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Mortgage Loan Servicing

9 Months Ended

Sep. 30, 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)	September 30,		December 31,
	2024		2023
FHLMC	$	635,359	$	659,488
FHLB		27,915		28,621
Total	$	663,274	$	688,109

Custodial escrow balances maintained in connection with serviced loans were $10.0 million and $5.0 million at September 30, 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 $425,000 and $450,000 for the three months ended September 30, 2024 and 2023, 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 for both the nine months ended September 30, 2024 and 2023, and is included in fees and service charges in the consolidated statements of earnings.

Activity for mortgage servicing rights for the periods indicated was as follows:

	2024			2023			2024			2023
	Three months ended						Nine months ended
(Dollars in thousands)	September 30,						September 30,
	2024			2023			2024			2023
Mortgage servicing rights:
Balance at beginning of period	$	2,997		$	3,514		$	3,158		$	3,813
Additions		129			130			295			370
Amortization		(85	)		(276	)		(412	)		(815	)
Balance at end of period	$	3,041		$	3,368		$	3,041		$	3,368

The fair value of mortgage servicing rights was $8.8 million and $9.5 million at September 30, 2024 and December 31, 2023, respectively. Fair value at September 30, 2024 was determined using discount rate of 10.0%; prepayment speeds ranging from 6.00% to 31.67%, depending on the stratification of the specific mortgage servicing right; and a weighted average default rate of 1.82%. 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 $140,000 at September 30, 2024 and $159,000 at December 31, 2023, which represented the Company’s best estimate at those dates 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 $17,000 of losses against the reserve during the three months ended September 30, 2024 and $19,000 of losses against the reserve during nine months ended September 30, 2024. The Company charged $84,000 of losses against the reserve during the three months ended September 30, 2023 and $105,000 of losses against the reserve during the nine months ended September 30,2023. As of September 30, 2024, the Company had no outstanding mortgage repurchase requests.