Note 6 - Mortgage Servicing Rights

9 Months Ended

Sep. 30, 2019

Notes to Financial Statements

Transfers and Servicing of Financial Assets [Text Block]

NOTE

6

.

MORTGAGE SERVICING RIGHTS

The Company is servicing mortgage loans for the benefit of others totaling $

1,112,454,000

 and

$964,967,000

at

September 30, 2019

and

December 31, 2018

, respectively and are carried at lower of cost or market. 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 $

671,000

and $

575,000

for the

three

months ended

September 30, 2019

and

2018

, respectively. Mortgage loan servicing fees were $

1,918,000

and $

1,698,000

for the

nine

months ended

September 30, 2019

and

2018

, respectively. These fees, net of amortization, are included mortgage banking which is a component of noninterest income on the consolidated statement of income.

Custodial balances maintained in connection with the foregoing loan servicing, and included in noninterest checking deposits, were 

$11,971,000

 and 

$5,618,000

 at  September 30, 2019 and December 31, 2018, respectively.

The following tables are a summary of activity in mortgage servicing rights:

	As of or For the
	Three Months Ended
	September 30,
	2019			2018
	(In Thousands)
Mortgage servicing rights:
Beginning balance	$	7,666		$	6,716
Mortgage servicing rights capitalized		1,030			527
Amortization of mortgage servicing rights		(478	)		(296	)
Ending balance	$	8,218		$	6,947

	As of or For the
	Nine Months Ended
	September 30,
	2019			2018
	(In Thousands)
Mortgage servicing rights:
Beginning balance	$	7,100		$	6,578
Mortgage servicing rights capitalized		2,231			1,275
Amortization of mortgage servicing rights		(1,113	)		(906	)
Ending balance	$	8,218		$	6,947

The fair values of these rights were $

8,924,000

 and

$8,700,000

at

September 30, 2019

and

December 31, 2018

, respectively. The fair value of servicing rights was determined at loan level using a discount rate of

12.00

% for all investor types. Prepayment speeds ranged from 

110.00

% to

258.00

% PSA (Public Securities Association prepayment model) at

September 30, 2019

, depending on the interest rate and term of the specific loan. Prepayment speeds ranged from

83.00%

to

226.00%

PSA at

December 31, 2018

. The weighted average prepayment speed was

176.00

% PSA and

119.00%

PSA at

September 30, 2019

and

December 31, 2018

, respectively.