Note 7. Mortgage Servicing Rights

Mortgage servicing rights (MSRs) are recorded at the lower of cost or market in "Other assets" on Pinnacle Financial's consolidated balance sheets and are amortized over the remaining life of the loans and written off when a mortgage loan prepays prior to maturity. Mortgage servicing rights had the following carrying values as of December 31, 2015 (in thousands):



	2015
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Mortgage servicing rights	$	6,802	$	(390	)	$	6,412

The following table provides a detail of changes in the mortgage servicing right from September 1, 2015, the closing date of the Magna Merger, to December 31, 2015:



	Residential
Beginning balance acquired in Magna Merger	$	6,641
Add: Capitalized MSRs	161
Less: Amortization	390
Ending balance	$	6,412

Income and expense associated with these MSRs, which includes servicing fees, late charges, guarantee fees and loan payoff interest, is recorded on a cash basis which approximates income as would be recorded on a U.S. GAAP basis. The following table summarizes the net servicing fee revenues for the year ended December 31, 2015 (in thousands):



	Residential
Gross servicing fees	$	1,090
Late charges and other ancillary revenue	160
Gross servicing revenue	$	1,250

Servicing asset amortization	$	386
Guaranty fees and loan pay-off interest	9
Other servicing expenses	51
Gross servicing expenses	$	446
Net servicing fee income	$	804

During the first quarter of 2016, in conjunction with a decision to exit the residential servicing line of business, Pinnacle Bank sold the mortgage servicing rights associated with the $830 million Fannie Mae portion of the residential servicing portfolio for $6.6 million, net of associated costs to sell. Approximately $241,000 was recorded as income during the year ended December 31, 2016 as a result of the sale.