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Loans Receivable and Allowance for Credit Losses
 9 Months Ended
Sep. 30, 2024
Credit Loss [Abstract]  
Loans Receivable and Allowance for Credit Losses Loans Receivable and Allowance for Credit Losses
As of September 30, 2024 and December 31, 2023, loans receivable, net, consisted of the following:
(In thousands)September 30, 2024December 31, 2023
Loan portfolio segment:
Commercial Real Estate$452,155 $472,093 
Residential Real Estate94,579 106,783 
Commercial and Industrial134,333 163,565 
Consumer and Other68,418 99,688 
Construction3,829 4,266 
Construction to Permanent - CRE2,357 2,464 
Loans receivable, gross755,671 848,859 
Allowance for credit losses(14,984)(15,925)
Loans receivable, net$740,687 $832,934 
Patriot's lending activities are conducted principally in Fairfield and New Haven Counties in Connecticut and Westchester County in New York, and the five Boroughs of New York City. Patriot originates commercial real estate loans, commercial business loans, a variety of consumer loans, and construction loans, and has purchased residential loans since 2016. All commercial and residential real estate loans are collateralized primarily by first or second mortgages on real estate. The ability and willingness of borrowers to satisfy their loan obligations is dependent to some degree on the status of the regional economy as well as upon the regional real estate market. Accordingly, the ultimate collectability of a substantial portion of the loan portfolio and the recovery of a substantial portion of any resulting real estate acquired is susceptible to changes in market conditions.
Patriot has established credit policies applicable to each type of lending activity in which it engages and evaluates the creditworthiness of each borrower. Unless extenuating circumstances exist, Patriot limits the extension of credit on commercial real estate loans to 75% of the market value of the underlying collateral. Patriot’s loan origination policy for multi-family residential real estate is limited to 80% of the market value of the underlying collateral. In the case of construction loans, the maximum loan-to-value is 75% of the “as completed” appraised value of the real estate project. Management monitors the appraised value of collateral on an on-going basis and additional collateral is requested when warranted. Real estate is the primary form of collateral, although other forms of collateral do exist and may include such assets as accounts receivable, inventory, marketable securities, time deposits, and other business assets.
Risk characteristics of the Company’s portfolio classes include the following:
Commercial Real Estate Loans
In underwriting commercial real estate ("CRE") loans, Patriot evaluates both the prospective borrower’s ability to make timely payments on the loan and the value of the property securing the loans. Repayment of such loans may be negatively impacted should the borrower default, the value of the property collateralizing the loan substantially decline, or there are declines in general economic conditions. Where the owner occupies the property, Patriot also evaluates the business’ ability to repay the loan on a timely basis and may require personal guarantees, lease assignments, and/or the guarantee of the operating company.
During the three and nine months ended September 30, 2024 and 2023, Patriot did not purchase any commercial real estate loans.
Residential Real Estate Loans
Patriot’s residential real estate loan portfolio consists primarily of purchased residential loans. The repayment of residential real estate loans, as well as the loans secured by residential real estate, may be negatively impacted if borrowers experience financial difficulties, if there is a significant decline in the value of the property securing the loan, or if there are declines in general economic conditions. During the three and nine months ended September 30, 2024, Patriot purchased $41,000 and $127,000 residential real estate loans, respectively. During the three and nine months ended 2023, Patriot did not purchase any residential real estate loans.
In 2024, the Bank reentered the residential mortgage business, began originating mortgage loans through its mortgage origination unit, Residential Mortgage Division, based in Jacksonville, Florida. These mortgage loans are typically sold to third parties. For further details, refer to Loans Held for Sale disclosures in footnote 5.
Commercial and Industrial Loans
Patriot’s commercial and industrial loan portfolio consists primarily of commercial business loans and lines of credit to businesses and professionals. These loans are generally for the financing of accounts receivable, purchases of inventory, purchases of new or used equipment, or for other short- or long-term working capital purposes. These loans are generally secured by business assets but are also occasionally offered on an unsecured basis. In granting these types of loans, Patriot considers the borrower’s cash flow as the primary source of repayment, supported by the value of collateral, if any, and personal guarantees, as applicable. Repayment of commercial and industrial loans may be negatively impacted by adverse changes in economic conditions, ineffective management, claims on the borrower’s assets by others that are superior to Patriot’s claims, a loss of demand for the borrower’s products or services, or the death or disability of the borrower or other key management personnel.
Patriot’s syndicated and leveraged loan portfolio totaled $5.7 million at both September 30, 2024 and December 31, 2023. The syndicated and leveraged loan is included in the commercial and industrial loan classification and is comprised of loan transaction led by a major financial institution, which is the Agent Bank or Lead Arranger, and is referred to as a syndicated loan or "Shared National Credit (SNC)". The SNC loan was determined to be complementary to the Bank’s existing commercial and industrial loan portfolio and product offerings. Further originations in this loan class are not expected.
Consumer and Other Loans
Patriot offers individual consumers various forms of credit including installment loans, credit cards, overdraft protection, auto loans and reserve lines of credit. Repayments of such loans are generally dependent on the personal income of the borrower, which may be negatively impacted by adverse changes in economic conditions. The Company does not place a high emphasis on originating these types of loans.
