v3.26.1
Servicing Assets
 6 Months Ended
Jun. 30, 2026
Transfers and Servicing [Abstract]  
Servicing Assets Servicing Assets
The Corporation sells certain residential mortgage loans and the guaranteed portion of certain SBA loans to third parties and retains servicing rights and receives servicing fees. All such transfers are accounted for as sales. When the Corporation sells a residential mortgage loan, it does not retain any portion of that loan and its continuing involvement in such transfers is limited to certain servicing responsibilities. While the Corporation may retain a portion of certain sold SBA loans, its continuing involvement in the portion of the loan that was sold is limited to certain servicing responsibilities. When the contractual servicing fees on loans sold with servicing retained are expected to be more than adequate compensation to a servicer for performing the servicing, a capitalized servicing asset is recognized.
Residential Mortgage Loans
The related MSR asset is amortized over the period of the estimated future net servicing life of the underlying assets. MSRs are evaluated quarterly for impairment based upon the fair value of the rights as compared to their amortized cost. Impairment is recognized on the income statement to the extent the fair value is less than the capitalized amount of the MSR.
The Corporation serviced $10.8 million and $10.3 million of residential mortgage loans as of June 30, 2026 and December 31, 2025, respectively. During the three and six months ended June 30, 2026, the Corporation recognized servicing fee income of $9 thousand and $11 thousand, compared to $50 thousand and $124 thousand during the three and six months ended June 30, 2025.
Changes in the MSR balance are summarized as follows:
Three months ended
June 30,		Six months ended
June 30,
(dollars in thousands)2026202520262025
Balance at beginning of the period$84 $1,079 $86 $1,124 
Servicing rights capitalized11 8 14 8 
Amortization of servicing rights(4)(37)(9)(82)
Sale of servicing assets— (979)— (979)
Balance at end of the period$91 $71 $91 $71 

During the second quarter of 2025 the Corporation sold approximately $979 thousand of residential mortgage loan servicing rights associated with $110.2 million of serviced loans.
The Corporation uses assumptions and estimates in determining the fair value of MSRs. These assumptions include prepayment speeds and discount rates. The assumptions used in the valuation were based on input from buyers, brokers and other qualified personnel, as well as market knowledge. At June 30, 2026, the key assumptions used to determine the fair value of the Corporation’s MSRs included a lifetime constant prepayment rate equal to 9.55% and a discount rate equal to 9.50%. At December 31, 2025, the key assumptions used to determine the fair value of the Corporation’s MSRs included a lifetime constant prepayment rate equal to 9.60% and a discount rate equal to 9.50%. As interest rates increased and the number of mortgage refinancings have declined, model inputs have been adjusted to align the MSRs fair value with market conditions.
The sensitivity of the current fair value of the residential mortgage servicing rights to immediate 10% and 20% adverse changes in key economic assumptions are included in the following table.
(dollars in thousands)June 30,
2026		December 31, 2025
Fair value of residential mortgage servicing rights$127 $114 
Weighted average life (months)4543
Prepayment speed9.55 %9.60 %
Impact on fair value:
10% adverse change$(6)$(5)
20% adverse change(11)(10)
Discount rate9.50 %9.50 %
Impact on fair value:
10% adverse change$(5)$(4)
20% adverse change(10)(9)
The sensitivity calculations above are hypothetical and should not be considered to be predictive of future performance. As indicated, changes in fair value based on adverse changes in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, in this table, the effect of an adverse variation in a particular assumption on the fair value of the MSRs is calculated without changing any other assumption; while in reality, changes in one factor may result in changes in another (for example, increases in market interest rates may result in lower prepayments), which may magnify or counteract the effect of the change.
SBA Loans
SBA loan servicing assets are amortized over the period of the estimated future net servicing life of the underlying assets. SBA loan servicing assets are evaluated quarterly for impairment based upon the fair value of the rights as compared to their amortized cost. Impairment is recognized on the income statement to the extent the fair value is less than the capitalized amount of the SBA loan servicing asset. The Corporation serviced $297.1 million and $305.3 million of SBA loans, as of June 30, 2026 and December 31, 2025, respectively.
Changes in the SBA loan servicing asset balance are summarized as follows:
Three months ended
June 30,		Six months ended
June 30,
(dollars in thousands)2026202520262025
Balance at beginning of the period$3,610 $3,205 $3,846 $3,258 
Servicing rights capitalized234 657 360 885 
Amortization of servicing rights(304)(280)(650)(590)
Change in valuation allowance11 5 (5)34 
Balance at end of the period$3,551 $3,587 $3,551 $3,587 
Activity in the valuation allowance for SBA loan servicing assets was as follows:
Three months ended
June 30,		Six months ended
June 30,
(dollars in thousands)2026202520262025
Valuation allowance, beginning of period$(54)$(45)$(39)$(74)
Impairment— — (15)— 
Recovery11 5 11 34 
Valuation allowance, end of period$(43)$(40)$(43)$(40)
The Corporation uses assumptions and estimates in determining the fair value of SBA loan servicing rights. These assumptions include prepayment speeds, discount rates, and other assumptions. The assumptions used in the valuation were based on input from buyers, brokers and other qualified personnel, as well as market knowledge. At June 30, 2026, the key assumptions used to determine the fair value of the Corporation’s SBA loan servicing rights included a lifetime constant prepayment rate equal to 18.34% and a discount rate equal to 11.89%. At December 31, 2025, the key assumptions used to determine the fair value of the Corporation’s SBA loan servicing rights included a lifetime constant prepayment rate equal to 17.10% and a discount rate equal to 12.91%.
The sensitivity of the current fair value of the SBA loan servicing rights to immediate 10% and 20% adverse changes in key economic assumptions are included in the following table.
(dollars in thousands)June 30,
2026		December 31, 2025
Fair value of SBA loan servicing rights$4,355 $4,522 
Weighted average life (years)3.33.3
Prepayment speed18.34 %17.10 %
Impact on fair value:
10% adverse change$(215)$(207)
20% adverse change(412)(397)
Discount rate11.89 %12.91 %
Impact on fair value:
10% adverse change$(100)$(101)
20% adverse change(195)(197)
The sensitivity calculations above are hypothetical and should not be considered to be predictive of future performance. As indicated, changes in fair value based on adverse changes in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, in this table, the effect of an adverse variation in a particular assumption on the fair value of the SBA servicing rights is calculated without changing any other assumption; while in reality, changes in one factor may result in changes in another (for example, increases in market interest rates may result in lower prepayments), which may magnify or counteract the effect of the change.