MORTGAGE SERVICING RIGHTS

3 Months Ended

Mar. 31, 2013

MORTGAGE SERVICING RIGHTS

MORTGAGE SERVICING RIGHTS

6.     MORTGAGE SERVICING RIGHTS

Mortgage servicing rights (“MSRs”) are recorded when loans are sold in the secondary market with servicing retained.  As of March 31, 2013, the Corporation had obligations to service approximately $109 million of residential first mortgage loans.  The valuation is based upon the net present value of the projected revenues over the expected life of the loans being serviced, as reduced by estimated internal costs to service these loans.  The fair value of the capitalized servicing rights approximates the carrying value.  The key economic assumptions used in determining the fair value of the mortgage servicing rights include an annual constant prepayment speed of 15.90 and a discount rate of 7.50% for March 31, 2013.

The following summarizes mortgage servicing rights capitalized and amortized, along with the aggregate activity in related valuation allowances (dollars in thousands):

	Three Months Ended			Year Ended			Three Months Ended
	March 31,			December 31,			March 31,
	2013			2012			2012
Balance at beginning of period	$	638		$	400		$	400
Additions from loans sold with servicing retained	75			344			71
Amortization	(38		)	(106		)	(21		)
Fair value of MSRs at end of period	$	675		$	638		$	450