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Servicing
 12 Months Ended
Dec. 31, 2011
Servicing [Abstract]  
Servicing

Note 6 - Servicing

Loans serviced for others are not included in the accompanying consolidated balance sheets. The unpaid principal balances of loans serviced for others were $273 and $278 million at December 31, 2011 and 2010, respectively.

The balance of capitalized servicing rights included in other assets at December 31, 2011 and 2010, was $2.1 and $2.2 million, respectively. The capitalized addition of servicing rights is included in net gain on sale of loans on the consolidated statement of income. The capitalized additions are as shown in the table following.

The fair market value of the capitalized servicing rights as of December 31, 2011 and 2010 was $2.8 million and $2.5 million, respectively. The valuations were completed by stratifying the loans into like groups based on loan type and term. Impairment was measured by estimating the fair value of each stratum, taking into consideration an estimated level of prepayment based upon current market conditions. An average constant prepayment rate of 12.6 and 16.6 were utilized for 2011 and 2010, respectively. All stratums showed positive values compared to carrying value using a discount yield of 7.75% for 2011 and for 2010.

The following summarizes mortgage servicing rights capitalized and amortized during each year:

 

                 
    (In Thousands)  
    2011     2010  

Beginning Year

   $ 2,178     $ 2,177  

Capitalized Additions

     391       684  

Amortization

     (498 )      (683 ) 

Valuation Allowance

     —         —    
   

 

 

    

 

 

  

End of Year

   $ 2,071     $ 2,178