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Mortgage Loan Servicing

9 Months Ended

Sep. 30, 2021

5. 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)	September 30,		December 31,
	2021		2020
FHLMC	$	694,967	$	639,875
FHLB		19,000		28,157
Total	$	713,967	$	668,032

Custodial escrow balances maintained in connection with serviced loans were $10.4 million and $5.8 million at September 30, 2021 and December 31, 2020, respectively. Gross service fee income related to such loans was $452,000 and $391,000 for the three months ended September 30, 2021 and 2020, respectively, and is included in fees and service charges in the consolidated statements of earnings. Gross service fee income related to such loans was $1.3 million and $1.1 million for the nine months ended September 30, 2021 and 2020, respectively.

Activity for mortgage servicing rights was as follows:

2021 2020 2021 2020

Three months ended Nine months ended

(Dollars in thousands) September 30, September 30,

2021 2020 2021 2020

Mortgage servicing rights:

Balance at beginning of period $ 4,143 $ 2,806 $ 3,726 $ 2,446

Additions 406 946 1,598 1,915

Amortization (348 ) (420 ) (1,123 ) (1,029 )

Balance at end of period $ 4,201 $ 3,332 $ 4,201 $ 3,332

The fair value of mortgage servicing rights was $6.1 million and $4.4 million at September 30, 2021 and December 31, 2020, respectively. Fair value at September 30, 2021 was determined using discount rates ranging from 8.87% to 12.00%; prepayment speeds ranging from 6.10% to 25.31%, depending on the stratification of the specific mortgage servicing right; and a weighted average default rate of 1.34%. 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%.

The Company had a mortgage repurchase reserve of $226,000 at September 30, 2021 and $235,000 at December 31, 2020, 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. The Company charged a $9,000 loss against the reserve during the first nine months ended September 30, 2021. The Company did not incur any losses charged against the reserve or make any provisions to the reserve during the first nine months of 2020. As of September 30, 2021, the Company did not have any outstanding mortgage repurchase requests.