Loan Servicing

12 Months Ended

Dec. 31, 2023

Loan Servicing

Loan Servicing

NOTE 9 Loan Servicing

Loans serviced for others are not included in the accompanying consolidated balance sheets. The unpaid principal balances of loans serviced for others totaled $190.0 million and $213.5 million at December 31, 2023 and 2022, respectively. Servicing loans for others generally consists of collecting mortgage payments, maintaining escrow accounts, disbursing payments to investors and collection and foreclosure processing. Loan servicing income is recorded on an accrual basis and includes servicing fees from investors and certain charges collected from borrowers, such as late payment fees, and is net of fair value adjustments to capitalized mortgage servicing rights.

The following table summarizes the Company’s activity related to servicing rights for the years ended December 31, 2023, 2022, and 2021:

	Year ended
	December 31,
(dollars in thousands)	2023		2022		2021
Servicing Assets:
Balance at beginning of year	$	2,643	$	1,880	$	1,987
Additions (1)		300		1,538		1,553
Amortization (2)		(595)		(524)		(745)
Balance at end of year		2,348		2,894		2,795
Less valuation reserve (3)		(296)		(251)		(915)
Balance at end of year, net of valuation reserve	$	2,052	$	2,643	$	1,880
Fair value, beginning of year	$	2,314	$	1,892	$	2,137
Fair value, end of year	$	2,062	$	2,314	$	1,892

(1) Associated income was reported within mortgage banking income, net on the consolidated statements of income.

(2) Associated amortization expense was reported within other noninterest income on the consolidated statements of income.

(3) Associated valuation reserve was reported within mortgage and lending expenses on the consolidated statements of income.

The following is a summary of key data and assumptions used in the valuation of servicing rights as of December 31, 2023 and 2022. Increases or decreases in any one of these assumptions would result in lower or higher fair value measurements.

	December 31,			December 31,
(dollars in thousands)	2023			2022
Fair value of servicing rights	$	2,052		$	2,643
Weighted-average remaining term, years		18.8			20.5
Prepayment speeds		6.2	%		6.9	%
Discount rate		11.1	%		10.5	%