Note 5 - Mortgage Servicing Rights

6 Months Ended

Jun. 30, 2023

Notes to Financial Statements

Transfers and Servicing of Financial Assets [Text Block]

NOTE 5. MORTGAGE SERVICING RIGHTS

The Company is servicing mortgage loans for the benefit of others which are not included in the condensed consolidated statements of financial condition and have unpaid principal balances of $2,030,603,000 and $2,022,066,000 at  June 30, 2023 and December 31, 2022, respectively. Servicing loans for others generally consists of collecting mortgage payments, maintaining escrow accounts, disbursing payments to investors and foreclosure processing. Mortgage loan servicing fees were $1,269,000 and $1,199,000 for the three months ended June 30, 2023 and 2022, respectively. Mortgage loan servicing fees were $2,535,000 and $2,355,000 for the six months ended June 30, 2023 and 2022, respectively. These fees, net of amortization, are included in mortgage banking, net which is a component of noninterest income on the condensed consolidated statements of income.

Custodial balances maintained in connection with the foregoing loan servicing are included in noninterest checking deposits and were $12,742,000 and $11,912,000 at  June 30, 2023 and December 31, 2022, respectively.

The following table is a summary of activity in mortgage servicing rights:

	As of or For the
	Three Months Ended
	June 30,
	2023			2022
	(In Thousands)
Mortgage servicing rights:
Beginning balance	$	15,875		$	14,288
Mortgage servicing rights capitalized		112			1,030
Amortization of mortgage servicing rights		(486	)		(509	)
Ending balance	$	15,501		$	14,809

	As of or For the
	Six Months Ended
	June 30,
	2023			2022
	(In Thousands)
Mortgage servicing rights:
Beginning balance	$	15,412		$	13,749
Mortgage servicing rights capitalized		975			2,178
Amortization of mortgage servicing rights		(886	)		(1,118	)
Ending balance	$	15,501		$	14,809
Valuation allowance:
Beginning balance		-			(56	)
Recovery of mortgage servicing rights		-			56
Ending balance		-			-
Mortgage servicing rights, net	$	15,501		$	14,809

Recovery of servicing rights is included in other noninterest expense on the condensed consolidated statements of income.

The fair values of these rights were $20,199,000 and $19,288,000 at  June 30, 2023 and December 31, 2022, respectively. The fair value of servicing rights was determined at loan level, depending on the interest rate and term of the specific loan, using the following valuation assumptions:

	June 30,	December 31,
	2023	2022
Key assumptions:
Discount rate	12%	12%
Prepayment speed range	101-599%	116-210%
Weighted average prepayment speed	114%	131%