The Company has purchased unsecured consumer loans from a third party which are higher yielding loans of 2-5 year terms that are expected to incur an increased level of charge-offs. Loans outstanding under this program at September 30, 2024 and December 31, 2023 totaled $26.1 million and $48.5 million, respectively. No loans were purchased under this program for three and nine months ended September 30, 2024. For the three and nine months ended September 30, 2023, the Bank purchased $1.8 million and $15.4 million unsecured consumer loans, respectively.
The Company does not originate any lending programs commonly referred to as subprime lending. Subprime lending generally targets borrowers with weakened credit histories that are typically characterized by payment delinquencies, previous charge-offs, judgments against the consumer, a history of bankruptcies, or borrowers with questionable repayment capacity as evidenced by low credit scores or high debt-burdened ratios.
During the three and nine months ended September 30, 2024, Patriot did not purchase any home equity line of credit loans (“HELOC”). During the three and nine months ended September 30, 2023, the Bank purchased HELOC loans of $1.5 million and $4.4 million, respectively.
Construction Loans
Construction loans are of a short-term nature, generally of eighteen months or less, that are secured by land and improvements intended for commercial, residential, or mixed-use development. Loan proceeds may be used for the acquisition of or improvements to the land under development and funds are generally disbursed as phases of construction are completed.
Included in this category are loans to construct single family homes where no contract of sale exists, based upon the experience and financial strength of the builder, the type and location of the property, and other factors. Construction loans tend to be personally guaranteed by the principal(s). Repayment of such loans may be negatively impacted by an inability to complete construction, a downturn in the market for new construction, by a significant increase in interest rates, or by decline in general economic conditions. The construction loans outstanding at September 30, 2024 and December 31, 2023 totaled $3.8 million and $4.3 million, respectively.
Construction to Permanent - Commercial Real Estate
Construction to permanent loans represent a one-time close of a construction facility with simultaneous conversion to an amortizing mortgage loan. Construction to permanent loans combine a short-term period similar to a construction loan, generally with a variable rate, and a longer term commercial real estate loan typically 20-25 years, resetting every five years to the Federal Home Loan Bank (“FHLB”) rate.
Close of the permanent facility typically occurs when events dictate, such as receipt of a certificate of occupancy and property stabilization, which is defined as cash flow sufficient to support a pre-defined minimum debt coverage ratio and other conditions and covenants particular to the loan. Construction facilities are typically variable rate instruments that, upon conversion to an amortizing mortgage loan, reset to a fixed rate instrument that is the greater of the in-force variable rate plus a predetermined spread over a reference rate (e.g., prime) or a minimum interest rate.
Small Business Administration ("SBA") Loans
Patriot originates SBA 7(a) loans, on which the SBA has historically provided guarantees of 75% of the principal balance. However, during the pandemic in 2021, the SBA temporarily increased the guarantees to 90% and reverted to 75% on October 1, 2021. The guaranteed portion of the Company’s SBA loans is generally sold in the secondary market with the unguaranteed portion held in the portfolio as a loan held for investment. SBA loans are for the purpose of providing working capital, financing the purchase of equipment, inventory, or commercial real estate and for other business purposes. Loans are guaranteed by the businesses' major owners. SBA loans are made based primarily on the historical and projected cash flow of the business and secondarily on the underlying collateral provided. SBA loans held for investment are included in the commercial real estate loans and commercial and industrial loan classifications, which totaled $31.0 million and $30.0 million as of September 30, 2024 and December 31, 2023, respectively. During the nine months ended September 30, 2024, $5.5 million SBA loans previously classified as held for sale were transferred to held for investment. No held for sale SBA loans were transferred to held for investment during the nine months ended September 30, 2023.
Small Business Administration Paycheck Protection Program
Under the Paycheck Protection Program of the CARES Act, small business loans were authorized to pay payroll and group health costs, salaries and commissions, mortgage and rent payments, utilities, and interest on other debt. The loans are provided through participating financial institutions that process loan applications and service the loans. The Bank participated in the SBA’s Paycheck Protection Program in 2021. Paycheck Protection Program loans totaled $130,000 and $133,000 as of September 30, 2024 and December 31, 2023, respectively, which are included in the commercial and industrial loan classifications.
Allowance for Credit Losses
The Company adopted ASU 2016-13 on January 1, 2023, which introduced the current expected credit loss ("CECL") methodology for estimating all expected losses over the life of a financial asset. Under the CECL methodology, the allowance for credit losses ("ACL") is measured on a collective basis for pools of loans with similar risk characteristics. For loans that do not share similar risk characteristics with the collectively evaluated pools, evaluations are performed on an individual basis. For all loan segments collectively evaluated, losses are predicted over a period of time determined to be reasonable and supportable, and at the end of the reasonable and supportable forecast period losses are reverted to long-term historical averages. The estimated credit losses for all loan segments are adjusted for changes in qualitative factors not inherently considered in the quantitative analyses.
