Note 9 - Loan Servicing

12 Months Ended

Dec. 31, 2024

Notes to Financial Statements

Transfers and Servicing of Financial Assets [Text Block]

NOTE 9 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 $728.5 million and $190.0 million at  December 31, 2024 and 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. As of and for the year ended December 31, 2024, the Company elected to subsequently measure MSRs at fair value. The Company accounted for MSRs at the lower of amortized cost or fair value as of and for the years ended December 31, 2023 and 2022.

The following table presents the changes in fair value of the Company’s MSR portfolio for the year ended December 31, 2024:

	Year ended
	December 31,
(dollars in thousands)	2024
Balance at beginning of period	$	2,052
Servicing assets acquired in business combination		5,445
Additions from loans sold with servicing rights retained		224
Change in fair value		197
Balance at end of period	$	7,918

The following table summarizes the Company’s activity related to servicing rights for the years ended December 31, 2023 and 2022:

(dollars in thousands)	2023			2022
Servicing Assets:
Balance at beginning of period	$	2,643		$	1,880
Additions, net of valuation reserve (1)		300			1,538
Amortization (2)		(595	)		(524	)
Balance at end of period		2,348			2,894
Less valuation reserve (3)		(296	)		(251	)
Balance at end of period, net of valuation reserve	$	2,052		$	2,643
Fair value, beginning of period	$	2,314		$	1,892
Fair value, end of period	$	2,062		$	2,314

⁽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 December 31, 2024 and 2023. Increases or decreases in any one of these assumptions would result in lower or higher fair value measurements.

	December 31,			December 31,
(dollars in thousands)	2024			2023
Fair value of servicing rights	$	7,918		$	2,062
Weighted-average remaining term, years	22.0				18.8
Prepayment speeds		9.9	%		6.2	%
Discount rate		10.5	%		11.1	%