Note

10.

Borrowings

As of

December

31,

2020

and

2019,

total borrowings were

$120.8

million and

$130.9

million, respectively. Borrowings consist primarily of FHLB advances, 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,

2020,

the Bank had

$63.9

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,

2020

and

2019,

outstanding advances from the FHLB-B aggregated

$90.0

million and

$100.0

million, respectively.

December

31,

2020,

advances of

$90.0

million outstanding bore fixed rates of interest ranging from

2.40%

4.23%

with maturities ranging from

2.5

years to

3.7

years. The FHLB-B advances with fixed interest rates have a weighted average interest rate of

3.26%.

December

31,

2020,

collateral for FHLB-B borrowings consisted of a mixture of real estate loans and securities with book value of

$267.5million.

Borrowing capacity under this line totaled

$78.4

million at

December 31, 2020.

In addition, Patriot has a

$2.0

million revolving line of credit with the FHLB-B. At

December

31,

2020

and

2019,

funds had been borrowed under the line of credit.

Interest expense incurred for FHLB-B borrowing for the year ended

December

31,

2020,

2019

and

2018

were

$2.7

million,

$2.2

million and

$1.6

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,

2020

and

2019,

borrowings available under the agreements totaled

million and

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

outstanding balance under the agreements at

December

31,

2020

and

2019.

Interest expense incurred for the year ended

December

31,

2019

and

2018

was

$2,000

and

$13,000,

respectively.

interest expense incurred in

2020.

Other Borrowing

August 2020,

Patriot was approved to pledge commercial and industrial loans and leases, commercial real estate, construction loans and

one

-to-

four

family

first

lien loans under the Federal Reserve Bank of New York's (“FRBNY”) Borrower-in-Custody program. As of

December 31, 2020,

Patriot had pledged eligible loans with a book value of

$40.9

million and a collateral value of

$26.3

million as collateral to support borrowing capacity at the FRBNY. There was

outstanding balance under the agreements as of

December 31, 2020.

Senior notes

December 22, 2016,

the Company issued

$12

million of senior notes bearing interest at

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,

2020

and

2019,

$73,000

and

$147,000

of unamortized debt issuance costs have been deducted from the face amount of the Senior Notes included in the consolidated balance sheet.

The 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

payment of principal until maturity.

For the year ended

December

31,

2020,

2019

and

2018,

the Company recognized interest expense of

$915,000

for each of the

three

years, at an effective rate of

7.6%,

which amount is greater than the stated interest rate on the Senior Notes due to debt issuance cost amortization expense of

$75,000

for each of the

three

years. As of

December

31,

2020

and

2019,

$23,000

and

$23,000

of interest has been included in the consolidated balance sheet in accrued expenses and other liabilities, respectively.

Subordinated notes

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

(a)(

) 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 (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,

2020

and

2019,

$218,000

and

$248,000

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 year ended

December

31,

2020,

2019

and

2018,

the Company recognized interest expense of

$654,000,

$656,000

and

$327,000,

respectively.

Junior subordinated debt owed to unconsolidated trust

2003,

the Patriot National Statutory Trust I (“the Trust”), which has

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

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%

(

3.4%

December

31,

2020

) 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

consecutive quarters. In

June

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,

2020

and

2019,

$8,000

and

$8,000

of debt placement fee amortization has been included in interest expense recognized of

$337,000

and

$462,000,

respectively. As of

December

31,

2020,

2019

and

2018,

the unamortized placement fee deducted from the face amount of the junior subordinated debt owed to the unconsolidated trust amounted to

$138,000,

$146,000

and

$154,000,

respectively, and accrued interest on the junior subordinated debentures was

$5,000

and

$6,000,

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

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,

2020

and

2019,

the note had a balance outstanding of

$994,000

and

$1.2

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. Interest expenses incurred for the year ended

December

31,

2020,

2019

and

2018

were

$19,000,

$23,000

and

$26,000,

respectively.

Maturity of borrowings

December

31,

2020,

the contractual maturities of the Company's borrowings in future periods were as follows:

(In thousands)
Year ending December 31,	FHLB Borrowings		Senior Notes			Subordinated Notes			Junior Subordinated Debt			Note Payable		Total
2021	$	-	$	12,000		$	-		$	-		$	202	$	12,202
2022		-		-			-			-			206		206
2023		60,000		-			-			-			210		60,210
2024		30,000		-			-			-			376		30,376
2025		-		-			-			-			-		-
Thereafter		-		-			10,000			8,248			-		18,248

Total contractual maturities of borrowings		90,000		12,000			10,000			8,248			994		121,242

Unamortized debt issuance costs		-		(73	)		(218	)		(138	)		-		(429	)

Balance of borrowings as of December 31, 2020	$	90,000	$	11,927		$	9,782		$	8,110		$	994	$	120,813