PATRIOT NATIONAL BANCORP INC
For the period ended Mar 31, 2025. Filed May 14, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 14, 2025
PNBK$0.84+2.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-19.
0001628280-24-048517
Item 2. : Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-14.
0001628280-25-025485
Item 2. : Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 167 previous paragraphs and 165 current paragraphs.
79 unchanged; 59 reworded; 27 added; 28 removed; 1 previous and 0 current paragraphs rearranged.
Tables are not compared: 14 previous and 13 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (27)
Current report
(28)the imposition of new or increased tariffs on imported or exported goods, which could negatively impact economic activity in the Company’s markets, affect the creditworthiness of borrowers, and reduce demand for the Company’s products and services.
Current report
During the first quarter of 2025, net interest income declined $1.5 million, compared to the first quarter of 2024 due to an intentional decline in loan balances. The Company reported a decrease in gross loans of $33.3 million in the first quarter of 2025, from $707.5 million at December 31, 2024 to $674.2 million at March 31, 2025. The Company has continued the trend of restricting loan growth and allowing loans to pay down as the balance sheet is reduced in order to strengthen capital ratios.
Current report
On March 20, 2025, the Company entered into (i) securities purchase agreements (the “Co-Lead Investors Agreements”) with its President and director, Steven Sugarman (the “Lead Party”), and three co-lead investors (the “Co-Lead Investors”), and (ii) securities purchase agreements (the “Purchasers Agreements”, and together with the Co-Lead Investors Agreements, the “Securities Purchase Agreements”) with other accredited investors (collectively, and together with the Co-Lead Investors and the Lead Party, the “Purchasers”).
Current report
Also on March 20, 2025, the Company completed a $57.8 million private placement of: (i) shares of the Company’s common stock, par value 0.01 per share (“Common Stock”), at a purchase price of $0.75 per share, and (ii) shares of a new series of the Company’s preferred stock, no par value per share, designated as Series A Non-Cumulative Perpetual Convertible Preferred Stock (the “Series A Preferred Stock”), with a liquidation preference of $60 per share (the “Private Placement”).
Current report
The Private Placement included the issuance of: (i) 60,400,106 shares of Common Stock, and (ii) 90,832 shares of Series A Preferred Stock, convertible, in the aggregate, into 7,266,560 shares of Common Stock.
Current report
In addition, as part of the Private Placement, on March 20, 2025, the Company’s amendments to (i) 6.25% Fixed to Floating Subordinated Note due June 30, 2028 (the “Subordinated Note”), and (ii) 8.5% Fixed Rate Senior Notes Due 2026 (the “Senior Notes” and together with the Subordinated Note, the “Notes”) became effective and noteholders converted approximately $7.0 million of the aggregate principal amount of the Notes into 9,333,334 shares of Common Stock.
Current report
The amendment to the Subordinated Note provides that the interest on the Subordinated Note will be paid-in-kind (“PIK”) and the aggregate outstanding principal amount of the Subordinated Note will be automatically increased on each interest payment date by the amount of such PIK interest for all accrued and unpaid interest payments as of the closing date of the Private Placement and for future scheduled interest payments owed through and including the March 30, 2026 interest payment date. In addition, pursuant to such amendment, the noteholder agreed to convert $2.0 million of the outstanding principal amount of the Subordinated Note into shares of Common Stock effective on the closing date of the Private Placement.
Current report
The amendment to the Senior Notes provides that (i) the maturity date of the Senior Notes will be extended to April 15, 2028, (ii) the interest rate will be increased to 10.0% effective as of January 1, 2026, and (iii) at any time prior to the maturity date, the Company may repay any amount of the outstanding principal amount of the Senior Notes, in whole or in part, without penalty. In addition, pursuant to such amendment, the noteholders agreed to convert into shares of Common Stock an amount of the outstanding Senior Notes, on a pro rata basis, equal to $5.0 million based on the terms of the amendment and the closing of the Private Placement, and all accrued and unpaid interest payments as of the closing date of the Private Placement and for future scheduled interest payments owed through the January 15, 2026 payment may be PIK.
Current report
As of March 31, 2025, the Private Placement results in capital ratios that are in excess of the minimums required by the OCC Agreement.
