Mortgage Servicing Rights

12 Months Ended

Dec. 31, 2018

NOTE 6 — Mortgage Servicing Rights

Loans serviced for others are not included in the balance sheets. The unpaid principal balance of mortgage loans serviced for others totaled $332,515 at December 31, 2018, and $355,616 at December 31, 2017.

The following is a summary of changes in the balance of mortgage servicing rights for the periods indicated below:

	As of December 31,
	2018			2017
Beginning balance	$	2,270		$	2,421
Additions		168			199
Amortization		(335	)		(350	)
Ending balances		2,103			2,270
Fair value at beginning of period	$	3,158		$	3,422
Fair value at end of period	$	3,371		$	3,158

There was no valuation allowance as of December 31, 2018 and 2017. The Bank did not sell any mortgage servicing rights during the years ended December 31, 2018 and 2017.

The estimated fair value of mortgage servicing rights was determined using a valuation model that calculates the present value of expected future servicing and ancillary income, net of expected servicing costs. The model incorporates various assumptions such as discount rates, prepayment speeds, and ancillary income and servicing costs. As of December 31, 2018, and 2017, the model used discount rates ranging from 10% to 14% and prepayment speeds ranging from 7% to 43%, respectively, both of which were based on market data from independent organizations.

The following table shows the estimated future amortization of mortgage servicing rights for the next five years. The projections of amortization expense are based on existing asset balances as of as of December 31, 2018. The actual amortization expense the Bank recognizes in any given period may be significantly different depending on changes in interest rates, market conditions, and regulatory requirements.

For the period ending December 31,
2019	$	444
2020		417
2021		389
2022		361
2023		331
Thereafter		161
Total	$	2,103