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Mortgage Servicing Rights
 9 Months Ended
Sep. 30, 2021
Transfers and Servicing [Abstract]  
Mortgage Servicing Rights Mortgage Servicing Rights
FASB ASC Topic 860 "Transfers and Servicing" requires all separately recognized servicing assets and servicing liabilities to be initially measured at fair value, if practicable. The Company's servicing assets and servicing liabilities are reported using the amortization method and carried at the lower of amortized cost or fair value by strata. In evaluating the carrying values of mortgage servicing rights, the Company obtains third party valuations based on loan level data including note rate, type, and term of the underlying loans. The model utilizes several assumptions, the most significant of which is loan prepayments, calculated using a three-months moving average of weekly prepayment data published by the Public Securities Association (PSA) and modeled against the serviced loan portfolio, and the discount rate to discount future cash flows. As of September 30, 2021, the prepayment assumption using the PSA model was 260, which translates into an anticipated prepayment rate of 12.48%. The discount rate is 9.00%. Other assumptions include delinquency rates, foreclosure rates, servicing cost inflation, and annual unit loan cost. All assumptions are adjusted periodically to reflect current circumstances. Amortization of mortgage servicing rights, as well as write-offs due to prepayments of the related mortgage loans, are recorded as a charge against mortgage servicing fee income.
For the nine months ended September 30, 2021 and 2020, servicing rights capitalized totaled $859,000 and $926,000, respectively. Servicing rights amortized for the nine-month periods ended September 30, 2021 and 2020 were $485,000 and 252,000, respectively. The fair value of servicing rights was $2,757,000, $1,985,000, and $2,013,000 at September 30, 2021, December 31, 2020 and September 30, 2020, respectively. The Bank serviced loans for others totaling $353,633,000, $318,459,000, and $315,426,000 at September 30, 2021, December 31, 2020, and September 30, 2020, respectively.
The Bank recorded an impairment reserve as of September 30, 2021, 2020 and December 31, 2020 for strata with a fair value lower than cost. Mortgage servicing rights are included in other assets and detailed in the following table:
September 30,
2021		December 31,
2020		September 30,
2020
Mortgage servicing rights$8,158,000 $7,299,000 $7,066,000 
Accumulated amortization(5,470,000)(4,985,000)(4,846,000)
Amortized cost2,688,000 2,314,000 2,220,000 
Impairment reserve(91,000)(358,000)(258,000)
Carrying value$2,597,000 $1,956,000 $1,962,000