Current report
Cash, cash equivalents and restricted cash decreased from $162.6 million at December 31, 2024 to $136.2 million at March 31, 2025. The decrease in 2025 was primarily due to a $104.2 million reduction in deposits offset by cash received on loans held for investment and cash proceeds on issuance of common and preferred stock shares. After completion of the Private Placement, the Company reduced excess cash by lowering deposits. For further details, refer to the Consolidated Statements of Cash Flows.
Current report
Deferred tax assets were zero both at March 31, 2025 and December 31, 2024 as Patriot recorded a full valuation allowance against all of the DTAs as of September 30, 2024. Patriot evaluates its ability to realize its deferred tax assets on a quarterly basis. In doing so, management considers all available evidence, both positive and negative, to determine whether it is more likely than not that the deferred tax assets will be realized. The Company will continue to evaluate its ability to realize its deferred tax assets. If future evidence suggests that it is more likely than not that additional deferred tax assets will be realized, the valuation allowance will be adjusted.
Current report
As of March 31, 2025, Patriot had available approximately $44.2million of Federal net operating loss carryforwards (“NOL”) that are offset by $15.5million in §382 limitations imposed by the Internal Revenue Code. After applying the limitation at December 31, 2024, Patriot has $28.7 million post-change NOL which do not expire. Patriot has not performed an analysis on the post-change NOL, but the potential impact of any additional limitation would not be material to the financial statements due to the fact that the NOL are fully offset by a valuation allowance.
Current report
Total deposits decreased by $104.2 million, from $966.6 million as of December 31, 2024, to $862.4 million as of March 31, 2025. The reduction was primarily driven by $116.9 million in deposits which were sold through the IntraFi network as of March 31, 2025. There were no such deposit sales as of December 31, 2024.
Current report
As of March 31, 2025, the Company had $163.5 million in book value and $108.4 million in discounted value of pledged collateral with the FHLB-B. The pledged collateral consisted of a mixture of residential and commercial real estate loans and lines of credit. The maximum borrowing capacity is limited to the lesser of 5.00% of the Bank’s most recently reported Call Report total assets or the discount value of the pledged collateral. Accordingly, as of March 31, 2025 the Company’s maximum borrowing capacity with the FHLB-B is $50.6 million. Of this amount, $45.0 million was used by a standby letter of credit, as described further in Note 10 Financial Instruments with Off-Balance-Sheet Risk. Additionally, $250,000 of the maximum borrowing capacity was used by an overnight line of credit designed to cover the Bank for temporary overdraft positions. As of March 31, 2025 and December 31, 2024, no funds had been borrowed under the overnight line of credit.
Current report
Interest expense incurred for the three months ended March 31, 2025 and March 31, 2024 were $2,000 and $359,000, respectively.
Current report
The Senior Notes were amended in March 2025. The amendment to the Senior Notes provides that (i) the maturity date of the Senior Notes will be extended to April 15, 2028, (ii) the interest rate will be increased to 10.0% effective as of January 1, 2026, and (iii) at any time prior to the maturity date, the Company may repay any amount of the outstanding principal amount of the Senior Notes, in whole or in part, without penalty. In addition, pursuant to such amendment, the noteholders agreed to convert into shares of Common Stock an amount of the outstanding Senior Notes, on a pro rata basis, equal to $5.0 million based on the terms of the amendment and the closing of the Private Placement, and all accrued and unpaid interest payments as of the closing date of the Private Placement and for future scheduled interest payments owed through the January 15, 2026 payment may be PIK.
Current report
For the three months ended March 31, 2025 and 2024, the Company recognized interest expense of $322,000 and $290,000, respectively.
Current report
The Subordinated Notes were amended in March 2025. The amendment to the Subordinated Note provides that the interest on the Subordinated Note will be PIK and the aggregate outstanding principal amount of the Subordinated Note will be automatically increased on each interest payment date by the amount of such PIK interest for all accrued and unpaid interest payments as of the closing date of the Private Placement and for future scheduled interest payments owed through and including the March 30, 2026 interest payment date. In addition, pursuant to such amendment, the noteholder agreed to convert $2.0 million of the outstanding principal amount of the Subordinated Note into shares of Common Stock effective on the closing date of the Private Placement.
