Note 4 - Originated Mortgage Servicing Rights

6 Months Ended

Jun. 30, 2012

Originated Mortgage Servicing Rights [Text Block]

NOTE 4 -- ORIGINATED MORTGAGE SERVICING RIGHTS

             Mortgage servicing rights, which are included in other assets on the Condensed Consolidated Balance Sheets, are accounted for on an individual loan-by-loan basis.  Accordingly, amortization is recorded in proportion to the amount of principal payment received on loans serviced.  The mortgage servicing rights are subject to periodic impairment testing.  Changes in the carrying value of capitalized mortgage servicing rights are summarized as follows:

(in thousands)
Balance, January 1, 2012	$	2,437
Servicing rights capitalized		206
Amortization of servicing rights		(302	)
Valuation adjustment		(195	)
Balance, June 30, 2012	$	2,146

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

(in thousands)
Balance, January 1, 2012	$	1,312
Additions		195
Reductions		-
Balance, June 30, 2012	$	1,507

The following table shows the future estimated amortization expense for mortgage servicing rights based on existing balances as of June 30, 2012.  The Corporation’s actual amortization expense in any given period may be significantly different from the estimated amounts displayed, depending on the amount of additional mortgage servicing rights, changes in mortgage interest rates, estimated prepayment speeds and market conditions. Estimated Amortization Expense:

	Amount (in thousands)
For the six months ended December 31, 2012	$	142
For the year ending December 31, 2013		267
For the year ending December 31, 2014		251
For the year ending December 31, 2015		235
For the year ending December 31, 2016		221
For the year ending December 31, 2017		207
Thereafter		823

The Corporation services loans for others with unpaid principal balances at June 30, 2012 and December 31, 2011 of approximately $392.6 million and $403.5 million, respectively.  The Corporation entered into an agreement with First State Bank to sell its entire servicing portfolio for 0.550% of total serviced assets equaling approximately $2,146,000 as of June 30, 2012.