Mortgage Servicing Rights

6 Months Ended

Jun. 30, 2019

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 was $348,945 and $332,515 as of June 30, 2019 and December 31, 2018, respectively.

A summary of activity in the Bank’s mortgage servicing rights is presented below:


	Three Months Ended June 30,						Three Months Ended June 30,
	2019			2018			2019			2018
	(dollars in thousands)
Mortgage servicing rights beginning balance	$	2,117		$	2,189		$	2,103		$	2,270
Additions		250			49			329			81
Amortization		(104	)		(75	)		(169	)		(188	)
Mortgage servicing rights ending balance	$	2,263		$	2,163		$	2,263		$	2,163
Fair value at beginning of period	$	3,386		$	3,109		$	3,371		$	3,158
Fair value at end of period	$	2,891		$	3,008		$	2,891		$	3,008

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. At June 30, 2019, the model used discount rates ranging from 10% to 13.5%, and prepayment speeds ranging from 9.5% to 42.8%, respectively, both of which were based on market data from independent organizations.

The following table summarizes the estimated future amortization expense for mortgage servicing rights for the periods indicated. The projections of amortization expense are based on existing asset balances as of June 30, 2019. The actual amortization expense the Bank recognizes in any given period may vary significantly depending on changes in interest rates, market conditions and regulatory requirements.


Estimated future amortization as of June 30, 2019:	(in thousands)
2019	$	478
2020		449
2021		418
2022		389
2023		356
Thereafter		173

Total	$	2,263