Current report
For the three months ended March 31, 2025 and 2024, the Company recognized interest expense of $213,000 and $227,000, respectively.
Current report
For the three months ended March 31, 2025 and 2024, the Company recognized interest expense of $162,000 and $179,000, respectively.
Current report
Provision for credit losses for the three months ended March 31, 2025, amounted to $733,000. This encompassed a $756,000 PCL on loans and a $23,000 of reserve for credit losses on unfunded commitments. For the three months ended March 31, 2024, the PCL was $658,000, consisting of $653,000 PCL on loans and a $5,000 PCL on unfunded commitments.
Current report
Non-interest expense for the three months ended March 31, 2025 increased by $1.5 million to $8.7 million, compared to $7.2 million for the three months ended March 31, 2024. The primary drivers of this increase were higher salaries and benefit expenses of $355,000, professional and other outside services of $240,000, regulatory assessments of $236,000, and an OREO expense of $253,000 which is included in other operating expense in the first quarter of 2025.
Current report
On-hand liquidity decreased $45.5 million from December 31, 2024 to March 31, 2025 primarily driven by lower cash balances maintained as of March 31, 2025 after the completion of the Private Placement as the risk of deposit flight subsided.
Current report
The Private Placement on March 20, 2025, provided additional liquidity to both the Bank and the Company and alleviated the liquidity risk. The Private Placement provided additional operating cash to the Bank and the Company and the amendment of the Company’s Senior Notes deferred interest payments until 2026 and extended the maturity to April 15, 2028 and the amendment of the Company’s Subordinated Notes deferred interest payment until 2026.
Current report
Regulatory Capital Requirements
Current report
As of December 31, 2024, the Bank did not meet any of its regulatory capital requirements. On January 14, 2025, the Bank entered into an agreement with the OCC, pursuant to which the Bank agreed, through its board of directors to take certain actions in the areas of strategic planning, capital planning, Bank Secrecy Act / Anti-Money Laundering risk management, payment activities oversight, credit administration and concentrations risk management. The Bank’s Board appointed a Compliance Committee in January 2025, as required, to oversee the progress and compliance with the OCC Agreement. On January 17, 2025, the OCC notified the Bank that, in connection with the entry into the OCC Agreement, the individual minimum capital ratios previously established on April 17, 2024 for the Bank has been terminated.
Current report
As of March 31, 2025, the Private Placement proceeds were utilized to infuse $44.5 million in capital into the Bank which resulted in capital ratios that are in excess of the minimums required by the OCC Agreement.
Removed paragraphs (28)
Previous report
For the nine months ended September 30, 2024, the net loss was $30.3 million, or $7.63 basic and diluted loss per share, compared to a net loss of $5.1 million, ($1.28 basic and diluted loss per share) for the nine months ended September 30, 2023. This represents a year-over-year increase in net loss of $25.3 million. The primary driver of this increase was the same $25.1 million DTA valuation allowance, see Note 2 - Summary of Significant Accounting Policies for more information. This increase is offset by fluctuations including lower pretax net interest income of $6.8 million, lower pretax provision for credit losses of $3.5 million and higher pretax noninterest income of $3.6 million, primarily from revenue on the Digital Payments Division.
Previous report
Cash, cash equivalents and restricted cash increased from $66.5 million at December 31, 2023 to $72.8 million at September 30, 2024. The increase in 2024 reflects the intention to boost balance sheet liquidity. For further details, refer to the Consolidated Statements of Cash Flows.
Previous report
For the nine months ended September 30, 2024, net charge-offs declined $1.4 million to $5.8 million, with a net charge-offs to average loans ratio of 0.96% , down from $7.2 million and 1.07% for the nine months ended September 30, 2023.
Previous report
As of September 30, 2024 the carrying value of the deferred tax assets is nil as there is a full valuation allowance against all of the DTAs. As of December 31, 2023, DTAs were $24.1 million, consisting predominately of Federal and state net operating losses, capitalized costs and allowance for credit losses.
