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Note 5 - Loans Held for Sale | 12 Months Ended
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Dec. 31, 2021
Notes to Financial Statements |
Loans Held for Sale [Text Block] |
Note 5. | Loans Held for Sale
SBA 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 $3.1 million of SBA loans held for sale at December 31, 2021, consisting of $2.6 million SBA commercial and industrial loans and $562,000 SBA commercial real estate loans. As of December 31, 2020, SBA loans held for sale consisted of $1.2 million of SBA commercial and industrial loans. During 2021 and 2020, $281,000 and $9.5 million SBA loans previously classified as held for sale were transferred to held for investment, respectively. In September 2020, one commercial and industrial loan of $5.0 million was reclassed from loans held for investment to loans held for sale. The loan was sold in October 2020 which resulted in proceeds of $5.0 million. No held of investment loan was reclassed to held of sale during 2021. 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 $29.6 million and $19.4 million at December 31, 2021 and 2020, respectively. As of December 31, 2021 and 2020, the servicing asset has a carrying value of $584,000 and $316,000, respectively, and fair value of $617,000 and $375,000, respectively. 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, 2021, 2020 and 2019:
(In thousands) |  | Year Ended December 31, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
Beginning balance |  | $ | 316 |  |  | $ | 201 |  |  | $ | 37 |
Servicing rights capitalized |  |  | 335 |  |  |  | 137 |  |  |  | 180 |
Servicing rights amortized |  |  | (22 | ) |  |  | (22 | ) |  |  | (16 | )
Servicing rights disposed |  |  | (45 | ) |  |  | - |  |  |  | - |
Ending balance |  | $ | 584 |  |  | $ | 316 |  |  | $ | 201 |
The servicing assets are included in the other assets on the consolidated balance sheet.

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