Note 5 - Mortgage Loan Servicing

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Mortgage Loan Servicing [Text Block]

NOTE 5 – MORTGAGE LOAN SERVICING

Mortgage loans serviced for others are not reported as assets in the Consolidated Balance Sheets. The year-end aggregate unpaid principal balances of mortgage loans serviced for others were as follows:

	2020		2019
Mortgage loan portfolios serviced for:
Federal Home Loan Mortgage Corporation	$	1,030,211,000	$	711,643,000
Federal Home Loan Bank		8,717,000		15,317,000
Total mortgage loans serviced for others	$	1,038,928,000	$	726,960,000

Custodial escrow balances, which are reported as deposits on the Consolidated Balance Sheets, maintained in connection with serviced loans were $11.8 million and $6.4 million as of December 31, 2020 and December 31, 2019, respectively.

Activity for capitalized mortgage loan servicing rights during 2020 and 2019 was as follows:

	2020			2019
Balance at beginning of year	$	4,652,000		$	4,436,000
Additions		6,467,000			1,962,000
Amortized to expense		(2,930,000	)		(1,746,000	)
Balance at end of year	$	8,189,000		$	4,652,000

We determined that no valuation allowance was necessary as of December 31, 2020 or December 31, 2019. The estimated fair value of mortgage servicing rights was $10.0 million and $7.4 million as of December 31, 2020 and December 31, 2019, respectively. The fair value of mortgage servicing rights is estimated using a valuation model that calculates the present value of estimated future net servicing cash flows, taking into consideration expected mortgage loan prepayment rates, discount rates, servicing costs and other economic factors, which are determined based on current market conditions. During 2020, fair value was determined using a discount rate of 7.75%, a weighted average constant prepayment rate of 14.0%, depending on the stratification of the specific right, and a weighted average delinquency rate of 0.40%. During 2019, fair value was determined using a discount rate of 10.0%, a weighted average constant prepayment rate of 15.3%, depending on the stratification of the specific right, and a weighted average delinquency rate of 0.32%.

The weighted average amortization period was 6.1 years and 5.3 years as of December 31, 2020 and December 31, 2019, respectively. Forecasted amortization as of December 31, 2020 is as follows:

2021	$	1,724,000
2022		1,476,000
2023		1,241,000
2024		1,026,000
2025		834,000
Thereafter		1,888,000