Huntington National Bank 2012 Annual Report Download - page 156

148
For MSRs under the amortization method, a summary of key assumptions and the sensitivity of the MSR value to changes in
these assumptions at December 31, 2012 and 2011 follows:
December 31, 2012 December 31, 2011
Decline in fair value due to Decline in fair value due to
10% 20% 10% 20%
adverse adverse adverse adverse
(dollar amounts in thousands) Actual change change Actual change change
Constant prepayment rate (annualized) 15.45 % $ (4,936) $ (9,451) 15.92 % $ (3,679) $ (7,160)
Spread over forward interest rate swap rates 940 bps (3,060) (6,119) 953 bps (2,605) (5,211)
Total servicing fees included in mortgage banking income amounted to $46.2 million, $49.1 million, and $48.1 million in 2012,
2011, and 2010, respectively. The unpaid principal balance of residential mortgage loans serviced for third parties was $15.6 billion,
$15.9 billion, and $15.9 billion at December 31, 2012, 2011, and 2010, respectively.
Automobile Portfolio
In 2012, Huntington transferred automobile loans totaling $2.3 billion to trusts in two separate securitization transactions and
received a total of $2.4 billion of net proceeds. Both securitizations qualified for sale accounting. An additional $0.2 billion of
automobile loans were also sold, but not securitized, in 2012. As a result of these transactions, Huntington recognized total gains of
$42.3 million which is reflected in noninterest income on the Consolidated Statements of Income and recorded a total servicing asset
of $38.0 million which is reflected in accrued income and other assets on the Consolidated Balance Sheets.
Huntington has retained servicing responsibilities on sold automobile loans and receives annual servicing fees and other ancillary
fees on the outstanding loan balances. Automobile loan servicing rights are accounted for using the amortization method. A servicing
asset is established at fair value at the time of the sale using a discounted future cash flow model. The model considers assumptions
related to actual servicing income, adequate compensation for servicing, and other ancillary fees. The servicing asset is then amortized
against servicing income. Impairment, if any, is recognized when carrying value exceeds the fair value as determined by calculating
the present value of expected net future cash flows. The primary risk characteristic for measuring servicing assets is payoff rates of
the underlying loan pools. Valuation calculations rely on the predicted payoff assumption and, if actual payoff is quicker than
expected, then future value would be impaired.
Changes in the carrying value of automobile loan servicing rights for the years ended December 31, 2012 and 2011, and the fair
value at the end of each period were as follows:
(dollar amounts in thousands) 2012 2011
Carrying value, beginning of year $ 13,377 $ 97
N
ew servicing assets created 38,043 16,039
Impairment charge (75) ---
Amortization and other (15,739) (2,759)
Carrying value, end of year $ 35,606 $ 13,377
Fair value, end of year $ 36,470 $ 13,428
Weighted-average life (years) 4.3 4.7
A summary of key assumptions and the sensitivity of the automobile loan servicing rights value to changes in these assumptions
at December 31, 2012 and 2011 follows:
December 31, 2012 December 31, 2011
Decline in fair value due to Decline in fair value due to
10% 20% 10% 20%
adverse adverse adverse adverse
(dollar amounts in thousands) Actual change change Actual change change
Constant prepayment rate (annualized) 13.80 % $ (880) $ (1,771) 15.60 % $ (362) $ (708)
Spread over forward interest rate swap rates 500 bps (18) (36)
N
A NA NA