Transfers of Financial Assets and Mortgage Servicing Assets

12 Months Ended

Dec. 31, 2015

Transfers of Financial Assets and Mortgage Servicing Assets

Transfers of Financial Assets

The Company sells financial assets in the normal course of business, primarily residential mortgage loans sold to government-sponsored enterprises through established programs and securities. The gain or loss on residential mortgage loans sold is included as mortgage banking activities in the accompanying Consolidated Statements of Income.

The Company may be required to repurchase a loan in the event of certain breaches of the representations and warranties, or in the event of default of the borrower within 90 days of sale, as provided for in the sale agreements. A reserve for loan repurchases provides for estimated losses pertaining to the potential repurchase of loans associated with the Company's mortgage banking activities. The reserve reflects management’s monthly evaluation of the identity of counterparty, the vintage of the loans sold, the amount of open repurchase requests, specific loss estimates for each open request, the current level of loan losses in similar vintages held in the residential loan portfolio, and estimated recoveries on the underlying collateral. The reserve also reflects management’s expectation of losses from repurchase requests for which the Company has not yet been notified, as the performance of loans sold and the quality of the servicing provided by the acquirer may also impact the reserve. The provision recorded at the time of the loan sale is netted from the gain or loss recorded in mortgage banking activities, while any incremental provision, post loan sale, is recorded in other non-interest expense in the accompanying Consolidated Statements of Income.

The following table provides a summary of activity in the reserve for loan repurchases:



	Years ended December 31,
(In thousands)	2015		2014			2013
Beginning balance	$	1,059	$	2,254		$	2,617
Provision (benefit)	133		(493		)	1,209
Loss on repurchased loans and settlements	—		(702		)	(1,572		)
Ending balance	$	1,192	$	1,059		$	2,254

The following table provides information for mortgage banking activities:



	Years ended December 31,
(In thousands)	2015 ⁽¹⁾		2014		2013
Residential mortgage loans:
Proceeds from the sale of loans held for sale	$	452,590	$	287,132	$	773,887
Net gain on sale	7,795		4,070		16,359
Loans sold with servicing rights retained	416,277		264,292		690,300
Commercial loans:
Proceeds from the sale of loans held for sale	729		—		12,771
Net gain (loss) on sale	145		—		(229		)

(1) Additionally, certain consumer loans not originated for sale were sold at cost for cash proceeds of $32.9 million.

Mortgage Servicing Assets

The Company has retained servicing rights on residential mortgage loans totaling $2.5 billion and $2.4 billion at December 31, 2015 and 2014, respectively. The resulting mortgage servicing assets of $20.7 million and $19.4 million at December 31, 2015 and 2014, respectively, are carried at the lower of cost or fair value and are included as a component of other assets in the accompanying Consolidated Balance Sheets. Changes in fair value are included as a component of other non-interest income in the accompanying Consolidated Statements of Income.

The following table presents the changes in fair value for those mortgage servicing assets:



	Years ended December 31,
(In thousands)	2015			2014
Beginning balance	$	28,690		$	29,150
Originations of servicing assets	8,027			4,581
Changes in fair value:
Due to payoffs/paydowns	(2,741		)	(2,577		)
Due to market changes	(408		)	(2,464		)
Ending balance	$	33,568		$	28,690

See Note 16: Fair Value Measurements for a further discussion on the fair value of mortgage servicing assets.

Loan servicing fees, net of mortgage servicing rights amortization, were $1.5 million, $1.5 million, and $3.0 million, for the years ended December 31, 2015, 2014, and 2013, respectively, and are included as a component of loan related fees in the accompanying Consolidated Statements of Income.

- 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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