Mortgage Servicing Rights, Net

9 Months Ended

Sep. 30, 2015

Transfers and Servicing of Financial Assets [Text Block]

NOTE 6: MORTGAGE SERVICING RIGHTS, NET

Mortgage servicing rights (“MSRs”) are recognized based on the fair value of the servicing rights on the date the corresponding mortgage loans are sold. An estimate of the fair value of the Company’s MSRs is determined using assumptions that market participants would use in estimating future net servicing income, including estimates of prepayment speeds, discount rates, default rates, cost to service, escrow account earnings, contractual servicing fee income, ancillary income, and late fees. Subsequent to the date of transfer, the Company has elected to measure its MSRs under the amortization method. Under the amortization method, MSRs are amortized in proportion to, and over the period of, estimated net servicing income.

The Company has recorded MSRs related to loans sold without recourse to Fannie Mae. The Company generally sells conforming, fixed-rate, closed-end, residential mortgages to Fannie Mae. MSRs are included in other assets on the accompanying consolidated balance sheets.

The Company evaluates MSRs for impairment on a quarterly basis. Impairment is determined by stratifying MSRs into groupings based on predominant risk characteristics, such as interest rate and loan type. If, by individual stratum, the carrying amount of the MSRs exceeds fair value, a valuation allowance is established. The valuation allowance is adjusted as the fair value changes. Changes in the valuation allowance are recognized in earnings as a component of mortgage lending income.

The following table details the changes in amortized MSRs and the related valuation allowance for the respective periods.

		Quarter ended September 30,				Nine Months Ended September 30,
(Dollars in thousands)		2015		2014		2015		2014
MSRs, net:
Beginning balance	$	2,359	$	2,346	$	2,388	$	2,350
Additions, net		174		168		440		371
Amortization expense		(171)		(89)		(505)		(253)
Decrease (increase) in valuation allowance		13		12		52		(31)
Ending balance	$	2,375	$	2,437	$	2,375	$	2,437

Valuation allowance included in MSRs, net:
Beginning of period	$	14	$	43	$	53	$	—
End of period		1		31		1		31

Fair value of amortized MSRs:
Beginning of period	$	3,014	$	3,228	$	3,238	$	3,452
End of period		3,052		3,314		3,052		3,314

- 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.

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