%
 
13.50
%
  Decline in fair value due to a 10% adverse change
 
$
(173
)
 
$
(205
)
  Decline in fair value due to a 20% adverse change
 
(336
)
 
(394
)

The sensitivity calculations above are hypothetical and should not be considered to be predictive of future performance. As indicated, changes in value based on adverse changes in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in value may not be linear. In addition, the effect of an adverse variation in a particular assumption on the value of the SBA loan servicing rights is calculated without changing any other assumption. In reality, changes in one factor may magnify or counteract the effect of the change.
Information about the asset quality of SBA loans serviced by the Company is shown in the table below:
SBA loans serviced
 
December 31, 2014
 
Net Charge-offs for the Year Ended December 31, 2014
 
 
Unpaid
Principal
Balance
 
 
 
 
 
 
Delinquent (days)
 
(In thousands)
 
30 to 89
 
90+
 
Serviced for others
 
$
245,902

 
$
1,983

 
$
4,013

 
$
1,998

Held-for-sale
 
12,511

 
—

 
—

 
—

Held-for-investment
 
134,781

 
—

 
2,116

 
1,911

Total SBA loans serviced
 
$
393,194

 
$
1,983

 
$
6,129

 
$
3,909


Indirect Automobile Loans
The Company purchases, on a nonrecourse basis, consumer installment contracts secured by new and used vehicles purchased by consumers from franchised motor vehicle dealers and select independent dealers. A portion of the indirect automobile loans originated is sold with servicing retained and the Company receives servicing fees. During the years ended December 31, 2014 and 2013, the Company sold $679.9 million and $392.2 million in indirect automobile loans.
The gain on loan sales and servicing fees are recorded in the Consolidated Statements of Comprehensive Income as part of noninterest income from indirect lending activities. During the years ended December 31, 2014 and 2013, the Company recorded gains on sales of indirect automobile loans of $13.4 million and $5.4 million, respectively. During the years ended December 31, 2014 and 2013, the Company recorded servicing fees of $6.1 million and $4.3 million, respectively. The table below is an analysis of the activity in the Company’s indirect automobile loan servicing rights:
 
 
For the Years Ended December 31,
(in thousands)
 
2014
 
2013
Indirect automobile loan servicing rights
 
 
 
 
Beginning carrying value
 
$
1,888

 
$
967

Additions
 
2,453

 
1,565

Amortization
 
(1,036
)
 
(644
)
Ending carryiing value
 
$
3,305

 
$
1,888


The Company has not recorded impairment on its indirect automobile loan servicing rights. The fair value of the indirect automobile loan servicing rights, key metrics, and the sensitivity of the fair value to adverse changes in key economic assumptions are summarized below:
 
 
December 31,
(In thousands)
 
2014
 
2013
Indirect loan servicing rights
 
 
 
 
Fair value
 
$
6,550

 
$
3,783

Composition of loans serviced for others:
 
 
 
 
Fixed-rate
 
100
%
 
100
%
Adjustable-rate
 
—
%
 
—
%
Total
 
100
%
 
100
%
Weighted average remaining term (years)
 
5.0

 
5.0

Prepayment speed
 
18.14
%
 
18.14
%
  Decline in fair value due to a 10% adverse change
 
$
(164
)
 
$
(95
)
  Decline in fair value due to a 20% adverse change
 
(322
)
 
(185
)
Weighted average discount rate
 
6.47
%
 
6.47
%
  Decline in fair value due to a 10% adverse change
 
$
(60
)
 
$
(35
)
  Decline in fair value due to a 20% adverse change
 
(119
)
 
(69
)

The sensitivity calculations above are hypothetical and should not be considered to be predictive of future performance. As indicated, changes in value based on adverse changes in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in value may not be linear. In addition, the effect of an adverse variation in a particular assumption on the value of the indirect automobile loan servicing rights is calculated without changing any other assumption. In reality, changes in one factor may magnify or counteract the effect of the change.
Information about the asset quality of the indirect automobile loans serviced by the Company is shown in the table below:
Indirect automobile loans serviced
 
December 31, 2014
 
Net Charge-offs for the Year Ended December 31, 2014
 
 
Unpaid
Principal
Balance
 
 
 
 
 
 
Delinquent (days)
 
(In thousands)
 
30 to 89
 
90+
 
Serviced for others
 
$
902,823

 
$
1,729

 
$
889

 
$
2,020

Held-for-sale
 
175,000

 
—

 
—

 
—

Held-for-investment
 
1,219,232

 
2,672

 
1,050

 
2,881

Total indirect automobile loans serviced
 
$
2,297,055

 
$
4,401

 
$
1,939

 
$
4,901