MORTGAGE SERVICING RIGHTS

12 Months Ended

Dec. 31, 2024

Mortgage servicing rights--Mortgage loans serviced for others are not included in the accompanying consolidated balance sheets. The unpaid balances of these loans as of December 31, 2024 and December 31, 2023, were $479,578 and $495,531, respectively, and consisted of one-to-four family residential real estate loans. These loans are serviced primarily for the Federal Home Loan Mortgage Corporation, Federal Home Loan Bank and the Federal National Mortgage Association. Custodial escrow balances maintained in connection with the foregoing loan servicing, and included in deposits were $2,430 and $2,665, at December 31, 2024 and December 31, 2023, respectively.

Mortgage servicing rights activity for the years ended December 31, 2024 and December 31, 2023, were as follows:


	As of and for the twelve months ended		As of and for the twelve months ended
	December 31, 2024		December 31, 2023
Mortgage servicing rights:
Mortgage servicing rights, beginning of period	$	3,865	$	4,262

Increase in mortgage servicing rights resulting from transfers of financial assets	332		218
Amortization during the period	(534)		(615)
Mortgage servicing rights, end of period	3,663		3,865
Valuation allowance, beginning of period	—		—
Additions	(41)		—
Recoveries	41		—

Valuation allowance, end of period	—		—
Mortgage servicing rights, net	$	3,663	$	3,865
Fair value of mortgage servicing rights, end of period	$	5,227	$	5,589
Residential mortgage loans serviced for others	$	479,578	$	495,531

The current period change in valuation allowance, if applicable, is included in non-interest expense as mortgage servicing rights expense, net on the consolidated statement of operations. Servicing fees totaled $1,236 and $1,292 for the years ended December 31, 2024 and December 31, 2023, respectively. Servicing fees are included in loan servicing income on the consolidated statement of operations. Late fees and ancillary fees related to loan servicing are not material.

To estimate the fair value of the MSR asset, a valuation model is applied at the loan level to calculate the present value of the expected future cash flows. The valuation model incorporates various assumptions that would impact market participants’ estimations of future servicing income. Central to the valuation model is the discount rate. Fair value at December 31, 2024, was determined using discount rates ranging from 10.000% to 13.000%. Fair value at December 31, 2023, was determined using discount rates ranging from 9.375% to 12.375%. Other assumptions utilized in the valuation model include, but are not limited to, prepayment speed, servicing costs, delinquencies, costs of advances, foreclosure costs, ancillary income, and income earned on float and escrow.

The estimated amortization expense is based on existing mortgage servicing asset balances. The timing of amortization expense actually recognized in future periods may differ significantly based on actual prepayment speeds, mortgage interest rates and other factors.

At December 31, 2024, the estimated future aggregate amortization expense for the mortgage servicing rights is as follows.


	Amortization Expense
2025	$	552
2026	476
2027	400
2028	340
2029	300
After 2029	1,595
Total	$	3,663