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Mortgage Loan Servicing

12 Months Ended

Dec. 31, 2024

(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:

	2024		2023
(Dollars in thousands)	As of December 31,
	2024		2023
FHLMC	$	626,379	$	659,488
FHLB		27,418		28,621
Total	$	653,797	$	688,109

Custodial escrow balances maintained in connection with serviced loans were $5.6 million at December 31, 2024 and $5.0 million at December 31, 2023. Gross service fee income related to such loans was $1.7 million for the year ended December 31, 2024 and $1.8 million for the years ended 2023 and 2022, 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:

	2024			2023
(Dollars in thousands)	As of December 31,
	2024			2023
Mortgage servicing rights:
Balance at beginning of year	$	3,158		$	3,813
Additions		404			424
Amortization		(501	)		(1,079	)
Balance at end of year	$	3,061		$	3,158

At December 31, 2024 and 2023, there was no valuation allowance related to mortgage servicing rights.

The fair value of mortgage servicing rights was $9.6 million and $9.5 million at December 31, 2024 and 2023, respectively. Fair value at December 31, 2024 was determined using a discount rate at 10.0%, prepayment speeds ranging from 6.00% to 25.44%, depending on the stratification of the specific mortgage servicing right, and a weighted average default rate of 1.87%. Fair value at December 31, 2023 was determined using a 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%.

The Company had a mortgage repurchase reserve of $131,000 at December 31, 2024 and $159,000 at December 31, 2023, which represented the Company’s best estimate as of such 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 made no provision to the reserve during 2024 compared to a $50,000 provision to the reserve during 2023 and no reserve provision during 2022. The Company charged losses of $28,000, $116,000, and $1,000 against the reserve during 2024, 2023, and 2022, respectively. As of December 31, 2024, the Company had no outstanding mortgage repurchase requests.