7. Mortgage Servicing Rights

The following tables present the changes in fair value of the Company’s MSR asset, as included in other assets within the consolidated balance sheets, and other information related to the serviced portfolio (dollars in thousands).


	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017		2016
Balance, beginning of period	$	43,580		$	33,491		$	61,968	$	52,285
Additions		5,939			10,416			8,429		20,309
Sales		—			—			(17,499)		(7,586)
Changes in fair value:
Due to changes in model inputs or assumptions (1)		(550)			1,413			(1,757)		(16,923)
Due to customer payoffs		(1,203)			(1,569)			(3,375)		(4,334)
Balance, end of period	$	47,766		$	43,751		$	47,766	$	43,751

	September 30,			December 31,
	2017			2016
Mortgage loans serviced for others	$	4,175,195		$	5,480,943
MSR asset as a percentage of serviced mortgage loans		1.14	%		1.13	%

(1)

Primarily represents normal customer payments, changes in discount rates and prepayment speed assumptions, which are primarily affected by changes in interest rates and the refinement of other MSR model assumptions.

The key assumptions used in measuring the fair value of the Company’s MSR asset were as follows.


	September 30,		December 31,
	2017		2016
Weighted average constant prepayment rate	10.85	%	10.47	%
Weighted average discount rate	11.07	%	10.95	%
Weighted average life (in years)	6.9		6.9

A sensitivity analysis of the fair value of the Company’s MSR asset to certain key assumptions is presented in the following table (in thousands).


	September 30,		December 31,
	2017		2016
Constant prepayment rate:
Impact of 10% adverse change	$	(1,747)	$	(2,297)
Impact of 20% adverse change		(3,441)		(4,471)
Discount rate:
Impact of 10% adverse change		(1,889)		(2,539)
Impact of 20% adverse change		(3,630)		(4,882)

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

Contractually specified servicing fees, late fees and ancillary fees earned of $4.2 million and $5.7 million during the three months ended September 30, 2017 and 2016, respectively, and $15.7 million and $17.3 million during the nine months ended September 30, 2017 and 2016, respectively, were included in other noninterest income within the consolidated statements of operations.