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SERVICING RIGHTS
 9 Months Ended
Sep. 30, 2015
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 (loss) from servicing rights was $(2.3) million and $924 thousand for the three months ended September 30, 2015 and 2014, respectively, and $(689) thousand and $3.0 million for the nine months ended September 30, 2015 and 2014, respectively. The Company recognized losses on the fair values of servicing rights of $5.5 million and $412 thousand for the three months ended September 30, 2015 and 2014, respectively, and $8.6 million and $1.2 million for the nine months ended September 30, 2015 and 2014, respectively. The decreases were partially offset by $1.9 million and $3.8 million increases, respectively, in servicing fees for the three and nine months ended September 30, 2015, comparing to the respective prior year periods. The decrease in fair value of servicing rights was due to generally lower interest rates and the increase in servicing fees was due to the increase in unpaid principal balance of loans sold with servicing retained. These amounts are reported in Loan Servicing Income (Loss) in the Consolidated Statements of Operations. The following table presents a composition of servicing rights as of the dates indicated: 
 
September 30, 2015
 
December 31, 2014
 
(In thousands)
Mortgage servicing rights, at fair value
$
40,837

 
$
19,082

SBA servicing rights, at cost
809

 
484

Total
$
41,646

 
$
19,566



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, 2015 and December 31, 2014 was $4.06 billion and $1.92 billion, respectively. Custodial escrow balances maintained in connection with serviced loans were $32.5 million and $8.3 million at September 30, 2015 and December 31, 2014, 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, 2015
 
December 31, 2014
 
($ in thousands)
Fair value of retained MSRs
$
40,837

 
$
13,135

Discount rate
9.88
%
 
10.09
%
Constant prepayment rate
12.09
%
 
13.22
%
Weighted-average life
6.41 years

 
5.80 years



At December 31, 2014, $5.9 million of the mortgage servicing rights were valued based on a market bid that settled subsequent to that date, which was classified as Level 3.
The following table presents activity in the MSRs for the periods indicated: 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
2015
 
2014
 
2015
 
2014
 
(In thousands)
Balance at beginning of period
$
34,198

 
$
9,816

 
$
19,082

 
$
13,535

Additions
12,143

 
7,735

 
36,034

 
18,871

Changes in fair value resulting from valuation inputs or assumptions
(3,097
)
 
110

 
(2,087
)
 
(1,240
)
Sales of servicing rights
—

 
(5,623
)
 
(5,862
)
 
(17,773
)
Other
(2,407
)
 
(662
)
 
(6,330
)
 
(2,017
)
Balance at end of period
$
40,837

 
$
11,376

 
$
40,837

 
$
11,376



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,
2015
 
2014
 
2015
 
2014
 
(In thousands)
Balance at beginning of period
$
744

 
$
375

 
$
484

 
$
348

Additions
132

 
18

 
471

 
87

Amortization, including prepayments
(67
)
 
(24
)
 
(146
)
 
(66
)
Balance at end of period
$
809

 
$
369

 
$
809

 
$
369