Previous report
Valuation Allowance against Deferred Tax Assets
Previous report
In certain circumstances DTAs are subject to reduction by a valuation allowance. A valuation allowance is subject to ongoing adjustment based on changes in circumstances that affect management’s judgment about the realizability of the deferred tax asset. Adjustments to increase or decrease the valuation allowance are charged or credited to the deferred tax component of the income tax provision or benefit.
Previous report
The Company recognize deferred tax assets to the extent we believe it is more likely than not the asset will be realized. Quarterly, management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit the use of existing deferred tax assets, including future reversals of existing taxable temporary differences, projected taxable income, tax-planning strategies, carryback potential if permitted, and the results of recent operations. A significant piece of objective negative evidence is the existence of a three or four year cumulative loss. Such objective negative evidence limits the ability of management to consider other subjective evidence, such as projected taxable income. When appropriate, the Company records a valuation allowance to reduce deferred tax assets to the amount that is more likely than not to be realized.
Previous report
Based on our assessment performed as of September 30, 2024, we determined that a full valuation allowance was appropriate against the Company’s U.S. federal and state deferred tax assets. This resulted in an increase in our income tax expense of approximately $25.1 million for the nine months ended September 30, 2024. Currently, the key factor on the Company’s assumption of providing 100% valuation allowance was purely based on our historical operating losses. Once we begin generating profits, we will re-evaluate whether providing 100% valuation allowance is appropriate or if we can reassess that allowance. As deferred tax assets associated with NOL carryforwards are already a direct reduction to Tier 1 Capital, the valuation allowance at September 30, 2024 resulted in a reduction of Tier 1 Capital of $19.9 million.
Previous report
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.
Previous report
At September 30, 2024, collateral for FHLB-B borrowings consisted of a mixture of real estate loans and securities with book value of $221.2 million. Remaining unused borrowing capacity under this line totaled $5.4 million at September 30, 2024.
Previous report
In addition, Patriot has a $2.0 million revolving line of credit with the FHLB-B. For the three and nine months ended September 30, 2024 and 2023, no funds had been borrowed under the line of credit.
Previous report
Interest expense incurred for the three and nine months ended September 30, 2024 were $292,000 and $1.0 million, respectively. Interest expense incurred for the three and nine months ended September 30, 2023 were $748,000 and $3.8 million, respectively.
Previous report
For the three and nine months ended September 30, 2024, the Company recognized interest expense of $290,000 and $869,000, respectively. Interest expense incurred for the three and nine months ended September 30, 2023 was $290,000 and $869,000, respectively.
Previous report
For the three and nine months ended September 30, 2024, the Company recognized interest expense of $229,000 and $680,000, respectively. Interest expense incurred for the three and nine months ended September 30, 2023 was $229,000 and $556,000, respectively.
Previous report
For the three and nine months ended September 30, 2024, the Company recognized interest expense of $180,000 and $539,000, respectively. Interest expense incurred for the three and nine months ended September 30, 2023 was $180,000 and $512,000, respectively.
Previous report
For the nine months ended September 30, 2024, interest income and dividend income was $40.0 million, which decreased $4.0 million as compared to $44.0 million for the nine months ended September 30, 2023. Total interest expense was $24.6 million, which increased $2.8 million as compared to $21.8 million for the nine months ended September 30, 2023. Net interest income was $15.4 million for the nine months ended September 30, 2024, which decreased $6.8 million from $22.3 million for the nine months ended September 30, 2023.
Previous report
The decline for both three and nine months ended September 30, 2024 reflects a lower loan balance and narrower net interest margin due to higher deposit costs and increase in nonaccrual loans.
Previous report
For the three months ended September 30, 2024, the provision for credit losses was $1.0 million, consisting of a $1.1 million loan provision and a $58,000 credit for off-balance-sheet exposure reserves. In comparison, for the three months ended September 30, 2023, the provision for credit losses was $4.7 million, including a $4.8 million loan provision and a $112,000 credit for off-balance-sheet exposure reserves.
Previous report
For the nine months ended September 30, 2024, the PCL was $4.8 million, which included a $4.9 million loan provision and a $94,000 credit for off-balance-sheet exposure reserves. For the nine months ended September 30, 2023, the provision was $8.2 million, consisting of a $9.6 million provision and a $1.4 million credit for off-balance-sheet exposure reserves.
