NOTE 14 — MORTGAGE BANKING AND LOAN SERVICING

Net revenues from mortgage banking activity consisted of the following:


	Years Ended December 31
	2017		2016		2015
Gain from sale of mortgage loans and interest rate locks	$	7,344	$	7,264	$	5,528
Mortgage loan servicing revenue (expense):
Mortgage loan servicing revenue		4,274		4,290		3,940
Amortization of mortgage servicing rights		(1,352)		(1,510)		(1,313)
Mortgage servicing rights valuation adjustments		75		—		200
Net servicing revenue		2,997		2,780		2,827
Net revenue from mortgage banking activity	$	10,341	$	10,044	$	8,355

Loans serviced for others are not included in the accompanying consolidated balance sheets. Loan servicing fee income was $2,834, $2,653, and $2,415 for 2017, 2016, and 2015. The unpaid principal balances of loans serviced for others totaled $1,148,796 and $1,115,246 at December 31, 2017 and 2016. Custodial escrow balances maintained in connection with serviced loans were $9,470 and $16,609 at year end 2017 and 2016. Mortgage servicing rights are included in other assets on the consolidated balance sheets. The weighted average amortization period is 6.94 years. The fair value of capitalized mortgage servicing assets is based on comparable market values and expected cash flows, with impairment assessed based on portfolio characteristics including product type and interest rates. The carrying value of capitalized mortgage servicing rights was $7,580 and $7,410 at year end 2017 and 2016. Fair value at year‑end 2017 was determined using a discount rate of 13%, and prepayment speeds ranging from 103% to 261%, depending on the stratification of the specific right. Fair value at year‑end 2016 was determined using a discount rate of 14%, and prepayment speeds ranging from 104% to 272%, depending on the stratification of the specific right. The notional amount of interest rate lock commitments to make 1‑4 family residential mortgage loans intended to be sold on the secondary market totaled $25.1 million and $38.7 million at December 31, 2017 and 2016, respectively. The estimated fair value of these commitments totaled $621 and $648 at December 31, 2017 and 2016, respectively, and is included in other assets on the consolidated balance sheet.


	2017		2016		2015
Mortgage servicing assets
Balances, January 1	$	7,410	$	6,120	$	5,708
Servicing assets capitalized		1,447		1,636		1,525
Servicing rights acquired		—		1,164		—
Amortization of servicing assets		(1,352)		(1,510)		(1,313)
Change in valuation allowance		75		—		200
Balance, December 31	$	7,580	$	7,410	$	6,120
Valuation allowance:
Balances, January 1	$	200	$	200	$	400
Additions expensed		—		175		25
Reductions credited to operations		(75)		(175)		(225)
Balance, December 31	$	125	$	200	$	200