Note 6 – Servicing

Loans serviced for others are not included in the accompanying consolidated balance sheets. The unpaid principal balances of loans serviced for others were $275.6 and $275.5 million at December 31, 2015 and 2014, respectively.

The balance of capitalized servicing rights included in other assets at December 31, 2015 and 2014, was $2.1 and $2.0 million, respectively. The capitalized addition of servicing rights is included in net gain on sale of loans on the consolidated statement of income.

The fair market value of the capitalized servicing rights as of December 31, 2015 and 2014 was $2.7 million and $2.9 million, respectively. The valuations were completed by stratifying the loans into like groups based on loan type and term. Impairment was measured by estimating the fair value of each stratum, taking into consideration an estimated level of prepayment based upon current market conditions. An average constant prepayment rate of 11.0 and 9.6 were utilized for 2015 and 2014, respectively. All stratums showed positive values compared to carrying value using a discount yield of 6.52% for 2015 and 6.48% for 2014.

The following summarizes mortgage servicing rights capitalized and amortized during each year:


	(In Thousands)
	2015			2014
Beginning Year	$	2,023		$	2,066
Capitalized Additions		407			301
Amortization		(374	)		(344	)
Valuation Allowance		—			—

End of Year	$	2,056		$	2,023