The Company estimates expected credit losses for pooled loans using a modeling method that incorporates probability of default ("PD") and loss given default ("LGD"). The PD model employs a quarterly risk-rating transition method to estimate the probability of default by simulating loan downgrades and assigning increasing default probabilities to each loan. This captures the likelihood that borrowers will be unable to repay their loans according to the original terms. The LGD calculation considers characteristics such as collateral value and vintage, underlying collateral characteristics (e.g., CRE vs. residential, owner-occupied vs. investment), a floor for the LGD calculation (minimum loss in event of default regardless of collateral protection), and other relevant underwriting characteristics. Also calculated is the exposure at default. The probability of default is multiplied by the loss given default and the exposure at default. This calculation is forecasted for every year remaining in the life of each loan, and the results are aggregated to determine the necessary level of ACL for the pooled loans. Forecasted exposure at default can be influenced by prepayments speeds, which management elected to discount in part to reflect the expectation of slower voluntary prepayments in the face of an increasing interest rate environment.
Commercial and industrial loans include risks associated with borrower’s cash flow, debt service coverage and management’s expertise. These loans are subject to the risk that the Company may have difficulty converting collateral to a liquid asset if necessary, as well as risks associated with degree of specialization, mobility and general collectability in a default situation. These commercial loans may be subject to many different types of risks, including fraud, bankruptcy, economic downturn, deteriorated or non-existent collateral, and changes in interest rates.
Real estate construction loans include risks associated with the borrower’s credit-worthiness, contractor’s qualifications, borrower and contractor performance, and the overall risk and complexity of the proposed project. Construction lending is also subject to risks associated with sub-market dynamics, including population, employment trends and household income. During times of economic stress, this type of loan has typically had a greater degree of risk than other loan types.
Real estate mortgage loans consist of loans secured by commercial and residential real estate. Commercial real estate lending is divided into Investment CRE and Owner-Occupied CRE. Investment CRE is dependent upon successful management, marketing and expense supervision necessary to maintain the property. Repayment of these loans may be adversely affected by conditions in the real estate market or the general economy. Owner-Occupied CRE is utilized by a business for the purpose of providing the space needs for that business and the running of its operations. Repayment is dependent on the cash flow and successful operations of the business. Repayment of these loans may be adversely affected by conditions in the specific owner’s industry. Also, commercial real estate loans typically involve relatively large loan balances to a single borrower. Residential real estate lending risks are generally less significant than those of other loans. Real estate lending risks include fluctuations in the value of real estate, bankruptcies, economic downturn and customer financial problems.
Consumer loans carry a moderate degree of risk compared to other loans. They are generally more risky than traditional residential real estate loans, and carry generally low relative balances across a diverse borrowing pool. Risk of default is assessed based on FICO scores, debt to income ratios, historical loss rates other common consumer loan metrics. For the pool of purchased unsecured consumer loans, the risk of default and necessary ACL is assessed on an individual loan basis using a customized model that heavily weights payment/delinquency status, FICO scores, and remaining loan life until maturity.
The Company maintains an ACL for credit losses on unfunded lending commitments and letters of credit to provide for the risk of loss inherent in these arrangements. The allowance is computed using a methodology similar to that used to determine the ACL for loans, modified to take into account the probability of a drawdown on the commitment. The ACL on unfunded loan commitments is classified as a liability account on the Consolidated Balance Sheets within other liabilities, while the corresponding provision for these credit losses is recorded as a component of provision for credit losses. The allowance for credit losses on unfunded commitments was $177,000 at September 30, 2024 and $271,000 at December 31, 2023, respectively.
The following tables summarize the activity in the allowance for credit losses, allocated to segments of the loan portfolio, for the three months ended September 30, 2024 and 2023:
(In thousands)Commercial
Real Estate 		Residential
Real Estate 		Commercial
and
Industrial 		Consumer
and
Other 		Construction Construction to
Permanent
- CRE 		Total
Three Months Ended September 30, 2024
Allowance for credit losses:
June 30, 2024$7,958 $678 $1,215 $5,133 $5 $— $14,989 
Charge-offs(124)— (122)(1,266)— — (1,512)
Recoveries— — 160 263 — — 423 
Provisions (credits)1,211 (70)(197)143 (3)— 1,084 (1)
September 30, 2024$9,045 $608 $1,056 $4,273 $2 $— $14,984 
Three Months Ended September 30, 2023
Allowance for credit losses:
June 30, 2023$10,039 $1,027 $1,673 $11,275 $33 $51 $24,098 
Charge-offs— (113)(423)(3,012)— — (3,548)
Recoveries— 3 9 306 — — 318 
Provisions (credits)3,321 171 149 1,127 (31)63 4,800 (2)
September 30, 2023$13,360 $1,088 $1,408 $9,696 $2 $114 $25,668 
(1) The provision on credit losses included in the above table for the three months ended September 30, 2024 does not include the credit on unfunded loan commitments of $58,000.
(2) The provision on credit losses included in the above table for the three months ended September 30, 2023 does not include the credit on unfunded loan commitments of $112,000.
