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Mortgage Banking
 3 Months Ended
Mar. 31, 2024
Mortgage Banking [Abstract]  
Mortgage Banking
Note 6 — Mortgage Banking
The following table presents the Company’s revenue from mortgage banking operations:
(Dollars in thousands)Three Months Ended March 31,
Mortgage banking revenue
20242023
Origination$108 $111 
Gain on sale of loans held for sale964 609 
Originations of MSRs— 149 
Servicing654 989 
Total gross mortgage revenue1,726 1,858 
MSR valuation adjustments, net450 (906)
Gain on sale of MSR 410 — 
Mortgage HFS and pipeline fair value adjustment291 440 
MSR hedge impact(479)389 
Mortgage banking revenue$2,398 $1,781 
Management used forward-settling mortgage-backed securities and U.S. Treasury futures to mitigate the impact of changes in fair value of MSRs. See Note 8 — Derivative Financial Instruments for further information.
Mortgage Servicing Rights
Activity in MSRs was as follows:
Three Months Ended March 31,
(Dollars in thousands)20242023
Balance at beginning of period$15,637 $20,824 
Addition of servicing rights— 149 
Settlement of sale of MSR(16,087)(1,806)
Valuation adjustment, net of amortization450 (906)
Balance at end of period$— $18,261 
During December 2023 and January 2024, the Company solicited non-binding indications of interest with respect to the proposed sale of substantially all of the Company’s MSR asset. The Company subsequently sold its MSR asset and recorded a $410,000 gain on the sale. There were no MSR assets recognized or recorded during the quarter ended March 31, 2024, and the carrying value of the MSR was zero at March 31, 2024.
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 gain or loss realized, and derecognized the related GNMA repurchase asset and offsetting liability during the quarter ended March 31, 2023.
Prior to the sale of the Company’s MSR, the Company received 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 on loans previously sold 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 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 March 31, 2024, and December 31, 2023, the reserve for mortgage loan putback expenses totaled $113,000 and $127,000, respectively. There is inherent uncertainty in reasonably estimating the requirement for reserves against future mortgage loan 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.