Quarterly report pursuant to Section 13 or 15(d)

Servicing Assets

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Servicing Assets
 3 Months Ended
Mar. 31, 2024
Transfers and Servicing [Abstract]  
Servicing Assets

Note 4 — Servicing Assets

The changes in servicing assets for the three months ended March 31, 2024 and 2023 were as follows:

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

7,070

 

 

$

7,176

 

Addition related to sale of SBA loans

 

 

514

 

 

 

615

 

Amortization

 

 

(694

)

 

 

(635

)

Change in valuation allowance

 

 

—

 

 

 

385

 

Balance at end of period

 

$

6,890

 

 

$

7,541

 

 

At March 31, 2024 and December 31, 2023, we serviced loans sold to unaffiliated parties of $536.0 million and $539.6 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 each of the three months ended March 31, 2024 and 2023. 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 $0.7 million and $0.6 million for the three months ended March 31, 2024 and 2023, respectively.

The fair value of servicing rights was $8.3 million at March 31, 2024 and was determined using discount rates ranging from 11.1% to 22.2% and prepayment speeds ranging from 11.4% to 20.5%, depending on the stratification of the specific right. The fair value of servicing rights was $7.7 million at December 31, 2023 and was determined using discount rates ranging from 14.4% to 24.7% and prepayment speeds ranging from 12.2% to 19.7%, depending on the stratification of the specific right.