SBA Servicing Asset

3 Months Ended

Mar. 31, 2022

SBA Servicing Asset [Abstract]

SBA Servicing Asset

Note 6 – SBA Servicing Asset

The Company periodically sells portions of SBA loans and retains rights to service the loans. Loans serviced for others are not included in the accompanying balance sheet. The unpaid principal balances of SBA loans serviced for others was $256.3 million and $210.2 million at March 31, 2022 and December 31, 2021, respectively.

The following table summarizes SBA servicing asset activity for the periods indicated:

	For the Three Months Ended March 31,
($ in thousands)	2022			2021
Beginning balance	$	3,938		$	2,415
Additions to servicing asset		1,408			856
Recovery on SBA servicing asset		59			—
Amortization of servicing asset		(180	)		(197	)
Ending balance	$	5,225		$	3,074

The fair market value of the SBA servicing asset as of March 31, 2022 and December 31, 2021, was $5.23 million and $3.94 million, respectively. Fair value adjustments to servicing rights are mainly due to market-based assumptions associated with discounted cash flows, loan prepayment speeds, and changes in interest rates. A significant change in prepayments of the loans in the servicing portfolio could result in significant changes in the valuation adjustments, thus creating potential volatility in the carrying amount of servicing rights.

The Company assumed a weighted average prepayment rate of 14.25%, weighted average term of 4.26 years, and a weighted average discount rate of 9.70% at March 31, 2022.

The Company assumed a weighted average prepayment rate of 14.37%, weighted average term of 4.02 years, and a weighted average discount rate of 11.38% at December 31, 2021.