Quarterly report pursuant to Section 13 or 15(d)

SBA Servicing Asset

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SBA Servicing Asset
3 Months Ended
Mar. 31, 2021
Transfers And Servicing Of Financial Assets [Abstract]  
SBA Servicing Asset

NOTE 7. SBA SERVICING ASSET

SBA servicing assets are recognized separately when rights are acquired through the sale of the guaranteed portion of SBA loans. These servicing rights are initially measured at fair value at the date of sale and included in the gain on sale. Updated fair values are obtained from an independent third party on a quarterly basis and adjustments are presented in SBA loan servicing fees on the consolidated statements of income. To determine the fair value of SBA servicing rights, the Company uses market prices for comparable servicing contracts, when available, or alternatively, uses a valuation model that calculates the present value of estimated future net servicing income.

Loans serviced for others are not included in the accompanying balance sheets.  The unpaid principal balances of SBA loans serviced for others were $186.4 million and $193.3 million at March 31, 2021 and December 31, 2020, respectively. SBA loan servicing fees were $324 thousand and $10 thousand for the three months ended March 31, 2021 and 2020, respectively.   

The risks inherent in the SBA servicing asset relate primarily to changes in prepayments that result from shifts in interest rates.  The following summarizes the activity pertaining to SBA servicing rights, which are in the consolidated balance sheets, for the three months ended March 31, 2021 and 2020:

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

 

 

(Dollars in thousands)

 

Beginning balance

 

$

2,953

 

 

$

3,355

 

Origination of servicing assets

 

 

38

 

 

 

105

 

Change in fair value:

 

 

 

 

 

 

 

 

Due to run-off

 

 

(135

)

 

 

(140

)

Due to market changes

 

 

(35

)

 

 

(265

)

Ending balance

 

$

2,821

 

 

$

3,055