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Servicing
 12 Months Ended
Dec. 31, 2022
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 $375.6 and $380.8 million at December 31, 2022 and 2021, respectively.

The balance of capitalized servicing rights included in other assets at December 31, 2022 and 2021, was $3.5 and $3.6 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, 2022 and 2021 was $5.1 million and $3.2 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 7.7% and 21.7% were utilized for 2022 and 2021, respectively. All strata did show positive values in 2022 compared to the carrying value using a discount yield of 5.94%. In 2021, all strata did not show positive values compared to carrying value using a discount yield of 1.97% which resulted in the need to establish a $414 thousand valuation allowance.

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

 

 

 

(In Thousands)

 

 

 

2022

 

 

2021

 

Beginning of Year

 

$

3,571

 

 

$

3,320

 

Capitalized Additions

 

 

537

 

 

 

1,417

 

Amortization

 

 

(559

)

 

 

(1,166

)

Ending Balance, December 31

 

 

3,549

 

 

 

3,571

 

Valuation Allowance

 

 

-

 

 

 

(414

)

Mortgage Servicing Rights net, December 31

 

$

3,549

 

 

$

3,157