7. MORTGAGE BANKING ACTIVITIES

Mortgage loans serviced for others, which are not reported in United Community’s assets, totaled $1.1 billion at both September 30, 2011, and December 31, 2010.

Activity for capitalized mortgage servicing rights, included in other assets, was as follows:


	Nine Months
	Ended			Year Ended
	September 30,			December 31,
	2011			2010
	(Dollars in thousands)
Balance, beginning of year	$	6,400		$	6,228
Originations		1,409			2,621
Amortized to expense		(1,560	)		(2,449	)

Balance, end of period		6,249			6,400
Less valuation allowance		(1,415	)		(285	)

Net balance	$	4,834		$	6,115

Activity in the valuation allowance for mortgage servicing rights was as follows:


	Three Months						Twelve Months
	Ended September			Nine Months Ended			Ended December 31,
	30, 2011			September 30, 2011			2010
	(Dollars in thousands)
Balance, beginning of year	$	(58	)	$	(285	)	$	(423	)
Impairment charges		(1,357	)		(1,357	)		(1,279	)
Recoveries		—			227			1,417

Balance, end of period	$	(1,415	)	$	(1,415	)	$	(285	)

Fair value of mortgage servicing rights as of September 30, 2011 was approximately $6.4 million and at December 31, 2010 was approximately $8.2 million.

Key economic assumptions in measuring the value of mortgage servicing rights at June 30, 2011 and December 31, 2010 were as follows:


	September 30,	December 31,
	2011	2010
Weighted average prepayment rate	421 PSA	322 PSA
Weighted average life (in years)	3.65	3.71
Weighted average discount rate	8%	8%