Loans Held for Sale

3 Months Ended

Mar. 31, 2025

SBA 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. As of March 31, 2025 and December 31, 2024, there were no SBA loans held for sale. During the three months ended March 31, 2025, no SBA loans previously classified as held for sale were transferred to held for investment. $5.5 million SBA held for sale loans were transferred to held for investment in the three months ended March 31, 2024.

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 a third party, amounted to approximately $42.1 million and $43.8 million at March 31, 2025 and December 31, 2024, respectively. As of March 31, 2025 and December 31, 2024, the servicing asset has a carrying value of $714,000 and $739,000, respectively, and fair value of $770,000 and $825,000, respectively. Income and fees collected for loan servicing are credited to noninterest income when earned, net of amortization on the related servicing assets. The servicing asset is included in other assets on the Consolidated Balance Sheets.

Loans held for sale - Digital Payments Loans

The Bank's Digital Payments Division has entered into a Program Management Agreement with a Buyer. Under the agreement, Patriot originates commercial credit card loans that are marketed by the buyer. As of March 31, 2025 and December 31, 2024, the Bank had credit card loans held for sale totaling $17.6 million and $11.4 million, respectively. The credit card loans are expected to be held for no longer than three days before being sold to the buyer. The credit card loans are fully cash-secured by deposits at Patriot. The credit card loans are sold to the buyer as a whole loan sale transaction, priced at par, thus there is no servicing asset or gain or loss on sale.

Loans held for sale Residential Mortgage Loans

In 2024, the Bank reentered the residential mortgage business. The Residential Mortgage Division, located in Jacksonville, FL, generates the loans and typically sells them to third parties. As of March 31, 2025 and December 31, 2024, the Company reported residential mortgage loans held for sale totaling $3.2 million and $4.3 million, respectively. These loans are recorded at the lower of aggregate cost or market value. For the three months ended March 31, 2025, a total gain on sale of $43,000 was recorded. A servicing asset of $50,000 was recognized for the three months ended March 31, 2025. No residential mortgage loans held for sale were originated and sold during the three months ended March 31, 2024. During the three months ended March 31, 2025, $1.1 million residential mortgage loans previously classified as held for sale were transferred to held for investment. No residential mortgage held for sale loans were transferred to held for investment in the three months ended March 31, 2024.

The following table presents an analysis of the activity in the servicing assets for SBA loans and residential mortgage loans for the three months ended March 31, 2025 and 2024:


	Three Month Ended March 31,
(In thousands)	2025		2024
Beginning balance	$	766	$	857
Servicing rights capitalized	26		64
Servicing rights amortized	(14)		(19)
Servicing rights disposed	(14)		—
Ending balance	$	764	$	902