NOTE 6 – SBA AND USDA LOAN SERVICING

The Company sells the guaranteed portion of certain SBA and USDA loans it originates and continues to service the sold portion of the loan. The portion of the loans sold are not included in the financial statements of the Company. As of December 31, 2019 and 2018, the unpaid principal balances of serviced loans totaled $441.6 million and $431.2 million, respectively.

Activity for SBA loan servicing rights are as follows:


	For the Year Ended December 31,
(Dollars in thousands)	2019		2018		2017
Beginning of period	$	8,419	$	9,329	$	8,823
Change in fair value		(257)		(910)		506
End of period, fair value	$	8,162	$	8,419	$	9,329

Fair value at December 31, 2019 and 2018 was determined using discount rates ranging from 5.80% to 12.06% and 8.78% to 14.56%, and prepayment speeds ranging from 10.82% to 16.54% and 6.82% to 12.87%, depending on the stratification of the specific right. Average default rates are based on the industry average for the applicable NAICS/SIC code.

The aggregate fair market value of the interest only strips included in SBA servicing assets was $26,000 and $27,000 at December 31, 2019 and 2018, respectively. Comparable market values and a valuation model that calculates the present value of future cash flows were used to estimate fair value.