Mortgage Servicing Rights, Net

3 Months Ended

Mar. 31, 2019

Transfers and Servicing of Financial Assets [Text Block]

NOTE 5: 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.

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 evaluates MSRs for impairment on a quarterly basis. 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 change in amortized MSRs and the related valuation allowance for the quarters ended March 31, 2019 and 2018 are presented below.

		Quarter ended March 31,
(Dollars in thousands)		2019		2018
MSRs, net:
Beginning balance	$	1,441	$	1,644
Additions, net		41		53
Amortization expense		(72)		(93)
Ending balance	$	1,410	$	1,604

Valuation allowance included in MSRs, net:
Beginning of period	$	—	$	—
End of period		—		—

Fair value of amortized MSRs:
Beginning of period	$	2,697	$	2,528
End of period		2,591		2,738