Mortgage Servicing Rights, net |
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Mortgage Servicing Rights, net | Note 7—Mortgage Servicing Rights, net The Company records servicing assets from the sale of residential real estate mortgage loans to the secondary market for which servicing has been retained. Residential real estate mortgage loans serviced for others are not included in the consolidated balance sheets. The principal balance of these loans at December 31, 2023 and 2022 are as follows:
Custodial escrow balances maintained with these serviced loans were $620 and $380 at December 31, 2023 and 2022, respectively. These balances are included in noninterest-bearing deposits in the consolidated balance sheets. Activity for mortgage servicing rights and the related valuation allowance are as follows:
Servicing income (loss), net of amortization of servicing rights and changes in the valuation allowance, was $308, $(20) and $(1,208) for the year ended December 31, 2023, 2022 and 2021, respectively. The fair value of mortgage servicing rights was $1,857 and $2,154 at December 31, 2023 and 2022, respectively. The fair value of mortgage servicing rights is highly sensitive to changes in underlying assumptions. Changes in prepayment speed assumptions have the most significant impact on the estimate of the fair value of mortgage servicing rights. The fair value at December 31, 2023 was determined using discount rates ranging from 10.0% to 12.5%, prepayment speeds with a weighted average of 9.8% (depending on the stratification of the specific right), a weighted average life of the mortgage servicing right of 77 months and a weighted average default rate of 0.2%. The fair value at December 31, 2022 was determined using discount rates ranging from 10.0% to 12.5%, prepayment speeds with a weighted average of 10.2% (depending on the stratification of the specific right), a weighted average life of the mortgage servicing right of 77 months and a weighted average default rate of 0.2%. Impairment is determined by stratifying the mortgage servicing rights into groupings based on predominant risk characteristics, such as interest rate, loan type and investor type. At December 31, 2023 and 2022, the carrying amount of certain individual groupings exceeded their fair value, resulting in write-downs to fair value. Refer to Note 16—Fair Value. |