Quarterly report pursuant to Section 13 or 15(d)

Servicing Assets

v3.23.3
Servicing Assets
 9 Months Ended
Sep. 30, 2023
Transfers and Servicing [Abstract]  
Servicing Assets

Note 4 — Servicing Assets

The changes in servicing assets for the three and nine months ended September 30, 2023 and 2022, were as follows:

 

 

 

Three Months Ended September 30,

 

 

 

2023

 

 

2022

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

7,352

 

 

$

7,354

 

Addition related to sale of SBA loans

 

 

396

 

 

 

828

 

Amortization

 

 

(592

)

 

 

(758

)

Balance at end of period

 

$

7,156

 

 

$

7,424

 

 

 

 

Nine Months Ended September 30,

 

 

 

2023

 

 

2022

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

7,176

 

 

$

7,080

 

Addition related to sale of SBA loans

 

 

1,410

 

 

 

2,377

 

Amortization

 

 

(1,815

)

 

 

(2,033

)

Change in valuation allowance

 

 

385

 

 

 

—

 

Balance at end of period

 

$

7,156

 

 

$

7,424

 

 

At September 30, 2023 and December 31, 2022, we serviced loans sold to unaffiliated parties of $531.6 million and $523.6 million, respectively. These represented loans that were sold for which the Bank continues to provide servicing. These loans are maintained off-balance sheet and are not included in the loans receivable balance. All of the loans serviced were SBA loans.

The Company recorded servicing fee income of $1.3 million for the three months ended September 30, 2023 and 2022, and $3.9 million and $3.7 million for the nine months ended September 30, 2023 and 2022, respectively. Servicing fee income, net of the amortization of servicing assets, is included in other operating income in the consolidated statements of income. Amortization expense was $0.6 million and $0.8 million for the three months ended September 30, 2023 and 2022, respectively, and $1.8 million and $2.0 million for the nine months ended September 30, 2023 and 2022, respectively.

The fair value of servicing rights was $7.6 million at September 30, 2023 and was determined using discount rates ranging from 15.4% to 26.8% and prepayment speeds ranging from 11.9% to 18.8%, depending on the stratification of the specific right. The fair value of servicing rights was $7.1 million at December 31, 2022 and was determined using discount rates ranging from 21.9% to 25.3% and prepayment speeds ranging from 10.8% to 16.7%, depending on the stratification of the specific right.