The following tables summarize the activity in the allowance for credit losses, allocated to segments of the loan portfolio, for the nine months ended September 30, 2024 and 2023:
(In thousands)Commercial
Real Estate 		Residential Real Estate Commercial
and
Industrial 		Consumer
and
Other 		Construction Construction
to
Permanent
- CRE 		Unallocated Total
Nine Months Ended September 30, 2024       
Allowance for credit losses:       
December 31, 2023$6,089 $607 $1,269 $7,843 $4 $113 $— $15,925 
Charge-offs(282)(21)(936)(5,638)— — — (6,877)
Recoveries— — 238 828 — — — 1,066 
Provisions (credits)3,238 22 485 1,240 (2)(113)— 4,870 (3)
September 30, 2024$9,045 $608 $1,056 $4,273 $2 $— $— $14,984 
Nine Months Ended September 30, 2023
Allowance for credit losses:
December 31, 2022$6,966 $665 $1,403 $1,207 $24 $10 $35 $10,310 
Impact of ASC 326 Adoption1,626 189 219 10,977 (4)29 (35)13,001 
Charge-offs— (113)(429)(7,324)(150)— — (8,016)
Recoveries— 14 25 739 — — — 778 
Provisions (credits)4,768 333 190 4,097 132 75 — 9,595 (4)
September 30, 2023$13,360 $1,088 $1,408 $9,696 $2 $114 $— $25,668 
(3) The provision on credit losses for the nine months ended September 30, 2024 does not include the credit on unfunded loan commitments of $94,000.
(4) The provision on credit losses for the nine months ended September 30, 2023 does not include the credit on unfunded loan commitments of $1.4 million.
The following tables summarize, by loan portfolio segment, the amount of loans receivable evaluated individually and collectively for allowance for credit losses as of September 30, 2024:
(In thousands)Commercial
Real Estate 		Residential
Real Estate 		Commercial
and
Industrial 		Consumer
and
Other 		Construction Construction to
 Permanent
 - CRE 		Total
September 30, 2024
Allowance for credit losses:
Individually evaluated loans$7,010 $— $— $— $— $— $7,010 
Collectively evaluated loans2,035 608 1,056 4,273 2 — 7,974 
Total allowance for credit losses$9,045 $608 $1,056 $4,273 $2 $— $14,984 
Loans receivable, gross:
Individually evaluated loans$28,254 $— $4,378 $— $— $2,357 $34,989 
Collectively evaluated loans423,901 94,579 129,955 68,418 3,829 — 720,682 
Total loans receivable, gross$452,155 $94,579 $134,333 $68,418 $3,829 $2,357 $755,671 
The following tables summarize, by loan portfolio, the amount of loans receivable evaluated individually and collectively for allowance for credit losses as of December 31, 2023:
(In thousands)Commercial
Real Estate 		Residential
Real Estate 		Commercial
and
Industrial 		Consumer
and
Other 		Construction Construction to
Permanent
- CRE 		Total
December 31, 2023
Allowance for credit losses:
Individually evaluated loans$3,813 $— $392 $— $— $— $4,205 
Collectively evaluated loans2,276 607 877 7,843 4 113 11,720 
Total allowance for credit losses$6,089 $607 $1,269 $7,843 $4 $113 $15,925 
Loans receivable, gross:
Individually evaluated loans$12,775 $— $3,904 $— $454 $— $17,133 
Collectively evaluated loans459,318 106,783 159,661 99,688 3,812 2,464 831,726 
Total loans receivable, gross$472,093 $106,783 $163,565 $99,688 $4,266 $2,464 $848,859 
Patriot monitors the credit quality of its loans receivable on an ongoing basis. Credit quality is monitored by reviewing certain indicators, including cash flow from business operations, loan to value ratios, debt service coverage ratios, and credit scores.
Patriot employs a risk rating system as part of the risk assessment of its loan portfolio. At origination, credit officers are required to assign a risk rating to each loan in their portfolio, which is ratified or modified by the Loan Committee to which the loan is submitted for approval. If financial developments occur on a loan in the credit officer’s portfolio of responsibility, the risk rating is reviewed and adjusted, as applicable. In carrying out its oversight responsibilities, the Loan Committee can adjust a risk rating based on available information. In addition, the risk ratings on all commercial loans over $250,000 are reviewed by the Credit Department either annually or biannually, or every 4 years, depending upon the amount of the bank’s exposure and other credit metrics.
Additionally, Patriot retains an independent third-party loan review firm to perform a semi-annual analysis of the results of its risk rating process. The semi-annual review is based on a randomly selected sample of loans within established parameters (e.g., value, concentration), in order to assess and validate the risk ratings assigned to individual loans. Any changes to the assigned risk ratings, based on the semi-annual review, are required to be reported to the Audit Committee of the Board of Directors.
When assigning a risk rating to a loan, management utilizes the Bank’s internal eleven-point risk rating system. An asset is considered “special mention” when it has a potential weakness based on objective evidence, but does not currently expose the Company to sufficient risk to warrant classification in one of the following categories:
•Substandard: An asset is classified “substandard” if it is not adequately protected by the current net worth and paying capacity of the obligor or the collateral pledged, if any. Substandard assets have well defined weaknesses based on objective evidence, and are characterized by the distinct possibility that the Company will sustain some loss, if noted deficiencies are not corrected.
