The Company evaluates potential impairment of MSRs based on the difference between the carrying amount and current estimated fair value of the servicing rights. In determining impairment, the Company aggregates all servicing rights and stratifies them into tranches based on predominant risk characteristics. If impairment exists, a valuation allowance is established for any excess of amortized cost over the current estimated fair value by a charge to income. If the Company later determines that all or a portion of the impairment no longer exists for a particular tranche, a reduction of the allowance may be recorded as an increase to income.

Service fee income is recorded for fees earned for servicing mortgage loans under servicing agreements with the Federal national Mortgage Association (“FNMA”), the Federal home loan Mortgage Corporation (“FHLMC”), Government national Mortgage Association (“GNMA”) and certain private investors. The fees are based on a contractual percentage of the outstanding principal balance of the loans serviced and are recorded in noninterest income. Amortization of MSRs and mortgage servicing costs are charged to expense when incurred.

The unpaid principal balances of loans serviced for others were approximately $3,534,607 at June 30, 2022 and $3,698,998 at December 31, 2021.

The estimated fair value of the mortgage servicing rights was $41,748 and $27,355 at June 30, 2022 and December 31, 2021, respectively. The estimated fair value of servicing rights at June 30, 2022 was determined using a net servicing fee of 0.26%, average discount rates ranging from 10.50% to 11.00% with a weighted average discount rate of 10.61%, average constant prepayment rates (“CPR”) ranging from 6.66% to 10.99% with a weighted average prepayment rate of 7.54%, depending upon the stratification of the specific servicing right, and a delinquency rate, including loans on forbearance of 2.90%. The estimated fair value of servicing rights at December 31, 2021 was determined using a net servicing fee of 0.26%, average discount rates ranging from 10.50% to 11.71% with a weighted average discount rate of 10.60%, average constant prepayment rates (“CPR”) ranging from 12.59% to

21.20

% with a weighted average prepayment rate of 16.56%, depending upon the stratification of the specific servicing right, and a delinquency rate, including loans on forbearance of 2.09%. Please refer to Note 15 in these Notes to Consolidated Financial Statements for additional information concerning the fair value of MSRs.

The following presents the activity in mortgage servicing rights, including their valuation allowance for the three and six months ended June 30, 2022 and 2021:


	Three Months Ended June 30						Six Months Ended June 30
	2022			2021			2022			2021
MSRs beginning balance	$	23,089		$	23,401		$	24,027		$	22,338
Addition from acquisition of subsidiary		0			0			0			0
Amount capitalized		423			3,111			1,110			6,335
Amount amortized		(919	)		(2,339	)		(2,544	)		(4,500	)

MSRs ending balance	$	22,593		$	24,173		$	22,593		$	24,173

MSRs valuation allowance beginning balance	$	0		$	(1,383	)	$	(883	)	$	(1,383	)
Aggregate additions charged and recoveries credited to operations		0			379			883			379
MSRs impairment		0			(629	)		0			(629	)

MSRs valuation allowance ending balance	$	0		$	(1,633	)	$	0		$	(1,633	)

MSRs, net of valuation allowance	$	22,593		$	22,540		$	22,593		$	22,540

In determining impairment, the Company aggregates all servicing rights and stratifies them into tranches based on predominant risk characteristics. The Company did not record any temporary impairments on mortgage servicing rights for the three and six months ended June 30, 2022. The Company recorded a $250 temporary impairment, net of recoveries on mortgage servicing rights for the three and six months ended June 30, 2021.

The estimated amortization expense is based on current information regarding future loan payments and prepayments. Amortization expense could change in future periods based on changes in the volume of prepayments and economic factors.