5) Loan Servicing

At December 31, 2017 and 2016, the Company serviced SBA loans sold to the secondary market of approximately $139,086,000 and $164,454,000, respectively.

Servicing assets represent the servicing spread generated from the sold guaranteed portions of SBA loans. The weighted average servicing rate for all loans serviced was 1.13% and 1.17% at December 31, 2017 and 2016, respectively.

Servicing rights are included in “accrued interest receivable and other assets” on the consolidated balance sheets. Activity for loan servicing rights follows:


	2017		2016		2015
	(Dollars in thousands)
Beginning of year balance	$	1,854	$	2,209	$	565
Additions		278		219		2,126
Amortization		(759)		(574)		(482)
End of year balance	$	1,373	$	1,854	$	2,209

There was no valuation allowance for servicing rights at December 31, 2017 and 2016, because the estimated fair value of the servicing rights was greater than the carrying value. The estimated fair value of loan servicing rights was $2,594,000 and $3,306,000 at December 31, 2017 and 2016, respectively. The fair value of servicing rights at December 31, 2017, was estimated using a weighted average constant prepayment rate ("CPR") assumption of 8.13%, and a weighted average discount rate assumption of 13.86%. The fair value of servicing rights at December 31, 2016, was estimated using a weighted average constant prepayment rate ("CPR") assumption of 7.40%, and a weighted average discount rate assumption of 12.96%.

The weighted average discount rate and CPR assumptions used to estimate the fair value of the I/O strip receivables are the same as for the servicing rights. Management reviews the key economic assumptions used to estimate the fair value of I/O strip receivables on a quarterly basis. The fair value of the I/O strip can be adversely impacted by a significant increase in either the prepayment speed of the portfolio or the discount rate.

I/O strip receivables are included in “accrued interest receivable and other assets” on the consolidated balance sheets. Activity for I/O strip receivables follows:


	2017		2016		2015
	(Dollars in thousands)
Beginning of year balance	$	1,067	$	1,367	$	1,481
Unrealized loss		(99)		(300)		(114)
End of year balance	$	968	$	1,067	$	1,367