Servicing Assets - SBA Loans
 12 Months Ended
Dec. 31, 2012
Servicing Assets - SBA Loans  
Servicing Assets - SBA Loans

8. Servicing Assets—SBA Loans

        The Company recognizes servicing assets through the sale of originated SBA loans when the rights to service those loans are retained. Servicing rights resulting from the sale of loans are initially recognized at fair value at the date of transfer. The Company subsequently measures the carrying value of the servicing assets by using the amortization method, which amortizes the servicing assets in proportion to and over the period of estimated net servicing income, and evaluates servicing assets for impairment based on fair value at each reporting date. The Company evaluates the possible impairment of servicing assets based on the difference between the carrying amount and current fair value of the servicing assets. Impairment is charged to servicing fees in the period recognized.

        Changes in the Company's amortized servicing assets are as follows:

 
   Year Ended
December 31,		  
 
   2012   2011  
 
   (Dollars in
thousands)
  

Beginning Balance

   $ 1,193   $ 954  

Servicing Assets capitalized

     334     453  

Servicing Assets amortized

     (242 )   (214 )
           

Ending Balance

   $ 1,285   $ 1,193  
           

Reserve for impairment of servicing assets:

              

Beginning Balance

   $ (103 ) $ (118 )

Impairments

     (63 )   (75 )

Recoveries

     12     90  
           

Ending Balance

   $ (154 ) $ (103 )
           

Ending Balance (net of reserve)

   $ 1,131   $ 1,090  
           

Fair value of amortized servicing assets:

              

Beginning balance

   $ 1,326   $ 921  

Ending balance

   $ 1,402   $ 1,326  

        The Company relies primarily on a discounted cash flow model to estimate the fair value of its servicing assets. This model calculates estimated fair value of the servicing assets using significant assumptions including a discount rate of 13.7% and prepayment speeds of 14.0% to 15.0% (depending on certain characteristics of the related loans). These assumptions are subject to change based on management's judgments and estimates of changes in future cash flows, among other things.