Mortgage Servicing Rights

9 Months Ended

Sep. 30, 2016

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 $765.16 million and $798.51 million at September 30, 2016 and December 31, 2015, respectively.

Mortgage servicing rights (MSRs) are evaluated for impairment at each reporting date. For purposes of impairment measurement, MSRs 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 MSRs and the associated valuation allowance.



	Three Months Ended September 30,						Nine Months Ended September 30,
(Dollars in thousands)	2016			2015			2016			2015
Mortgage servicing rights:
Balance at beginning of period	$	4,339		$	4,661		$	4,608		$	4,733
Additions	313			342			760			1,048
Amortization	(417		)	(339		)	(1,133		)	(1,117		)
Sales	—			—			—			—
Carrying value before valuation allowance at end of period	4,235			4,664			4,235			4,664
Valuation allowance:
Balance at beginning of period	—			—			—			—
Impairment recoveries	—			—			—			—
Balance at end of period	$	—		$	—		$	—		$	—
Net carrying value of mortgage servicing rights at end of period	$	4,235		$	4,664		$	4,235		$	4,664
Fair value of mortgage servicing rights at end of period	$	5,666		$	6,945		$	5,666		$	6,945

At September 30, 2016 and 2015, the fair value of MSRs exceeded the carrying value reported in the Statements of Financial Condition by $1.43 million and $2.28 million, respectively. This difference represents increases in the fair value of certain MSRs that could not be recorded above cost basis.

Mortgage loan contractual servicing fees, including late fees and ancillary income, were $0.68 million and $0.71 million for the three months ended September 30, 2016 and 2015, respectively. Mortgage loan contractual servicing fees, including late fees and ancillary income, were $2.04 million and $2.14 million for the nine months ended September 30, 2016 and 2015, respectively. Mortgage loan contractual servicing fees are included in Mortgage Banking 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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