Mortgage Servicing Rights Mortgage Servicing Rights (Notes)

3 Months Ended

Mar. 31, 2015

Mortgage Servicing Rights [Abstract]

Transfers and Servicing of Financial Assets [Text Block]

NOTE H - MORTGAGE SERVICING RIGHTS

The activity of the servicing asset for first quarter 2015 and 2014 is presented in the following table:



	Three months ended March 31
(Dollars in thousands)	2015			2014
Balance at January 1	$	16,688		$	16
Servicing rights originated	662			—
Amortization	(852		)	(164		)
Servicing rights acquired in the 1st Financial merger	—			148
Valuation allowance provision	$	(62	)	$	—
Balance at March 31	$	16,436		$	—

The following table presents the activity in the servicing asset valuation allowance for first quarter 2015 and 2014:



	Three months ended March 31
(Dollars in thousands)	2015		2014
Balance at January 1	$	850	$	—
Valuation allowance provision	62		—
Balance at March 31	$	912	$	—

As of March 31, 2015, the carrying value of BancShares' mortgage servicing rights was $16.4 million. Contractually specified mortgage servicing fees, late fees, and ancillary fees earned for the three months ended March 31, 2015 were $1.1 million and is included in mortgage income in the Consolidated Statements of Income. There were no mortgage servicing fees, late fees or ancillary fees earned for the three months ended March 31, 2014.

The amortization expense related to mortgage servicing rights, included as a reduction of mortgage income in the Consolidated Statements of Income, was $852 thousand and $164 thousand for the three months ended March 31, 2015 and March 31, 2014, respectively. Amortization expense included impairment of $62 thousand for the three months ended March 31, 2015. There was no impairment recorded for the three months ended March 31, 2014.

Valuation of mortgage servicing rights is performed using a pooling methodology. Similar loans are pooled together and evaluated on a discounted earnings basis to determine the present value of future earnings. Key economic assumptions used to value mortgage servicing rights as of March 31, 2015 and December 31, 2014 were as follows:



	March 31, 2015			December 31, 2014
Discount rate - conventional fixed loans	6.95		%	7.20		%
Discount rate - all loans excluding conventional fixed loans	8.95		%	9.20		%
Weighted average constant prepayment rate	16.07		%	14.25		%
Weighted average cost to service loans	$	56.02		$	56.02

- 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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