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Mortgage Loan Servicing

12 Months Ended

Dec. 31, 2023

(9) 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:

	2023		2022
(Dollars in thousands)	As of December 31,
	2023		2022
FHLMC	$	659,488	$	685,859
FHLB		28,621		27,285
Total	$	688,109	$	713,144

Custodial escrow balances maintained in connection with serviced loans were $5.0 million at December 31, 2023 and $5.3 million at December 31 2022. Gross service fee income related to such loans was $1.8 million for the years ended December 31, 2023 and 2022 and 2021, 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:

	2023			2022
(Dollars in thousands)	As of December 31,
	2023			2022
Mortgage servicing rights:
Balance at beginning of year	$	3,813		$	4,193
Additions		424			818
Amortization		(1,079	)		(1,198	)
Balance at end of year	$	3,158		$	3,813

At December 31, 2023 and 2022, there was no valuation allowance related to mortgage servicing rights.

The fair value of mortgage servicing rights was $9.5 million and $10.3 million at December 31, 2023 and 2022, respectively. Fair value at December 31, 2023 was determined using discount rate at 10.0%, prepayment speeds ranging from 6.00% to 26.87%, depending on the stratification of the specific mortgage servicing right, and a weighted average default rate of 1.65%. Fair value at December 31, 2022 was determined using discount rate at 9.50%,, prepayment speeds ranging from 6.00% to 21.34%, depending on the stratification of the specific mortgage servicing right, and a weighted average default rate of 1.47%.

The Company had a mortgage repurchase reserve of $159,000 at December 31, 2023 and $225,000 at December 31, 2022, 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 made a $50,000 provision to the reserve during 2023 compared to no reserve during 2022 and 2021. The Company charged losses of $116,000, $1,000 and $9,000 against the reserve during 2023, 2022 and 2021, respectively. As of December 31, 2023, the Company had no outstanding mortgage repurchase requests.