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Note 4 - Mortgage Banking

12 Months Ended

Dec. 31, 2021

Note 4 – Mortgage Banking

Activity in secondary market loans during the year was as follows:

(Dollars in thousands)
	2021			2020			2019
Loans originated for resale, net of principal payments	$	197,387		$	326,286		$	63,920
Proceeds from loan sales		205,398			325,306			62,763
Net gains on sales of loans held for sale		6,776			11,313			1,951
Loan servicing fees, net of amortization		(163	)		(129	)		82

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 $481.9 million and $404.2 million at December 31, 2021 and 2020, respectively. The Bank maintains custodial escrow balances in connection with these serviced loans; however, such escrows were immaterial at December 31, 2021 and 2020.

Activity for loan servicing rights (included in other assets) was as follows:

(Dollars in thousands)
	2021			2020			2019
Balance, beginning of year	$	3,967		$	2,131		$	1,049
Capitalized		1,961			3,554			822
Amortization		(1,635	)		(1,344	)		(453	)
Market valuation allowance change		374			(374	)		-
Acquired from merger with County Bank Corp.		-			-			713
Balance, end of year	$	4,667		$	3,967		$	2,131

The fair value of loan servicing rights was $5,521,000 and $3,967,000 as of December 31, 2021 and 2020, respectively. Valuation allowances of $0 and $373,000 were recorded at December 31, 2021 and December 31, 2020, respectively. The fair value of the Bank’s servicing rights at December 31, 2021 was determined using a discount rate of 8.00% and prepayment speeds ranging from 5% to 27%. 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%.