•Doubtful: Assets classified as “doubtful” have all of the weaknesses inherent in those classified as “substandard”, with the added characteristic that the identified weaknesses make collection or liquidation-in-full improbable, on the basis of currently existing facts, conditions, and values.
Charge-offs of loans to reduce the loan to its recoverable value that are solely collateral dependent, generally occur immediately upon confirmation of the partial loss amount. Loans that are cash flow dependent are modeled to reflect the expected cash flows through expected loan maturity, including any proceeds from refinancing or principal curtailment. A specific reserve is established for the amount by which the net investment in the loan exceeds the present value of discounted cash flows. Charge-offs on cash flow dependent loans also generally occur immediately upon confirmation of the partial loss amount. If either type of loan is classified as "Loss”, meaning full loss on the loan is expected, the full balance of the loan receivable is charged off, regardless of the potential recovery from a sale of the underlying collateral. Any amount that may be recovered on the sale of collateral underlying a loan is recognized as a “recovery” in the period in which the collateral is sold. In accordance with Federal Financial Institutions Examination Council published policies establishing uniform criteria for the classification of retail credit based on delinquency status, “Open-end” and “Closed-end” credits are charged off when 180 days and 90 days delinquent, respectively. Loans receivable that are part of the unsecured loan purchase program are charged-off in full when the loan is 90 days past due.
The allowance for credit losses may increase to reflect the decline in the performance of the loan portfolio and the higher level of incurred losses.
Loan Portfolio Vintage Analysis
The following tables summarize loan amortized cost by vintage, credit quality indicator, class of loans and charge-offs based on year of origination as of September 30, 2024:
Term of Loans by Origination
As of September 30, 2024:20242023202220212020PriorRevolvingTotal Loans
Receivable
Gross
Loan portfolio segment:
Commercial Real Estate:
Pass$— $106,912 $130,761 $89,463 $3,331 $74,427 $— $404,894 
Special mention— — 12,693 899 — 436 — 14,028 
Substandard— 867 3,974 17,252 233 10,907 — 33,233 
Total — 107,779 147,428 107,614 3,564 85,770 — 452,155 
Current period gross charge-offs— — — — — 282 — 282 
Residential Real Estate:
Pass373 — 1,227 2,831 9,633 77,192 741 91,997 
Special mention— — — — 1,053 1,398 — 2,451 
Substandard— — — — — 131 — 131 
Total 373 — 1,227 2,831 10,686 78,721 741 94,579 
Current period gross charge-offs— — — — — 21 — 21 
Commercial and Industrial:
Pass872 2,785 14,230 20,564 1,003 6,337 78,612 124,403 
Special mention— 5 19 40 — 887 750 1,701 
Substandard— 263 505 843 5,706 808 104 8,229 
Total 872 3,053 14,754 21,447 6,709 8,032 79,466 134,333 
Current period gross charge-offs— — — — — 936 — 936 
Consumer and Other:
Pass282 3,247 20,085 2,346 — 16,517 24,545 67,022 
Substandard— 59 459 19 — 424 435 1,396 
Total 282 3,306 20,544 2,365 — 16,941 24,980 68,418 
Current period gross charge-offs— 253 4,900 485 — — — 5,638 
Construction:
Pass— — — 3,829 — — — 3,829 
Total — — — 3,829 — — — 3,829 
Construction to Permanent - CRE:
Substandard— — — 2,357 — — — 2,357 
Total — — — 2,357 — — — 2,357 
Total loans$1,527 $114,138 $183,953 $140,443 $20,959 $189,464 $105,187 $755,671 
 Total Current period gross charge-offs$— $253 $4,900 $485 $— $1,239 $— $6,877 
Loans receivable, gross:
Pass$1,527 $112,944 $166,303 $119,033 $13,967 $174,473 $103,898 $692,145 
Special mention— 5 12,712 939 1,053 2,721 750 18,180 
Substandard— 1,189 4,938 20,471 5,939 12,270 539 45,346 
Total Loans receivable, gross$1,527 $114,138 $183,953 $140,443 $20,959 $189,464 $105,187 $755,671 
Current period gross charge-offs$— $253 $4,900 $485 $— $1,239 $— $6,877 
The following tables summarize loan amortized cost by vintage, credit quality indicator, class of loans and charge-offs based on year of origination as of December 31, 2023:
