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Note 5 - Mortgage Loan Servicing

12 Months Ended

Dec. 31, 2024

NOTE 5 – MORTGAGE LOAN SERVICING

Mortgage loans serviced for others are not reported as assets on the Consolidated Balance Sheets. The year-end aggregate unpaid principal balances of mortgage loans serviced for others were as follows:

(Dollars in thousands)	2024		2023

Mortgage loan portfolios serviced for:
Federal Home Loan Mortgage Corporation	$	1,364,485	$	1,341,602
Federal Home Loan Bank		176,540		62,786
Other		9,805		0
Total mortgage loans serviced for others	$	1,550,830	$	1,404,388

Custodial escrow balances, which are reported as deposits on the Consolidated Balance Sheets, maintained in connection with serviced loans were $10.9 million and $10.1 million as of December 31, 2024 and 2023, respectively.

Activity for capitalized mortgage loan servicing rights, which are reported as other assets on the Consolidated Balance Sheets, during 2024 and 2023 was as follows:

(Dollars in thousands)	2024			2023

Balance at beginning of year	$	11,343		$	11,837
Additions		4,465			2,259
Amortized to expense		(3,333	)		(2,753	)

Balance at end of year	$	12,475		$	11,343

Mortgage servicing rights result from our mortgage loan origination activities. Late and ancillary fees, included as part of mortgage banking income and reported as noninterest income in the Consolidated Statements of Income, aggregated less than $0.1 million during 2024 and 2023.

We determined that no valuation allowance was necessary as of December 31, 2024 or December 31, 2023. The estimated fair value of mortgage servicing rights was $21.0 million and $19.3 million as of December 31, 2024 and 2023, respectively. The fair value of mortgage servicing rights is estimated using a valuation model that calculates the present value of estimated future net servicing cash flows, taking into consideration expected mortgage loan prepayment rates, discount rates, servicing costs and other economic factors, which are determined based on current market conditions. As of December 31, 2024, fair value was determined using a discount rate of 10.50%, a weighted average constant prepayment rate of 7.81%, depending on the stratification of the specific right, and a weighted average delinquency rate of 0.68%. As of December 31, 2023, fair value was determined using a discount rate of 11.00%, a weighted average constant prepayment rate of 7.44%, depending on the stratification of the specific right, and a weighted average delinquency rate of 0.29%.

The weighted average amortization period was 8.7 years and 8.6 years as of December 31, 2024 and 2023, respectively.