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Note 4 - Mortgage Banking | 12 Months Ended
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Dec. 31, 2020
Notes to Financial Statements |
Mortgage Banking [Text Block] | Note 4 – Mortgage Banking Activity in secondary market loans during the year was as follows:
(Dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |
|  | 2020 |  |  | 2019 |  |  | 2018 |
Loans originated for resale, net of principal payments |  | $ | 326,286 |  |  | $ | 63,920 |  |  | $ | 33,555 |
Proceeds from loan sales |  |  | 325,306 |  |  |  | 62,763 |  |  |  | 34,872 |
Net gains on sales of loans held for sale |  |  | 11,313 |  |  |  | 1,951 |  |  |  | 1,003 |
Loan servicing fees, net of amortization |  |  | (129 | ) |  |  | 82 |  |  |  | 91 |
Net gains on sales of loans held for sale include capitalization of loan servicing rights. Loans serviced for others are not reported as assets in the accompanying consolidated balance sheets. The unpaid principal balances of these loans were $404.2 million and $242.0 million at December 31, 2020 and 2019, respectively. The Bank maintain custodial escrow balances in connection with these serviced loans; however, such escrows were immaterial at December 31, 2020 and 2019. Activity for loan servicing rights (included in other assets) was as follows:
(Dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |
|  | 2020 |  |  | 2019 |  |  | 2018 |
Balance, beginning of year |  | $ | 2,131 |  |  | $ | 1,049 |  |  | $ | 908 |
Capitalized |  |  | 3,554 |  |  |  | 822 |  |  |  | 441 |
Amortization |  |  | (1,344 | ) |  |  | (453 | ) |  |  | (300 | )
Market valuation allowance change |  |  | (374 | ) |  |  | - |  |  |  | - |
Acquired from merger with County Bank Corp. |  |  | - |  |  |  | 713 |  |  |  | - |
Balance, end of year |  | $ | 3,967 |  |  | $ | 2,131 |  |  | $ | 1,049 |
The fair value of loan servicing rights was $3,967,000 and $2,304,000 as of December 31, 2020 and 2019, respectively. Valuation allowances of $373,000 and $0 were recorded at December 31, 2020 and December 31, 2019, respectively. The fair value of the Bank’s servicing rights at December 31, 2020 was determined using a discount rate of 7.75% and prepayment speeds ranging from 7% to 26%. The fair value of the Bank’s servicing rights at December 31, 2019 was determined using a discount rate of 5.51% and prepayment speeds ranging from 11% to 18%. The fair value of Lakestone’s servicing rights at December 31, 2019 was determined using a discount rate of 8.65% and prepayment speeds ranging from 11% to 13%.

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