MORTGAGE SERVICING RIGHTS

3 Months Ended

Mar. 31, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

Mortgage servicing rights--Mortgage loans serviced for others are not included in the accompanying consolidated balance sheets. The unpaid balances of these loans as of March 31, 2021 and December 31, 2020 were $551,622 and $553,655, respectively, and consisted of one to four family residential real estate loans. These loans are serviced primarily for the Federal Home Loan Mortgage Corporation, Federal Home Loan Bank and the Federal National Mortgage Association. The current period valuation allowance is included as amortization of mortgage servicing rights in non-interest expense on the consolidated statement of operations.

Custodial escrow balances maintained in connection with the foregoing loan servicing, and included in deposits were $4,979 and $2,890, at March 31, 2021 and December 31, 2020, respectively. Mortgage servicing rights activity for the three month period ended March 31, 2021 and twelve months ended December 31, 2020 were as follows:


	As of and for the Three Months Ended			As of and for the Twelve Months Ended
Mortgage servicing rights:	March 31, 2021			December 31, 2020
Mortgage servicing rights, beginning of period	$	5,266		$	4,541

Increase in mortgage servicing rights resulting from transfers of financial assets	297			2,020
Amortization during the period	(439)			(1,295)
	5,124			5,266
Valuation allowance:
Valuation allowance, beginning of period	(2,014)			(259)
Additions	—			(1,755)
Recoveries	889			—

Valuation allowance, end of period	(1,125)			(2,014)
Mortgage servicing rights, net	$	3,999		$	3,252
Fair value of mortgage servicing rights; end of period	$	4,005		$	3,285
Residential mortgage loans serviced for others	$	551,622		$	553,655
Net book value of mortgage servicing rights to loans serviced for others	0.73		%	0.59		%

Servicing fees totaled $352 and $339 for the three months ended March, 31 2021 and March 31, 2020, respectively. Late fees and ancillary fees related to loan servicing are not material.

To estimate the fair value of the MSR asset, a valuation model is applied at the loan level to calculate the present value of the expected future cash flows. The valuation model incorporates various assumptions that would impact market participants’ estimations of future servicing income. Central to the valuation model is the discount rate. Fair value at March 31, 2021 was determined using discount rates ranging from 9% to 12%. Fair value at December 31, 2020 was determined using discount rates ranging from 9% to 12%. Other assumptions utilized in the valuation model include, but are not limited to, prepayment speed, servicing costs, delinquencies, costs of advances, foreclosure costs, ancillary income, and income earned on float and escrow.