Company: PNBK
Filing Date: 2025-05-14
Form Type: 10-Q
Source: 0001628280-25-025485
Chunk: 105

Company: PATRIOT NATIONAL BANCORP INC
Filing Date: 2025-05-14
Form: 10-Q
Item: Part I, Item 2
Chunk 105
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 of Common Stock effective on the closing date of the Private Placement.

For the three months ended March 31, 2025 and 2024, the Company recognized interest expense of $213,000 and $227,000, 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 1 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.

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The junior subordinated debentures bear interest at three-month SOFR plus 3.15% and mature on March 26, 2033, at which time the principal amount borrowed will be due. 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. As of March 31, 2025 and December 31, 2024, the unamortized placement fee deducted from the face amount of the junior subordinated debt owed to the unconsolidated trust amounted to $99,000 and $101,000, respectively, and accrued interest on the junior subordinated debentures was $333,000 and $174,000, respectively.  In December 2024, the Company opted to defer payment of the quarterly interest, as permitted under the terms of the junior subordinated debentures, and continues to defer interest payments through March 31, 2025.

For the three months ended March 31, 2025 and 2024, the Company recognized interest expense of $162,000 and $179,000, respectively. 

At its option, exercisable on a quarterly basis, the Company may redeem