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Mortgage Banking
 12 Months Ended
Dec. 31, 2021
Mortgage Banking [Abstract]  
Mortgage Banking
Note 9 - Mortgage Banking
The following table presents the Company's revenue from mortgage banking operations:
(Dollars in thousands)Years Ended December 31,
Mortgage banking revenue
202120202019
Origination$1,379 $1,880 $1,000 
Gain on sale of loans held for sale11,862 13,481 4,348 
Originations of MSRs5,153 5,709 2,595 
Servicing5,990 6,116 6,547 
Total gross mortgage revenue24,384 27,186 14,490 
MSR valuation adjustments, net(2,593)(12,746)(7,012)
Mortgage HFS and pipeline fair value adjustment(6,897)7,351 979 
MSR hedge impact(1,967)7,812 3,852 
Mortgage banking revenue$12,927 $29,603 $12,309 
Management uses mortgage-backed securities to mitigate the impact of changes in fair value of MSRs. See Note 12 - Derivative Financial Instruments for further information.
Mortgage Servicing Rights
Activity in MSRs was as follows:
Years Ended December 31,
(Dollars in thousands)202120202019
Fair Value at Beginning of Period$13,660 $20,697 $25,114 
Originations of MSRs5,153 5,709 2,595 
MSR valuation adjustments, net(2,593)(12,746)(7,012)
Fair Value at End of Period$16,220 $13,660 $20,697 
The Company receives annual servicing fee income approximating 0.28% of the outstanding balance of the underlying loans. In connection with the Company's activities as a servicer of mortgage loans, the investors and the securitization trusts have no recourse to the Company's assets for failure of debtors to pay when due.
The Company is potentially subject to losses in its loan servicing portfolio due to loan foreclosures. The Company has obligations to either repurchase the outstanding principal balance of a loan or make the purchaser whole for the economic benefits of a loan if it is determined that the loan sold violated representations or warranties made by the Company and/or the borrower at the time of the sale, which the Company refers to as mortgage loan servicing put back expenses. Such representations and warranties typically include those made regarding loans that had missing or insufficient file documentation and/or loans obtained through fraud by borrowers or other third parties. Put back claims may be made until the loan is paid in full. When a put back claim is received, the Company evaluates the claim and takes appropriate actions based on the nature of the claim. The Company is required by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation to provide a response to put back claims within 60 days of the date of receipt.
At December 31, 2021 and 2020, the reserve for mortgage loan servicing put back expenses totaled $379,000 and $311,000, respectively. There is inherent uncertainty in reasonably estimating the requirement for reserves against future mortgage loan servicing put back expenses. Future put back expenses depend on many subjective factors, including the review procedures of the purchasers and the potential refinance activity on loans sold with servicing released and the subsequent consequences under the representations and warranties.
GNMA optional repurchase programs allow financial institutions to buy back individual delinquent mortgage loans that meet certain criteria from the securitized loan pool for which the institution provides servicing. At the servicer's option and without GNMA's prior authorization, the servicer may repurchase a delinquent loan for an amount equal to 100% of the remaining principal balance of the loan. This buy-back option is considered a conditional option until the delinquency criteria are met, at which time the option becomes unconditional. When a financial institution is deemed to have regained effective control over these loans under the unconditional buy-back option, the loans can no longer be reported as sold and must be included in the balance sheet as mortgage loans held for sale, regardless of whether the institution intends to exercise the buy-back option. These loans totaled $43.4 million and $55.5 million at December 31, 2021 and 2020, respectively, and were recorded as mortgage loans held for sale, at the lower of cost or fair value with a corresponding liability in FHLB advances and other borrowings on the Company's consolidated balance sheets.