Mortgage Servicing Rights

3 Months Ended

Mar. 31, 2020

NOTE 5 – 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 $335,251 and $336,722 as of March 31, 2020 and December 31, 2019, respectively.

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


	Three Months Ended March 31, 2020			Three Months Ended March 31, 2019
	(in thousands)
Mortgage servicing rights beginning balance	$	2,172		$	2,103
Additions		99			79
Amortization		(118	)		(65	)
Valuation Allowance		(217	)		—

Mortgage servicing rights ending balance	$	1,936		$	2,117
Fair value at beginning of period	$	2,404
Fair value at end of period	$	1,958

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 March 31, 2020, the model used discount rates ranging from 10% to 14%, and prepayment speeds ranging from 15% to 46%, 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 March 31, 2020. The actual amortization expense the Company recognizes in any given period may vary significantly depending on changes in interest rates, market conditions and regulatory requirements.


	(in thousands)
Estimated future amortization as of March 31, 2020:
2020		409
2021		383
2022		358
2023		333
2024		305
Thereafter		148

Total	$	1,936