Loan Servicing Rights

12 Months Ended

Sep. 30, 2016

Mortgage loans serviced for others are not included in the accompanying consolidated statements of financial condition. The following table is the activity for loan servicing rights and the related valuation allowance:



	September 30,
	2016			2015		2014
	(dollars in thousands)
Loan servicing rights
Beginning of year	$	—		$	—	$	—
Acquired in HF Financial acquisition	6,573			—		—
Additions	—			—		—
Amortization⁽¹⁾	(779		)	—		—
End of year	$	5,794		$	—	$	—

Valuation allowance
Beginning of year	$	—		$	—	$	—
Additions / (reductions) ⁽¹⁾	(13		)	—		—
End of year	$	(13	)	$	—	$	—
Loan servicing rights, net	$	5,781		$	—	$	—

Servicing fees received	$	930		$	—	$	—
Balance of loans serviced at:
Beginning of year	—			—		—
End of year	868,865			—		—

⁽¹⁾ Changes to carrying amounts are reported net of loan servicing income on the consolidated statements of comprehensive income for the periods presented.

Amortization of servicing rights is adjusted each quarter based upon analysis of portfolio attributes and factors, including an evaluation of historical prepayment activity and prospective industry consensus data. An independent third party is utilized to calculate the amortization and valuation based upon specific loan characteristics, prepayment speeds generated from a validation model utilizing both empirical and market derived data and discount rates. At September 30, 2016, the constant prepayment rates (CPR) used to calculate the amortization averaged 16.0%. For valuation purposes, an average discount rate of 11.9% was utilized at September 30, 2016. Based on the Company's analysis of mortgage servicing rights, a $0.0 million valuation reserve was recorded at September 30, 2016, 2015 and 2014.

- 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.

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