Previous report
One key driver in both the level of outstanding loans and reserves is the pool of purchased unsecured consumer loans, which decreased from $58.3 million as of September 30, 2023 to $26.1 million as of September 30, 2024. Correspondingly, the reserves for this pool also fell, declining from $9.2 million as of September 30, 2023 to $3.8 million as of September 30, 2024. Additionally, as of September 30, 2023, the Bank had obligations of $18.1 million yet to fund under these same pools, against which the bank held $1.1 million of reserves. During the fourth quarter of 2023, the Bank entered into an agreement with the originator and servicer that released the Bank from any obligation for further funding, thereby freeing up the aforementioned $1.1 million of reserves.
Previous report
As of September 30, 2023, the ACL also included $6.2 million of reserves against an $8.9 million loan that had been originated in part for community development purposes. The loan was used to finance a special-use property and was charged-off during the fourth quarter of 2023, resulting in a loss of approximately $5.9 million.
Previous report
Non-interest expense for the three months ended September 30, 2024 increased to $8.4 million, compared to $8.1 million for the three months ended September 30, 2023. Non-interest expense for the nine months ended September 30, 2024 was $23.6 million, compared to $23.8 million for the nine months ended September 30, 2023.
Previous report
On-hand liquidity increased $53 million from December 31, 2023 to September 30, 2024 due to the payoff of the $70 million Federal Reserve BTFP borrowing, which released the pledge of certain available-for-sale securities. The payoff of the BTFP will have a slight benefit on the Company's Net Interest Income as the rate on the BTFP was slightly higher than the current replacement funding. Both on-hand liquidity to total liabilities and total liquidity to total liabilities increased at September 30, 2024 compared to December 31, 2023 due to the increased total liquidity and the reduction in total liabilities as the overall balance sheet has shrunk in an effort to improve the Bank's capital ratios.
Previous report
Capital
Previous report
As of September 30, 2024, the Bank did not meet all of its regulatory capital requirements. The common equity tier 1 capital was $64.5 million, or 8.19% of risk-weighted assets, below the required level of 10.00%. The Tier 1 capital was $64.5 million, or 8.19% of risk-weighted assets, also below the required level of 10.00%. However, the Tier 1 leverage capital was $64.5 million, or 6.53% of average assets, falling short of the required 9.00%. The total risk-based capital was $73.2 million, or 9.29% of risk-weighted assets, below the required 11.50%. During the second quarter, the Bank significantly reduced its total and risk-based assets to work towards achieving the IMCR targets. This trend will continue through the remainder of 2024 with a goal of achieving the IMCR in 2025. The Company has restricted new loan originations significantly to allow the loan portfolio to decline in order to lower average assets and risk weighted assets. Average assets are down $100 million to $984 million at September 30, 2024 from $1,083 million at December 31, 2023, reflecting the actions of the Company during the year to lower assets.
Previous report
If a bank fails to maintain its capital ratios above the higher minimums established in the IMCR, the OCC may issue a capital directive requiring the bank to submit and adhere to an acceptable plan to achieve or maintain its required capital levels. Additionally, the OCC may deem a bank’s failure to maintain capital ratios above the IMCR an unsafe or unsound practice within the meaning of 12 USC 1818.1
Previous report
Impact of Inflation and Changing Prices
Previous report
The Company’s Consolidated Financial Statements have been prepared in terms of historical dollars, without considering changes in the relative purchasing power of money over time due to inflation. Unlike most industrial companies, virtually all of the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates have a more significant impact on a financial institution’s performance than the effect of general levels of inflation. Interest rates do not necessarily move in the same direction or with the same magnitude as the prices of goods and services. Notwithstanding this, inflation can directly affect the value of loan collateral, in particular, real estate. Inflation, deflation or disinflation could significantly affect the Company’s earnings in future periods.
Reworded paragraphs (59)
Previous wording
(26)the premiums paid for the guaranteed portion of SBA loans by third party investors; and
Current wording
(26)the premiums paid for the guaranteed portion of SBA loans by third party investors;
Previous wording
(27)our ability to meet regulatory capital requirements.
