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Mortgage Loan Servicing

3 Months Ended

Mar. 31, 2022

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)	March 31,		December 31,
	2022		2021
FHLMC	$	695,360	$	697,484
FHLB		20,329		18,218
Total	$	715,689	$	715,702

Custodial escrow balances maintained in connection with serviced loans were $9.9 million and $5.8 million at March 31, 2022 and December 31, 2021, respectively. Gross service fee income related to such loans was $454,000 and $431,000 for the three months ended March 31, 2022 and 2021, respectively, and is included in fees and service charges in the consolidated statements of earnings.

Activity for mortgage servicing rights was as follows:

	2022			2021
	Three months ended
(Dollars in thousands)	March 31,
	2022			2021
Mortgage servicing rights:
Balance at beginning of period	$	4,193		$	3,726
Additions		234			639
Amortization		(299	)		(399	)
Balance at end of period	$	4,128		$	3,966

The fair value of mortgage servicing rights was $9.1 million and $6.7 million at March 31, 2022 and December 31, 2021, respectively. Fair value at March 31, 2022 was determined using discount rates ranging from 9.00% to 12.00%; prepayment speeds ranging from 6.00% to 18.11%, depending on the stratification of the specific mortgage servicing right; and a weighted average default rate of 1.37%. Fair value at December 31, 2021 was determined using discount rates ranging from 9.00% to 12.00%; prepayment speeds ranging from 6.02% to 23.70%, depending on the stratification of the specific mortgage servicing right; and a weighted average default rate of 1.34%.

The Company had a mortgage repurchase reserve of $226,000 at March 31, 2022 at December 31, 2021, 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 did not incur any losses charged against the reserve or make any provisions to the reserve during the first three months of 2022. The Company charged a $9,000 loss against the reserve during the first three months ended March 31, 2021. As of March 31, 2022, the Company did not have any outstanding mortgage repurchase requests.