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SERVICING RIGHTS
 9 Months Ended
Sep. 30, 2014
Transfers and Servicing [Abstract]  
SERVICING RIGHTS
SERVICING RIGHTS
The Company retains mortgage servicing rights (MSRs) from certain of its sales of residential mortgage loans. MSRs on residential mortgage loans are reported at fair value. Income earned by the Company on its MSRs is derived primarily from contractually specified mortgage servicing fees and late fees, net of curtailment costs and third party subservicing costs. The Company retains servicing rights in connection with its SBA loan operations, which are measured using the amortization method.
Income earned from servicing rights for the three and nine months ended September 30, 2014 and 2013 was $924 thousand and $293 thousand, respectively, and $3.0 million and $939 thousand, respectively. These amounts are reported in loan servicing income in the consolidated statements of operations. The following table presents a composition of servicing rights as of the dates indicated:
 
 
September 30, 2014
 
December 31, 2013
 
(In thousands)
Mortgage servicing rights, at fair value
$
11,376

 
$
13,535

SBA servicing rights, at cost
369

 
348

Total
$
11,745

 
$
13,883


Mortgage loans sold with servicing retained are not reported as assets and are subserviced by a third party vendor. The unpaid principal balance of these loans at September 30, 2014 and December 31, 2013 was $1.24 billion and $1.37 billion, respectively. Custodial escrow balances maintained in connection with serviced loans were $8.9 million and $5.9 million at September 30, 2014 and December 31, 2013, respectively.
Mortgage Servicing Rights
The following table presents the key characteristics, inputs and economic assumptions used to estimate the fair value of the MSRs as of the dates indicated:
 
 
September 30, 2014
 
December 31, 2013
 
($ in thousands)
Fair value of retained MSRs
$
11,376

 
$
13,535

Decay
20.55
%
 
15.40
%
Discount rate
10.70
%
 
10.39
%
Constant prepayment rate
12.41
%
 
10.28
%
Weighted-average life (in years)
6.20

 
7.37


The following table presents activity in the MSRs for the periods indicated:
 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
2014
 
2013
 
2014
 
2013
 
(In thousands)
Balance at beginning of period
$
9,816

 
$
4,620

 
$
13,535

 
$
1,739

Additions
7,735

 
2,836

 
18,871

 
5,598

Prepayments
(308
)
 
(146
)
 
(758
)
 
(308
)
Changes in fair value resulting from valuation inputs or assumptions
110

 
(79
)
 
(1,240
)
 
251

Sales of servicing rights
(5,623
)
 
—

 
(17,773
)
 
—

Other—loans paid off
(354
)
 
(11
)
 
(1,259
)
 
(60
)
Balance at end of period
$
11,376

 
$
7,220

 
$
11,376

 
$
7,220



SBA Servicing Rights
The Company used a discount rate of 7.25 percent to calculate the present value of cash flows and an estimated prepayment speed based on prepayment data available. Discount rates and prepayment speeds are reviewed quarterly and adjusted as appropriate. The following table presents activity in the SBA servicing rights for the periods indicated:
 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
2014
 
2013
 
2014
 
2013
 
(In thousands)
Balance at beginning of period
$
375

 
$
420

 
$
348

 
$
539

Additions
18

 
—

 
87

 
32

Amortization, including prepayments
(24
)
 
(37
)
 
(66
)
 
(188
)
Balance at end of period
$
369

 
$
383

 
$
369

 
$
383