NON-CONSOLIDATED VARIABLE INTEREST ENTITIES AND SERVICING ASSETS (Tables)

9 Months Ended

Sep. 30, 2017

Changes in Servicing Assets

The changes in servicing assets are shown below:
		Quarter Ended				Nine-Month Period Ended
		September 30,				September 30,
(In thousands)		2017		2016		2017		2016
Balance at beginning of period		$	26,502	$	25,044	$	26,244	$	24,282
Capitalization of servicing assets			833		1,420		2,757		3,878
Amortization			(775)		(817)		(2,342)		(2,424)
Adjustment to fair value			(690)		(263)		(1,047)		(387)
Other (1)			129		91		387		126
Balance at end of period		$	25,999	$	25,475	$	25,999	$	25,475
(1)	Amount represents the adjustment to fair value related to the repurchase of loans serviced for others.

Changes in Impairment Allowance

Changes in the impairment allowance were as follows:
	Quarter Ended				Nine-Month Period Ended
	September 30,				September 30,
	2017		2016		2017		2016
(In thousands)
Balance at beginning of period	$	197	$	260	$	461	$	136
Temporary impairment charges		690		266		1,047		460
OTTI of servicing assets		-		-		(621)		-
Recoveries		-		(3)		-		(73)
Balance at end of period	$	887	$	523	$	887	$	523

Components of Net Servicing Income

	The components of net servicing income are shown below:
		Quarter Ended				Nine-Month Period Ended
		September 30,				September 30,
		2017		2016		2017		2016
(In thousands)
Servicing fees		$	1,898	$	1,930	$	5,897	$	5,657
Late charges and prepayment penalties			103		200		340		505
Adjustment for loans repurchased			129		91		387		126
Other (1)			-		-		(35)		(1)
Servicing income, gross			2,130		2,221		6,589		6,287
Amortization and impairment of servicing assets			(1,464)		(1,080)		(3,389)		(2,811)
Servicing income, net		$	666	$	1,141	$	3,200	$	3,476
(1)	Mainly consisted of compensatory fees imposed by GSEs.

Key Economic Assumptions Used in Determining Fair Value at Time of Sale of Loans

The Corporation’s servicing assets are subject to prepayment and interest rate risks. Key economic assumptions used in determining the fair value at the time of sale of the related mortgages ranged as follows:
	Maximum		Minimum
Nine-Month Period Ended September 30, 2017:
Constant prepayment rate:
Government-guaranteed mortgage loans	6.2	%	6.0	%
Conventional conforming mortgage loans	6.7	%	6.3	%
Conventional non-conforming mortgage loans	9.5	%	9.1	%
Discount rate:
Government-guaranteed mortgage loans	12.0	%	12.0	%
Conventional conforming mortgage loans	10.0	%	10.0	%
Conventional non-conforming mortgage loans	14.3	%	14.3	%
Nine-Month Period Ended September 30, 2016:
Constant prepayment rate:
Government-guaranteed mortgage loans	7.6	%	6.1	%
Conventional conforming mortgage loans	8.0	%	6.5	%
Conventional non-conforming mortgage loans	14.1	%	10.6	%
Discount rate:
Government-guaranteed mortgage loans	12.0	%	11.5	%
Conventional conforming mortgage loans	10.0	%	9.5	%
Conventional non-conforming mortgage loans	14.3	%	13.8	%

Weighted-Averages of Key Economic Assumptions in Valuation Model

	(Dollars in thousands)
Carrying amount of servicing assets	$	25,999
Fair value	$	29,543
Weighted-average expected life (in years)		8.30
Constant prepayment rate (weighted-average annual rate)		6.41%
Decrease in fair value due to 10% adverse change	$	767
Decrease in fair value due to 20% adverse change	$	1,500
Discount rate (weighted-average annual rate)		11.22%
Decrease in fair value due to 10% adverse change	$	1,383
Decrease in fair value due to 20% adverse change	$	2,653