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14) Mortgage Servicing Rights

9 Months Ended

Sep. 30, 2013

The following is a summary of the MSR activity for the periods presented.

	As of September 30	As of December 31
	2013	2012
Amortized cost:
Balance before valuation allowance at beginning of year	$ 2,797,470	$ -
MSRs received as proceeds from loan sales	1,851,221	2,797,470
Amortization	(312,675)	-
Application of valuation allowance to write down MSRs with other than temporary impairment	-	-
Balance before valuation allowance at year end	$ 4,336,016	$ 2,797,470

Valuation allowance for impairment of MSRs:
Balance at beginning of year	$ -	$ -
Additions	-	-
Application of valuation allowance to write down MSRs with other than temporary impairment	-	-
Balance at year end	$ -	$ -

Mortgage servicing rights, net	$ 4,336,016	$ 2,797,470

Estimated fair value of MSRs at year end	$ 4,336,016	$ 2,797,470

Amortization for 2012 was immaterial, and was not recorded. The following table summarizes the Company’s estimate of future amortization of its existing MSRs carried at amortized cost. This projection was developed using the assumptions made by management in its September 30, 2013 valuation of MSRs. The assumptions underlying the following estimate will change as market conditions and portfolio composition and behavior change, causing both actual and projected amortization levels to change over time. Therefore, the following estimates will change in a manner and amount not presently determinable by management.

		Estimated MSR Amortization
2013		$ 433,602
2014		433,602
2015		433,602
2016		433,602
2017		433,602
Thereafter		2,168,006
Total		$ 4,336,016

The Company began to retain MSRs in the second quarter of 2012. Since the retained MSRs were relatively small, they were determined to be immaterial. However, the Company substantially increased its MSR retention in the fourth quarter 2012 and began to report these MSRs pursuant to the accounting policy discussed in Note 9 of the Notes to Consolidated Financial Statements.