NOTE

– MORTGAGE LOAN SERVICING

Mortgage loans serviced for others are

not

reported as assets in the Consolidated Balance Sheets. The year-end aggregate unpaid principal balances of mortgage loans serviced for others were as follows:

	2018		2017

Mortgage loan portfolios serviced for:
Federal Home Loan Mortgage Corporation	$	599,262,000	$	600,495,000
Federal Home Loan Bank		16,333,000		13,136,000
Total mortgage loans serviced for others	$	615,595,000	$	613,631,000

Custodial escrow balances, which are reported as deposits on the Consolidated Balance Sheets, maintained in connection with serviced loans were

$4.1

million and

$4.7

million as of

December 31, 2018

and

December 31, 2017,

respectively.

Activity for capitalized mortgage loan servicing rights during

2018

and

2017

was as follows:

	2018			2017

Balance at beginning of year	$	5,106,000		$	5,544,000
Additions		842,000			1,229,000
Amortized to expense		(1,512,000	)		(1,667,000	)

Balance at end of year	$	4,436,000		$	5,106,000

We determined that

valuation allowance was necessary as of

December 31, 2018

December 31, 2017.

The estimated fair value of mortgage servicing rights was

$8.4

million as of

December 31, 2018

and

December 31, 2017.

The fair value of mortgage servicing rights is estimated using a valuation model that calculates the present value of estimated future net servicing cash flows, taking into consideration expected mortgage loan prepayment rates, discount rates, servicing costs and other economic factors, which are determined based on current market conditions. During

2018,

fair value was determined using a discount rate of

10.0%,

a weighted average constant prepayment rate of

9.3%,

depending on the stratification of the specific right, and a weighted average delinquency rate of

0.32%.

During

2017,

fair value was determined using a discount rate of

7.50%,

a weighted average constant prepayment rate of

11.8%,

depending on the stratification of the specific right, and a weighted average delinquency rate of

0.73%.

The weighted average amortization period was

7.3

years and

3.4

years as of

December 31, 2018

and

December 31, 2017,

respectively. Estimated amortization as of

December 31, 2018

is as follows:

2019	$	1,087,000
2020		921,000
2021		762,000
2022		611,000
2023		470,000
Thereafter		585,000