Loan Servicing Rights

12 Months Ended

Sep. 30, 2023

The Company services one- to four-family mortgage loans for Freddie Mac and also provides servicing for secondary market purchasers of the guaranteed portion of SBA loans; such loans are not included in the accompanying consolidated balance sheets. The principal amount of loans serviced for Freddie Mac at September 30, 2023, 2022 and 2021 was $384,619,000, $406,727,000 and $419,675,000, respectively. The guaranteed principal amount of SBA loans serviced for others at September 30, 2023, 2022 and 2021 was $1,882,000, $3,560,000 and $6,761,000, respectively.

The following is an analysis of the changes in Freddie Mac loan servicing rights for the years ended September 30, 2023, 2022 and 2021 (dollars in thousands):


	2023		2022		2021
Balance, beginning of year	$	3,020	$	3,438	$	2,980
Additions	113		578		1,388
Amortization	(1,009)		(1,115)		(1,022)
Valuation recovery	—		119		92
Balance, end of year	$	2,124	$	3,020	$	3,438

At September 30, 2023, 2022 and 2021, the estimated fair value of Freddie Mac servicing rights totaled $5,469,000, $5,547,000 and $3,656,000, respectively. The Freddie Mac servicing rights' fair values at September 30, 2023, 2022 and 2021 were estimated using discounted cash flow analyses with an average discount rates of 9.50%, 9.50% and 9.00%, and average conditional prepayment rates of 6.23%, 6.31% and 12.71%, respectively. At September 30, 2023 and 2022, there was no valuation allowance. At September 30, 2021, there was a valuation allowance of $92,000, respectively.

The following is an analysis of the changes in SBA loan servicing rights for the years ended September 30, 2023, 2022 and 2021 (dollars in thousands):


	2023		2022		2021
Balance, beginning of year	$	3	$	44	$	115

Amortization	(3)		(41)		(89)
Valuation recovery	—		—		18
Balance, end of year	$	—	$	3	$	44

At September 30, 2023 and 2022, SBA servicing rights were insignificant. At September 30, 2021, the estimated fair value of SBA servicing rights totaled $99,000. The SBA servicing rights' fair values at September 30, 2021 were estimated using discounted cash flow analyses with an average discount rate of 15.00% and average conditional prepayment rates of 17.85%. There was no valuation allowance on SBA servicing rights at September 30, 2023, 2022 and 2021.