Loan Servicing Rights

3 Months Ended

Mar. 31, 2022

LOAN SERVICING RIGHTS

Loan servicing rights are included in other assets on the balance sheet. At March 31, 2022, loan servicing rights derived from mortgage loans sold with servicing retained totaled $38.2 million, compared to $30.0 million at December 31, 2021. Loans serviced for others are not reported as assets. The principal balance of mortgage loans serviced for others was $4.426 billion at March 31, 2022, compared to $3.662 billion at December 31, 2021. Custodial escrow balances maintained in connection with serviced loans were $46.5 million at March 31, 2022 and $18.2 million at December 31, 2021.

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)	2022		2021
Balance at beginning of period	$	30,085	$	28,124
Additions (1)	9,666		3,113
Amortization	(1,505)		(2,975)
Balance before valuation allowance at end of period	38,246		28,262
Valuation allowance:
Balance at beginning of period	(46)		(1,407)
(Additions)/recoveries	45		1,261
Balance at end of period	(1)		(146)
Loan servicing rights, net	$	38,245	$	28,116

(1)Additions in the three months ended March 31, 2022 include loan servicing rights of $7.7 million acquired from First Midwest on February 15, 2022.

At March 31, 2022, the fair value of servicing rights was $45.5 million, which was determined using a discount rate of 9% and a conditional prepayment rate of 9%. At December 31, 2021, the fair value of servicing rights was $33.8 million, which was determined using a discount rate of 9% and a conditional prepayment rate of 10%.