Company: FITBI
Filing Date: 2025-05-06
Form Type: 10-Q
Source: 0000035527-25-000137
Chunk: 16

Company: FIFTH THIRD BANCORP
Filing Date: 2025-05-06
Form: 10-Q
Item: Item 7
Chunk 16
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,($ in millions)20252024Changes in fair value and settlement of free-standing derivatives purchased   to economically hedge the MSR portfolio$19 (46)Changes in fair value:Due to changes in inputs or assumptions(a)(16)41 Other changes in fair value(b)(34)(33)Net valuation adjustments on MSRs and free-standing derivatives purchased to economically hedge MSRs$(31)(38)

(a)Primarily reflects changes in prepayment speed and OAS assumptions which are updated based on market interest rates.

(b)Primarily reflects changes due to realized cash flows and the passage of time.

Net mortgage servicing revenue increased $3 million for the three months ended March 31, 2025 compared to the same period in the prior year as the $4 million reduction in gross mortgage servicing fees was more than offset by the $7 million reduction in negative valuation adjustments on the MSR and MSR related hedge. The valuation adjustments on the MSR portfolio included decreases of $16 million and increases of $41 million for the three months ended March 31, 2025 and 2024, respectively, due to changes in market rates and other inputs in the valuation model, including future prepayment speeds and OAS assumptions. Mortgage rates decreased during the three months ended March 31, 2025, which caused an increase in prepayment speeds. The fair value of the MSR portfolio decreased $34 million and $33 million as a result of contractual principal payments and actual prepayment activity for the three months ended March 31, 2025 and 2024, respectively.

Further detail on the valuation of MSRs can be found in Note 8 of the Notes to Condensed Consolidated Financial Statements. The Bancorp maintains a non-qualifying hedging strategy to manage a portion of the risk associated with changes in the valuation of the MSR portfolio. Refer to Note 9 of the Notes to Condensed Consolidated Financial Statements for more information on the free-standing derivatives used to economically hedge the MSR portfolio. In addition to the derivative positions used to economically hedge the MSR portfolio, the Bancorp acquires various securities as a component of its non-qualifying hedging strategy. Net gains and losses on these securities were immaterial for both the three months ended March 31, 2025 and 2024.

The Bancorp’s total residential mortgage loans serviced as of March 31, 2025 and 2024 were $109.4 billion and $115.7 billion, respectively, with $92.8 billion and $