Mortgage Servicing Rights

12 Months Ended

Dec. 31, 2014



NOTE G – MORTGAGE SERVICING RIGHTS

The following table summarizes the changes in MSRs, which are included in other assets on the consolidated balance sheets:



	2014			2013
	(in thousands)
Amortized cost:
Balance at beginning of year	$	42,452		$	39,737
Originations of mortgage servicing rights	5,047			12,072
Amortization expense	(5,351		)	(9,357		)
Balance at end of year	$	42,148		$	42,452
Valuation allowance:
Balance at beginning of year	$	—		$	(3,680	)
Reversals	—			3,680
Balance at end of year	$	—		$	—
Net MSRs at end of year	$	42,148		$	42,452

MSRs represent the economic value of existing contractual rights to service mortgage loans that have been sold. Accordingly, actual and expected prepayments of the underlying mortgage loans can impact the value of MSRs.

The Corporation estimates the fair value of its MSRs by discounting the estimated cash flows from servicing income, net of expense, over the expected life of the underlying loans at a discount rate commensurate with the risk associated with these assets. Expected life is based on the contractual terms of the loans, as adjusted for prepayment projections. No adjustment to the valuation allowance was necessary for the year ended December 31, 2014. A $3.7 million decrease to the valuation allowance was recorded for the year ended December 31, 2013.

The Corporation accounts for MSRs at the lower of amortized cost or fair value. The estimated fair value of MSRs were $46.0 million and $49.3 million as of December 31, 2014 and 2013, respectively. As a result of the MSR fair values exceeding book values, no increases to the valuation allowance were necessary for the years ended December 31, 2014 or 2013.

Estimated MSR amortization expense for the next five years, based on balances as of December 31, 2014 and the contractual remaining lives of the underlying loans, follows (in thousands):



Year
2015	$	10,224
2016	9,028
2017	7,717
2018	6,283
2019	4,717

- Definition

The entire disclosure for a transferor's continuing involvement in financial assets that it has transferred in a securitization or asset-backed financing arrangement, the nature of any restrictions on assets reported by an entity in its statement of financial position that relate to a transferred financial asset (including the carrying amounts of such assets), how servicing assets and servicing liabilities are reported, and (for securitization or asset-backed financing arrangements accounted for as sales) when a transferor has continuing involvement with the transferred financial assets and transfers of financial assets accounted for as secured borrowings, how the transfer of financial assets affects an entity's financial position, financial performance, and cash flows.

+ References+ Details