Note 9. Mortgage Servicing Rights

We invest in mortgage servicing rights and contract with a licensed sub-servicer to perform all servicing functions for loans associated with our MSRs. The following table presents activity for MSRs for the three and six months ended June 30, 2014 and 2013.

MSR Activity


	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2014		2013		2014		2013
Balance at beginning of period	$	64,971	$	18,123	$	64,824	$	5,315
Additions		11,807		16,148		14,666		28,614
Changes in fair value due to:
Changes in assumptions ⁽¹⁾		(3,553)		9,506		(4,678)		10,312
Other changes ⁽²⁾		(2,000)		(679)		(3,587)		(1,143)

Balance at End of Period	$	71,225	$	43,098	$	71,225	$	43,098

(1)	Primarily reflects changes in prepayment assumptions due to changes in interest rates and discount rates.

(2)	Represents changes due to realization of expected cash flows.

We make investments in MSRs through the retention of servicing rights associated with the residential mortgage loans that we have acquired and subsequently transfer to third parties or through the direct acquisition of MSRs sold by third parties. The following table details the retention and purchase of MSRs during the three and six months ended June 30, 2014.

MSR Additions


(In Thousands)	Three Months Ended June 30, 2014				Six Months Ended June 30, 2014
	MSR Value		Associated Principal		MSR Value		Associated Principal
Jumbo MSR additions:
From securitization	$	2,186	$	257,201	$	2,186	$	257,201
From loan Sales		-		-		488		58,793

Total jumbo MSR additions		2,186		257,201		2,674		315,994
Conforming MSR additions:
From loan sales	$	7,495	$	725,339	$	9,302	$	880,437
From purchases		2,126		213,953		2,690		273,342

Total conforming MSR additions		9,621		939,292		11,992		1,153,779

Total MSR additions	$	11,807	$	1,196,493	$	14,666	$	1,469,773

MSR Income

The following table presents the components of our MSR income.


	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2014		2013		2014		2013
Servicing income, net:
Income	$	4,026	$	1,943	$	7,624	$	2,793
Late charges		38		11		73		18
Cost of sub-servicer		(288)		(234)		(603)		(412)

Net servicing income		3,776		1,720		7,094		2,399
Market valuation adjustments		(5,553)		8,827		(8,265)		9,169

Income from MSRs, Net	$	(1,777)	$	10,547	$	(1,171)	$	11,568