Note 9 – Loan Servicing

Loans serviced for others are not included in the accompanying consolidated balance sheets. The unpaid principal balances of loans serviced for others totaled approximately $943.1 million and $772.1 million at December 31, 2013 and 2012.

The aggregate fair value of capitalized mortgage servicing rights was approximately $9.9 million, $6.6 million, and $5.4 million at December 31, 2013, 2012 and 2011, compared to the carrying values of $7.0 million, $5.1 million and $4.2 million, respectively. Comparable market values and a valuation model that calculates the present value of future cash flows were used to estimate fair value. For purposes of measuring impairment, risk characteristics including product type, investor type and interest rates, were used to stratify the originated mortgage servicing rights.


	December 31 2013			December 31 2012			December 31 2011
Mortgage servicing rights
Balances, January 1	$	6,169		$	5,049		$	4,175
Servicing rights capitalized		2,535			2,439			1,866
Amortization of servicing rights		(1,276	)		(1,319	)		(992	)

Balances, December 31		7,428			6,169			5,049

Impairment allowance
Balances, January 1		(1,024	)		(856	)		(803	)
Additions		(54	)		(762	)		(792	)
Reductions		689			594			739

Balances, December 31		(389	)		(1,024	)		(856	)

Mortgage servicing rights, net	$	7,039		$	5,145		$	4,193

During 2013, 2012 and 2011, the Bank recorded recovery and additional impairment of approximately $635,000, $(168,000) and $(53,000).