Note

11.

Cash Surrender Value of Bank-owned Life Insurance

Prior to

December

31,

2014,

Patriot had an investment in, and was the beneficiary of, certain bank-owned life insurance (“BOLI”) policies. The BOLI policies were held on certain key officers, directors and employees of the Bank and provided income through appreciation in the policies’ cash surrender value. During the year ended

December

31,

2014,

Patriot discontinued the practice and liquidated the BOLI policies; prior to which it earned

$439,000

of income that is included in non-interest income on the Consolidated Statement of Operations.

The

$22.5

million of proceeds obtained from liquidating the BOLI policies were used to acquire a portfolio of residential mortgages that yielded a greater return on investment. Liquidating the BOLI policies resulted in a total charge of

$892,000

comprised of a

$455,000

market-value adjustment and a

$437,000

modified endowment contract cancellation penalty that is included in non-interest income and non-interest expense in the Statement of Operations, respectively. Liquidation of the tax-exempt BOLI policies resulted in a

$1.7

million increase to the income tax provision, which was offset by Patriot’s available net operating tax loss carryforwards.