Mortgage Servicing Rights

9 Months Ended

Sep. 30, 2020

Transfers and Servicing [Abstract]

Mortgage Servicing Rights

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 $346.1 million and $336.7 million as of September 30, 2020 and December 31, 2019, respectively.

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

	Three Months Ended September 30, 2020			Three Months Ended September 30, 2019			Nine Months Ended September 30, 2020			Nine Months Ended September 30, 2019
	(in thousands)						(in thousands)
Mortgage servicing rights beginning balance	$	1,587		$	2,263		$	2,172		$	2,103
Additions		232			77			578			406
Amortization		(199	)		(139	)		(560	)		(308	)
Increase in valuation allowance		(5	)		—			(575	)		—
Mortgage servicing rights ending balance	$	1,615		$	2,201		$	1,615		$	2,201
Fair value at beginning of period	$	1,587		$	2,891		$	2,404		$	3,371
Fair value at end of period	$	1,615		$	2,407		$	1,615		$	2,407

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 September 30, 2020, the model used discount rates ranging from 10% to 13.5%, and prepayment speeds ranging from 20.9% to 46.9%, 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 September 30, 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 September 30, 2020:
2020	$	341
2021		320
2022		299
2023		278
2024		254
Thereafter		123
Total	$	1,615