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Borrowings | 12 Months Ended
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Dec. 31, 2023
Debt Disclosure [Abstract] |
Borrowings | Borrowings As of December 31, 2023 and 2022, total borrowings were $201.1 million and $115.2 million, respectively. Borrowings consist primarily of FHLB advances, FRB borrowing, senior notes, subordinated notes, junior subordinated debentures and a note payable. The senior notes, subordinated notes, junior subordinated debentures 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. Federal Home Loan Bank borrowings The Company is a member of the Federal Home Loan Bank of Boston ("FHLB-B"). Borrowings from the FHLB-B are limited to a percentage of the value of qualified collateral, as defined on the FHLB-B 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, 2023, the Bank had $71.4 million of available borrowing capacity from the FHLB-B. FHLB-B advances are structured to facilitate the Bank’s management of its balance sheet and liquidity requirements. At December 31, 2023 and 2022, outstanding advances from the FHLB-B aggregated $101.0 million and $85.0 million, respectively. At December 31, 2023, FHLB-B advances of $101.0 million outstanding bore fixed rates of interest ranging from 2.40% to 5.56% with maturities ranging from 2 days to 0.8 years, and have a weighted average interest rate of 4.62%. At December 31, 2023, collateral for FHLB-B borrowings consisted of a mixture of real estate loans and securities with book value of $263.4 million. Remaining borrowing capacity under this line totaled $71.4 million at December 31, 2023. In addition, Patriot has a $2.0 million revolving line of credit with the FHLB-B. At December 31, 2023 and 2022, no funds had been borrowed under the line of credit. Interest expense incurred for FHLB-B borrowing for the years ended December 31, 2023, 2022 and 2021 were $4.2 million, $3.5 million and $3.0 million, respectively. Correspondent Bank - Lines of Credit Patriot has entered into unsecured federal funds sweep and federal funds line of credit facility agreements with certain correspondent Banks. As of December 31, 2023 and 2022, borrowings available under the agreements totaled $17.0 million and $24.5 million, respectively. The purpose of the agreements is to provide a credit facility intended to satisfy overnight federal account balance requirements and to provide for daily settlement of FRB, ACH, and other clearinghouse transactions. There was no outstanding balance under the agreements at December 31, 2023 and 2022. Interest expense incurred for the year ended December 31, 2023 was $117,000 and no interest expense was incurred in 2022 and 2021. Other Borrowing The Federal Reserve Bank of New York (“FRBNY”) accepts loan pledges from qualifying depository institutions to secure borrowings from the Discount Window. Patriot has pledged eligible loans as collateral to support its borrowing capacity at the FRBNY. As of December 31, 2023, Patriot had pledged eligible loans with a book value of $15.5 million, with a collateral value of $11.4 million. A total of $12.0 million was borrowed from the Discount Window under the FRBNY's Borrower-in-Custody ('BIC") program and fully repaid during 2023. There was no outstanding balance under the agreements as of December 31, 2023. Interest expense incurred for the year ended December 31, 2023 was $48,000. In 2022 and 2021, no funds was borrowed under the BIC program, and no interest expense was incurred. In July 2023, the Bank established a collateralized funding line of $80.0 million at par value under the Federal Reserve's newly established Bank Term Funding Program ("BTFP"). The program provides additional funding to eligible depository institutions, assuring they can meet the needs of all their depositors. The program serves as an additional source of liquidity against high-quality securities, eliminating the need of an institution to quickly sell those securities in times of stress. The line allows for a fixed rate borrowing for up to one year, with repayment permitted at any time without penalty. As of December 31, 2023, the collateral value of the pledged securities was $72.4 million. Patriot had borrowed a total of $70.0 million under the BTFP, which remained outstanding and carried a fixed rate of 4.89% as of December 31, 2023 . Interest expense incurred was $1.8 million for the year ended December 31, 2023. Senior notes On December 22, 2016, the Company issued $12 million of senior notes (“2016 Senior Notes”) bearing interest at 7% per annum. On November 17, 2021, the original maturity date of the Senior Notes were extended from December 22, 2021 to June 30, 2022. On June 22, 2022, the Company amended and restated the Senior Notes. The maturity date of the Senior Notes were further extended to December 31, 2022, and the interest rate increases from (i) 7% to 7.25% from July 1, 2022 until September 30, 2022 and (ii) from 7.25% to 7.50% thereafter. The Senior Notes were repaid in December 2022. On December 21, 2022, the Company completed an issuance and sale of $12 million in aggregate principal amount of 8.50% fixed rate Senior Notes due January 15, 2026 (“2022 Senior Notes”). In connection with the issuance of the Senior Notes, the Company incurred $360,000 of costs, which are being amortized over the term of the 2022 Senior Notes to recognize a constant rate of interest expense. As of December 31, 2023, unamortized debt issuance cost of $277,000 was deducted from the face amount of the Senior Notes included in the Consolidated Balance Sheet. The 