Huntington National Bank 2009 Annual Report Download - page 164

sheet. An
y
increase or decrease in the fair value or amortized cost of MSRs carried under the fair valu
e
method durin
g
the period is recorded as an increase or decrease in mort
g
a
g
e bankin
g
income, which i
s
reflected in non-interest income in the consolidated statements of income
.
Th
e
f
o
ll
ow
i
n
g
ta
bl
es summar
i
ze t
h
ec
h
an
g
es
i
n MSRs recor
d
e
d
us
i
n
g
e
i
t
h
er t
h
e
f
a
i
rva
l
ue met
h
o
d
or t
he
amortization method for the
y
ears ended December 31, 2009 and 2008
:
Fa
i
r
V
alue Method
2009 2008
(
In thousands
)
Fa
i
rva
l
ue,
b
e
gi
nn
i
n
g
o
fy
ear
....................................
$
167,43
8
$
207
,
894
New serv
i
c
i
n
g
assets create
d
....................................
23,0
7
4
38
,
84
6
Ch
an
g
e
i
n
f
a
i
rva
l
ue
d
ur
i
n
g
t
h
e per
i
o
dd
ue to:
Ti
me
d
eca
y
(1)
.............................................
(
6
,
798
)
(
7,
842)
Pa
y
offs(2)
................................................
(
38
,
486
)
(18
,7
92)
Chan
g
es in valuation inputs or assumptions(3
)
.....................
34,305
(5
2,668
)
O
ther chan
g
e
s
...............................................
(3
,
106)
—
Fair value, end of
y
ea
r
.......................................
$176
,
427 $167
,
43
8
(1) Represents
d
ecrease
i
nva
l
ue
d
ue to passa
g
eo
f
t
i
me,
i
nc
l
u
di
n
g
t
h
e
i
mpact
f
rom
b
ot
h
re
g
u
l
ar
ly
sc
h
e
d
u
l
e
d
l
oan pr
i
nc
i
pa
l
pa
y
ments an
d
part
i
a
ll
oan pa
yd
owns.
(2) Represents
d
ecrease
i
nva
l
ue assoc
i
ate
d
w
i
t
hl
oans t
h
at pa
id
o
ff d
ur
i
n
g
t
h
e per
i
o
d.
(3) Represents c
h
an
g
e
i
nva
l
ue resu
l
t
i
n
g
pr
i
mar
ily f
rom mar
k
et-
d
r
i
ven c
h
an
g
es
i
n
i
nterest rates
.
Am
o
rt
i
z
a
t
io
nM
e
th
od
2009 2008
(
In thousands
)
C
arr
y
in
g
value, be
g
innin
g
of
y
ear
.....................................
$
—
$
—
New serv
i
c
i
n
g
assets create
d
...
......................................
40
,
4
5
2
—
Am
o
r
ti
z
atio
n
a
n
d other
.............................................
(
2
,
287
)
—
C
arry
i
n
g
value, end o
f
yea
r
........................................
$
38
,
165
$
—
Fa
i
r value, end o
fy
ear
............................................
$
43
,
769
$
—
MSRs do not trade in an active, open market with readil
y
observable prices. While sales of MSRs occur
,
the precise terms and conditions are t
y
picall
y
not readil
y
available. Therefore, the fair value of MSRs is
est
i
mate
d
us
i
n
g
a
di
scounte
df
uture cas
hfl
ow mo
d
e
l
.T
h
emo
d
e
l
cons
id
ers port
f
o
li
oc
h
aracter
i
st
i
cs, contractu
-
all
y
specified servicin
g
fees and assumptions related to prepa
y
ments, delinquenc
y
rates, late char
g
es, othe
r
ancillar
y
revenues, costs to service, and other economic factors. Chan
g
es in the assumptions used ma
y
have
a
s
ig
n
ifi
cant
i
mpact on t
h
eva
l
uat
i
on o
f
MSRs.
A summar
y
of ke
y
assumptions and the sensitivit
y
of the MSR value at December 31, 2009 to chan
g
es i
n
t
h
ese assum
p
t
i
ons
f
o
ll
ows
:
A
ctua
l
10
%
Adverse
C
han
g
e
20
%
Adverse
C
han
g
e
Decl
i
ne
i
nFa
i
r
V
alue Due t
o
(
In thousands
)
C
onstant pre-pa
y
ment rat
e
..............................
10.26%
$(
11,811
)$(
21,133
)
S
p
rea
d
over
f
orwar
di
nterest rate swa
p
rate
s
.................
483b
p
s (3,6
5
6) (7,312)
MSR va
l
ues are very sens
i
t
i
ve to movements
i
n
i
nterest rates as expecte
df
uture net serv
i
c
i
ng
i
ncom
e
d
epen
d
sont
h
e pro
j
ecte
d
outstan
di
n
g
pr
i
nc
i
pa
lb
a
l
ances o
f
t
h
eun
d
er
lyi
n
gl
oans, w
hi
c
h
can
b
e
g
reat
ly
i
mpacte
dby
t
h
e
l
eve
l
o
f
prepa
y
ments. T
h
e Compan
yh
e
dg
es a
g
a
i
nst c
h
an
g
es
i
n MSR
f
a
i
rva
l
ue attr
ib
uta
bl
et
o
chan
g
es in interest rates throu
g
h a combination of derivative instruments and tradin
g
securities
.
1
5
6