Mortgage Servicing Rights

3 Months Ended

Mar. 31, 2018

The following table summarizes the changes in mortgage servicing rights ("MSRs"), which are included in other assets on the consolidated balance sheets:



	Three months ended March 31
	2018			2017
	(in thousands)
Amortized cost:
Balance at beginning of period	$	37,663		$	38,822
Originations of mortgage servicing rights	1,483			1,183
Amortization	(1,398		)	(1,462		)
Balance at end of period	$	37,748		$	38,543

Valuation allowance:
Valuation Allowance - Balance at beginning and end of period	$	—		$	(1,291	)

Net MSRs at end of period	$	37,748		$	37,252

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 a valuation allowance was not necessary as of March 31, 2018. For the three months ended March 31, 2017, the Corporation determined that no adjustment to the valuation allowance of $1.3 million was necessary. Additions and reductions to the valuation allowance are recorded as decreases and increases, respectively, to "mortgage banking income" on the consolidated statements of income.