Current wording
(27)our ability to meet regulatory capital requirements; and
Previous wording
The preparation of consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and to disclose contingent assets and liabilities. Actual results could differ from those estimates. Management has identified the accounting for the allowance for credit losses, the analysis and valuation of its investment securities, the valuation of deferred tax assets, the valuation of derivatives, and the valuation of servicing assets as certain of the Company’s most critical accounting policies and estimates in that they are important to the portrayal of the Company’s financial condition and results of operations. They require management’s most subjective and complex judgment as a result of the need to make estimates about the effect of matters that are inherently uncertain. Refer to the 2023 Form 10-K for additional information.
Current wording
The preparation of consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and to disclose contingent assets and liabilities. Actual results could differ from those estimates. Management has identified the accounting for the allowance for credit losses as one of the Company’s most critical accounting policies and estimates because it is important to the portrayal of the Company’s financial condition and results of operations. This area requires management’s most subjective and complex judgment due to the need to make estimates about the effect of matters that are inherently uncertain. Refer to the Company's 2024 Form 10-K for additional information.
Previous wording
The Company reported net loss of $27.0 million ($6.78 basic and diluted loss per share) for the quarter ended September 30, 2024, compared to a net loss of $3.8 million ($0.95 basic and diluted loss per share) for the quarter ended September 30, 2023. The $23.2 million increase in net loss for the quarter was primarily driven by a full valuation allowance on deferred tax assets ("DTA") of $25.1 million, see Note 2 - Summary of Significant Accounting Policies for more information. This increase was partially offset by a pretax $3.7 million reduction in provision for credit losses and a pretax $1.5 million decrease in net interest income.
Current wording
The Company reported net loss of $2.8 million ($0.21 basic and diluted loss per share) for the quarter ended March 31, 2025, compared to a net loss of $299,000 ($0.08 basic and diluted loss per share) for the quarter ended March 31, 2024.
Previous wording
Total assets decreased $119.3 million to $974.1 million as of September 30, 2024, compared to $1.09 billion at December 31, 2023, primarily due to the decline in loans receivable of $93.2 million as of September 30, 2024.
Current wording
Total assets decreased $55.7 million to $956.6 million as of March 31, 2025, compared to $1.01 billion at December 31, 2024, primarily due to the decline in gross loans receivable of $33.3 million and a $26.4 million decline in cash, cash equivalents and restricted cash as of March 31, 2025.
Previous wording
Total investments increased by $0.4 million, from $93.6 million at December 31, 2023 to $94.0 million at September 30, 2024. The increase in the nine months ended September 30, 2024 was primarily attributable to a $2.3 million increase in purchase of available-for-sale securities and a $3.3 million unrealized gain on securities, partially offset by the sale and repayment of securities totaling $5.3 million. During the nine months ended September 30, 2024, the Bank sold available-for-sale securities of $2.3 million and recognized a net loss of $24,000.
Current wording
Total investments increased by $700,000, from $84.4 million at December 31, 2024 to $85.1 million at March 31, 2025. The increase in the three months ended March 31, 2025 was primarily attributable to a $1.4 million unrealized gain on securities, partially offset by the amortization of securities totaling $827,000. During the three months ended March 31, 2025, the Bank did not sell any available-for-sale securities.
Previous wording
The Company’s loan portfolio decreased $93.2 million, from $848.9 million at December 31, 2023 to $755.7 million at September 30, 2024. The Company has continued the trend of restricting loan growth and allowing loans to pay down as the balance sheet is reduced in order to strengthen capital ratios.
Current wording
The Company’s loan portfolio decreased $33.3 million, from $707.5 million at December 31, 2024 to $674.2 million at March 31, 2025. The Company has continued the trend of restricting loan growth and allowing loans to pay down as the balance sheet is reduced in order to strengthen capital ratios.
Previous wording
SBA loans held for investment were included in the commercial real estate loans and commercial and industrial loan classifications above. As of September 30, 2024 and December 31, 2023, SBA loans included in the commercial and industrial loans were $11.6 million and $17.1 million, respectively. SBA loans included in the commercial real estate loans were $19.5 million and $12.9 million, respectively.
