Note 5 - Loans Held for Sale

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Loans Held for Sale [Text Block]

Note 5. Loans Held for Sale

Loans held for sale represent the guaranteed portion of SBA loans originated and are reflected at the lower of aggregate cost or market value. There were

$15.3

million of loans held for sale at

December 31, 2019,

consisting of

$10.2

 million commercial and industrial loans and

$5.1

million commercial real estate.

The Company generally sells the guaranteed portion of its SBA loans to a

third

party and retains the servicing, holding the unguaranteed portion in its portfolio. When sales of SBA loans do occur, the premium received on the sale and the present value of future cash flows of the servicing assets, less the discount of the retained portion of the loan are recognized in income.

Servicing assets represent the estimated fair value of retained servicing rights, net of servicing costs, at the time loans are sold. Servicing assets are amortized in proportion to, and over the period of, estimated net servicing revenues. Impairment will be evaluated based on stratifying the underlying financial assets by date of origination and term. Fair value is determined using prices for similar assets with similar characteristics, when available, or based upon discounted cash flows using market-based assumptions. Any impairment, if temporary, would be reported as a valuation allowance.

Serviced loans sold to others are

not

included in the accompanying Consolidated Balance Sheets. The total amount of such loans serviced, but owned by

third

party, amounted to approximately

$13.6

million and

$1.9

million at

December 31, 2019

and

2018,

respectively. The servicing asset has a carrying value of

$201,000

and fair value of

$280,000

at

December 31, 2019.

Income and fees collected for loan servicing are credited to noninterest income when earned, net of amortization on the related servicing assets.

The following table presents an analysis of the activity in the SBA servicing assets for the years ended

December 

31,

 

2019

and

2018:

(In thousands)	Year Ended December 31,
	2019			2018
Beginning balance	$	37			-
Servicing rights capitalized		180			42
Servicing rights amortized		(16	)		(5	)
Ending balance		201			37

No

servicing assets were recorded for the year ended

December 31, 2017.

The servicing assets are included in the other assets on the Consolidated Balance Sheet.