Term of Loans by Origination
As of December 31, 2023:20232022202120202019PriorRevolvingTotal Loans
Receivable
Gross
Loan portfolio segment:
Commercial Real Estate:
Pass$104,683 $138,091 $111,308 $3,401 $31,832 $63,526 $— $452,841 
Special mention— 6,482 — — — — — 6,482 
Substandard— 1,799 — 280 10,000 691 — 12,770 
Total104,683 146,372 111,308 3,681 41,832 64,217 — 472,093 
Current period gross charge-offs— — — — 6,341 5 — 6,346 
Residential Real Estate:
Pass— 1,251 2,975 11,577 15,770 74,596 614 106,783 
Total— 1,251 2,975 11,577 15,770 74,596 614 106,783 
Current period gross charge-offs— — — — — 515 — 515 
Commercial and Industrial:
Pass2,696 13,916 23,099 8,004 9,578 7,024 96,431 160,748 
Special mention6 348 — — 37 11 104 506 
Substandard16 — 801 — 401 1,093 — 2,311 
Total2,718 14,264 23,900 8,004 10,016 8,128 96,535 163,565 
Current period gross charge-offs— 182 85 — 516 144 — 927 
Consumer and Other:
Pass6,470 36,668 4,724 — 5,590 14,314 30,945 98,711 
Substandard197 645 61 — — — 74 977 
Total6,667 37,313 4,785 — 5,590 14,314 31,019 99,688 
Current period gross charge-offs114 9,013 1,280 — 6 66 — 10,479 
Construction:
Pass— — 3,812 — — — — 3,812 
Substandard— — — — 454 — — 454 
Total— — 3,812 — 454 — — 4,266 
Current period gross charge-offs— — 150 — — — — 150 
Construction to Permanent - CRE:
Special mention— — 2,464 — — — — 2,464 
Total— — 2,464 — — — — 2,464 
Total loans$114,068 $199,200 $149,244 $23,262 $73,662 $161,255 $128,168 $848,859 
 Total Current period gross charge-offs$114 $9,195 $1,515 $— $6,863 $730 $— $18,417 
Loans receivable, gross:
Pass$113,849 $189,926 $145,918 $22,982 $62,770 $159,460 $127,990 $822,895 
Special mention6 6,830 2,464 — 37 11 104 9,452 
Substandard213 2,444 862 280 10,855 1,784 74 16,512 
Loans receivable, gross$114,068 $199,200 $149,244 $23,262 $73,662 $161,255 $128,168 $848,859 
 Total Current period gross charge-offs$114 $9,195 $1,515 $— $6,863 $730 $— $18,417 
Loan Portfolio Aging Analysis
The following tables summarize performing and non-performing (i.e., non-accruing) loans receivable by portfolio segment, by aging category, by delinquency status as of September 30, 2024:
(In thousands)Performing (Accruing) Loans
As of September 30, 2024:30 - 59 Days Past Due 60 - 89 Days Past Due 90 Days or Greater Past Due Total Past Due Current Total Performing Loans Non- accruing Loans Loans Receivable Gross
Loan portfolio segment:
Commercial Real Estate:
Pass$185 $— $— $185 $401,524 $401,709 $3,185 $404,894 
Special mention770 — — 770 13,258 14,028 — 14,028 
Substandard306 — 3,979 4,285 3,878 8,163 25,070 33,233 
1,261 — 3,979 5,240 418,660 423,900 28,255 452,155 
Residential Real Estate:
Pass— — — — 91,997 91,997 — 91,997 
Special mention— — — — 2,451 2,451 — 2,451 
Substandard— — — — — — 131 131 
— — — — 94,448 94,448 131 94,579 
Commercial and Industrial:
Pass— 1,111 — 1,111 120,184 121,295 3,108 124,403 
Special mention19 — — 19 1,682 1,701 — 1,701 
Substandard604 350 — 954 5,986 6,940 1,289 8,229 
623 1,461 — 2,084 127,852 129,936 4,397 134,333 
Consumer and Other:
Pass810 508 — 1,318 65,704 67,022 — 67,022 
Substandard— — — — — — 1,396 1,396 
810 508 — 1,318 65,704 67,022 1,396 68,418 
Construction:
Pass— — — — 3,829 3,829 — 3,829 
— — — — 3,829 3,829 — 3,829 
Construction to Permanent - CRE:
Substandard— — — — — — 2,357 2,357 
— — — — — — 2,357 2,357 
Total$2,694 $1,969 $3,979 $8,642 $710,493 $719,135 $36,536 $755,671 
Loans receivable, gross:
Pass$995 $1,619 $— $2,614 $683,238 $685,852 $6,293 $692,145 
Special mention789 — — 789 17,391 18,180 — 18,180 
Substandard910 350 3,979 5,239 9,864 15,103 30,243 45,346 
Loans receivable, gross$2,694 $1,969 $3,979 $8,642 $710,493 $719,135 $36,536 $755,671 
As of September 30, 2024, the loan 90 days past due and still accruing of $4.0 million, represented a 50% participation in a matured CRE loan for which an extension has been agreed to in exchange for a principal reduction and cash collateral, both of which have been deposited with lead bank pending documentation.
