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Note 3 - Available-for-sale Securities

3 Months Ended

Mar. 31, 2022

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 March 31, 2022 and December 31, 2021 are as follows:

(In thousands)		Amortized Cost				Gross Unrealized Gains				Gross Unrealized (Losses)				Fair Value
March 31, 2022:
U. S. Government agency and mortgage-backed securities		$	65,864			$	-			$	(5,974	)		$	59,890
Corporate bonds			17,754				43				(3,065	)			14,732
Subordinated notes			3,108				9				(48	)			3,069
SBA loan pools			5,567				-				(512	)			5,055
Municipal bonds			562				-				(48	)			514
		$	92,855			$	52			$	(9,647	)		$	83,260

December 31, 2021:
U. S. Government agency and mortgage-backed securities		$	67,850			$	24			$	(1,245	)		$	66,629
Corporate bonds			17,754				118				(951	)			16,921
Subordinated notes			4,608				35				(17	)			4,626
SBA loan pools			5,772				-				(169	)			5,603
Municipal bonds			563				1				(2	)			562
		$	96,547			$	178			$	(2,384	)		$	94,341

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 March 31, 2022 and December 31, 2021:

(In thousands)		Less than 12 Months								12 Months or More								Total
		Fair Value				Unrealized (Loss)				Fair Value				Unrealized (Loss)				Fair Value				Unrealized (Loss)
March 31, 2022:
U. S. Government agency and mortgage-backed securities		$	52,958			$	(5,216	)		$	6,932			$	(758	)		$	59,890			$	(5,974	)
Corporate bonds			12,931				(3,065	)			-				-				12,931				(3,065	)
Subordinated notes			2,059				(48	)			-				-				2,059				(48	)
SBA loan pools			2,450				(246	)			2,605				(266	)			5,055				(512	)
Municipal bonds			515				(48	)			-				-				515				(48	)
		$	70,913			$	(8,623	)		$	9,537			$	(1,024	)		$	80,450			$	(9,647	)

December 31, 2021:
U. S. Government agency and mortgage-backed securities		$	60,606			$	(1,196	)		$	1,610			$	(49	)		$	62,216			$	(1,245	)
Corporate bonds			15,042				(951	)			-				-				15,042				(951	)
Subordinated notes			-				-				1,092				(17	)			1,092				(17	)
SBA loan pools			5,603				(169	)			-				-				5,603				(169	)
Municipal bonds			406				(2	)			-				-				406				(2	)
		$	81,657			$	(2,318	)		$	2,702			$	(66	)		$	84,359			$	(2,384	)

As of March 31, 2022 and December 31, 2021, thirty-seven of thirty-nine and thirty-two of thirty-nine available-for-sale securities had unrealized losses with an aggregate decline of 10.7% and 2.7% 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. Securities under the U.S. Small Business Administration (“SBA”) government guaranteed loan pools program 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 March 31, 2022.

As of March 31, 2022 and December 31, 2021, available-for-sale securities of $32.8 million and $36.6 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 March 31, 2022 and December 31, 2021. 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
March 31, 2022:
Corporate bonds		$	17,754			$	-			$	-			$	17,754			$	14,732			$	-			$	-			$	14,732
Subordinated notes			-				3,108				-				3,108				-				3,069				-				3,069
SBA loan pools			-				-				5,567				5,567				-				-				5,055				5,055
Municipal bonds			-				562				-				562				-				514				-				514
Available-for-sale securities with stated maturity dates			17,754				3,670				5,567				26,991				14,732				3,583				5,055				23,370
U. S. Government agency and mortgage-backed securities			9,986				-				55,878				65,864				9,024				-				50,866				59,890
		$	27,740			$	3,670			$	61,445			$	92,855			$	23,756			$	3,583			$	55,921			$	83,260

December 31, 2021:
Corporate bonds		$	17,754			$	-			$	-			$	17,754			$	16,921			$	-			$	-			$	16,921
Subordinated notes			-				4,608				-				4,608				-				4,626				-				4,626
SBA loan pools			-				-				5,772				5,772				-				-				5,603				5,603
Municipal bonds			-				563				-				563				-				562				-				562
Available-for-sale securities with stated maturity dates			17,754				5,171				5,772				28,697				16,921				5,188				5,603				27,712
U. S. Government agency and mortgage-backed securities			13,876				-				53,974				67,850				13,835				-				52,794				66,629
		$	31,630			$	5,171			$	59,746			$	96,547			$	30,756			$	5,188			$	58,397			$	94,341

During the three months ended March 31, 2022, the Bank purchased $1.0 million corporate bonds. During the three months ended March 31, 2021, the Bank purchased $10.9 million U.S. Government agency mortgage-backed securities and $3.0 million SBA government guaranteed loan pools securities. There was no sale of available-for-sale securities in the three months ended March 31, 2022 and 2021.