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Servicing
 12 Months Ended
Dec. 31, 2024
Transfers and Servicing [Abstract]  
Servicing

Note 7 - 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 $364.3 and $367.8 million at December 31, 2024 and 2023, respectively. Unpaid principal balances of agricultural real estate loans serviced for others were $141.9 million at December 31, 2024 and $135.8 million at December 31, 2023.

The balance of capitalized servicing rights at December 31, 2024 and 2023 for 1-4 family real estate loans, was $3.5 million each year. Agricultural real estate loan servicing rights, established in 2023, were $2.2 million at December 31, 2024 and 2023. The capitalized addition of servicing rights is included in loan servicing income 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 December 31, 2024 and 2023 was $4.8 million and $5.5 million, respectively. Capitalized servicing rights for agricultural real estate loans had a fair value of $2.7 million and $2.6 million as of December 31, 2024 and 2023. 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 6.1% and 6.3% were utilized for 2024 and 2023, respectively. In 2024, two 1-4 family real estate strata, which included 82 of the total 3,677 loans, were slightly below the carrying value using a discount yield of 5.98% which resulted in the need to establish a $2 thousand valuation allowance. The carrying value of 10 agricultural real estate strata, which included 33 of the total 619 loans, using an approximate discount rate of 8.62% were lower than fair value requiring a $95 thousand valuation allowance to be established.

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

 

 

 

(In Thousands)

 

 

 

2024

 

 

2023

 

Beginning of Year

 

$

5,655

 

 

$

3,549

 

Capitalized Additions

 

 

826

 

 

 

2,710

 

Amortization

 

 

(728

)

 

 

(604

)

Ending Balance, December 31

 

 

5,753

 

 

 

5,655

 

Valuation Allowance

 

 

(97

)

 

 

(7

)

Servicing Rights net, December 31

 

$

5,656

 

 

$

5,648