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Mortgage Servicing Rights | 12 Months Ended
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Dec. 31, 2017
Transfers and Servicing [Abstract] |
Mortgage Servicing Rights |
NOTE 7 – MORTGAGE SERVICING RIGHTS
The following table summarizes the changes in MSRs, which are included in other assets on the consolidated balance sheets:
| 2017 |  | 2016
| (in thousands)
Amortized cost: |  |  |
Balance at beginning of year | $ | 38,822 |  |  | $ | 40,944 |
Originations of mortgage servicing rights | 4,968 |  |  | 5,485 |
Amortization expense | (6,127 | ) |  | (7,607 | )
Balance at end of year | $ | 37,663 |  |  | $ | 38,822 |
Valuation allowance: |  |  |
Balance at beginning of year | $ | (1,291 | ) |  | $ | — |
Net deductions (additions) to the valuation allowance | 1,291 |  |  | (1,291 | )
Balance at end of year | $ | — |  |  | $ | (1,291 | )
Net MSRs at end of year | $ | 37,663 |  |  | $ | 37,531 |
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 accounts for MSRs at the lower of amortized cost or fair value. The fair value of MSRs is estimated 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. Based on its fair value analysis, the Corporation determined that a valuation allowance was no longer necessary as of December 31, 2017 and reduced it by $1.3 million net additions recorded in 2016. Reductions and additions to the valuation allowance are recorded as increases and decreases, respectively, to mortgage banking income on the consolidated statements of income. The estimated fair value of MSRs was $41.6 million and $38.2 million as of December 31, 2017 and 2016, respectively. Total MSR amortization expense, recognized as a reduction to mortgage banking income in the consolidated statements of income, was $6.1 million and $7.6 million in 2017 and 2016, respectively. Estimated MSR amortization expense for the next five years, based on balances as of December 31, 2017 and the estimated remaining lives of the underlying loans, follows (in thousands):
Year |
2018 | $ | 6,342 |
2019 | 5,905 |
2020 | 5,423 |
2021 | 4,893 |
2022 | 4,311 |

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- 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 Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 860 -URI http://asc.fasb.org/topic&trid=2197590 + Details
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