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LOAN SERVICING

12 Months Ended

Dec. 31, 2011

NOTE 14 — LOAN SERVICING

Loans serviced for others are not included in the accompanying consolidated balance sheets. Loan servicing fee income was $2,104, $1,890, and $1,521 for 2011, 2010, and 2009. The unpaid principal balances of loans serviced for others totaled $780,388 and $781,673 at December 31, 2011 and 2010. Custodial escrow balances maintained in connection with serviced loans were $10,423 and $7,403 at year end 2011 and 2010. The weighted average amortization period is 4.2 years. Mortgage servicing rights are included in other assets on the consolidated balance sheets. The fair value of capitalized mortgage servicing assets is based on comparable market values and expected cash flows, with impairment assessed based on portfolio characteristics including product type and interest rates. The fair market value of capitalized mortgage servicing rights was estimated at $5,412 and $5,498 at year end 2011 and 2010. Fair value at year-end 2011 was determined using a discount rate of 9%, and prepayment speeds ranging from 231% to 396%, depending on the stratification of the specific right. Fair value at year-end 2010 was determined using a discount rate of 9%, and prepayment speeds ranging from 160% to 373%, depending on the stratification of the specific right.

	2011			2010			2009


Mortgage servicing assets
Balances, January 1	$	5,498		$	5,042		$	3,359
Servicing assets capitalized		1,257			1,748			3,400
Amortization of servicing assets		(1,388	)		(1,424	)		(2,317	)
Change in valuation allowance		45			132			600

Balance, December 31	$	5,412		$	5,498		$	5,042

Valuation allowance:
Balances, January 1	$	494		$	626		$	1,226
Additions expensed		300			—			—
Reductions credited to operations		(345	)		(132	)		(600	)

Balance, December 31	$	449		$	494		$	626