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Mortgage Servicing Rights
 3 Months Ended
Mar. 31, 2025
Goodwill and Intangible Assets Disclosure [Abstract]  
Mortgage Servicing Rights

11) Mortgage Servicing Rights

 

The Company initially records its MSRs at fair value as discussed in Note 8.

 

After being initially recorded at fair value, MSRs backed by mortgage loans are accounted for using the amortization method. Amortization expense is included in other expenses on the condensed consolidated statements of earnings. MSR amortization is determined by amortizing the MSR balance in proportion to, and over the period of, the estimated future net servicing income of the underlying financial assets.

 

The Company periodically assesses MSRs for impairment. Impairment occurs when the current fair value of the MSR falls below the asset’s carrying value (carrying value is the amortized cost reduced by any related valuation allowance). If MSRs are impaired, the impairment is recognized in current-period earnings and the carrying value of the MSRs is adjusted through a valuation allowance.

 

The Company periodically reviews the various loan strata to determine whether the value of the MSRs in each stratum is impaired and likely to recover. If the Company deems recovery of the value to be unlikely in the foreseeable future, a write-down of the cost of the MSRs for that stratum to its estimated recoverable value is charged to the valuation allowance.

 

The following table presents the MSR activity:

 

   As of March 31,
2025		   As of December 31,
2024		 
Amortized cost:          
Balance before valuation allowance at beginning of year  $2,939,878   $3,461,146 
MSR additions resulting from loan sales (1)   35,852    90,370 
Amortization (2)   (136,182)   (611,638)
Sale of MSRs   -    - 
Application of valuation allowance to write down MSRs with other than temporary impairment   -    - 
Balance before valuation allowance at end of period  $2,839,548   $2,939,878 
           
Valuation allowance for impairment of MSRs:          
Balance at beginning of year  $-   $- 
Additions   -    - 
Application of valuation allowance to write down MSRs with other than temporary impairment   -    - 
Balance at end of period  $-   $- 
           
Mortgage servicing rights, net  $2,839,548   $2,939,878 
           
Estimated fair value of MSRs at end of period  $4,288,738   $4,552,316 

 

 

(1)Included in mortgage fee income on the condensed consolidated statements of earnings
(2)Included in other expenses on the condensed consolidated statements of earnings

 

 

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2025 (Unaudited)

 

11) Mortgage Servicing Rights (Continued)

 

The table below summarizes the Company’s estimate of future amortization of its existing MSRs carried at amortized cost. This projection was developed using the Company’s assumptions in its March 31, 2025 valuation of MSRs. The assumptions used in the following table are likely to change as market conditions, portfolio composition and borrower behavior change, causing both actual and projected amortization levels to change over time.

 

   Estimated MSR Amortization 
2025   313,624 
2026   276,708 
2027   249,392 
2028   221,913 
2029   198,505 
Thereafter   1,579,406 
Total  $2,839,548 

 

The Company collected the following contractual servicing fee income and late fee income as reported in other revenues on the condensed consolidated statement of earnings.

 

   2025   2024 
   Three Months Ended March 31, 
   2025   2024 
Contractual servicing fees  $232,101   $256,662 
Late fees   19,617    23,208 
Total  $251,718   $279,870 

 

The following is a summary of the unpaid principal balances (“UPB”) of the servicing portfolio.

 

   As of March 31,
2025		   As of December 31, 2024 
Servicing UPB  $381,495,494   $385,134,774 

 

The following key assumptions were used in determining MSR value:

 

   Prepayment
Speeds		   Average
Life (Years)		   Discount
Rate		 
March 31, 2025   10.00    7.83    11.98 
December 31, 2024   8.79    8.28    12.14 

 

 

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2025 (Unaudited)