Note 5 - Loan Servicing

12 Months Ended

Dec. 31, 2011

Accounting for Certain Loans and Debt Securities Acquired in Transfer Disclosure [Text Block]

NOTE 5 – LOAN SERVICING

Loans held for sale at year end are as follows:

(In Thousands of Dollars)
	2011		2010
Loans held for sale	$	349	$	1,358
Less: Allowance to adjust to lower of cost or market		0		(3	)
Loans held for sale, net	$	349	$	1,355

Mortgage loans serviced for others are not reported as assets.  The principal balances of these loans at year end are as follows:

(In Thousands of Dollars)
	2011		2010
Mortgage loan portfolios serviced for:
Freddie Mac	$	601,710	$	617,558
Fannie Mae	$	1,446	$	1,942
Federal Home Loan Bank	$	2,757	$	3,188

Custodial escrow balances maintained in connection with serviced loans were $1,438,000 and $1,477,000 at year end 2011 and 2010.

Activity for capitalized mortgage servicing rights, included in other assets on the Consolidated Balance Sheet, was as follows:

(In Thousands of Dollars)
	2011			2010			2009
Servicing rights:
Beginning of year	$	4,603		$	3,705		$	2,370
Additions		1,505			2,428			3,056
Amortized to expense		(1,512	)		(1,530	)		(1,721	)
End of year	$	4,596		$	4,603		$	3,705

Management has determined that no valuation allowance was necessary at December 31, 2011, 2010, or 2009.

The fair value of mortgage servicing rights was $6,034,000 and $6,067,000 at year end 2011 and 2010. Fair value at the end of 2011 was determined using a discount rate of 7.375%, a weighted average constant prepayment rate of 14.79%, depending on the stratification of the specific right, and a weighted average delinquency rate of 1.09%.  At the end of 2010, fair value was determined using a discount rate of 7.97%, a weighted average constant prepayment rate of 14.12%, depending on the stratification of the specific right, and a weighted average delinquency rate of 1.38%

The weighted average amortization period is 2.6 years.  Estimated amortization expense for each of the next five years is:

(In Thousands of Dollars)
2012	$	995
2013	$	822
2014	$	692
2015	$	577
2016	$	466