Loan Servicing Rights

3 Months Ended

Mar. 31, 2020

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Loan Servicing Rights

LOAN SERVICING RIGHTSAt March 31, 2020, loan servicing rights derived from loans sold with servicing retained totaled $24.1 million, compared to $25.4 million at December 31, 2019.  Loans serviced for others are not reported as assets.  The principal balance of loans serviced for others was $3.467 billion at March 31, 2020, compared to $3.445 billion at December 31, 2019.  Approximately 99.8% of the loans serviced for others at March 31, 2020 were residential mortgage loans.  Custodial escrow balances maintained in connection with serviced loans were $28.4 million at March 31, 2020 and $12.7 million at December 31, 2019.

The following table summarizes the carrying values and activity related to loan servicing rights and the related valuation allowance: 

	Three Months Ended March 31,
(dollars in thousands)	2020		2019
Balance at beginning of period	$	25,399	$	24,512
Additions	1,731		659
Amortization	(1,555)		(900)
Balance before valuation allowance at end of period	25,575		24,271
Valuation allowance:
Balance at beginning of period	(31)		(15)
(Additions)/recoveries	(1,412)		(2)
Balance at end of period	(1,443)		(17)
Loan servicing rights, net	$	24,132	$	24,254

At March 31, 2020, the fair value of servicing rights was $24.1 million, which was determined using a discount rate of 9% and a conditional prepayment rate of 16%.  At December 31, 2019, the fair value of servicing rights was $26.5 million, which was determined using a discount rate of 12% and a conditional prepayment rate of 10%.