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Note 7 - Loan Servicing
 6 Months Ended
Jun. 30, 2025
Notes to Financial Statements  
Transfers and Servicing of Financial Assets [Text Block]

NOTE 7 Loan Servicing

 

Loans serviced for others are not included in the accompanying consolidated balance sheets. The unpaid principal balances of loans serviced for others totaled $701.0 million and $728.5 million as of June 30, 2025 and December 31, 2024, respectively. Servicing loans for others generally consists of collecting mortgage payments, maintaining escrow accounts, disbursing payments to investors and collection and foreclosure processing. Loan servicing income is recorded on an accrual basis and includes servicing fees from investors and certain charges collected from borrowers, such as late payment fees, and is net of fair value adjustments to capitalized mortgage servicing rights. As of and for the year ended December 31, 2024, the Company elected to subsequently measure mortgage servicing rights (“MSRs”) at fair value. The Company accounted for MSRs at the lower of amortized cost or fair value for all periods prior to December 31, 2024.

 

The following table presents the changes in fair value of the Company’s MSR portfolio for the three and six months ended June 30, 2025:

 

  

Three months ended

  

Six months ended

 
  

June 30,

  

June 30,

 

(dollars in thousands)

 

2025

  

2025

 

Balance at beginning of period

 $7,351  $7,918 

Additions from loans sold with servicing rights retained

  47   101 

Change in fair value

  (214)  (835)

Balance at end of period

 $7,184  $7,184 

 

The following table summarizes the Company’s activity related to servicing rights for the three and six months ended June 30, 2024:

 

  

Three months ended

  

Six months ended

 
  

June 30,

  

June 30,

 

(dollars in thousands)

 

2024

  

2024

 

Servicing Assets:

        

Balance at beginning of period

 $1,983  $2,052 

Additions, net of valuation reserve (1)

  320   341 

Amortization (2)

  (133)  (223)

Balance at end of period

  2,170   2,170 

Less valuation reserve (3)

  (207)  (207)

Balance at end of period, net of valuation reserve

 $1,963  $1,963 

Fair value, beginning of period

 $2,083  $2,062 

Fair value, end of period

 $2,082  $2,082 

(1)

Associated income was reported within mortgage banking income, net on the consolidated statements of income.

(2)

Associated amortization expense was reported within other noninterest income on the consolidated statements of income.

(3)

Associated valuation reserve was reported within mortgage and lending expenses on the consolidated statements of income.

 

The following is a summary of key data and assumptions used in the valuation of servicing rights as of June 30, 2025 and December 31, 2024. Increases or decreases in any one of these assumptions would result in lower or higher fair value measurements. 

  

June 30,

  

December 31,

 

(dollars in thousands)

 

2025

  

2024

 

Fair value of servicing rights

 $7,184  $7,918 

Weighted-average remaining term, years

  21.8   22.0 

Prepayment speeds

  12.2%  9.9%

Discount rate

  10.5%  10.5%