(5)	Mortgage Operations

Transfers and servicing of financial assets and extinguishments of liabilities are accounted for and reported based on consistent application of a financial-components approach that focuses on control. Transfers of financial assets that are sales are distinguished from transfers that are secured borrowings. Retained interests (mortgage servicing rights) in loans sold are measured by allocating the previous carrying amount of the transferred assets between the loans sold and retained interests, if any, based on their relative fair value at the date of transfer. Fair values are estimated using discounted cash flows based on a current market interest rate.

The Company recognizes a gain and a related asset for the fair value of the rights to service loans for others when loans are sold. The Company sold substantially its entire portfolio of conforming long-term residential mortgage loans originated during the year ended December 31, 2019 for cash proceeds equal to the fair value of the loans. At December 31, 2019 and 2018, the Company serviced real estate mortgage loans for others totaling $208,862 and $211,845, respectively.

The recorded value of mortgage servicing rights is amortized in proportion to, and over the period of, estimated net servicing revenues. The Company assesses capitalized mortgage servicing rights for impairment based upon the fair value of those rights at each reporting date. For purposes of measuring impairment, the rights are stratified based upon the product type, term and interest rates. Fair value is determined by discounting estimated net future cash flows from mortgage servicing activities using discount rates that approximate current market rates and estimated prepayment rates, among other assumptions. The amount of impairment recognized, if any, is the amount by which the capitalized mortgage servicing rights for a stratum exceeds their fair value. Impairment, if any, is recognized through a valuation allowance for each individual stratum. Changes in the carrying amount of mortgage servicing rights are reported in earnings under other operating income on the condensed consolidated statements of income.

The following table summarizes the activity related to the Company’s mortgage servicing rights assets for the years ended December 31, 2019, 2018 and 2017. Mortgage servicing rights are included in Interest Receivable and Other Assets on the consolidated balance sheets.

	December 31, 2018		Additions		Reductions			December 31, 2019
Mortgage servicing rights	$	1,579	$	198	$	(296	)	$	1,481
Valuation allowance		—		—		—			—
Mortgage servicing rights, net of valuation allowance	$	1,579	$	198	$	(296	)	$	1,481

	December 31, 2017		Additions		Reductions			December 31, 2018
Mortgage servicing rights	$	1,712	$	141	$	(274	)	$	1,579
Valuation allowance		—		—		—			—
Mortgage servicing rights, net of valuation allowance	$	1,712	$	141	$	(274	)	$	1,579

	December 31, 2016			Additions		Reductions			December 31, 2017
Mortgage servicing rights	$	1,815		$	229	$	(332	)	$	1,712
Valuation allowance		(21	)		—		21			—
Mortgage servicing rights, net of valuation allowance	$	1,794		$	229	$	(311	)	$	1,712

At December 31, 2019 and December 31, 2018, the estimated fair market value of the Company's mortgage servicing rights asset was $1,631 and $2,091, respectively.

The Company received contractually specified servicing fees of $523, $549, and $575 for the years ended December 31, 2019, 2018, and 2017, respectively. Contractually specified servicing fees are included in Other Income on the consolidated statements of income.