Mortgage Servicing Rights

9 Months Ended

Sep. 30, 2011

Mortgage Servicing Rights [Abstract]

Note 5. Mortgage Servicing Rights

The Corporation has originated mortgage servicing rights which are included in other intangible assets on the consolidated balance sheets. Mortgage servicing rights are amortized in proportion to, and over the period of, estimated net servicing income on a basis similar to the interest method using an accelerated amortization method and are subject to periodic impairment testing. The aggregate fair value of these rights was $2.4 million and $2.9 million at September 30, 2011 and December 31, 2010. The fair value of mortgage servicing rights was determined using discount rates ranging from 3.50% to 7.32% for the nine months ended September 30, 2011.

Changes in the mortgage servicing rights balance are summarized as follows:


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2011			2010			2011			2010
	(Dollars in thousands)
Beginning of period	$	2,878		$	1,799		$	2,441		$	1,437
Servicing rights capitalized		277			370			965			877
Amortization of servicing rights		(123	)		(89	)		(312	)		(228	)
Changes in valuation		(672	)		(412	)		(734	)		(418	)

End of period	$	2,360		$	1,668		$	2,360		$	1,668

Mortgage loans serviced for others	$	377,060		$	255,292		$	377,060		$	255,292

Activity in the valuation allowance for mortgage servicing rights was as follows:


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2011			2010			2011			2010
	(Dollars in thousands)
Valuation allowance, beginning of period	$	(263	)	$	(256	)	$	(201	)	$	(250	)
Additions		(672	)		(412	)		(734	)		(418	)
Reductions		—			—			—			—
Direct write-downs		—			—			—			—

Valuation allowance, end of period	$	(935	)	$	(668	)	$	(935	)	$	(668	)

The estimated amortization expense of mortgage servicing rights for each of the five succeeding fiscal years is as follows:


Year (Dollars in thousands)	Amount
2011	$	169
2012		554
2013		427
2014		330
2015		250
Thereafter		630