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Servicing
 9 Months Ended
Sep. 30, 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 $362.8, $366.0 and $364.3 million at September 30, 2025 and 2024 and at December 31, 2024, respectively. Unpaid principal balances of agricultural real estate loans serviced for others were $152.3, $140.3 and $141.9 million at September 30, 2025 and 2024 and at December 31, 2024, respectively.

The balance of capitalized servicing rights included in assets at September 30, 2025 and 2024 and at December 31, 2024 for 1-4 family real estate loans, was $3.6 million, $3.5 million and $3.5 million, respectively. Agricultural real estate loan servicing rights were $2.4, $2.2 and $2.2 million at September 30, 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 September 30, 2025 and 2024 was $4.7 million and $5.2 million, respectively, and at December 31, 2024 was $4.8 million. Capitalized servicing rights for agricultural real estate loans had a fair value of $2.0 million and $2.7 million as of September 30, 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 8.7% and 7.2% were utilized at September 30, 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 0.715% and 0.156% for fixed rate agricultural real estate loans at September 30, 2025 and 2024, respectively, compared to 0.184% at December 31, 2024. At September 30, 2025, two 1-4 family real estate strata, which included 73 of the total 3,620 loans, were slightly below the carrying value using a discount yield of 5.43% which resulted in the need to establish a $5 thousand valuation allowance. At September 30, 2025, the carrying value of all fourteen agricultural real estate strata, which included 652 loans, using an approximate discount rate of 8.16% were lower than the fair value requiring a $454 thousand valuation allowance to be established.

The following table presents the activity in the mortgage servicing rights for the three and nine months ended September 30, 2025 and 2024.

 

 

(In Thousands)

 

 

(In Thousands)

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

September 30, 2025

 

 

September 30, 2024

 

 

September 30, 2025

 

 

September 30, 2024

 

Beginning Balance

$

5,897

 

 

$

5,511

 

 

$

5,753

 

 

$

5,655

 

Capitalized Additions

 

313

 

 

 

359

 

 

 

828

 

 

 

570

 

Amortization

 

(214

)

 

 

(177

)

 

 

(585

)

 

 

(532

)

Ending Balance, September 30,

 

5,996

 

 

 

5,693

 

 

 

5,996

 

 

 

5,693

 

Valuation Allowance

 

(459

)

 

 

(49

)

 

 

(459

)

 

 

(49

)

Servicing Rights net, September 30,

$

5,537

 

 

$

5,644

 

 

$

5,537

 

 

$

5,644