Mortgage Servicing Assets

3 Months Ended

Mar. 31, 2014

Transfers and Servicing of Financial Assets [Abstract]

The Company recognizes the rights to service residential mortgage loans for others as separate assets, whether the servicing rights are acquired through a separate purchase or through the sale of originated loans with servicing rights retained. The Company allocates a portion of the total proceeds of a mortgage loan to servicing rights based on the relative fair value. The unpaid principal balance of residential mortgage loans serviced for third parties was $828.02 million and $839.26 million at March 31, 2014 and December 31, 2013, respectively.

Mortgage servicing assets are evaluated for impairment at each reporting date. For purposes of impairment measurement, mortgage servicing assets are stratified based on the predominant risk characteristics of the underlying servicing, principally by loan type. If temporary impairment exists within a tranche, a valuation allowance is established through a charge to income equal to the amount by which the carrying value exceeds the fair value. If it is later determined all or a portion of the temporary impairment no longer exists for a particular tranche, the valuation allowance is reduced through a recovery of income.

The following table shows changes in the carrying value of mortgage servicing assets and the associated valuation allowance.



	Three Months Ended March 31,
(Dollars in thousands)	2014			2013
Mortgage servicing assets:
Balance at beginning of period	$	4,844		$	4,645
Additions	201			363
Amortization	(286		)	(480		)
Sales	—			—
Carrying value before valuation allowance at end of period	4,759			4,528
Valuation allowance:
Balance at beginning of period	—			—
Impairment (charges) recoveries	—			—
Balance at end of period	$	—		$	—
Net carrying value of mortgage servicing assets at end of period	$	4,759		$	4,528
Fair value of mortgage servicing assets at end of period	$	7,868		$	6,137

During the three months ended March 31, 2014, the Company determined that it was not necessary to permanently write-down any previously established valuation allowance. At March 31, 2014 and 2013, the fair value of mortgage servicing assets exceeded the carrying value reported in the Statements of Financial Condition by $3.11 million and $1.61 million, respectively. This difference represents increases in the fair value of certain mortgage servicing assets that could not be recorded above cost basis.

Mortgage loan contractual servicing fees, including late fees and ancillary income, were $0.79 million and $0.82 million for the three months ended March 31, 2014 and 2013, respectively. Mortgage loan contractual servicing fees are included in Mortgage Banking Income on the Statements of Income.

- 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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