Servicing

12 Months Ended

Dec. 31, 2023

Transfers and Servicing [Abstract]

Servicing

Note 7 - Servicing

Loans serviced for others are not included in the accompanying Company's consolidated balance sheets. The unpaid principal balances of 1-4 family real estate loans serviced for others were $367.8 and $375.6 million at December 31, 2023 and 2022, respectively. Unpaid principal balances of agricultural real estate loans serviced for others were $135.8 million at December 31, 2023.

The balance of capitalized servicing rights included in other assets at December 31, 2023 and 2022 for 1-4 family real estate loans, was $3.5 million each year. Agricultural real estate loan servicing rights, established in 2023, were $2.2 million at December 31 2023. The capitalized addition of servicing rights is included in net gain on sale of loans on the Company's consolidated statement of income.

The fair value of the capitalized servicing rights for 1-4 family real estate loans as of December 31, 2023 and 2022 was $5.5 million and $5.1 million, respectively. Capitalized servicing rights for agricultural real estate loans had a fair value of $2.6 million as of December 31, 2023. The valuations were completed by stratifying the loans into like groups based on loan type and term. Impairment was measured by estimating the fair value of each stratum, taking into consideration an estimated level of prepayment based upon current market conditions. An average constant prepayment rate for 1-4 family real estate loans of 6.3% and 7.7% were utilized for 2023 and 2022, respectively. In 2023, two 1-4 family real estate strata, which included 103 of the total 3,749 loans, were slightly below the carrying value using a discount yield of 5.70% which resulted in the need to establish a $2 thousand valuation allowance. The carrying value of eleven agricultural real estate strata, which included 41 of the total 593 loans, using an approximate discount rate of 8.66% were lower than market value requiring a $5 thousand valuation allowance to be established. All strata did show positive values in 2022 compared to the carrying values using a discount yield of 5.94%.

The following summarizes servicing rights capitalized and amortized during each year:

	(In Thousands)
	2023			2022
Beginning of Year	$	3,549		$	3,571
Capitalized Additions		2,710			537
Amortization		(604	)		(559	)
Ending Balance, December 31		5,655			3,549
Valuation Allowance		(7	)		-
Servicing Rights net, December 31	$	5,648		$	3,549