Mortgage Servicing Rights

12 Months Ended

Dec. 31, 2011

Mortgage Servicing Rights [Abstract]

MORTGAGE SERVICING RIGHTS

NOTE 8 — MORTGAGE SERVICING RIGHTS

The following shows the net carrying value and fair value of MSRs and the total loans that the Corporation is servicing for others:

	December 31, 2011		December 31, 2010
	(In thousands)
Net carrying value of MSRs	$	3,593	$	3,782
Fair value of MSRs	$	4,757	$	5,674
Loans serviced for others that have servicing rights capitalized	$	902,812	$	891,937

The fair value of MSRs was estimated by calculating the present value of estimated future net servicing cash flows, taking into consideration expected prepayment rates, discount rates, servicing costs and other economic factors that are based on current market conditions. The prepayment rates and the discount rate are the most significant factors affecting valuation of the MSRs. Increases in mortgage loan prepayments reduce estimated future net servicing cash flows because the life of the underlying loan is reduced. Expected loan prepayment rates are validated by a third-party model. At December 31, 2011, the weighted average coupon rate of the the Corporation’s servicing portfolio was 5.01% and the discount rate was 8.4%. At December 31,2010, the weighted average coupon rate of the Corporation’s servicing portfolio was 5.25% and the discount rate was 8.4%.

There was no MSR impairment valuation allowance recorded at December 31, 2011 and 2010, as the estimated fair value of MSRs exceeded the recorded book value.

The following shows activity for capitalized MSRs for the three years ended December 31, 2011:

	2011			2010			2009
	(In thousands)
Balance at beginning of year	$	3,782		$	3,077		$	2,191
Acquired in OAK acquisition		—			691			—
Additions		1,566			1,918			2,736
Amortization		(1,755	)		(1,904	)		(1,850	)
Balance at end of year	$	3,593		$	3,782		$	3,077