Mortgage Servicing Rights

The following table presents the changes in the Company’s mortgage servicing rights (“MSR”) for the three and nine months ended September 30, 2013 and 2012:

(in thousands)



	Three months ended						Nine months ended
	September 30,						September 30,
	2013			2012			2013			2012
Balance, beginning of period	$	38,192		$	22,513		$	27,428		$	18,184
Additions for new mortgage servicing rights capitalized	4,072			5,642			15,182			11,923
Changes in fair value:
Due to changes in model inputs or assumptions(1)	3,406			(2,770		)	3,739			(3,833		)
Other(2)	(3,817		)	(896		)	(4,496		)	(1,785		)
Balance, end of period	$	41,853		$	24,489		$	41,853		$	24,489


(1)	Principally reflects changes in discount rates and prepayment speed assumptions, which are primarily affected by changes in interest rates.


(2)	Represents changes due to collection/realization of expected cash flows over time.

Information related to our serviced loan portfolio as of September 30, 2013 and December 31, 2012 is as follows:

(dollars in thousands)



	September 30, 2013			December 31, 2012
Balance of loans serviced for others	$	4,195,759		$	3,162,080
MSR as a percentage of serviced loans	1.00		%	0.87		%

The amount of contractually specified servicing fees, late fees and ancillary fees earned, recorded in mortgage banking revenue on the Condensed Consolidated Statements of Income, was $2.7 million and $7.5 million for the three and nine months ended September 30, 2013, as compared to $1.7 million and $4.6 million for the three and nine months ended September 30, 2012.

Key assumptions used in measuring the fair value of MSR as of September 30, 2013 and December 31, 2012 are as follows:



	September 30, 2013		December 31, 2012
Constant prepayment rate	16.04	%	21.39	%
Discount rate	8.69	%	8.65	%
Weighted average life (years)	4.9		4.7

A sensitivity analysis of the current fair value to changes in discount and prepayment speed assumptions as of September 30, 2013 and December 31, 2012 is as follows:



	September 30, 2013			December 31, 2012
Constant prepayment rate
Effect on fair value of a 10% adverse change	$	(2,232	)	$	(1,445	)
Effect on fair value of a 20% adverse change	$	(4,268	)	$	(2,754	)

Discount rate
Effect on fair value of a 100 basis point adverse change	$	(1,561	)	$	(889	)
Effect on fair value of a 200 basis point adverse change	$	(3,017	)	$	(1,720	)

The sensitivity analysis presents the hypothetical effect on fair value of the MSR. The effect of such hypothetical change in assumptions generally cannot be extrapolated because the relationship of the change in an assumption to the change in fair value is not linear. Additionally, in the analysis, the impact of an adverse change in one assumption is calculated independent of any impact on other assumptions. In reality, changes in one assumption may change another assumption.