Note 6 - Servicing Rights on Sold Loans

12 Months Ended

Dec. 31, 2021

Notes to Financial Statements

Transfers and Servicing of Financial Assets [Text Block]

Note 6 - Servicing Rights on Sold Loans

Mortgage loans serviced for FHLB, Fannie Mae, and Freddie Mac are not included in the accompanying consolidated balance sheets. Selected commercial loan balances have also been sold in whole or in part to various participants, including the Main Street Lending Program, with servicing retained by First Fed and are not included in the accompanying consolidated balance sheets. The unpaid principal balances of serviced loans, primarily mortgage loans, were $454.4 million and $268.2 million at December 31, 2021 and 2020, respectively.

Loan servicing rights for the periods shown are as follows:

	For the Year Ended December 31,
	2021			2020
	(In thousands)
Balance at beginning of period	$	2,120		$	871
Additions		1,234			1,564
Amortization		(109	)		(278	)
Valuation allowance net recovery (impairment)		37			(37	)
Balance at end of period	$	3,282		$	2,120

The aggregate change in valuation allowance for loan servicing rights for the periods shown are as follows:

	For the Year Ended December 31,
	2021			2020
	(In thousands)
Balance at beginning of period	$	(37	)	$	—
Impairments		—			(37	)
Recoveries		37			—
Balance at end of period	$	—		$	(37	)

The key economic assumptions used in determining the fair value of loan servicing rights for the periods shown are as follows:

	For the Year Ended December 31,
	2021			2020
Constant prepayment rate		9.3	%		14.4	%
Weighted-average life (years)		5.4			4.8
Yield to maturity discount		10.3	%		8.4	%

The fair values of loan servicing rights are approximately $3.8 million and $2.2 million at December 31, 2021 and 2020, respectively.

The following represents servicing and late fees earned in connection with loan servicing rights and is included in the accompanying consolidated financial statements as a component of noninterest income for the periods shown:

	For the Year Ended December 31,
	2021		2020
	(In thousands)
Servicing fees	$	1,013	$	452
Late fees		9		12