Mortgage Servicing Rights

12 Months Ended

Dec. 31, 2014

The Company acquired from Alaska Pacific Bank on April 1, 2014, a portfolio of residential mortgage loans originated for sale where the Company retained servicing responsibilities. At this time, the Company is servicing these loans but is not currently retaining any new servicing rights from its residential mortgage origination business. At December 31, 2014 the Company was servicing $96.5 million of residential mortgage loans sold with retained servicing. These loans are not included in the Company's Consolidated Balance Sheets and are generally held with no recourse to the Company for failure of debtors to pay when due.

In connection with residential mortgage loans held with retained servicing, the Company receives servicing fees based on a percentage of the outstanding balance. The Company recognized servicing fees of $203,000 during 2014 as a component of other noninterest income in the Company's Consolidated Statements of Income. At December 31, 2014, the Company had recorded $1.0 million of mortgage servicing rights, under the fair value method in other assets on the Company's Consolidated Balance Sheets.

The value of mortgage servicing rights is significantly affected by mortgage interest rates available in the marketplace, which influence mortgage loan prepayment speeds. In general, during periods of declining rates, the value of mortgage servicing rights declines due to increasing prepayments attributable to increased mortgage-refinance activity. During periods of rising interest rates, the fair value of mortgage servicing rights generally increases due to reduced refinance activity.

The following table details the activity in the Company's mortgage servicing rights for the year indicated:



(In thousands)	2014

Acquired from Alaska Pacific Bank		$1,170
Decrease in fair value	(160		)
Carrying value, December 31		$1,010

- 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.

+ References+ Details