Mortgage Servicing Rights

3 Months Ended

Mar. 31, 2024

NOTE 5 – MORTGAGE SERVICING RIGHTS

Loans serviced for others are not included in the Company’s consolidated balance sheets. The unpaid principal balance of mortgage loans serviced for others was $277.4 million and $282.2 million as of March 31, 2024 and December 31, 2023, respectively.

A summary of activity in the Company’s mortgage servicing rights is presented below:


	Three Months Ended March 31, 2024			Three Months Ended March 31, 2023
	(in thousands)
Mortgage servicing rights beginning balance	$	1,720		$	1,860
Additions		8			9
Amortization		(38	)		(46	)
Mortgage servicing rights ending balance	$	1,690		$	1,823

Fair value at beginning of period	$	3,269		$	3,376
Fair value at end of period	$	3,240		$	3,488

There was no valuation allowance as of March 31, 2024 or December 31, 2023. The Company did not sell any mortgage servicing rights during the three months ended March 31, 2024 or March 31, 2023.

The estimated fair value of mortgage servicing rights was determined using a valuation model that calculates the present value of expected future servicing and ancillary income, net of expected servicing costs. The model incorporates various assumptions such as discount rates, prepayment speeds and ancillary income and servicing costs. As of March 31, 2024, the model used discount rates ranging from 10.1% to 13.0%, and prepayment speeds ranging from 6.9% to 39.5%, both of which were based on market data from independent organizations. As of March 31, 2023 the model used discount rates ranging from 10.1% to 13.0%, and prepayment speeds ranging from 7.0% to 38.8%.

The following table summarizes the estimated future amortization expense for mortgage servicing rights for the annual periods indicated. The projections of amortization expense are based on existing asset balances as of March 31, 2024. The actual amortization expense the Company recognizes in any given period may vary significantly depending on changes in interest rates, market conditions and regulatory requirements.


Estimated future amortization as of March 31, 2024:	(in thousands)
2024	$	150
2025		194
2026		174
2027		152
2028		130
Thereafter		890
Total	$	1,690

- Definition

The entire disclosure for a transferor's continuing involvement in financial assets that it has transferred in a securitization or asset-backed financing arrangement, the nature of any restrictions on assets reported by an entity in its statement of financial position that relate to a transferred financial asset (including the carrying amounts of such assets), how servicing assets and servicing liabilities are reported, and (for securitization or asset-backed financing arrangements accounted for as sales) when a transferor has continuing involvement with the transferred financial assets and transfers of financial assets accounted for as secured borrowings, how the transfer of financial assets affects an entity's financial position, financial performance, and cash flows.

+ References

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+ Details

1895 Bancorp of Wisconsin, Inc. /MD/ 10-Q