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Servicing
 3 Months Ended
Mar. 31, 2024
Transfers and Servicing [Abstract]  
Servicing

NOTE 6 SERVICING

Loans serviced for others are not included in the accompanying Company's consolidated balance sheets. The unpaid principal balances of 1-4 family real estate loans serviced for others were $363.6, $370.2 and $367.8 million at March 31, 2024 and 2023 and at December 31, 2023, respectively. Unpaid principal balances of agricultural real estate loans serviced for others were $133.8, $136.3 and $135.8 million at March 31, 2024, 2023 and at December 31, 2023, respectively.

The balance of capitalized servicing rights included in assets at March 31, 2024 and December 31, 2023 for 1-4 family real estate loans, was $3.4 million and $3.5 million, respectively. Agricultural real estate loan servicing rights, established in 2023, were $2.1 million and $2.2 million at March 31, 2024 and December 31, 2023, respectively. The capitalized addition of servicing rights is included in net gain on sale of loans on the Company's consolidated statement of income.

The fair value of the capitalized servicing rights for 1-4 family real estate loans as of March 31, 2024 and 2023 was $5.5 million and $5.8 million, respectively, and at December 31, 2023 was $5.5 million. Capitalized servicing rights for agricultural real estate loans had a fair value of $2.1 million and $1.5 million as of March 31, 2024 and 2023, respectively, and was $2.2 million at December 31, 2023. As the Company continues to refine and enhance its process for valuing agricultural real estate loan servicing rights, it may be necessary to adjust their value in future periods. 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 for 1-4 family real estate loans of 5.4% and 5.7% were utilized at March 31, 2024 and 2023, respectively, and 6.3% at December 31, 2023. At March 31, 2024, two 1-4 family real estate strata, which included 92 of the total 3,705 loans, were slightly below the carrying value using a discount yield of 6.22% which resulted in the need to establish a $2 thousand valuation allowance. The carrying value of eleven agricultural real estate strata, which included 38 of the total 588 loans, using an approximate discount rate of 9.17% were lower than market value requiring a $5 thousand valuation allowance to be established.

 

 

(In Thousands)

 

 

Three Months Ended

 

 

March 31, 2024

 

 

March 31, 2023

 

Beginning Balance

$

5,655

 

 

$

3,549

 

Capitalized Additions

 

75

 

 

 

1,595

 

Amortization

 

(168

)

 

 

(159

)

Ending Balance, March 31,

 

5,562

 

 

 

4,985

 

Valuation Allowance

 

(7

)

 

 

-

 

Servicing Rights net, March 31,

$

5,555

 

 

$

4,985