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Mortgage Banking
 12 Months Ended
Dec. 31, 2024
Mortgage Banking [Abstract]  
Mortgage Banking
Note 9 — Mortgage Banking
The following table presents the Company’s revenue from mortgage banking operations:
(Dollars in thousands)Year Ended December 31,
Mortgage banking revenue
202420232022
Origination$528 $483 $774 
Gain on sale of loans held for sale4,928 3,111 4,889 
Originations of MSR— 708 2,286 
Servicing744 3,739 5,643 
Total gross mortgage revenue6,200 8,041 13,592 
MSR asset valuation adjustments, net450 (4,089)1,219 
Gain on sale of MSR asset410 — — 
Mortgage HFS and pipeline fair value adjustment(1)(53)(1,352)
MSR asset hedge impact(479)(543)(6,737)
Mortgage banking revenue$6,580 $3,356 $6,722 
During 2023 and 2022, management used forward-settling mortgage-backed securities and U.S. Treasury futures to mitigate the impact of changes in fair value of the MSR asset. See Note 12 — Derivative Financial Instruments for further information. Due to the timing of the MSR asset sale, the MSR asset hedge impact in 2024 primarily reflected the financial effects of the MSR asset sale rather than ongoing hedging activities.
Mortgage Servicing Rights
Activity in the MSR asset was as follows:
Years Ended December 31,
(Dollars in thousands)202420232022
Balance at beginning of year$15,637 $20,824 $16,220 
Servicing acquired in BTH merger— — 1,099 
Addition of servicing rights— 708 2,286 
Settlement of sale of MSR asset(16,087)(1,806)— 
Valuation adjustment, net of amortization450 (4,089)1,219 
Balance at end of year$— $15,637 $20,824 
The Company sold substantially all of its MSR asset and recorded a $410,000 gain on the sale during the year ended December 31, 2024. There were no MSR assets recognized or recorded during the year ended December 31, 2024, and the Company is no longer retaining servicing on sold loans.
During the second half of 2022, the Company entered into an agreement to sell its GNMA MSR asset portfolio, which met all final sale conditions in early 2023. The Company sold $1.8 million in GNMA MSR assets, 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 asset, 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 December 31, 2024 and 2023, the reserve for mortgage loan putback expenses totaled $103,000 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.