LOAN SERVICING

3 Months Ended

Mar. 31, 2025

Mortgage Loan Servicing

We retain the servicing rights on certain mortgage loans sold. The unpaid principal balance of mortgage loans serviced for others is listed below:

TABLE 6.1


(in millions)	March 31, 2025		December 31, 2024
Mortgage loans sold with servicing retained	$	6,603	$	6,429

The following table summarizes activity relating to mortgage loans sold with servicing retained:

TABLE 6.2


	Three Months Ended March 31,
(in millions)		2025		2024
Mortgage loans sold with servicing retained		$	312	$	316
Pre-tax net gains (losses) resulting from above loan sales (1)		4		6
Mortgage servicing fees (1)		4		4

(1) Recorded in mortgage banking operations on the Consolidated Statements of Income.

Following is a summary of activity relating to MSRs:

TABLE 6.3


	Three Months Ended March 31,
(in millions)		2025		2024
Balance at beginning of period		$	70.5	$	59.5

Additions		3.5		3.9
Payoffs and curtailments		(0.8)		(0.5)
Impairment (charge) / recovery		(0.1)		0.2
Amortization / other		(0.5)		(0.6)
Balance at end of period		$	72.6	$	62.5
Fair value, beginning of period		$	86.3	$	71.8
Fair value, end of period		84.8		75.2

There was a $0.2 million valuation allowance for MSRs at March 31, 2025 and $0.1 million as of December 31, 2024.

The fair value of MSRs is highly sensitive to changes in assumptions and is determined by estimating the present value of the asset’s future cash flows utilizing market-based prepayment rates, discount rates and other assumptions validated through comparison to trade information, industry surveys and the use of independent third-party valuations. Changes in prepayment speed assumptions have the most significant impact on the fair value of MSRs. Generally, as interest rates decline, mortgage loan prepayments accelerate due to increased refinance activity, which results in a decrease in the fair value of MSRs and as interest rates increase, mortgage loan prepayments decline, which results in an increase in the fair value of MSRs. Measurement of fair value is limited to the conditions existing and the assumptions utilized as of a particular point in time, and those assumptions may not be appropriate if they are applied at a different point in time.

Following is a summary of the sensitivity of the fair value of MSRs to changes in key assumptions:

TABLE 6.4


(dollars in millions)	March 31, 2025			December 31, 2024
Weighted average life (months)	92			96
Constant prepayment rate (annualized)	8.1		%	7.6		%
Discount rate	10.1		%	10.3		%
Effect on fair value due to change in interest rates:
+2.00%	$	10		$	6
+1.00%	7			5
+0.50%	5			3
+0.25%	3			2
-0.25%	(3)			(2)
-0.50%	(6)			(5)
-1.00%	(12)			(11)
-2.00%	(21)			(20)
-3.00%	(39)			(34)

The sensitivity calculations above are hypothetical and should not be considered to be predictive of future performance. Changes in fair value based on adverse changes in assumptions generally cannot be extrapolated because the relationship of the changes in assumptions to fair value may not be linear. Also, in this table, the effects of an adverse variation in a particular assumption on the fair value of MSRs is calculated without changing any other assumptions, while, in reality, changes in one factor may result in changing another, which may magnify or contract the effect of the change.

- Definition

The entire disclosure for a transferor's continuing involvement in financial assets that it has transferred in a securitization or asset-backed financing arrangement, the nature of any restrictions on assets reported by an entity in its statement of financial position that relate to a transferred financial asset (including the carrying amounts of such assets), how servicing assets and servicing liabilities are reported, and (for securitization or asset-backed financing arrangements accounted for as sales) when a transferor has continuing involvement with the transferred financial assets and transfers of financial assets accounted for as secured borrowings, how the transfer of financial assets affects an entity's financial position, financial performance, and cash flows.

+ References

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+ Details

FNB CORP/PA/ 10-Q