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Mortgage Servicing Rights
 6 Months Ended
Jun. 30, 2011
Transfers and Servicing [Abstract]  
Mortgage Servicing Rights
Note 10 – Mortgage Servicing Rights

FASB ASC Topic 940 “Financial Services – Mortgage Banking”, requires all separately recognized servicing assets and servicing liabilities to be initially measured at fair value, if practicable. The Company’s servicing assets and servicing liabilities are reported using the amortization method. In evaluating the carrying values of mortgage servicing rights, the Company obtains third party valuations based on loan level data including note rate, type and term of the underlying loans. The model utilizes several assumptions, the most significant of which is loan prepayments, calculated using a three-month moving average of weekly prepayment data published by the Public Securities Association (PSA) and modeled against the serviced loan portfolio, and the discount rate to discount future cash flows. As of June 30, 2011, the prepayment assumption using the PSA model was 259, which translates into an anticipated prepayment rate of 15.54%. The discount rate is the quarterly average ten-year U.S. Treasuries plus 5.0%. Other assumptions include delinquency rates, foreclosure rates, servicing cost inflation, and annual unit loan cost. All assumptions are adjusted periodically to reflect current circumstances. Amortization of mortgage servicing rights, as well as write-offs due to prepayments of the related mortgage loans, are recorded as a charge against mortgage servicing fee income.
For the six months ended June 30, 2011 and 2010, servicing rights capitalized totaled $263,000 and $237,000, respectively. Servicing rights capitalized for the three month periods ended June 30, 2011 and 2010, were $65,000 and $118,000 respectively. Servicing rights amortized for the six month periods ended June 30, 2011 and 2010, were $275,000 and $199,000, respectively. Servicing rights amortized for the three month periods ended June 30, 2011 and 2010, were $121,000 and $99,000, respectively. The fair value of servicing rights was $1,962,000, $1,684,000 and $1,485,000 at June 30, 2011, December 31, 2010 and June 30, 2010, respectively. At June 30, 2011 and 2010, the Bank serviced loans for others totaling $253.4 million and $236.4 million, respectively. Mortgage servicing rights are included in other assets and detailed in the following table:

   
June 30,
2011
  
December 31, 2010
  
June 30,
2010
 
Mortgage servicing rights
 $5,987,000  $5,732,000  $5,323,000 
Accumulated amortization
  (4,537,000)  (4,265,000)  (4,013,000)
Impairment reserve
  (58,000)  (23,000)  (60,000)
   $1,392,000  $1,444,000  $1,250,000