Current wording
SBA loans held for investment were included in the commercial real estate loans and commercial and industrial loan classifications above. As of March 31, 2025 and December 31, 2024, SBA loans included in the commercial real estate loans were $17.0 million and $18.7 million, respectively. SBA loans included in the commercial and industrial loans were $10.6 million and $11.2 million, respectively.
Previous wording
At September 30, 2024, the net loan to deposit ratio was 89.8% and the net loan to total assets ratio was 76.0%. At December 31, 2023, these ratios were 99.1% and 76.2%, respectively.
Current wording
At March 31, 2025, the net loan to deposit ratio was 77.4% and the net loan to total assets ratio was 69.8%. At December 31, 2024, these ratios were 72.4% and 69.2%, respectively.
Previous wording
The allowance for credit losses on loans was $15.0 million as of September 30, 2024, compared to $15.9 million as of December 31, 2023, a reduction of $941,000. The decrease in allowance was mainly due to reduction in loan balances and the recognition of charge-offs on the unsecured consumer loan portfolio. Based upon the overall assessment and evaluation of the loan portfolio at September 30, 2024, management believes $15.0 million in the allowance for credit losses, which represented 1.98% of gross loans outstanding, is adequate under prevailing economic conditions to absorb existing losses in the loan portfolio.
Current wording
The allowance for credit losses on loans was $6.7 million as of March 31, 2025, compared to $7.3 million as of December 31, 2024, a reduction of $576,000. The decrease in allowance was mainly due to reduction in loan balances and the recognition of charge-offs on the unsecured consumer loan portfolio. Based upon the overall assessment and evaluation of the loan portfolio at March 31, 2025, management believes $6.7 million in the allowance for credit losses, which represented 1.00% of gross loans outstanding, is adequate under prevailing economic conditions to absorb existing losses in the loan portfolio.
Previous wording
The following table provides detail of activity in the allowance for credit losses on loans for the three and nine months ended September 30, 2024 and 2023:
Current wording
The following table provides detail of activity in the allowance for credit losses on loans for the three months ended March 31, 2025 and 2024:
Previous wording
For the three months ended September 30, 2024, net charge-offs decreased $2.1 million to $1.1 million, with a net charge-offs to average loans ratio of 0.56%, compared to $3.2 million and 1.40% for the three months ended September 30, 2023.
Current wording
For the three months ended March 31, 2025, net charge-offs decreased $1.5 million to $1.3 million, with a net charge-offs to average loans ratio of 0.19%, compared to $2.8 million and 0.33% for the three months ended March 31, 2024.
Previous wording
The reduction in net charge-offs for both three and nine months ended September 30, 2024 was primary driven by a $1.7 million decrease in charge-offs related to purchased unsecured consumer loans as the portfolio balances have declined.
Current wording
The reduction in net charge-offs for the three months ended March 31, 2025 was primary driven by a $1.6 million decrease in charge-offs related to purchased unsecured consumer loans as the portfolio balances have declined.
Previous wording
The average loan balance decreased by $137.4 million, from $921.2 million for the three months ended September 30, 2023, to $783.8 million for the three months ended September 30, 2024. For the nine-month period, the average loan balance decreased $89.4 million, from $899.5 million in 2023 to $810.1 million in 2024. This decrease in average loan balance for the three and nine months ended September 30, 2024, reflects the Company's continued approach of limiting loan growth and allowing loans to pay down to strengthen capital ratios as the balance sheet is reduced.
Current wording
The average loan balance decreased by $130.6 million, from $841.1 million for the three months ended March 31, 2024, to $710.5 million for the three months ended March 31, 2025. This decrease in average loan balance reflects the Company's continued approach of limiting loan growth and allowing loans to pay down to strengthen capital ratios as the balance sheet is reduced.
Previous wording
As of September 30, 2024 and September 30, 2023, the ACL was $15.0 million and $25.7 million, respectively. The decrease was due to significant charge-offs of reserved CRE and consumer loans after September 30, 2023, which also impacted the ACL to loans ratio of 1.98%, compared to an ACL of $25.7 million and an ACL to loans ratio of 2.88% as of September 30, 2023.
