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Note 8 - Borrowings | 12 Months Ended
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Dec. 31, 2016
Notes to Financial Statements |
Debt Disclosure [Text Block] |
Note 8. | Borrowings
Federal Home Loan Bank borrowings Borrowings from the FHLB are limited to a percentage of the value of qualified collateral, as defined on the FHLB Statement of Products Policy. Qualified collateral, as defined, primarily consists of mortgage-backed securities and loans receivable that are required to be free and clear of liens and encumbrances, and may not be pledged for any other purposes. As of December 31, 2016, the Bank had $14.2 million of available borrowing capacity from the FHLB. FHLB advances are typically obtained at discounted rates during “loan sale” periods and are structured to facilitate the Bank’s management of its balance sheet and liquidity requirements. At December 31, 2016 and 2015, outstanding advances from the FHLB aggregated $123.0 million and $132.0 million, respectively. The advances outstanding at December 31, 2016 bore fixed rates of interest ranging from 0.276% to 0.800% with maturities ranging from 3 days to 4.1 years. At December 31, 2016, collateral for FHLB borrowings consisted of a mixture of real estate loans and securities with book value of $221.0 million. In addition, Patriot has a $2.0 million revolving line of credit with the FHLB. At December 31, 2016 and 2015, no funds had been borrowed under the line of credit. Correspondent Bank - Line of Credit Effective July 2016, Patriot entered into a Federal funds sweep and Federal funds line of credit facility agreement (the “Correspondent Bank Agreement”) with ZB, N.A. (“Zions Bank”). The purpose of the agreement is to provide a credit facility intended to satisfy overnight Fed account balance requirements and to provide for daily settlement of Fed, ACH, and other clearinghouse transactions. The Correspondent Bank Agreement provides for up to $16 million in funds of which $15 million was outstanding as of December 31, 2016. The Correspondent Bank Agreement is unsecured, currently requires a compensating balance of $250,000 to remain on account with Zions Bank at all times, pays interest on funds on account (e.g., Fed funds sweep, compensating balance) at variable rates depending on the total deposit, and charges interest on advances at Zions Bank’s daily Fed funds rate, which is variable. Interest expense for the year ended December 31, 2016 amounted to $3,000 on weighted average advances of $11 million or a weighted average interest rate of 73 basis points. Senior notes On December 22, 2016, the Company issued $12 million of senior notes bearing interest at 7% per annum and maturing on December 22, 2021 (the “Senior notes”). Interest on the Senior notes is payable semi-annually on June 22 and December 22 of each year beginning on June 22, 2017. In connection with the issuance of the Senior notes, the Company incurred $374,000 of costs, which are being amortized over the term of the Senior notes to recognize a constant rate of interest expense. At December 31, 2016, $372,000 of unamortized debt issuance costs have been deducted from the face amount of the Senior notes included in the Consolidated Balance Sheet. For the year ended December 31, 2016, the Company recognized interest expense of $25,000 at an effective rate of 7.62%, which amount is greater than the stated interest rate on the Senior notes due to debt issuance cost amortization expense of $2,000. As of December 31, 2016, $23,000 of interest has been included in the Consolidated Balance Sheet in Accrued expenses and other liabilities. The Senior Notes contain affirmative covenants that require the Company to: maintain its and its subsidiaries’ legal entity and tax status, pay its income tax obligations on a timely basis, and comply with SEC and FDIC reporting requirements. The 7% Senior Notes are unsecured, rank equally with all other senior obligations of the Company, are not redeemable nor may they be put to the Company by the holders of the notes, and require no payment of principal until maturity. Junior subordinated debt owed to unconsolidated trust In 2003, the Trust, which has no independent assets and is wholly-owned by the Company, issued $8.0 million of trust preferred securities. The proceeds, net of a $240,000 placement fee, were invested in junior subordinated debentures issued by the Company, which invested