Note 6: Loan Servicing

Loans serviced for others are not included in the accompanying balance sheets. The risks inherent in mortgage servicing assets relate primarily to changes in prepayments that result from shifts in mortgage interest rates. The unpaid principal balance of residential mortgage loans serviced for others was $103,853,962 and $99,414,705 at December 31, 2019 and 2018, respectively.

The following summarizes the activity in mortgage servicing rights measured using the fair value method for the years ended December 31, 2019 and 2018:


	2019		2018

Fair value as of the beginning of the period	$	1,252,740	$	909,821
Recognition of mortgage servicing rights on the sale of loans		245,790		309,712
Changes in fair value due to changes in valuation inputs or assumptions used in the valuation model		(284,715)		33,207

Fair value at the end of the period	$	1,213,815	$	1,252,740

Contractually specified servicing fees were approximately $251,000 and $256,000 for the years ended December 31, 2019 and 2018, respectively.

Certain loan sale transactions with the FHLB provide for establishment of a LRA. The LRA consists of amounts withheld from the loan sale proceeds by the FHLB for absorbing potential losses on those loans sold. These withheld funds are an asset to the Company as they are scheduled to be paid to the Company in future years, net of any credit losses on those loans sold. The LRA funds withheld to settle these potential losses totaled approximately $2,911,000 and $2,722,000 at December 31, 2019 and 2018, respectively; however, these receivables are recorded at fair value at the time of sale, which includes consideration of potential credit losses, at the time of the establishment of the LRA. In the event that the credit losses do not exceed the withheld funds, the LRA agreements provide for payment of these funds to the Company in seven annual installments beginning five years after the sale date or in 26 annual installments, beginning five years after the sale date. The carrying value of the LRA is equal to the initial fair value plus an interest component less any cash receipts, which totaled approximately $1,713,000 and $1,703,000 at December 31, 2019 and 2018, respectively. The Company had mandatory delivery contracts outstanding as of December 31, 2019 of $3.9 million.