6.	MORTGAGE BANKING ACTIVITIES

Mortgage loans serviced for others, which are not reported in United Community’s assets, totaled $1.1 billion as of June 30, 2015 and December 31, 2014. Mortgage banking income is comprised of gains recognized on the sale of loans and changes in fair value of mortgage banking derivatives.

Mortgage loans serviced for others are not reported as assets. The principal balances of these loans are as follows:

	June 30, 2015		December 31, 2014
	(Dollars in thousands)
Mortgage loan portfolios serviced for:
FHLMC	$	849,109	$	821,609
FNMA		248,012		259,463

Escrow balances are maintained at the Federal Home Loan Bank (FHLB) in connection with serviced loans totaling $1.3 and $1.0 million at June 30, 2015 and December 31, 2014, respectively.

Activity for capitalized mortgage servicing rights, included in other assets, was as follows:

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2015			2014			2015			2014
	(Dollars in thousands)
Balance, beginning of period	$	5,543		$	5,803		$	5,535		$	5,941
Originations		530			287			981			541
Amortized to expense		(462	)		(432	)		(905	)		(824	)
Balance, end of period		5,611			5,658			5,611			5,658
Less valuation allowance		(12	)		(6	)		(12	)		(6	)
Net balance	$	5,599		$	5,652		$	5,599		$	5,652

Activity in the valuation allowance for mortgage servicing rights was as follows:

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2015			2014			2015			2014
	(Dollars in thousands)
Balance, beginning of period	$	(219	)	$	(1	)	$	(58	)	$	—
Impairment charges		—			(5	)		(161	)		(6	)
Recoveries		207			—			207			—
Balance, end of period	$	(12	)	$	(6	)	$	(12	)	$	(6	)

The fair value of mortgage servicing rights as of June 30, 2015, was approximately $9.8 million and at December 31, 2014, the fair value was approximately $9.0 million.

Key economic assumptions in measuring the value of mortgage servicing rights at June 30, 2015, and December 31, 2014, were as follows:

	June 30, 2015	December 31, 2014
Weighted average prepayment rate	195 PSA	219 PSA
Weighted average life (in years)	3.54	3.61
Weighted average discount rate	8.00%	8.00%