Mortgage Servicing Rights

9 Months Ended

Sep. 30, 2013

Transfers and Servicing [Abstract]

Mortgage Servicing Rights

Mortgage Servicing Rights

The following table summarizes the changes in mortgage servicing rights (MSRs), which are included in other assets on the consolidated balance sheets:

	Three months ended September 30						Nine months ended September 30
	2013			2012			2013			2012
	(in thousands)
Amortized cost:
Balance at beginning of period	$	41,750		$	37,003		$	39,737		$	34,666
Originations of mortgage servicing rights	2,909			4,341			10,371			11,177
Amortization	(2,031		)	(2,711		)	(7,480		)	(7,210		)
Balance at end of period	$	42,628		$	38,633		$	42,628		$	38,633
Valuation allowance:
Balance at beginning of period	$	(1,690	)	$	(1,550	)	$	(3,680	)	$	(1,550	)
Reversals (additions)	1,690			(2,130		)	3,680			(2,130		)
Balance at end of period	$	—		$	(3,680	)	$	—		$	(3,680	)
Net MSRs at end of period	$	42,628		34,953			$	42,628		$	34,953

MSRs represent the economic value of existing contractual rights to service mortgage loans that have been sold. Accordingly, actual and expected prepayments of the underlying mortgage loans can impact the value of MSRs.

The Corporation estimates the fair value of its MSRs by discounting the estimated cash flows from servicing income, net of expense, over the expected life of the underlying loans at a discount rate commensurate with the risk associated with these assets. Expected life is based on the contractual terms of the loans, as adjusted for prepayment projections.

As of September 30, 2013, the estimated fair value of MSRs was $44.9 million, resulting in the reversal of the remaining $1.7 million valuation allowance during the third quarter of 2013. An increase to the valuation allowance of $2.1 million was recorded for three and nine months ended September 30, 2012. As a result, the fair value of MSRs as of September 30, 2012 was equal to their book value.