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Note 7 - Loan Servicing
 9 Months Ended
Sep. 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 $679.1 million and $728.5 million as of September 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 nine months ended September 30, 2025: 

 

   

Three months ended

    

Nine months ended

  
   

September 30,

    

September 30,

  

(dollars in thousands)

  

2025

    

2025

  

Balance at beginning of period

   $ 7,184     $ 7,918  

Additions from loans sold with servicing rights retained

     53       154  

Change in fair value

     (529 )     (1,364 )

Balance at end of period

   $ 6,708     $ 6,708  

 

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

 

   

Three months ended

    

Nine months ended

  
   

September 30,

    

September 30,

  

(dollars in thousands)

  

2024

    

2024

  

Servicing Assets:

                

Balance at beginning of period

   $ 1,963     $ 2,052  

Additions, net of valuation reserve (1)

     225       358  

Amortization (2)

     (105 )     (327 )

Balance at end of period

     2,083       2,083  

Less valuation reserve (3)

     (209 )     (209 )

Balance at end of period, net of valuation reserve

   $ 1,874     $ 1,874  

Fair value, beginning of period

   $ 2,082     $ 2,062  

Fair value, end of period

   $ 1,874     $ 1,874  

(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 September 30, 2025 and December 31, 2024. Increases or decreases in any one of these assumptions would result in lower or higher fair value measurements. 

   

September 30,

    

December 31,

  

(dollars in thousands)

  

2025

    

2024

  

Fair value of servicing rights

   $ 6,708     $ 7,918  

Weighted-average remaining term, years

     21.6       22.0  

Prepayment speeds

     13.4 %     9.9 %

Discount rate

     10.3 %     10.5 %