MORTGAGE SERVICING RIGHTS

9 Months Ended

Sep. 30, 2011

MORTGAGE SERVICING RIGHTS [Abstract]

MORTGAGE SERVICING RIGHTS

NOTE 12 – MORTGAGE SERVICING RIGHTS

Mortgage servicing rights (“MSRs”), which are recognized as a separate asset on the date the corresponding mortgage loan is sold, are recorded at fair value as determined at each accounting period end.  An estimate of the fair value of the Company's MSRs is determined utilizing assumptions about factors such as mortgage interest rates, discount rates, mortgage loan prepayment speeds, market trends and industry demand.  Data and assumptions used in the fair value calculation related to MSRs as of the dates indicated were as follows:

	September 30,				December 31,
	2011		2010		2010
	(Dollars in thousands)
Unpaid principal balance	$	4,143,880	$	3,690,125	$	3,870,872
Weighted-average prepayment speed (CPR)		22.7		23.2		15.6
Discount rate (annual percentage)		10.3		10.3		10.3
Weighted-average coupon interest rate (percentage)		5.1		5.4		5.2
Weighted-average remaining maturity (months)		314.0		318.0		315.0
Weighted-average servicing fee (basis points)		28.1		28.6		28.4

Because the valuation is determined by using discounted cash flow models, the primary risk inherent in valuing the MSRs is the impact of fluctuating interest rates on the estimated life of the servicing revenue stream.  The use of different estimates or assumptions could also produce different fair values.  The Company does not hedge the change in fair value of MSRs and, therefore, the Company is susceptible to significant fluctuations in the fair value of its MSRs in changing interest rate environments.

The Company has only one class of mortgage servicing asset comprised of closed end loans for one-to-four family residences, secured by first liens.  The following table presents the activity in this class for the periods indicated:

	2011			2010
	(In thousands)
Fair value as of January 1	$	38,642		$	35,560
Additions:
Origination of servicing assets		7,938			9,173
Changes in fair value:
Due to payoffs/paydowns		(4,435	)		(4,900	)
Due to change in valuation inputs or assumptions
used in the valuation model		(12,975	)		(12,924	)
Other changes in fair value		(11	)		(8	)
Fair value as of September 30	$	29,159		$	26,901

All of the changes to the fair value of the MSRs are recorded as part of mortgage lending noninterest revenue on the income statement.  As part of mortgage lending noninterest revenue, the Company recorded contractual servicing fees of $2.9 million and $2.6 million and late and other ancillary fees of approximately $334,000 and $358,000 for the three months ended September 30, 2011 and 2010, respectively.  The Company recorded contractual servicing fees of $8.6 million and $7.7 million and late and other ancillary fees of approximately $966,000 and $1.0 million for the nine months ended September 30, 2011 and 2010, respectively.