The following tables summarize performing and non-performing loans (i.e., non-accruing) receivable by portfolio segment, by aging category, by delinquency status as of December 31, 2023:
(In thousands)Performing (Accruing) Loans
As of December 31, 2023:30 - 59 Days Past Due 60 - 89 Days Past Due 90 Days or Greater Past Due Total Past Due Current Total Performing Loans Non- accruing Loans Loans Receivable Gross
Loan portfolio segment:
Commercial Real Estate:
Pass$2,274 $231 $— $2,505 $448,707 $451,212 $1,629 $452,841 
Special mention— — — — 6,482 6,482 — 6,482 
Substandard— — — — 1,624 1,624 11,146 12,770 
2,274 231 — 2,505 456,813 459,318 12,775 472,093 
Residential Real Estate:
Pass1,439 — — 1,439 105,344 106,783 — 106,783 
1,439 — — 1,439 105,344 106,783 — 106,783 
Commercial and Industrial:
Pass420 10 — 430 157,335 157,765 2,983 160,748 
Special mention— 348 — 348 158 506 — 506 
Substandard526 — — 526 847 1,373 938 2,311 
946 358 — 1,304 158,340 159,644 3,921 163,565 
Consumer and Other:
Pass1,327 1,015 341 2,683 96,028 98,711 — 98,711 
Substandard— — — — — — 977 977 
1,327 1,015 341 2,683 96,028 98,711 977 99,688 
Construction:
Pass— — — — 3,812 3,812 — 3,812 
Substandard— — — — — — 454 454 
— — — — 3,812 3,812 454 4,266 
Construction to Permanent - CRE:
Special mention— — — — 2,464 2,464 — 2,464 
— — — — 2,464 2,464 — 2,464 
Total$5,986 $1,604 $341 $7,931 $822,801 $830,732 $18,127 $848,859 
Loans receivable, gross:
Pass$5,460 $1,256 $341 $7,057 $811,226 $818,283 $4,612 $822,895 
Special mention— 348 — 348 9,104 9,452 — 9,452 
Substandard526 — — 526 2,471 2,997 13,515 16,512 
Loans receivable, gross$5,986 $1,604 $341 $7,931 $822,801 $830,732 $18,127 $848,859 
The following tables summarize non-performing (i.e., non-accruing) loans by aging category and status, within the applicable loan portfolio segment as of September 30, 2024 and December 31, 2023:
(In thousands) Non-accruing Loans
 30 - 59
Days
Past Due 		60 - 89
Days
Past Due 		90 Days or
Greater Past
Due 		Total
Past Due 		Current Total
Non-accruing
Loans
As of September 30, 2024: 
Loan portfolio segment: 
Commercial Real Estate: 
Pass$— $— $3,185 $3,185 $— $3,185 
Substandard — — 16,055 16,055 9,015 25,070 
Residential Real Estate: 
Substandard — — 131 131 — 131 
Commercial and Industrial: 
Pass— — 2,660 2,660 448 3,108 
Substandard — 4 991 995 294 1,289 
Consumer and Other: 
Substandard — 1 1,395 1,396 — 1,396 
Construction to permanent - CRE:
Substandard— — 2,357 2,357 — 2,357 
Total non-accruing loans $— $5 $26,774 $26,779 $9,757 $36,536 
 
As of December 31, 2023: 
Loan portfolio segment: 
Commercial Real Estate: 
Pass$— $— $1,629 $1,629 $— $1,629 
Substandard — 770 439 1,209 9,937 11,146 
Commercial and Industrial: 
Pass— — 2,054 2,054 929 2,983 
Substandard — 371 535 906 32 938 
Consumer and Other: 
Substandard — 16 887 903 74 977 
Construction:
Substandard— — — — 454 454 
Total non-accruing loans $— $1,157 $5,544 $6,701 $11,426 $18,127 
The accrual of interest on loans is discontinued at the time the loan is 90 days past due for payment unless the loan is well-secured and in process of collection. Consumer loans are typically charged-off when they become 120 days past due (180 days for open ended consumer credit). Past due status is based on contractual terms of the loan. In all cases, loans are placed on non-accrual status or charged-off, at an earlier date, if collection of principal or interest is considered doubtful.
All interest accrued, but not collected for loans that are placed on non-accrual status or charged-off, is reversed against interest income. The interest on these loans is generally accounted for on the cash-basis method until qualifying for return to accrual status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current, future payments are reasonably assured, after at least six months of timely payment history. The Bank considers loans under $100,000 and consumer installment loans to be pools of smaller homogeneous loan balances, and therefore are collectively evaluated for credit losses, and not individually measured for credit losses.
If non-accrual loans had been performing in accordance with the original contractual terms, additional interest income (net of cash collected) of approximately $894,000 and $2.2 million would have been recognized during the three and nine months ended September 30, 2024, respectively. During the three and nine months ended September 30, 2023, additional interest income (net of cash collected) of approximately $328,000 and $605,000 would have been recognized, respectively.
Interest income collected and recognized on non-accruing loans for the three and nine months ended September 30, 2024 was $325,000 and $543,000, respectively. During the three and nine months ended September 30, 2023, interest income collected and recognized on non-accruing loans was $152,000 and $396,000, respectively.