2022 Senior Note Purchase Agreement contains certain customary representations, warranties, and covenants made by each of the Company and the Purchasers. The 2022 Senior Notes are not subject to any sinking fund and are not convertible into or exchangeable for any other securities or assets of the Company or any of its subsidiaries. The 2022 Senior Notes are not subject to redemption at the option of the holders. Principal and interest on the 2022 Senior Notes are subject to acceleration only in limited circumstances. The 2022 Senior Notes are an unsecured, unsubordinated obligation and ranks equally in right of payment to all of the Company’s existing and future unsecured indebtedness, liabilities and other obligations that are not subordinated in right of payment to the Senior Note, and will be effectively subordinated to any of the Company’s existing and future secured indebtedness, to the extent of the value of the collateral securing such indebtedness. The 2022 Senior Notes are the obligations of the Company only and are not obligations of, and are not guaranteed by, any of the Company’s affiliates. For the year ended December 31, 2023, 2022 and 2021, the Company recognized interest expense of $1.2 million, $866,000 and $913,000, respectively, and the debt issuance cost amortization expense was $139,000, $0 and $73,000, respectively. As of December 31, 2023 and 2022, $470,000 and $28,000 of interest was included in accrued expenses and other liabilities on the Consolidated Balance Sheet, respectively. Subordinated notes On June 29, 2018, the Company entered into certain subordinated note purchase agreements with two institutional accredited investors and completed a private placement of $10 million of fixed-to-floating rate subordinated notes with the maturity date of September 30, 2028 (the “Subordinated Notes”) pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, and Rule 506(b) of Regulation D promulgated thereunder. The Subordinated Notes initially bear interest at 6.25% per annum, from and including June 29, 2018, to but excluding, June 30, 2023, payable semi-annually in arrears. From and including June 30, 2023, until but excluding June 30, 2028 or an early redemption date, the interest rate shall reset quarterly to an interest rate per annum equal to the then current three-month LIBOR, which was replaced by SOFR in 2023 (but not less than zero) plus 332.5 basis points, payable quarterly in arrears. The Company may, at its option, beginning on June 30, 2023 and on any scheduled interest payment date thereafter, redeem the Subordinated Notes. Interest on the Subordinated Notes is payable beginning on December 30, 2018. In connection with the issuance of the Subordinated Notes, the Company incurred $291,000 of debt issuance costs, which are being amortized over the term of the Subordinated Notes to recognize a constant rate of interest expense. At December 31, 2023 and 2022, $131,000 and $160,000 of unamortized debt issuance costs have been deducted from the face amount of the Subordinated Notes included in the Consolidated Balance Sheet, respectively. For the years ended December 31, 2023, 2022 and 2021, the Company recognized interest expense of $786,000, $654,000 and $654,000, respectively. Junior subordinated debt owed to unconsolidated trust In 2003, the Patriot National Statutory Trust I (“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 (replaced by SOFR) plus 3.15% (8.77% at December 31, 2023) 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, 2023, 2022 and 2021, $9,000, $9,000 and $9,000 of debt placement fee amortization has been included in interest expense recognized of $695,000, $412,000 and $279,000, respectively. As of December 31, 2023 and 2022, the unamortized placement fee deducted from the face amount of the junior subordinated debt owed to the unconsolidated trust amounted to $111,000 and $120,000, respectively, and accrued interest on the junior subordinated debentures was $12,000 and $9,000, 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 $2.0 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, 2023 and 2022, the note had a balance outstanding of $376,000 and $585,000, 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. Interest expense incurred for the years ended December 31, 2023, 2022 and 2021 was $8,000, $12,000 and $15,000, respectively. Maturity of borrowings At December 31, 2023, the contractual maturities of the Company’s borrowings in future periods were as follows:
(In thousands) |  |  |  |  |  |  |  |  |  |  |  |
Year ending December 31, |  | FHLB and FRB Borrowings |  | Senior Notes |  | Subordinated Notes |  | Junior Subordinated Debt |  | Note Payable |  | Total
2024 |  | $ | 171,000 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 376 |  |  | $ | 171,376 |
2025 |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
2026 |  | — |  |  | 12,000 |  |  | — |  |  | — |  |  | — |  |  | 12,000 |
2027 |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
2028 |  | — |  |  | — |  |  | 10,000 |  |  | — |  |  | — |  |  | 10,000 |
Thereafter |  | — |  |  | — |  |  | — |  |  | 8,248 |  |  | — |  |  | 8,248 |
Total contractual maturities of borrowings |  | 171,000 |  |  | 12,000 |  |  | 10,000 |  |  | 8,248 |  |  | 376 |  |  | 201,624 |
Unamortized debt issuance costs |  | — |  |  | (277) |  |  | (131) |  |  | (111) |  |  | — |  |  | (519) |
Balance of borrowings as of December 31, 2023 |  | $ | 171,000 |  |  | $ | 11,723 |  |  | $ | 9,869 |  |  | $ | 8,137 |  |  | $ | 376 |  |  | $ | 201,105 |

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