Mortgage Servicing Rights |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Transfers and Servicing [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Mortgage Servicing Rights | Mortgage Servicing Rights FASB ASC Topic 860 "Transfers and Servicing", requires all separately recognized servicing assets and servicing liabilities to be initially measured at fair value, if practicable. The Company's servicing assets and servicing liabilities are reported using the amortization method and carried at the lower of amortized cost or fair value by strata. In evaluating the carrying values of mortgage servicing rights, the Company obtains third party valuations based on loan level data including note rate, type, and term of the underlying loans. The model utilizes several assumptions, the most significant of which is loan prepayments, calculated using a three-months moving average of weekly prepayment data published by the PSA and modeled against the serviced loan portfolio, and the discount rate to discount future cash flows. As of June 30, 2025, the prepayment assumption using the PSA model was 132, which translates into an anticipated prepayment rate of 6.34%. The discount rate is 9.75%. Other assumptions include delinquency rates, foreclosure rates, servicing cost inflation, and annual unit loan cost. All assumptions are adjusted periodically to reflect current circumstances. Amortization of mortgage servicing rights, as well as write-offs due to prepayments of the related mortgage loans, are recorded as a charge against mortgage servicing fee income. For the six months ended June 30, 2025 and 2024, servicing rights capitalized totaled $27,000 and $8,000, respectively. Servicing rights amortized for the six-month periods ended June 30, 2025 and 2024 were $144,000 and $164,000, respectively. The fair value of servicing rights was $2,903,000, $3,054,000, and $3,281,000 at June 30, 2025, December 31, 2024 and June 30, 2024, respectively. The Bank serviced loans for others totaling $287,718,000, $297,950,000, and $307,637,000 at June 30, 2025, December 31, 2024, and June 30, 2024, respectively. Mortgage servicing rights are included in other assets and detailed in the following table:
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