NOTE 12 – LOAN SERVICING RIGHTS

Loan servicing rights were assumed in Old National’s acquisitions of United on July 31, 2014 and Founders on January 1, 2015. See Note 3 to the consolidated financial statements for detail regarding loan servicing rights recorded associated with these acquisitions.

At March 31, 2015, loan servicing rights derived from loans sold with servicing retained totaled $9.5 million and were included in other assets in the consolidated balance sheet, compared to $9.5 million at December 31, 2014. Loans serviced for others are not reported as assets. The principal balance of loans serviced for others was $1.2 billion at March 31, 2015, compared to $1.1 billion at December 31, 2014. Approximately 95% of the loans serviced for others at March 31, 2015 were residential mortgage loans. Custodial escrow balances maintained in connection with serviced loans were $5.9 million at March 31, 2015 and $16.5 million at December 31, 2014.

The following table summarizes the activity related to loan servicing rights and the related valuation allowance for the three months ended March 31, 2015 and 2014:


(dollars in thousands)	2015			2014
Balance at January 1,	$	9,584		$	—
Additions		956			—
Amortization		(518	)		—

Balance before valuation allowance at March 31,		10,022			—

Valuation allowance:
Balance at January 1,		(50	)		—
Additions		(437	)		—

Balance at March 31,		(487	)		—

Loan servicing rights, net	$	9,535		$	—

At March 31, 2015, the fair value of servicing rights was $9.6 million. Fair value at March 31, 2015 was determined using a discount rate of 12% and a weighted average prepayment speed of 215% PSA. At December 31, 2014, the fair value of servicing rights was $9.5 million. Fair value at December 31, 2014 was determined using a discount rate of 12% and a weighted average prepayment speed of 192% PSA.