LOAN SERVICING ACTIVITIES

12 Months Ended

Dec. 31, 2021

LOAN SERVICING ACTIVITIES

LOAN SERVICING ACTIVITIES

6. LOAN SERVICING ACTIVITIES

The Bank services real estate and C&I loans for others having principal balances outstanding of approximately $471.9 million and $377.7 million at December 31, 2021 and 2020, respectively. Loans serviced for others are not reported as assets. Servicing loans for others generally consists of collecting loan payments, maintaining escrow accounts, disbursing payments to investors, paying taxes and insurance and processing foreclosure. In connection with loans serviced for others, the Bank held borrowers’ escrow balances of $2.9 million and $3.9 million at December 31, 2021 and 2020, respectively.

There are no restrictions on the Company’s consolidated assets or liabilities related to loans sold with servicing rights retained. Upon sale of these loans, the Company recorded an SRA in other assets, and has elected to account for the SRA under the "amortization method" prescribed under GAAP. The activity for SRAs for the periods indicated are as follows:

	Year Ended December 31,
(In thousands)	2021		2020		2019
Servicing right assets:
Beginning of year	$	1,710	$	1,459	$	1,315
Acquired in the Merger		2,070		—		—
Additions		885		703		509
Amortized to expense		(809)		(452)		(365)
End of year		3,856		1,710		1,459
Valuation allowance:
Beginning of year		—		—		—
Additions expensed		(80)		—		—
End of year		(80)		—		—
Servicing right assets, net	$	3,776	$	1,710	$	1,459

The fair value of SRAs was $3.9 million and $1.7 million, at December 31, 2021 and 2020, respectively. The fair value at December 31, 2021 was determined using discount rates ranging from 7.8% to 12.0%, prepayment speeds ranging from 5% to 38%, depending on the stratification of the specific servicing right, and a weighted average default rate of 1.24%. The fair value at December 31, 2020 was determined using discount rates ranging from 4.0% to 17.0%, prepayment speeds ranging from 5% to 20%, depending on the stratification of the specific servicing right, and a weighted average default rate of 1.30%.