Mortgage Servicing Rights

9 Months Ended

Sep. 30, 2013

Note 12 - Mortgage Servicing Rights

The following tables summarize the Corporation’s activity related to mortgage servicing rights (“MSRs”) for the three and nine months ended September 30, 2013 and 2012:


	Three Months Ended September 30,
(dollars in thousands)	2013			2012
Balance, beginning of period	$	4,790		$	4,220
Additions		174			385
Amortization		(187	)		(243	)
Recovery		—			—
Impairment		(33	)		(105	)

Balance, end of period	$	4,744		$	4,257

Fair value	$	5,622		$	4,279

Loans serviced for others	$	627,058		$	583,859


	Nine Months Ended September 30,
(dollars in thousands)	2013			2012
Balance, beginning of period	$	4,491		$	4,041
Additions		883			1,016
Amortization		(617	)		(718	)
Recovery		91			109
Impairment		(104	)		(191	)

Balance, end of period	$	4,744		$	4,257

Fair value	$	5,622		$	4,279

Loans serviced for others	$	627,058		$	583,859

As of September 30, 2013 and December 31, 2012, key economic assumptions and the sensitivity of the current fair value of MSRs to immediate 10 and 20 percent adverse changes in those assumptions are as follows:


(dollars in thousands)	September 30, 2013			December 31, 2012
Fair value amount of MSRs	$	5,622		$	4,638
Weighted average life (in years)		6.1			4.8
Prepayment speeds (constant prepayment rate)*		11.9			15.9
Impact on fair value:
10% adverse change	$	(220	)	$	(230	)
20% adverse change	$	(426	)	$	(442	)
Discount rate		10.50	%		10.50	%
Impact on fair value:
10% adverse change	$	(220	)	$	(158	)
20% adverse change	$	(424	)	$	(306	)

*	Represents the weighted average prepayment rate for the life of the MSR asset.

These assumptions and sensitivities are hypothetical and should be used with caution. Changes in fair value based on a 10% variation in assumptions generally cannot be extrapolated because the relationship of the change in assumptions to the change in fair value may not be linear. Also, the effect of a variation in a particular assumption on the fair value of the MSRs is calculated without changing any other assumption. In reality, changes in one factor may result in changes in another, which could magnify or counteract the sensitivities.

- Definition

The entire disclosure for a transferor's continuing involvement in financial assets that it has transferred in a securitization or asset-backed financing arrangement, the nature of any restrictions on assets reported by an entity in its statement of financial position that relate to a transferred financial asset (including the carrying amounts of such assets), how servicing assets and servicing liabilities are reported, and (for securitization or asset-backed financing arrangements accounted for as sales) when a transferor has continuing involvement with the transferred financial assets and transfers of financial assets accounted for as secured borrowings, how the transfer of financial assets affects an entity's financial position, financial performance, and cash flows.

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