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Mortgage Loan Servicing

12 Months Ended

Dec. 31, 2020

(8) Mortgage Loan Servicing

Mortgage loans serviced for others are not reported as assets. The following table provides information on the principal balances of mortgage loans serviced for others:

(Dollars in thousands)	As of December 31,
	2020		2019
FHLMC	$	639,875	$	509,101
FHLB		28,157		40,462

Custodial escrow balances maintained in connection with serviced loans were $5.8 million and $4.7 million at December 31, 2020 and 2019, respectively. Gross service fee income related to such loans was $1.5 million, $1.4 million and $1.4 million for the years ended December 31, 2020, 2019 and 2018, respectively, and is included in fees and service charges in the consolidated statements of earnings.

Activity for mortgage servicing rights and the related valuation allowance follows:

	2020			2019
(Dollars in thousands)	As of December 31,
	2020			2019
Mortgage servicing rights:
Balance at beginning of year	$	2,446		$	2,495
Additions		2,705			943
Amortization		(1,425	)		(992	)
Balance at end of year	$	3,726		$	2,446

At December 31, 2020 and 2019, there was no valuation allowance related to mortgage servicing rights.

The fair value of mortgage servicing rights was $4.4 million and $5.2 million at December 31, 2020 and 2019, respectively. Fair value at December 31, 2020 was determined using discount rates ranging from 8.78% to 12.00%, prepayment speeds ranging from 7.10% to 29.61%, depending on the stratification of the specific mortgage servicing right, and a weighted average default rate of 1.36%. Fair value at December 31, 2019 was determined using discount rates ranging from 9.00% to 11.00%, prepayment speeds ranging from 6.00% to 23.21%, depending on the stratification of the specific mortgage servicing right, and a weighted average default rate of 1.40%.

The Company had a mortgage repurchase reserve of $235,000 at December 31, 2020 and December 31, 2019, which represents the Company’s best estimate of probable losses that the Company will incur related to the repurchase of one-to-four family residential real estate loans previously sold or to reimburse investors for credit losses incurred on loans previously sold where a breach of the contractual representations and warranties occurred. As of December 31, 2020, the Company had no outstanding mortgage repurchase requests.