Individually Evaluated Loans
The following table reflects information about the individually evaluated loans by class as of September 30, 2024 and December 31, 2023:
(In thousands)September 30, 2024December 31, 2023
Recorded
Investment 		Principal
Outstanding 		Related
Allowance 		Recorded Investment Principal Outstanding Related Allowance
With no related allowance recorded:
Commercial Real Estate$3,808 $4,498 $— $2,838 $5,879 $— 
Commercial and Industrial4,378 5,432 — 2,266 2,899 — 
Construction— — — 454 461 — 
Construction to permanent - CRE2,357 2,476 — — — — 
10,543 12,406 — 5,558 9,239 — 
With a related allowance recorded:
Commercial Real Estate24,446 25,367 7,010 9,937 10,137 3,813 
Commercial and Industrial— — — 1,638 3,159 392 
24,446 25,367 7,010 11,575 13,296 4,205 
Individually evaluated loans, Total:
Commercial Real Estate28,254 29,865 7,010 12,775 16,016 3,813 
Commercial and Industrial4,378 5,432 — 3,904 6,058 392 
Construction— — — 454 461 — 
Construction to permanent - CRE2,357 2,476 — — — — 
Total$34,989 $37,773 $7,010 $17,133 $22,535 $4,205 
The following table summarizes additional information regarding individually evaluated loans by class for the three and nine months ended September 30, 2024 and 2023:
Three Month Ended September 30,Nine Months Ended September 30,
(In thousands)2024202320242023
Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized
With no related allowance recorded:
Commercial Real Estate$3,923 $— $384 $— $3,922 $— $591 $— 
Residential Real Estate— — 183 — — — 694 — 
Commercial and Industrial4,479 125 3,246 97 3,720 236 2,639 212 
Consumer and Other— — — — — — 205 — 
Construction— — 362 — — — 840 — 
Construction to permanent - CRE2,357 — — — 2,411 — — — 
10,759 125 4,175 97 10,053 236 4,969 212 
With a related allowance recorded:
Commercial Real Estate24,627 59 10,405 — 25,018 274 13,833 15 
Residential Real Estate— — 1,352 — — — 1,514 — 
Commercial and Industrial— — 4,052 55 — — 3,821 169 
Consumer and Other— — 18 — — — 7 — 
24,627 59 15,827 55 25,018 274 19,175 184 
Individually evaluated loans, Total:
Commercial Real Estate28,550 59 10,789 — 28,940 274 14,424 15 
Residential Real Estate— — 1,535 — — — 2,208 — 
Commercial and Industrial4,479 125 7,298 152 3,720 236 6,460 381 
Consumer and Other— — 18 — — — 212 — 
Construction— — 362 — — — 840 — 
Construction to permanent - CRE2,357 — — — 2,411 — — — 
Total$35,386 $184 $20,002 $152 $35,071 $510 $24,144 $396 
Credit losses for loans that no longer share similar risk characteristics with the collectively evaluated pools are excluded from the collective evaluation and estimated on an individual basis (individually evaluated loans). Individual evaluations are performed for nonaccrual loans in excess of $100,000 as well as selected substandard loans. Specific allowances were estimated based on one of several methods, including the estimated fair value of the underlying collateral, observable market value of similar debt or the present value of expected cash flows.
For collateral dependent loans, appraisal reports of the underlying collateral have been obtained from independent licensed appraisal firms. For non-performing loans, the independently determined appraised values were first reduced by a 5.8% discount to reflect the Bank’s experience selling Other Real Estate Owned ("OREO") properties, and were further reduced by 8% in selling costs, in order to estimate the potential loss, if any, that may eventually be realized. Performing loans are monitored to determine when, if at all, additional credit loss reserves may be required for a loss of underlying collateral value. For cash flow dependent loans, the Bank determined the reserve based on the present value of expected future cash flows discounted at the loan's effective interest rate.
Loans not requiring specific reserves had fair values exceeding the total recorded investment, supporting the net investment in the loan which includes principal balance, unamortized fees and costs and accrued interest, if any. Once a borrower is in default, Patriot is under no obligation to advance additional funds on unused commitments.
Loan Modifications Made to Borrowers Experiencing Financial Difficulty
On a case-by-case basis, Patriot may agree to modify the contractual terms of a borrower’s loan to assist customers who may be experiencing financial difficulty. Substantially all loan modifications involve lowering the monthly payments on such loans through either a reduction in interest rate below market rate, an extension of the term of the loan, or a combination of adjusting these two contractual attributes. Loan modifications may also result in the forgiveness of principal or accrued interest. In addition, when modifying commercial loans, Patriot frequently obtains additional collateral or guarantor support. If the borrower has performed under the existing contractual terms of the loan and Patriot’s underwriters determine that the borrower has the capacity to continue to perform under the terms of the loan, the loan continues accruing interest. Non-accruing modified loans may be returned to accrual status when there has been a sustained period of performance (generally six consecutive months of payments) and both principal and interest are reasonably assured of collection.
During the three and nine months ended September 30, 2024 and 2023, the Company had no modified loans made to borrowers experiencing financial difficulty. There were no modified loans that had a payment default during the three and nine months ended September 30, 2024 and were modified in the twelve months prior to that default to borrowers experiencing financial difficulty. As of September 30, 2024 and December 31, 2023, there were no commitments to advance additional funds under the modified loans.