Loan Servicing Rights

9 Months Ended

Sep. 30, 2021

LOAN SERVICING RIGHTSLoan servicing rights are included in other assets on the balance sheet. At September 30, 2021, loan servicing rights derived from mortgage loans sold with servicing retained totaled $29.2 million, compared to $26.7 million at December 31, 2020. Loans serviced for others are not reported as assets. The principal balance of mortgage loans serviced for others was $3.618 billion at September 30, 2021, compared to $3.613 billion at December 31, 2020. Custodial escrow balances maintained in connection with serviced loans were $43.8 million at September 30, 2021 and $16.2 million at December 31, 2020.

The following table summarizes the carrying values and activity related to loan servicing rights and the related valuation allowance:


	Three Months Ended September 30,				Nine Months Ended September 30,
(dollars in thousands)	2021		2020		2021		2020
Balance at beginning of period	$	28,886	$	26,288	$	28,124	$	25,399
Additions	2,671		4,446		8,842		9,849
Amortization	(2,236)		(2,885)		(7,645)		(7,399)
Balance before valuation allowance at end of period	29,321		27,849		29,321		27,849
Valuation allowance:
Balance at beginning of period	(105)		(2,253)		(1,407)		(31)
(Additions)/recoveries	5		(95)		1,307		(2,317)
Balance at end of period	(100)		(2,348)		(100)		(2,348)
Loan servicing rights, net	$	29,221	$	25,501	$	29,221	$	25,501

At September 30, 2021, the fair value of servicing rights was $31.9 million, which was determined using a discount rate of 9% and a conditional prepayment rate of 11%. At December 31, 2020, the fair value of servicing rights was $26.8 million, which was determined using a discount rate of 9% and a conditional prepayment rate of 14%.