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LOANS:
 12 Months Ended
Dec. 31, 2012
Loans Receivable, Net [Abstract]  
LOANS
5. LOANS:

 

Loans are summarized as follows:

 

    December 31,  
(Dollar amounts in thousands)   2012     2011  
Commercial   $ 1,088,144     $ 1,099,324  
Residential     496,237       505,600  
Consumer     268,507       289,717  
Total gross loans     1,852,888       1,894,641  
Less: unearned income     (952 )     (962 )
Allowance for loan losses     (21,958 )     (19,241 )
TOTAL   $ 1,829,978     $ 1,874,438  

 

Loans in the above summary include loans totaling $27.8 million and $35.0 million at December 31, 2012 and 2011 that are subject to the FDIC loss share arrangement (“covered loans”) discussed in footnote 6.

 

The Corporation periodically sells residential mortgage loans it originates based on the overall loan demand of the Corporation and the outstanding balances in the residential mortgage portfolio. At December 31, 2012 and 2011, loans held for sale included $8.8 million and $4.1 million, respectively, and are included in the totals above.

 

In the normal course of business, the Corporation’s subsidiary banks make loans to directors and executive officers and to their associates. In 2012, the aggregate dollar amount of these loans to directors and executive officers who held office amounted to $58.5 million at the beginning of the year. During 2012, advances of $27.2 million, repayments of $11.6 million and decreases of $12.6 million resulting from changes in personnel were made with respect to related party loans for an aggregate dollar amount outstanding of $61.5 million at December 31, 2012.

 

Loans serviced for others, which are not reported as assets, total $543.6 million and $450.1 million at year-end 2012 and 2011. Custodial escrow balances maintained in connection with serviced loans were $2.64 million and $1.89 million at year-end 2012 and 2011.

 

Activity for capitalized mortgage servicing rights (included in other assets) was as follows:

 

    December 31,  
(Dollar amounts in thousands)   2012     2011     2010  
Servicing rights:                        
Beginning of year   $ 2,429     $ 2,080     $ 2,034  
Additions*     868       1,035       810  
Amortized to expense     (1,072 )     (686 )     (764 )
End of year   $ 2,225     $ 2,429     $ 2,080  

 

  * In 2011 $520 thousand is from the acquisition of Freestar Bank 

 

Third party valuations are conducted periodically for mortgage servicing rights. Based on these valuations, fair values were approximately $3.2 million and $3.3 million at year end 2012 and 2011. There was no valuation allowance in 2012 or 2011.

 

Fair value for 2012 was determined using a discount rate of 9%, prepayment speeds ranging from 262% to 550%, depending on the stratification of the specific right. Fair value at year end 2011 was determined using a discount rate of 9%, prepayment speeds ranging from 139% to 700%, depending on the stratification of the specific right. Mortgage servicing rights are amortized over 8 years, the expected life of the sold loans.