Company: PNBK
Filing Date: 2025-11-14
Form Type: 10-Q
Source: 0001628280-25-052358
Chunk: 81

Company: PATRIOT NATIONAL BANCORP INC
Filing Date: 2025-11-14
Form: 10-Q
Item: Part I, Item 1
Chunk 81
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 on sale.

As of September 30, 2025 and December 31, 2024, the Company reported residential mortgage loans held for sale totaling $0 and $4.3 million, respectively. These loans are recorded at the lower of aggregate cost or market value. For the three and nine months ended September 30, 2025, a total gain on sale of $0 and $79,000 was recorded, respectively. A servicing asset of $72,000 was recognized as of September 30, 2025. In April 2025, the Company decided to close the Residential Mortgage Division.

58

Deferred Taxes

Patriot accounts for income taxes under the liability method of accounting for income taxes. Under the liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. The liability method requires that any tax benefits recognized for net operating loss carry forwards and other items be reduced by a valuation allowance when it is more likely than not that the benefits may not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under the liability method, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Deferred tax assets ("DTA") were zero both at September 30, 2025 and December 31, 2024 as Patriot recorded a full valuation allowance against all of the DTAs as of September 30, 2024. Patriot evaluates its ability to realize its deferred tax assets on a quarterly basis. In doing so, management considers all available evidence, both positive and negative, to determine whether it is more likely than not that the deferred tax assets will be realized. The Company will continue to evaluate its ability to realize its deferred tax assets. If future evidence suggests that it is more likely than not that additional deferred tax assets will be realized, the valuation allowance will be adjusted.

The Company is currently assessing the tax basis treatment of its loan servicing assets in consultation with its tax advisors. Preliminary analysis indicates that, under current tax regulations, no tax basis may be recognized for these assets, which could give rise to a deferred tax liability. The Company is evaluating whether a change in accounting method is required and expects to complete its assessment prior to year-end. Any resulting adjustment will be reflected in the period the