Note 8 - Loan Servicing

9 Months Ended

Sep. 30, 2024

Notes to Financial Statements

Transfers and Servicing of Financial Assets [Text Block]

NOTE 8 Loan Servicing

Loans serviced for others are not included in the accompanying consolidated balance sheets. The unpaid principal balances of loans serviced for others totaled $181.8 million and $190.0 million as of September 30, 2024 and December 31, 2023, respectively. Servicing loans for others generally consists of collecting mortgage payments, maintaining escrow accounts, disbursing payments to investors and collection and foreclosure processing. Loan servicing income is recorded on an accrual basis and includes servicing fees from investors and certain charges collected from borrowers, such as late payment fees, and is net of fair value adjustments to capitalized mortgage servicing rights.

The following table summarizes the Company’s activity related to servicing rights for the three and nine months ended September 30, 2024 and 2023:

	Three months ended						Nine Months Ended
	September 30,						September 30,
(dollars in thousands)	2024			2023			2024			2023
Servicing Assets:
Balance at beginning of period	$	1,963		$	2,351		$	2,052		$	2,643
Additions, net of valuation reserve (1)		225			210			358			236
Amortization (2)		(105	)		(140	)		(327	)		(458	)
Balance at end of period		2,083			2,421			2,083			2,421
Less valuation reserve (3)		(209	)		(207	)		(209	)		(207	)
Balance at end of period, net of valuation reserve	$	1,874		$	2,214		$	1,874		$	2,214
Fair value, beginning of period	$	2,082		$	2,351		$	2,062		$	2,643
Fair value, end of period	$	1,874		$	2,269		$	1,874		$	2,269

(1) Associated income was reported within mortgage banking income, net on the consolidated statements of income.

(2) Associated amortization expense was reported within other noninterest income on the consolidated statements of income.

(3) Associated valuation reserve was reported within mortgage and lending expenses on the consolidated statements of income.

The following is a summary of key data and assumptions used in the valuation of servicing rights as of September 30, 2024 and December 31, 2023. Increases or decreases in any one of these assumptions would result in lower or higher fair value measurements.

	September 30,			December 31,
(dollars in thousands)	2024			2023
Fair value of servicing rights	$	1,874		$	2,062
Weighted-average remaining term, years		19.1			18.8
Prepayment speeds		10.1	%		6.2	%
Discount rate		10.5	%		11.1	%