Mortgage Servicing Rights

9 Months Ended

Sep. 30, 2014

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 September 30						Nine months ended September 30
	2014			2013			2014			2013
	(in thousands)
Amortized cost:
Balance at beginning of period	$	42,586		$	41,750		$	42,452		$	39,737
Originations of mortgage servicing rights	1,456			2,909			3,807			10,371
Amortization	(1,664		)	(2,031		)	(3,881		)	(7,480		)
Balance at end of period	$	42,378		$	42,628		$	42,378		$	42,628

Valuation allowance:
Balance at beginning of period	$	—		$	(1,690	)	$	—		$	(3,680	)
Reversals	—			1,690			—			3,680
Balance at end of period	$	—		$	—		$	—		$	—

Net MSRs at end of period	$	42,378		$	42,628		$	42,378		$	42,628

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 estimates the fair value of its MSRs 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. No adjustment to the valuation allowance was necessary for three and nine months ended September 30, 2014. A decrease to the valuation allowance of $1.7 million and $3.7 million was recorded for the three and nine months ended September 30, 2013.

The Corporation accounts for MSRs at the lower of amortized cost or fair value. As of September 30, 2014, the estimated fair value of MSRs was $47.9 million, which exceeded their book value. Therefore, no increase to the valuation allowance was necessary during the three or nine months ended September 30, 2014.

- 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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