Mortgage Banking

12 Months Ended

Dec. 31, 2013

Mortgage Banking [Abstract]

Mortgage Banking [Text Block]

8. Mortgage Banking

Net revenues from the sales and servicing of mortgage loans consisted of the following:

	Years Ended December 31
	2013		2012		2011
	(In Thousands)
Gain from sale of mortgage loans	$	5,716	$	10,599	$	5,607
Mortgage loan servicing revenue (expense):
Mortgage loan servicing revenue		3,564		3,387		3,403
Amortization of mortgage servicing rights		(2,098)		(3,562)		(2,169)
Mortgage servicing rights valuation adjustments		1,261		(759)		(404)
		2,727		(934)		830
Net revenue from sale and servicing of mortgage loans	$	8,443	$	9,665	$	6,437

The unpaid principal balance of residential mortgage loans serviced for third parties was $1.4 billion at December 31, 2013 and $1.3 billion at December 31, 2012.

Activity for capitalized mortgage servicing rights and the related valuation allowance follows:

	Years Ended December 31
	2013		2012		2011
	(In Thousands)
Mortgage servicing assets:
Balance at beginning of period	$	10,121	$	10,219	$	10,602
Loans sold, servicing retained		2,110		3,464		1,786
Amortization		(2,098)		(3,562)		(2,169)
Carrying value before valuation allowance at end of period		10,133		10,121		10,219
Valuation allowance:
Balance at beginning of period		(2,288)		(1,529)		(1,125)
Impairment recovery (charges)		1,261		(759)		(404)
Balance at end of period		(1,027)		(2,288)		(1,529)
Net carrying value of MSRs at end of period	$	9,106	$	7,833	$	8,690
Fair value of MSRs at end of period	$	9,686	$	7,833	$	8,690

Amortization of mortgage servicing rights is computed based on payments and payoffs of the related mortgage loans serviced.

The Company’s servicing portfolio is comprised of the following:

	December 31
	2013			2012
	Number of		Principal	Number of		Principal
Investor	Loans		Outstanding	Loans		Outstanding
	(In Thousands)
Fannie Mae	5,304	$	527,666	5,190	$	522,978
Freddie Mac	8,873		829,594	8,550		786,124
Federal Home Loan Bank	116		12,093	166		18,330
Other	26		1,888	21		1,285
Totals	14,319	$	1,371,241	13,927	$	1,328,717

Custodial escrow balances maintained in connection with serviced loans were $10.4 million and $9.7 million at December 31, 2013 and 2012, respectively.

Significant assumptions at December 31, 2013 used in determining the value of MSRs include a weighted average prepayment rate of 212 prepayment speed assumption (“PSA”) and a weighted average discount rate of 10.04%. Significant assumptions at December 31, 2012 used in determining the value of MSRs include a weighted average prepayment rate of 328 PSA and a weighted average discount rate of 10.04%.

A sensitivity analysis of the current fair value to immediate 10% and 20% adverse changes in those assumptions as of December 31, 2013 is presented below. These sensitivities are hypothetical. Changes in fair value based on 10% and 20% variation in assumptions generally cannot be extrapolated because the relationship of the change in the assumption to the change in fair value may not be linear. Also, the effect of a variation in a particular assumption on the fair value of the MSR is calculated independently without changing any other assumption. In reality, changes in one factor may result in changes in another (for example, changes in mortgage interest rates, which drive changes in prepayment rate estimates, could result in changes in the discount rates), which might magnify or counteract the sensitivities.

	10% Adverse		20% Adverse
	Change		Change
	(In Thousands)
Assumption:
Decline in fair value from increase in prepayment rate	$	454	$	861
Declines in fair value from increase in discount rate		318		725