NOTE 12 – LOAN SERVICING RIGHTS

At March 31, 2017, loan servicing rights derived from loans sold with servicing retained totaled $25.4 million, compared to $25.6 million at December 31, 2016. Loans serviced for others are not reported as assets. The principal balance of loans serviced for others was $3.375 billion at March 31, 2017, compared to $3.385 billion at December 31, 2016. Approximately 99% of the loans serviced for others at March 31, 2017 were residential mortgage loans. Custodial escrow balances maintained in connection with serviced loans were $20.8 million at March 31, 2017 and $5.3 million at December 31, 2016.

The following table summarizes the carrying values and activity related to loan servicing rights and the related valuation allowance for the three months ended March 31, 2017 and 2016:


(dollars in thousands)	2017			2016
Balance at January 1,	$	25,629		$	10,502
Additions		1,041			481
Amortization		(1,174	)		(447	)

Balance before valuation allowance at March 31,		25,496			10,536

Valuation allowance:
Balance at January 1,		(68	)		(34	)
(Additions)/recoveries		18			32

Balance at March 31,		(50	)		(2	)

Loan servicing rights, net	$	25,446		$	10,534

At March 31, 2017, the fair value of servicing rights was $26.8 million, which was determined using a discount rate of 13% and a weighted average prepayment speed of 133% PSA. At December 31, 2016, the fair value of servicing rights was $26.8 million, which was determined using a discount rate of 13% and a weighted average prepayment speed of 136% PSA.