Huntington National Bank 2014 Annual Report Download - page 151

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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, 2014 and 2013 follows:
December 31, 2014 December 31, 2013
Decline in fair value due Decline in fair value due
10% 20% 10% 20%
adverse adverse adverse adverse
(dollar amounts in thousands) Actual change change Actual change change
Constant prepayment rate (annualized) 11.40 % $ (5,289) $ (10,164) 6.70 % $ (6,813) $ (12,977)
Spread over forward interest rate swap rates 856 bps (4,343) (8,403) 940 bps (6,027) (12,054)
Total servicing, late and other ancillary fees included in mortgage banking income was $44.3 million, $43.8 million, and $46.2
million in 2014, 2013, and 2012, respectively. The unpaid principal balance of residential mortgage loans serviced for third parties
was $15.6 billion, $15.2 billion, and $15.6 billion at December 31, 2014, 2013, and 2012, respectively.
Automobile Loans and Leases
The following table summarizes activity relating to automobile loans sold and/or securitized with servicing retained for the years
ended December 31, 2014, 2013, and 2012:
Year Ended December 31,
(dollar amounts in thousands) 2014 (1) 2013 (1) 2012
Automobile loans sold with servicing retained $ --- $ --- $ 169,324
Automobile loans securitized with servicing retained --- --- 2,300,018
Pretax gains (2) --- --- 42,251
(1) Huntington did not sell or securitize any automobile loans in 2014 or 2013.
(2) Recorded in noninterest income
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, 2014 and 2013, and the fair
value at the end of each period were as follows:
(dollar amounts in thousands) 2014 2013
Carrying value, beginning of year $ 17,672 $ 35,606
N
ew servicing assets create
d
--- ---
Amortization and other (10,774) (17,934)
Carrying value, end of year $ 6,898 $ 17,672
Fair value, end of year $ 6,948 $ 18,193
Weighted-average life (years) 2.6 3.6