Note 7 - Servicing Rights on Sold Loans

12 Months Ended

Dec. 31, 2025

Notes to Financial Statements

Transfers and Servicing of Financial Assets [Text Block]

Note 7 - 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 $301.6 million and $329.3 million at December 31, 2025 and 2024, respectively.

Loan servicing rights for the periods shown are as follows:

	For the Year Ended December 31,
(dollars in thousands)	2025			2024
Balance at beginning of period	$	3,281		$	3,793
Additions		13			38
Change in fair value		(280	)		(550	)
Balance at end of period	$	3,014		$	3,281

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,
	2025			2024
Constant prepayment rate		5.9	%		6.8	%
Weighted-average life (years)		6.3			6.4
Yield to maturity discount		11.0	%		11.8	%

The fair values of loan servicing rights were approximately $3.0 million and $3.3 million at December 31, 2025 and 2024, respectively. See Note 15 Fair Value Measurement for additional information.

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,
(dollars in thousands)	2025		2024
Servicing fees	$	705	$	736
Late fees		8		11

The following table represents the hypothetical effect on the fair value of the Company's loan servicing rights using unfavorable shock analyses of certain key valuation assumptions as of December 31, 2025 and 2024. This analysis is presented for hypothetical purposes only. As the amounts indicate, changes in fair value based on changes in assumptions generally cannot be extrapolated because the relationship of the change in assumptions to the change in fair value may not be linear.

	For the Year Ended December 31,
(dollars in thousands)	2025			2024
Servicing right fair value	$	3,014		$	3,281
Constant prepayment rate assumption (weighted-average)		5.9	%		6.8	%
Impact on fair value with a 10% adverse change in prepayment speed	$	(104	)	$	(129	)
Impact on fair value with a 20% adverse change in prepayment speed	$	(194	)	$	(176	)
Yield to maturity discount assumption (weighted-average)		11.0	%		11.8	%
Impact on fair value with a 10% adverse change in discount rate	$	(144	)	$	(184	)
Impact on fair value with a 20% adverse change in discount rate	$	(260	)	$	(312	)