Note 6 - Mortgage Loan Servicing

12 Months Ended

Dec. 31, 2017

Notes to Financial Statements

Mortgage Loan Servicing [Text Block]

NOTE

6

– MORTGAGE LOAN SERVICING

Mortgage loans serviced for others are

not

reported as assets in the Consolidated Balance Sh

eets. The year-end aggregate unpaid principal balances of mortgage loans serviced for others were as follows:

	201 7		201 6
Mortgage loan portfolios serviced for:
Federal Home Loan Mortgage Corporation	$	600,495,000	$	597,389,000
Federal Home Loan Bank		13,136,000		10,501,000
Total mortgage loans serviced for others	$	613,631,000	$	607,890,000

Custodial escrow balances maintained in connection with serviced loans were $

4.7

million and

$4.6

million as of

December 31, 2017

and

December 31, 2016,

respectively.

Activity for capitalized mortgage loan servicing rights during

201

7

and

2016

was as follows:

	201 7			201 6
Balance at beginning of year	$	5,544,000		$	6,121,000
Additions		1,229,000			1,378,000
Amortized to expense		(1,667,000	)		(1,955,000	)
Balance at end of year	$	5,106,000		$	5,544,000

We determined that

no

valuation allowance was necessary as

of

December 31, 2017

or

December 31, 2016.

The estimated fair value of mortgage servicing rights was

$8.4

million and

$8.0

million as of

December 31, 2017

and

December 31, 2016,

respectively. The fair value of mortgage servicing rights is estimated using a valuation model that calculates the present value of estimated future net servicing cash flows, taking into consideration expected mortgage loan prepayment rates, discount rates, servicing costs and other economic factors, which are determined based on current market conditions. During

2017,

fair value was determined using a discount rate of

7.50%,

a weighted average constant prepayment rate of

11.8%,

depending on the stratification of the specific right, and a weighted average delinquency rate of

0.73%.

During

2016,

fair value was determined using a discount rate of

7.01%,

a weighted average constant prepayment rate of

11.5%,

depending on the stratification of the specific right, and a weighted average delinquency rate of

0.68%.

The weighted average amo

rtization period was

3.4

years and

3.6

years as of

December 31, 2017

and

December 31, 2016,

respectively. Estimated amortization as of

December 31, 2017

is as follows:

2018	$	1,213,000
2019		1,036,000
2020		867,000
2021		708,000
2022		557,000
Thereafter		725,000