the proceeds in the Bank. The Bank used the proceeds to fund its operations. Trust preferred securities currently qualify for up to 25% of the Company’s Tier I Capital, with the excess qualifying as Tier 2 Capital. The junior subordinated debentures are unsecured obligations of the Company. The debentures are subordinate and junior in right of payment to all present and future senior indebtedness of the Company. In addition to its obligations under the junior subordinated debentures and in conjunction with the Trust, the Company issued an unconditional guarantee of the trust preferred securities. The junior subordinated debentures bear interest at three -month LIBOR plus 3.15% (4.15% at December 31, 2016) and mature on March 26, 2033, at which time the principal amount borrowed will be due. Beginning in the second quarter of 2009, the Company opted to defer payment of quarterly interest on the junior subordinated debentures for 20 consecutive quarters. In June of 2014, the Company brought the debt current by paying approximately $1.7 million of interest in arrears to the holders of the junior subordinated debentures. On bringing the debt current and, as permitted under the terms of the junior subordinated debentures, the Company again opted to defer payment of quarterly interest through September 2016, when a $0.7 million payment was made to bring the debt current. The placement fee of $240,000 is amortized and included as a component of the periodic interest expense on the junior subordinated debentures, in order to produce a constant rate of interest expense. For the years ended December 31, 2016 and 2015, $7,000 of debt placement fee amortization has been included in interest expense recognized of $334,000 and $294,000, respectively. As of December 31, 2016 and 2015, the unamortized placement fee deducted from the face amount of the junior subordinated debt owed to the unconsolidated trust amounted to $169,000 and $176,000 and accrued interest on the junior subordinated debentures was $6,000 and $430,000, respectively. At its option, exercisable on a quarterly basis, the Company may redeem the junior subordinated debentures from the Trust, which would then redeem the trust preferred securities. Note Payable In September 2015, the Bank purchased the property in which its Fairfield, Connecticut branch is located for approximately $2 million, a property it had been leasing until that date. The purchase price was primarily satisfied by issuing the seller a $2.0 million, nine -year, promissory note bearing interest at a fixed rate of 1.75% per annum. As of December 31, 2016 and 2015, the note had a balance outstanding of $1.8 million and $1.9 million, respectively. The note matures in August 2024 and requires a balloon payment of approximately $234,000. The note is secured by a first Mortgage Deed and Security Agreement on the purchased property. Maturity of borrowings At December 31, 2016, the contractual maturities of the Company’s borrowings in future periods were as follows:
(In thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Year ending December 31, |  | FHLB Borrowings |  |  | Correspondent Bank |  |  | Senior Notes |  |  | Subordinated Note |  |  | Note Payable |  |  | Total |
2017 |  | $ | 58,000 |  |  |  | 15,000 |  |  |  | - |  |  |  | - |  |  |  | 189 |  |  |  | 73,189 |
2018 |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 192 |  |  |  | 192 |
2019 |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 195 |  |  |  | 195 |
2020 |  |  | 40,000 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 199 |  |  |  | 40,199 |
2021 |  |  | 25,000 |  |  |  | - |  |  |  | 12,000 |  |  |  | - |  |  |  | 202 |  |  |  | 37,202 |
Thereafter |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 8,248 |  |  |  | 792 |  |  |  | 9,040 |
Total contractual maturities of borrowings |  |  | 123,000 |  |  |  | 15,000 |  |  |  | 12,000 |  |  |  | 8,248 |  |  |  | 1,769 |  |  |  | 160,017 |
Unamortized debt issuance costs |  |  | - |  |  |  | - |  |  |  | (372 | ) |  |  | (169 | ) |  |  | -- |  |  |  | (541 | )
Balance of borrowings at December 31, 2016 |  | $ | 123,000 |  |  |  | 15,000 |  |  |  | 11,628 |  |  |  | 8,079 |  |  |  | 1,769 |  |  |  | 159,476 |

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21475-112644 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.19,20,22) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 + Details
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