Note 6: Loan Servicing

The Company has recognized servicing rights for residential mortgage loans sold with servicing retained. Residential mortgage loans serviced for others are subject to credit, prepayment and interest rate risks.

Mortgage loans serviced for others are not included in the accompanying consolidated balance sheets. The unpaid principal balance of mortgage loans serviced for others was $34.9 million and $33.4 million at December 31, 2015 and 2014, respectively. Contractually specified servicing fees, late fees and ancillary fees of approximately $30,000 and $40,000 are included in loan servicing fees in the income statement at December 31, 2015 and 2014, respectively.

Custodial escrow balances maintained in connection with the foregoing loan servicing, and included in demand deposits, were approximately $313,000 and $391,000 at December 31, 2015 and 2014, respectively.

Comparable market values and a valuation model that calculates the present value of future cash flows were used to estimate fair value.

Activity in the balance of servicing assets was as follows at December 31, 2015 and 2014:

	2015		2014
	(In thousands)
Carrying amount, beginning of period	$	332	$	271
Additions
Servicing obligations that result from transfers of financial assets		88		99
Subtractions
Amortization		51		38
	$	369	$	332

The fair value of servicing rights subsequently measured using the amortization method was as follows:

Fair value, beginning of period		$	367			$	344
Fair value, end of period		$	404			$	367