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Mortgage Banking | 12 Months Ended
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Dec. 31, 2023
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 |  |  |  |  |  |  |  |  |  |  | 2023 |  | 2022 |  | 2021 |  |
Origination |  |  |  |  |  |  |  |  |  |  | $ | 483 |  |  | $ | 774 |  |  | $ | 1,379 |  |  |
Gain on sale of loans held for sale |  |  |  |  |  |  |  |  |  |  | 3,111 |  |  | 4,889 |  |  | 11,862 |  |  |
Originations of MSRs |  |  |  |  |  |  |  |  |  |  | 708 |  |  | 2,286 |  |  | 5,153 |  |  |
Servicing |  |  |  |  |  |  |  |  |  |  | 3,739 |  |  | 5,643 |  |  | 5,990 |  |  |
Total gross mortgage revenue |  |  |  |  |  |  |  |  |  |  | 8,041 |  |  | 13,592 |  |  | 24,384 |  |  |
MSR valuation adjustments, net (1)(2) |  |  |  |  |  |  |  |  |  |  | (4,089) |  |  | 1,219 |  |  | (2,593) |  |  |
Mortgage HFS and pipeline fair value adjustment |  |  |  |  |  |  |  |  |  |  | (53) |  |  | (1,352) |  |  | (6,897) |  |  |
MSR hedge impact |  |  |  |  |  |  |  |  |  |  | (543) |  |  | (6,737) |  |  | (1,967) |  |  |
Mortgage banking revenue |  |  |  |  |  |  |  |  |  |  | $ | 3,356 |  |  | $ | 6,722 |  |  | $ | 12,927 |  |  |
____________________________ (1)The Company recorded a $1.8 million impairment on the MSR portfolio during the year ended December 31, 2023 in conjunction with the planned sale of the mortgage servicing right asset. (2)The Company recorded a $2.0 million impairment on the held for sale GNMA MSR portfolio during the year ended December 31, 2022. Management uses forward-settling mortgage-backed securities and U.S. Treasury futures 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) |  |  |  |  |  |  | 2023 |  | 2022 |  |  |  |  |  |  | 2021
Balance at beginning of period |  |  |  |  |  |  | $ | 20,824 |  |  | $ | 16,220 |  |  |  |  |  |  |  | $ | 13,660 |
Servicing acquired in BTH merger |  |  |  |  |  |  | — |  |  | 1,099 |  |  |  |  |  |  |  | — |
Addition of servicing rights |  |  |  |  |  |  | 708 |  |  | 2,286 |  |  |  |  |  |  |  | 5,153 |
Settlement of sale of GNMA MSR |  |  |  |  |  |  | (1,806) |  |  | — |  |  |  |  |  |  |  | — |
Valuation adjustment, net of amortization |  |  |  |  |  |  | (4,089) |  |  | 1,219 |  |  |  |  |  |  |  | (2,593) |
Balance at end of period |  |  |  |  |  |  | $ | 15,637 |  |  | $ | 20,824 |  |  |  |  |  |  |  | $ | 16,220 |
During the second half of 2022, the Company entered into an agreement to sell its GNMA MSR portfolio, which met all final sale conditions in early 2023. The Company sold $1.8 million in GNMA MSR, with no significant additional gain or loss realized, and derecognized the related GNMA repurchase asset and offsetting liability during the quarter ended March 31, 2023. The Company receives annual servicing fee income approximating 0.25% 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 putback 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. Putback claims may be made until the loan is paid in full. When a putback 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 putback claims within 60 days of the date of receipt. At December 31, 2023 and 2022, the reserve for mortgage loan servicing putback expenses totaled $127,000 and $217,000, respectively. There is inherent uncertainty in reasonably estimating the requirement for reserves against future mortgage loan servicing putback expenses. Future putback 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 consolidated balance sheets as mortgage loans held for sale, regardless of whether the institution intends to exercise the buy-back option. These loans totaled $24.6 million at December 31, 2022, 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. The final sale conditions of the GNMA MSR portfolio were met during the quarter ended March 31, 2023, and, accordingly, there were no GNMA repurchase program loans on the balance sheet at December 31, 2023.

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- Definition The entire disclosure for a transferor's continuing involvement in financial assets that it has transferred in a securitization or asset-backed financing arrangement, the nature of any restrictions on assets reported by an entity in its statement of financial position that relate to a transferred financial asset (including the carrying amounts of such assets), how servicing assets and servicing liabilities are reported, and (for securitization or asset-backed financing arrangements accounted for as sales) when a transferor has continuing involvement with the transferred financial assets and transfers of financial assets accounted for as secured borrowings, how the transfer of financial assets affects an entity's financial position, financial performance, and cash flows. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 860 -SubTopic 30 -Name Accounting Standards Codification -Section 50 -Paragraph 1A -Subparagraph (b)(2) -Publisher FASB -URI 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