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Mortgage Loan Servicing

3 Months Ended

Mar. 31, 2024

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,
	2024		2023
FHLMC	$	650,910	$	659,488
FHLB		29,103		28,621
Total	$	680,013	$	688,109

Custodial escrow balances maintained in connection with serviced loans were $9.4 million and $5.0 million at March 31, 2024 and December 31, 2023, respectively. Custodial escrow balances are included in the deposit balances on the balance sheet. Gross service fee income related to such loans was $436,000 and $453,000 for the three months ended March 31, 2024 and 2023, respectively, and is included in fees and service charges in the consolidated statements of earnings.

Activity for mortgage servicing rights was as follows:

	2024			2023
	Three months ended
(Dollars in thousands)	March 31,
	2024			2023
Mortgage servicing rights:
Balance at beginning of period	$	3,158		$	3,813
Additions		61			103
Amortization		(242	)		(264	)
Balance at end of period	$	2,977		$	3,652

The fair value of mortgage servicing rights was $9.7 million and $9.5 million at March 31, 2024 and December 31, 2023, respectively. Fair value at March 31, 2024 was determined using discount rate of 10.0%; prepayment speeds ranging from 6.00% to 24.22%, depending on the stratification of the specific mortgage servicing right; and a weighted average default rate of 1.71%. Fair value at December 31, 2023 was determined using discount rates 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%.

The Company had a mortgage repurchase reserve of $157,000 at March 31, 2024 and $159,000 at December 31, 2023, 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 $2,000 loss against the reserve during the three months ended March 31, 2024. The Company charged a $15,000 loss against the reserve during the first three months ending March 31, 2023. As of March 31, 2024, the Company had no outstanding mortgage repurchase requests.