NOTE 9 – LOAN SERVICING RIGHTS

At December 31, 2017, loan servicing rights derived from loans sold with servicing retained totaled $24.7 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 $3.321 billion at December 31, 2017, compared to $3.385 billion at December 31, 2016. Approximately 99.5% of the loans serviced for others at December 31, 2017 were residential mortgage loans. Custodial escrow balances maintained in connection with serviced loans were $8.9 million at December 31, 2017 and $5.3 million at December 31, 2016.

The following table summarizes the activity related to loan servicing rights and the related valuation allowance in 2017 and 2016:


	Years Ended December 31,
(dollars in thousands)	2017			2016
Balance at beginning of period	$	25,629		$	10,502
Additions (1)		4,206			20,280
Amortization		(5,145	)		(5,153	)

Balance before valuation allowance at end of period		24,690			25,629

Valuation allowance:
Balance at beginning of period		(68	)		(34	)
(Additions)/recoveries		39			(34	)

Balance at end of period		(29	)		(68	)

Loan servicing rights, net	$	24,661		$	25,561

(1)	Additions in 2016 include loan servicing rights of $15.3 million acquired from Anchor (WI) in May 2016.

At December 31, 2017, the fair value of servicing rights was $25.8 million, which was determined using a discount rate of 13% and a weighted average prepayment speed of 140% 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.