TRANSFERS AND SERVICING OF FINANCIAL ASSETS |
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Transfers and Servicing [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
TRANSFERS AND SERVICING OF FINANCIAL ASSETS | TRANSFERS AND SERVICING OF FINANCIAL ASSETS The Company has originated loans that are serviced for others, including loans partially guaranteed by the SBA, some of which have been sold in the secondary market, as well as CRE loans and C&I loans participated with various other financial institutions and special purpose vehicle (“SPV”) participations for the Main Street loans. Loans sold and serviced for others are accounted for as sales and are therefore not included in the accompanying consolidated balance sheets. Loans serviced for others totaled $150.2 million and $58.8 million at September 30, 2024 and December 31, 2023, respectively. This includes SBA loans serviced for others of $36.3 million and $35.4 million at September 30, 2024, and December 31, 2023, for which there was a related servicing asset of $415 thousand and $546 thousand, respectively. Consideration for each SBA loan sale includes the cash received and a related servicing asset. The Company receives servicing fees ranging from 0.25% to 1.00% for the services provided over the life of the loan. The servicing asset is based on the estimated fair value of these future cash flows to be collected. The risks inherent in SBA servicing assets primarily relates to accelerated prepayment of loans in excess of what was originally modeled driven by changes in interest rates and a reduction in the estimated future cash flows. The servicing asset activity includes additions from loan sales with servicing retained, and reductions from amortization as the serviced loans are repaid and servicing fees are earned. The SBA servicing asset is reported in accrued interest receivable and other assets in the consolidated balance sheets. A summary of changes in the SBA servicing asset for the three and nine months ended September 30, 2024 and 2023 follows:
(1) Amortization included accelerated amortization of $84 thousand and $29 thousand for the three months ended September 30, 2024 and 2023, respectively, and $174 thousand and $32 thousand for the nine months ended September 30, 2024 and 2023, respectively. There were no SBA 7(a) loan sales during the three months ended September 30, 2024 and 2023. SBA 7(a) loans sold during the nine months ended September 30, 2024 totaled $6.3 million resulting in total gains on sale of SBA loans of $415 thousand. SBA 7(a) loans sold during the nine months ended September 30, 2023 totaled $10.9 million resulting in total gains on sale of SBA loans of $874 thousand. The fair value of the servicing asset approximated the carrying value at September 30, 2024 and December 31, 2023. The significant assumptions used in the valuation of the SBA servicing asset at September 30, 2024 and December 31, 2023 included:
The following table presents the components of net servicing fees, included in servicing and related income on loans, net in the consolidated statements of operations, for the three and nine months ended September 30, 2024 and 2023:
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