Mortgage Servicing Rights

12 Months Ended

Dec. 31, 2015



NOTE 7 – MORTGAGE SERVICING RIGHTS

The following table summarizes the changes in MSRs, which are included in other assets on the consolidated balance sheets:



	2015			2014
	(in thousands)
Amortized cost:
Balance at beginning of year	$	42,148		$	42,452
Originations of mortgage servicing rights	6,166			5,047
Amortization expense	(7,370		)	(5,351		)
Balance at end of year	$	40,944		$	42,148

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 accounts for

MSRs at the lower of amortized cost or fair value.

The fair value of MSRs is estimated 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 estimated prepayments.

The estimated fair value of MSRs were $45.3 million and $46.0 million as of December 31, 2015 and 2014, respectively, which exceeded their book values

Total MSR amortization expense, recognized as a reduction to mortgage banking income in the consolidated statements of income, was $7.4 million and $5.4 million in 2015 and 2014, respectively. Estimated MSR amortization expense for the next five years, based on balances as of December 31, 2015 and the estimated remaining lives of the underlying loans, follows (in thousands):



Year
2016	$	10,681
2017	9,292
2018	7,774
2019	6,118
2020	4,316

- 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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