Mortgage Servicing Rights, Net

12 Months Ended

Dec. 31, 2013

Mortgage Servicing

Transfers and Servicing of Financial Assets [Text Block]

NOTE 8: MORTGAGE SERVICING RIGHTS, NET

Mortgage servicing rights (“MSRs”) are recognized based on the fair value of the servicing rights on the date the corresponding mortgage loans are sold. An estimate of the Company’s MSRs is determined using assumptions that market participants would use in estimating future net servicing income, including estimates of prepayment speeds, discount rate, default rates, cost to service, escrow account earnings, contractual servicing fee income, ancillary income, and late fees. Subsequent to the date of transfer, the Company has elected to measure its MSRs under the amortization method. Under the amortization method, MSRs are amortized in proportion to, and over the period of, estimated net servicing income. Servicing fee income is recorded net of related amortization expense and recognized in earnings as part of mortgage lending income.

The Company has recorded MSRs related to loans sold without recourse to Fannie Mae. The Company generally sells conforming, fixed-rate, closed-end, residential mortgages to Fannie Mae. MSRs are included in other assets on the accompanying consolidated balance sheets.

The Company periodically evaluates MSRs for impairment. Impairment is determined by stratifying MSRs into groupings based on predominant risk characteristics, such as interest rate and loan type. If, by individual stratum, the carrying amount of the MSRs exceeds fair value, a valuation allowance is established. The valuation allowance is adjusted as the fair value changes. Changes in the valuation allowance are recognized in earnings as a component of mortgage lending income.

The following table details the changes in amortized MSRs and the related valuation allowance for the years ended December 31, 2013, 2012, and 2011.

		Year ended December 31
(Dollars in thousands)		2013	2012	2011
Beginning balance	$	1,526	1,245	1,189
Additions, net		822	966	415
Amortization expense		(384)	(416)	(242)
Change in valuation allowance		386	(269)	(117)
Ending balance	$	2,350	1,526	1,245
Valuation allowance included in MSRs, net:
Beginning of period	$	386	117	—
End of period		—	386	117
Fair value of amortized MSRs:
Beginning of period	$	1,526	1,245	1,335
End of period		3,452	1,526	1,245

Data and assumptions used in the fair value calculation related to MSRs at December 31, 2013and 2012, respectively, are presented below.

		December 31
(Dollars in thousands)		2013		2012
Unpaid principal balance	$	356,334		283,306
Weighted average prepayment speed (CPR)		7.5	%	23.7
Discount rate (annual percentage)		10.0	%	11.0
Weighted average coupon interest rate		3.9	%	3.9
Weighted average remaining maturity (months)		268		275
Weighted average servicing fee (basis points)		25.0		25.0

At December 31, 2013, the weighted average amortization period for MSRs was7.5 years. Estimated amortization expense for each of the next five years is presented below.

(Dollars in thousands)	December 31, 2013
2014		$	313
2015			272
2016			242
2017			209
2018			183