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Servicing
 12 Months Ended
Dec. 31, 2021
Transfers And Servicing [Abstract]  
Servicing

Note 6 - Servicing

Loans serviced for others are not included in the accompanying consolidated balance sheets.  The unpaid principal balances of loans serviced for others were $380.8 and $377.5 million at December 31, 2021 and 2020, respectively.

The balance of capitalized servicing rights included in other assets at December 31, 2021 and 2020, was $3.6 and $3.3 million, respectively.  The capitalized addition of servicing rights is included in net gain on sale of loans on the consolidated statement of income.  

The fair market value of the capitalized servicing rights as of December 31, 2021 and 2020 was $3.2 million and $3.5 million, respectively.  The valuations were completed by stratifying the loans into like groups based on loan type and term. Impairment was measured by estimating the fair value of each stratum, taking into consideration an estimated level of prepayment based upon current market conditions.  An average constant prepayment rate of 21.7% and 24.1% were utilized for 2021 and 2020, respectively.  All stratums did not show positive values in 2021 compared to carrying value using a discount yield of 1.97% which resulted in the need to establish a $414 thousand valuation allowance.  In 2020, all stratums showed positive values compared to carrying value using a discount yield of  2.38%.

The following summarizes mortgage servicing rights capitalized and amortized during each year:

 

 

 

(In Thousands)

 

 

 

2021

 

 

2020

 

Beginning of Year

 

$

3,320

 

 

$

2,629

 

Capitalized Additions

 

 

1,417

 

 

 

1,722

 

Amortization

 

 

(1,166

)

 

 

(1,031

)

Valuation Allowance

 

 

(414

)

 

 

-

 

End of Year

 

$

3,157

 

 

$

3,320