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Note 3 - Available-for-sale Securities

9 Months Ended

Sep. 30, 2021

Notes to Financial Statements

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

Note 3.

Available-for-Sale Securities

The amortized cost, gross unrealized gains, gross unrealized losses and fair values of available-for-sale securities at September 30, 2021 and December 31, 2020 are as follows:

(In thousands)		Amortized Cost				Gross Unrealized Gains				Gross Unrealized (Losses)				Fair Value
September 30, 2021:
U. S. Government agency and mortgage-backed securities		$	89,557			$	154			$	(693	)		$	89,018
Corporate bonds			20,005				308				(91	)			20,222
Subordinated notes			4,608				67				(5	)			4,670
SBA loan pools			9,836				3				(205	)			9,634
Municipal bonds			562				1				(4	)			559
		$	124,568			$	533			$	(998	)		$	124,103

December 31, 2020:
U. S. Government agency and mortgage-backed securities		$	16,719			$	131			$	(17	)		$	16,833
Corporate bonds			18,014				260				(984	)			17,290
Subordinated notes			9,036				97				(128	)			9,005
SBA loan pools			5,627				-				(60	)			5,567
Municipal bonds			564				3				-				567
		$	49,960			$	491			$	(1,189	)		$	49,262

The following table presents the available-for-sale securities’ gross unrealized losses and fair value, aggregated by the length of time the individual securities have been in a continuous loss position as of September 30, 2021 and December 31, 2020:

(In thousands)		Less than 12 Months								12 Months or More								Total
		Fair Value				Unrealized (Loss)				Fair Value				Unrealized (Loss)				Fair Value				Unrealized (Loss)
September 30, 2021:
U. S. Government agency and mortgage-backed securities		$	49,299			$	(693	)		$	-			$	-			$	49,299			$	(693	)
Corporate bonds			1,903				(91	)			-				-				1,903				(91	)
Subordinated notes			-				-				1,103				(5	)			1,103				(5	)
SBA loan pools			5,815				(169	)			3,268				(36	)			9,083				(205	)
Municipal bonds			404				(4	)			-				-				404				(4	)
		$	57,421			$	(957	)		$	4,371			$	(41	)		$	61,792			$	(998	)

December 31, 2020:
U. S. Government agency and mortgage-backed securities		$	5,797			$	(14	)		$	1,476			$	(3	)		$	7,273			$	(17	)
Corporate bonds			-				-				13,015				(984	)			13,015				(984	)
Subordinated notes			1,878				(122	)			1,103				(6	)			2,981				(128	)
SBA loan pools			1,533				(12	)			4,034				(48	)			5,567				(60	)
		$	9,208			$	(148	)		$	19,628			$	(1,041	)		$	28,836			$	(1,189	)

At September 30, 2021 and December 31, 2020, 31 of 50 and 22 of 37 available-for-sale securities had unrealized losses with an aggregate decline of 1.6% and 4.0% from the amortized cost of those securities, respectively.

Based on its quarterly reviews, management believes that none of the losses on available-for-sale securities noted above constitute other-than-temporary impairment (“OTTI”). The noted losses are considered temporary due to market fluctuations in available interest rates on U.S. Government agency debt, mortgage-backed securities issued by U.S. Government agencies, subordinated notes, corporate debt, and municipal bonds. Management considers the issuers of the securities to be financially sound, the corporate bonds are investment grade, and the collectability of all contractual principal and interest payments is reasonably expected. SBA government guaranteed loan pools securities were purchased at a premium and the impairment was attributable primarily to increased prepayment speeds. The timely payment of principal and interest on these securities is guaranteed by the U.S. Government agency. The contractual terms of the subordinated notes do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments. Since Patriot is not more-likely-than-not to be required to sell the investments before recovery of the amortized cost basis and does not intend to sell the securities at a loss, none of the available-for-sale securities noted are considered to be OTTI as of September 30, 2021.

As of September 30, 2021 and December 31, 2020, available-for-sale securities of $60.9 million and $6.1 million, respectively, were pledged to the Federal Reserve Bank (“FRB”). The securities were pledged primarily to secure borrowings from the Federal Home Loan Bank and municipal deposits.

The following summarizes, by class and contractual maturity, the amortized cost and estimated fair value of available-for-sale debt securities held as of September 30, 2021 and December 31, 2020. The mortgages underlying the mortgage-backed securities are not due at a single maturity date. Additionally, these mortgages often are and generally may be pre-paid without penalty, creating a degree of uncertainty that such investments can be held until maturity. For convenience, mortgage-backed securities have been included in the summary as a separate line item.

(In thousands)		Amortized Cost																Fair Value
		Due Within 5 years				Due After 5 years through 10 years				Due After 10 years				Total				Due Within 5 years				Due After 5 years through 10 years				Due After 10 years				Total
September 30, 2021:
Corporate bonds		$	20,005			$	-			$	-			$	20,005			$	20,222			$	-			$	-			$	20,222
Subordinated notes			-				4,608				-				4,608				-				4,670				-				4,670
SBA loan pools			1,353				2,498				5,985				9,836				1,340				2,478				5,816				9,634
Municipal bonds			-				562				-				562				-				559				-				559
Available-for-sale securities with stated maturity dates			21,358				7,668				5,985				35,011				21,562				7,707				5,816				35,085
U. S. Government agency and mortgage-backed securities			18,789				287				70,481				89,557				18,707				289				70,022				89,018
		$	40,147			$	7,955			$	76,466			$	124,568			$	40,269			$	7,996			$	75,838			$	124,103

December 31, 2020:
Corporate bonds		$	4,014			$	14,000			$	-			$	18,014			$	4,274			$	13,016			$	-			$	17,290
Subordinated notes			2,000				7,036				-				9,036				2,003				7,002				-				9,005
SBA loan pools			1,921				3,706				-				5,627				1,899				3,668				-				5,567
Municipal bonds			-				564				-				564				-				567				-				567
Available-for-sale securities with stated maturity dates			7,935				25,306				-				33,241				8,176				24,253				-				32,429
U. S. Government agency and mortgage-backed securities			3,364				1,466				11,889				16,719				3,363				1,491				11,979				16,833
		$	11,299			$	26,772			$	11,889			$	49,960			$	11,539			$	25,744			$	11,979			$	49,262

During the nine months ended September 30, 2021, the Bank purchased $112.0 million U.S. Government agency debt and mortgage-backed securities, $18.2 million Corporate bonds, and $5.9 million SBA government guaranteed loan pools securities. In 2021, the Bank sold $32.4 million U.S. Government agency mortgage-backed securities, $16.3 million corporate bonds, $4.5 million subordinated notes, and $535,000 SBA loan pools securities, and recognized a net gain on sale of securities of $26,000 and $119,000 during the three and nine months ended September 30, 2021, respectively. During the nine months ended September 30, 2020, the Bank purchased $4.9 million U.S. Government agency mortgage-backed securities, $988,000 SBA government guaranteed loan pools securities and $565,000 municipal bonds. There was no sale of available-for-sale securities in the nine months ended September 30, 2020.