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Loan Servicing

3 Months Ended

Mar. 31, 2024

NOTE 6 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 $185.7 million and $190.0 million as of March 31, 2024 and December 31, 2023, 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 three months ended March 31, 2024 and 2023:


	Three months ended
	March 31,
(dollars in thousands)	2024		2023
Servicing Assets:
Balance at beginning of year	$	2,052	$	2,643
Additions ⁽¹⁾		260		261
Amortization ⁽²⁾		(89)		(183)
Balance at end of year		2,223		2,721
Less valuation reserve ⁽³⁾		(240)		(300)
Balance at end of year, net of valuation reserve	$	1,983	$	2,421
Fair value, beginning of year	$	2,062	$	2,314
Fair value, end of year	$	2,083	$	2,236

(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 March 31, 2024 and December 31, 2023. Increases or decreases in any one of these assumptions would result in lower or higher fair value measurements.


	March 31,			December 31,
(dollars in thousands)	2024			2023
Fair value of servicing rights	$	2,083		$	2,062
Weighted-average remaining term, years		18.8			18.8
Prepayment speeds		6.2	%		6.2	%
Discount rate		11.1	%		11.1	%