Mortgage Operations

12 Months Ended

Dec. 31, 2012

Mortgage Operations [Abstract]

Mortgage Operations

(5) Mortgage Operations

The recorded value of mortgage servicing rights is included in other assets, and is amortized in proportion to, and over the period of, estimated net servicing revenues. The Company assesses capitalized mortgage servicing rights for impairment based upon the fair value of those rights at each reporting date. For purposes of measuring impairment, the rights are stratified based upon the product type, term and interest rates. Fair value is determined by discounting estimated net future cash flows from mortgage servicing activities using discount rates that approximate current market rates and estimated prepayment rates, among other assumptions. The amount of impairment recognized, if any, is the amount by which the capitalized mortgage servicing rights for a stratum exceeds their fair value. Impairment, if any, is recognized through a valuation allowance for each individual stratum. Changes in the carrying amount of mortgage servicing rights are reported in earnings under Other income.

The Company had $4,559 and $2,832 of mortgage loans held-for-sale at December 31, 2012 and December 31, 2011, respectively. At December 31, 2012 and December 31, 2011, the Company serviced real estate mortgage loans for others of $235,561 and $211,535, respectively.

The following table summarizes the activity related to the Company's mortgage servicing rights assets for the years ended December 31, 2012, December 31, 2011 and December 31, 2010. Mortgage servicing rights are included in Interest Receivable and Other Assets in the consolidated balance sheets.

	(in thousands)
	December 31, 2011			Additions			Reductions		December 31, 2012
Mortgage servicing rights	$	1,636		$	667		$	543	$	1,760
Valuation allowance		(347	)		(189	)		—		(536	)
Mortgage servicing rights, net of valuation allowance	$	1,289		$	478		$	543	$	1,224

	(in thousands)
	December 31, 2010			Additions			Reductions		December 31, 2011
Mortgage servicing rights	$	1,712		$	317		$	393	$	1,636
Valuation allowance		(345	)		(2	)		—		(347	)
Mortgage servicing rights, net of valuation allowance	$	1,367		$	315		$	393	$	1,289

	(in thousands)
	December 31, 2009			Additions			Reductions		December 31, 2010
Mortgage servicing rights	$	1,550		$	557		$	395	$	1,712
Valuation allowance		(277	)		(68	)		—		(345	)
Mortgage servicing rights, net of valuation allowance	$	1,273		$	489		$	395	$	1,367

The Company received contractually specified servicing fees of $562, $533, and $502 for the years ended December 31, 2012, 2011, and 2010, respectively. Contractually specified servicing fees are included in Other Income on the consolidated statements of income.