Fair Value and Interest Rate Risk (Tables)

6 Months Ended

Jun. 30, 2023

The following table provides a comparison of the carrying amounts and estimated fair values of Patriot’s financial assets and liabilities as of June 30, 2023 and December 31, 2022:


(In thousands)		June 30, 2023				December 31, 2022
	Fair Value Hierarchy	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial Assets:
Cash and noninterest bearing balances due from banks	Level 1	$	2,320	$	2,320	$	5,182	$	5,182
Interest-bearing deposits due from banks	Level 1	68,489		68,489		33,311		33,311
Available-for-sale securities	Level 2	80,665		80,665		75,093		75,093
Available-for-sale securities	Level 3	9,882		9,882		9,427		9,427
Other investments	Level 2	4,450		4,450		4,450		4,450
Federal Reserve Bank stock	Level 2	2,523		2,523		2,627		2,627
Federal Home Loan Bank stock	Level 2	8,072		8,072		3,874		3,874
Loans receivable, net	Level 3	906,636		893,639		838,006		818,960
Loans held for sale	Level 2	5,860		6,320		5,211		5,534
SBA servicing assets	Level 3	882		977		886		1,013

Accrued interest receivable	Level 2	7,628		7,628		7,267		7,267
Interest rate swap receivable	Level 2	244		244		203		203

Financial assets, total		$	1,097,651	$	1,085,209	$	985,537	$	966,941

Financial Liabilities:
Demand deposits	Level 2	$	127,817	$	127,817	$	269,636	$	269,636
Savings deposits	Level 2	50,981		50,981		71,002		71,002
Money market deposits	Level 2	298,717		298,717		211,000		211,000
Negotiable order of withdrawal accounts	Level 2	37,970		37,970		34,440		34,440
Time deposits	Level 2	238,768		235,475		225,670		221,353
Brokered deposits	Level 1	109,126		108,641		48,698		47,684
FHLB and other borrowings	Level 2	207,000		205,964		85,000		83,853
Senior notes	Level 2	11,653		11,127		11,640		11,103
Subordinated debt	Level 2	9,854		9,826		9,840		9,680
Junior subordinated debt owed to unconsolidated trust	Level 2	8,132		8,132		8,128		8,128
Note payable	Level 3	481		455		585		544
Accrued interest payable	Level 2	1,117		1,117		585		585
Interest rate swap liability	Level 2	244		244		203		203

Financial liabilities, total		$	1,101,860	$	1,096,466	$	976,427	$	969,211

Fair Value, Assets Measured on Recurring Basis

The following tables detail the financial assets measured at fair value on a recurring basis and the valuation techniques utilized relative to the fair value hierarchy, as of June 30, 2023 and December 31, 2022:


(In thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
June 30, 2023:
U. S. Government agency and mortgage-backed securities	$	—	$	67,248	$	—	$	67,248
Corporate bonds	—		3,373		9,882		13,255
Subordinated notes	—		4,236		—		4,236
SBA loan pools	—		5,326		—		5,326
Municipal bonds	—		482		—		482
Available-for-sale securities	$	—	$	80,665	$	9,882	$	90,547

Interest rate swap receivable	$	—	$	244	$	—	$	244

Interest rate swap liability	$	—	$	244	$	—	$	244

December 31, 2022:
U. S. Government agency and mortgage-backed securities	$	—	$	59,046	$	—	$	59,046
Corporate bonds	—		5,228		9,427		14,655
Subordinated notes	—		4,602		—		4,602
SBA loan pools	—		5,718		—		5,718
Municipal bonds	—		499		—		499
Available-for-sale securities	$	—	$	75,093	$	9,427	$	84,520

Interest rate swap receivable	$	—	$	203	$	—	$	203

Interest rate swap liability	$	—	$	203	$	—	$	203

Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation

The reconciliation of the beginning and ending balances during 2023 for Level 3 available-for-sale securities is as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2023		2022		2023		2022
Level 3 fair value, beginning of year	$	10,205	$	11,237	$	9,427	$	13,180
Purchases	—		—		—		—
Realized gain (loss)	—		—		—		—
Unrealized gain (loss)	(323)		(895)		455		(2,838)
Transfers in and /or out of Level 3	—		—		—		—
Level 3 fair value, end of year	$	9,882	$	10,342	$	9,882	$	10,342

Fair Value Measurement Inputs and Valuation Techniques

The table below presents the valuation methodology and unobservable inputs for level 3 assets measured at fair value on a non-recurring basis as of June 30, 2023 and December 31, 2022:


(In thousands)	Fair Value		Valuation Methodology	Unobservable Inputs	Range of Inputs
June 30, 2023:
Impaired loans, net	$	13,003	Real Estate Appraisals	Discount for appraisal type	5.8	%	-	20%

SBA servicing assets	977		Discounted Cash Flows	Market discount rates	14.73	%	-	14.90%

December 31, 2022:
Impaired loans, net	$	12,873	Real Estate Appraisals	Discount for appraisal type	5.8	%	-	20%

SBA servicing assets	1,013		Discounted Cash Flows	Market discount rates	14.73	%	-	14.90%