Loan Servicing

12 Months Ended

Dec. 31, 2012

Note 11:

Loan Servicing

Loans serviced for others are not included in the accompanying consolidated balance sheets. The risks inherent in mortgage servicing assets relate primarily to changes in prepayments that result from shifts in mortgage interest rates. The unpaid principal balances of mortgage and other loans serviced for others was $113.6 million as of December 31, 2012. That total included $17.6 million of Federal National Mortgage Association (FNMA) loans acquired from Dupont State Bank. No mortgage servicing rights were acquired with that portfolio of loans. The total of loans serviced for others as of December 31, 2011 was $96.3 million, comprised only of Federal Housing Loan Mortgage Corporation (FHLMC-“Freddie Mac”) loans. Mortgage servicing rights are included in other assets in the balance sheets.

The following summarizes the activity pertaining to mortgage servicing rights measured using the amortization method, along with the aggregate activity in related valuation allowances:

	2012			2011
Mortgage servicing rights
Balances, January 1	$	667		$	638
Servicing rights capitalized		308			238
Amortization of servicing rights		(296	)		(209	)
Balance at end of year		679			667

Valuation allowances
Balance at beginning of year		26			50
Additions		—			—
Reductions		(26	)		(24	)
Balances at end of year		—			26
Mortgage servicing assets, net	$	679		$	641

Fair value disclosures
Fair value as of the beginning of the period	$	848		$	834
Fair value as of the end of the period		704			848

At December 31, 2011, a valuation allowance was necessary to adjust the cost basis of certain pools of the mortgage servicing rights asset to fair value. There was no allowance at December 31, 2012.