Mortgage Servicing Rights

3 Months Ended

Mar. 31, 2018

(In Thousands)

The Company retains the right to service certain mortgage loans that it sells to secondary market investors. These mortgage servicing rights (“MSRs”) are recognized as a separate asset on the date the corresponding mortgage loan is sold. MSRs are amortized in proportion to and over the period of estimated net servicing income. These servicing rights are carried at the lower of amortized cost or fair value. Fair value is determined using an income approach with various assumptions including expected cash flows, prepayment speeds, market discount rates, servicing costs, and other factors. Impairment losses on MSRs are recognized to the extent by which the unamortized cost exceeds fair value. There were no impairment losses recognized during the three months ended March 31, 2018 and 2017.

Changes in the Company’s MSRs were as follows:



Balance at January 1, 2018	$	39,339
Capitalization	2,098
Amortization	(1,221		)
Balance at March 31, 2018	$	40,216

Data and key economic assumptions related to the Company’s MSRs as of March 31, 2018 and December 31, 2017 are as follows:



	March 31, 2018			December 31, 2017
Unpaid principal balance	$	4,089,045		$	4,012,519

Weighted-average prepayment speed (CPR)	7.42		%	8.04		%
Estimated impact of a 10% increase	$	(1,692	)	$	(1,592	)
Estimated impact of a 20% increase	(3,280		)	(3,095		)

Discount rate	9.40		%	9.69		%
Estimated impact of a 10% increase	$	(2,374	)	$	(2,027	)
Estimated impact of a 20% increase	(4,556		)	(3,896		)

Weighted-average coupon interest rate	3.89		%	3.89		%
Weighted-average servicing fee (basis points)	26.54			26.36
Weighted-average remaining maturity (in years)	8.27			7.98

The Company recorded servicing fees of $2,370 and $1,233 for the three months ended March 31, 2018 and 2017, respectively, which are included in “Mortgage banking income” in the Consolidated Statements of Income.