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Mortgage Servicing Rights | 12 Months Ended
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Dec. 31, 2024
Transfers and Servicing of Financial Assets [Abstract] |
Mortgage Servicing Rights | Note 5. Mortgage Servicing Rights The Company’s portfolio of residential mortgage loans serviced for third parties was $2.5 billion and $2.6 billion as of December 31, 2024 and 2023, respectively. Substantially all of these loans were originated by the Company and sold to third parties on a non-recourse basis with servicing rights retained. These retained servicing rights are recorded as a servicing asset and are initially recorded at fair value (see Note 21 Fair Value of Assets and Liabilities for more information). Changes to the balance of mortgage servicing rights are recorded in noninterest income under Mortgage Banking in the Company’s consolidated statements of income. The Company’s mortgage servicing activities include collecting principal, interest, and escrow payments from borrowers; making tax and insurance payments on behalf of borrowers; monitoring delinquencies and executing foreclosure proceedings; and accounting for and remitting principal and interest payments to investors. Servicing income, including late and ancillary fees, was $5.5 million for the year ended December 31, 2024, $5.6 million for 2023 and $6.0 million for 2022. Servicing income is recorded in noninterest income under Mortgage Banking in the Company’s consolidated statements of income. The Company’s residential mortgage investor loan servicing portfolio is primarily comprised of fixed rate loans concentrated in Hawaiʻi. For the years ended December 31, 2024, 2023 and 2022, the change in the fair value of the Company’s mortgage servicing rights accounted for under the fair value measurement method was as follows:
(dollars in thousands) |  | 2024 |  |  | 2023 |  |  | 2022 |
Balance at Beginning of Year |  | $ | 678 |  |  | $ | 717 |  |  | $ | 800 |
Changes in Fair Value Due to Payoffs |  |  | (31 | ) |  |  | (39 | ) |  |  | (83 | )
Balance at End of Year |  | $ | 647 |  |  | $ | 678 |  |  | $ | 717 |
For the years ended December 31, 2024, 2023 and 2022, the change in the carrying value of the Company’s mortgage servicing rights accounted for under the amortization method was as follows:
(dollars in thousands) |  | 2024 |  |  | 2023 |  |  | 2022 |
Balance at Beginning of Year |  | $ | 20,201 |  |  | $ | 21,902 |  |  | $ | 21,451 |
Servicing Rights that Resulted From Asset Transfers |  |  | 466 |  |  |  | 528 |  |  |  | 1,217 |
Amortization |  |  | (2,115 | ) |  |  | (2,229 | ) |  |  | (2,595 | )
Valuation Allowance Recovery |  |  | — |  |  |  | — |  |  |  | 1,829 |
Balance at End of Year |  | $ | 18,552 |  |  | $ | 20,201 |  |  | $ | 21,902 |
Valuation Allowance: |  |  |  |  |  |  |  |  |
Balance at Beginning of Year |  | $ | — |  |  | $ | — |  |  | $ | (1,829 | )
Valuation Allowance Recovery |  |  | — |  |  |  | — |  |  |  | 1,829 |
Balance at End of Year |  | $ | — |  |  | $ | — |  |  | $ | — |
Fair Value: |  |  |  |  |  |  |  |  |
Balance at Beginning of Year |  | $ | 26,173 |  |  | $ | 27,323 |  |  | $ | 21,451 |
Balance at End of Year |  | $ | 24,989 |  |  | $ | 26,173 |  |  | $ | 27,323 |
The key data and assumptions used in estimating the fair value of the Company’s mortgage servicing rights as of December 31, 2024 and 2023 were as follows:
|  | December 31, |
|  | 2024 |  |  | 2023 |
Weighted-Average Constant Prepayment Rate 1 |  |  | 4.00 | % |  |  | 4.06 | %
Weighted-Average Life (in years) |  |  | 9.28 |  |  |  | 9.44 |
Weighted-Average Note Rate |  |  | 3.74 | % |  |  | 3.67 | %
Weighted-Average Discount Rate 2 |  |  | 9.92 | % |  |  | 9.48 | %
1. Represents annualized loan prepayment rate assumption. 2. Derived from multiple interest rate scenarios that incorporate a spread to a market yield curve and market volatilities. A sensitivity analysis of the Company’s fair value of mortgage servicing rights to changes in certain key assumptions as of December 31, 2024 and 2023 is presented in the following table.
|  | December 31, |
(dollars in thousands) |  | 2024 |  |  | 2023 |
Constant Prepayment Rate |  |  |  |  |  |
Decrease in fair value from 25 basis points (“bps”) adverse change |  | $ | (306 | ) |  | $ | (326 | )
Decrease in fair value from 50 bps adverse change |  |  | (606 | ) |  |  | (645 | )
Discount Rate |  |  |  |  |  |
Decrease in fair value from 25 bps adverse change |  |  | (282 | ) |  |  | (303 | )
Decrease in fair value from 50 bps adverse change |  |  | (558 | ) |  |  | (600 | )
This analysis generally cannot be extrapolated because the relationship of a change in one key assumption to the change in the fair value of the Company’s mortgage servicing rights usually is not linear. Also, the effect of changing one key assumption without changing other assumptions is not realistic.

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- Definition The entire disclosure for a transferor's continuing involvement in financial assets that it has transferred in a securitization or asset-backed financing arrangement, the nature of any restrictions on assets reported by an entity in its statement of financial position that relate to a transferred financial asset (including the carrying amounts of such assets), how servicing assets and servicing liabilities are reported, and (for securitization or asset-backed financing arrangements accounted for as sales) when a transferor has continuing involvement with the transferred financial assets and transfers of financial assets accounted for as secured borrowings, how the transfer of financial assets affects an entity's financial position, financial performance, and cash flows. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 946 -SubTopic 210 -Name Accounting Standards Codification -Section S99 -Paragraph 1 -Subparagraph (SX 210.6-04(11)) -Publisher 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