Loan Sales and Servicing (Tables)

6 Months Ended

Jun. 30, 2020

Schedule of loans transferred to held for sale and loans sold

The following table summarizes the Company's activity in the loans held for sale portfolio and loan sales, excluding activity related to loans originated for sale in the secondary market.



	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
	(In Thousands)
Loans transferred from held for investment to held for sale	$	—	$	—	$	—	$	1,196,883
Charge-offs on loans recognized at transfer from held for investment to held for sale	—		—		—		—
Loans and loans held for sale sold	—		936,624		—		1,081,298

Schedule of loan sales and residential mortgage servicing rights

The following table summarizes the Company's sales of loans originated for sale in the secondary market.



	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
	(In Thousands)
Residential real estate loans originated for sale in the secondary market sold (1)	$	316,119	$	180,668	$	519,949	$	300,390
Net gains recognized on sales of residential real estate loans originated for sale in the secondary market (2)	17,498		7,509		26,273		12,644
Servicing fees recognized (2)	2,568		2,632		5,176		5,304


(1)	The Company has retained servicing responsibilities for all loans sold that were originated for sale in the secondary market.


(2)	Recorded as a component of mortgage banking income in the Company's Unaudited Condensed Consolidated Statements of Income.

The following table provides the recorded balance of loans sold with retained servicing and the related MSRs.



	June 30, 2020		December 31, 2019
	(In Thousands)
Recorded balance of residential real estate mortgage loans sold with retained servicing (1)	$	4,479,225	$	4,534,202
MSRs (2)	29,035		42,022


(1)	These loans are not included in loans on the Company's Unaudited Condensed Consolidated Balance Sheets.


(2)	Recorded under the fair value method and included in other assets on the Company's Unaudited Condensed Consolidated Balance Sheets.

The following table is an analysis of the activity in the Company’s MSRs.



	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
	(In Thousands)
Carrying value, at beginning of period	$	31,232		$	47,545		$	42,022		$	51,539
Additions	2,739			1,646			4,410			2,705
Increase (decrease) in fair value:
Due to changes in valuation inputs or assumptions	(2,674		)	(4,691		)	(12,814		)	(7,034		)
Due to other changes in fair value (1)	(2,262		)	(2,534		)	(4,583		)	(5,244		)
Carrying value, at end of period	$	29,035		$	41,966		$	29,035		$	41,966


(1)	Represents the realization of expected net servicing cash flows, expected borrower repayments and the passage of time.

Schedule of sensitivity of current fair value of residential real estate mortgage servicing rights

At June 30, 2020 and December 31, 2019, the sensitivity of the current fair value of the residential MSRs to immediate 10% and 20% adverse changes in key economic assumptions are included in the following table:



	June 30, 2020			December 31, 2019
	(Dollars in Thousands)
Fair value of MSRs	$	29,035		$	42,022
Composition of residential loans serviced for others:
Fixed rate mortgage loans	98.3		%	98.1		%
Adjustable rate mortgage loans	1.7			1.9
Total	100.0		%	100.0		%
Weighted average life (in years)	3.4			4.6
Prepayment speed:	21.1		%	16.9		%
Effect on fair value of a 10% increase	$	(2,058	)	$	(2,906	)
Effect on fair value of a 20% increase	(3,891		)	(5,043		)
Weighted average option adjusted spread:	6.2		%	6.4		%
Effect on fair value of a 10% increase	$	(560	)	$	(1,159	)
Effect on fair value of a 20% increase	(1,098		)	(1,812		)

BBVA USA Bancshares, Inc. 10-Q