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Mortgage Banking | 12 Months Ended
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Dec. 31, 2019
Mortgage Banking [Abstract] |
Mortgage Banking | Note 4 – Mortgage Banking Activity in secondary market loans during the year was as follows:
(Dollars in thousands) |  |  |  |  |  |  |  |  |
|  | 2019 |  |  | 2018 |  |  | 2017 |
Loans originated for resale, net of principal payments |  | $ | 63,920 |  |  | $ | 33,555 |  |  | $ | 43,171 |
Proceeds from loan sales |  |  | 62,763 |  |  |  | 34,872 |  |  |  | 42,883 |
Net gains on sales of loans held for sale |  |  | 1,951 |  |  |  | 1,003 |  |  |  | 1,265 |
Loan servicing fees, net of amortization |  |  | 82 |  |  |  | 91 |  |  |  | 155 |
Net gains on sales of loans held for sale include capitalization of loan servicing rights. Loans serviced for others are not reported as assets in the accompanying consolidated balance sheets. The unpaid principal balances of these loans were $242.0 million and $134.6 million at December 31, 2019 and 2018, respectively. The Banks maintain custodial escrow balances in connection with these serviced loans; however, such escrows were immaterial at December 31, 2019 and 2018. Activity for loan servicing rights (included in other assets) was as follows:
(Dollars in thousands) |  |  |  |  |  |  |  |  |
|  | 2019 |  |  | 2018 |  |  | 2017 |
Balance, beginning of year |  | $ | 1,049 |  |  | $ | 908 |  |  | $ | 697 |
Capitalized |  |  | 822 |  |  |  | 441 |  |  |  | 443 |
Amortization |  |  | (453 | ) |  |  | (300 | ) |  |  | (232 | )
Acquired from merger with County Bank Corp |  |  | 713 |  |  |  | — |  |  |  | — |
Balance, end of year |  | $ | 2,131 |  |  | $ | 1,049 |  |  | $ | 908 |
The fair value of loan servicing rights was $2,304,000 and $1,700,000 as of December 31, 2019 and 2018, respectively. Consequently, a valuation allowance was not necessary at year-end 2019 or 2018. The fair value of ChoiceOne Bank’s servicing rights at December 31, 2019 was determined using a discount rate of 5.51% and prepayment speeds ranging from 11% to 18%. The fair value of Lakestone Bank & Trust’s servicing rights at December 31, 2019 was determined using a discount rate of 8.65% and prepayment speeds ranging from 11% to 13%. The fair value of servicing rights at December 31, 2018 was determined using a discount rate of 6.92% and prepayment speeds ranging from 7% to 13%.

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