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Servicing
 3 Months Ended
Mar. 31, 2025
Transfers and Servicing [Abstract]  
Servicing

NOTE 5 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 $362.6, $363.6 and $364.3 million at March 31, 2025 and 2024 and at December 31, 2024, respectively. Unpaid principal balances of agricultural real estate loans serviced for others were $145.3, $132.9 and $141.9 million at March 31, 2025 and 2024 and at December 31, 2024, respectively.

The balance of capitalized servicing rights included in assets at March 31, 2025 and 2024 and at December 31, 2024 for 1-4 family real estate loans, was $3.5, $3.4 and $3.5 million, respectively. Agricultural real estate loan servicing rights, established in 2023, were $2.3, $2.1 and $2.2 million at March 31, 2025 and 2024 and at December 31, 2024, respectively. 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 March 31, 2025 and 2024 was $5.0 million and $5.5 million, respectively, and at December 31, 2024 was $4.8 million. Capitalized servicing rights for agricultural real estate loans had a fair value of $2.6 million and $2.1 million as of March 31, 2025 and 2024, respectively, and was $2.7 million at December 31, 2024. 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 7.8% and 5.4% were utilized at March 31, 2025 and 2024, respectively, and 8.1% at December 31, 2024. Agricultural real estate loans utilize an average constant prepayment rate based on the Bank's last twelve months of data. The average constant prepayment rate was 0.259% and 0.596% for fixed rate agricultural real estate loans at March 31, 2025 and 2024, respectively, compared to 0.184% at December 31, 2024. At March 31, 2025, two 1-4 family real estate strata, which included 80 of the total 3,656 loans, were slightly below the carrying value using a discount yield of 5.77% which resulted in the need to establish a $2 thousand valuation allowance. At March 31, 2025, the carrying value of eleven agricultural real estate strata, which included 34 of the total 636 loans, using an approximate discount rate of 8.54% were lower than fair value requiring a $46 thousand valuation allowance to be established.

 

 

(In Thousands)

 

 

Three Months Ended

 

 

March 31, 2025

 

 

March 31, 2024

 

Beginning Balance

$

5,753

 

 

$

5,655

 

Capitalized Additions

 

276

 

 

 

75

 

Amortization

 

(176

)

 

 

(168

)

Ending Balance, March 31,

 

5,853

 

 

 

5,562

 

Valuation Allowance

 

(48

)

 

 

(7

)

Servicing Rights net, March 31,

$

5,805

 

 

$

5,555