Current wording
As of March 31, 2025 and March 31, 2024, the ACL was $6.7 million and $13.8 million, respectively. The decrease was primarily due to significant charge-offs of non-performing CRE loans after March 31, 2024. This also impacted the ACL to total loans ratio, which was 1.00% as of March 31, 2025, compared to 1.70% as of March 31, 2024.
Previous wording
The nonaccrual loan was $36.5 million as of September 30, 2024, compared to $30.8 million as of September 30, 2023. The allowance for credit losses to nonaccrual loans ratio was 41.01% as of September 30, 2024, compared to 83.26% as of September 30, 2023. The rate at September 30, 2023 was significantly higher due to reserves on individually evaluated CRE loans that were subsequently charged-off after September 30, 2023.
Current wording
The nonaccrual loan balance was $29.7 million as of March 31, 2025, compared to $19.1 million as of March 31, 2024. The allowance for credit losses to nonaccrual loans ratio was 22.65% as of March 31, 2025, compared to 72.21% as of March 31, 2024. The rate at March 31, 2024 was significantly higher due to reserves on individually evaluated CRE loans that were subsequently charged-off after March 31, 2024.
Previous wording
As of September 30, 2024, non-accrual loans increased to $36.5 million, compared to $18.1 million as of December 31, 2023. The non-accrual loans at September 30, 2024 was comprised of 116 borrowers. Of these, 14 loans were individually evaluated, and a specific reserve of $7.0 million was established for them. For collateral dependent loans, the Bank has obtained appraisal reports from independent licensed appraisal firms and discounted those values based on the Bank’s experience selling OREO properties and for estimated selling costs to determine estimated impairment. For cash flow dependent loans, the Bank determined the reserve based on the present value of expected future cash flows discounted at the loan's effective interest rate.
Current wording
As of March 31, 2025, non-accrual loans increased to $29.7 million, compared to $25.9 million as of December 31, 2024. The non-accrual loans at March 31, 2025 was comprised of 268 borrowers. Of these, 14 loans were individually evaluated, and a specific reserve of $310,000 was established for them. For collateral dependent loans, the Bank has obtained appraisal reports from independent licensed appraisal firms and discounted those values based on the Bank’s experience selling OREO properties and for estimated selling costs to determine estimated impairment. No individually evaluated loans were cash flow dependent loans.
Previous wording
As of December 31, 2023, the $18.1 million of non-accrual loans was comprised of 139 borrowers. Of which, 19 loans were individually evaluated, and a specific reserve of $4.2 million was established.
Current wording
As of December 31, 2024, the $25.9 million of non-accrual loans was comprised of 335 borrowers. Of which, 14 loans were individually evaluated, and a specific reserve of $463,000 was established.
Previous wording
SBA loans held for sale totaled nil and $9.9 million as of September 30, 2024 and December 31, 2023, respectively. SBA loans held for sale represent the guaranteed portion of SBA loans and are reflected at the lower of aggregate cost or market value. SBA loans held for sale at December 31, 2023, consisted of $3.5 million SBA commercial and industrial loans and $6.4 million SBA commercial real estate loans, respectively.For the three and nine months ended September 30, 2024, total gain on sale of $67,000 and $378,000 was recorded. A servicing asset of $791,000 and $857,000 was recognized as of September 30, 2024 and December 31, 2023, respectively.
Current wording
SBA loans held for sale totaled zero as of March 31, 2025 and December 31, 2024. SBA loans held for sale represent the guaranteed portion of SBA loans and are reflected at the lower of aggregate cost or market value.
Previous wording
As of September 30, 2024, the credit card loans held for sale from Digital Payments division totaled $10.2 million. The credit card loans expected to be held for no longer than three days before being sold. The credit card receivable are fully cash-secured by deposits at Patriot. The credit card loans are sold to the third party as a whole loan sale transaction, priced at Par, thus there is no servicing asset or gain or loss on sale.
Current wording
As of March 31, 2025 and December 31, 2024, the credit card loans held for sale from Digital Payments division totaled $17.6 million and $11.4 million, respectively. The credit card loans expected to be held for no longer than three days before being sold. The credit card receivable are fully cash-secured by deposits at Patriot. The credit card loans are sold to the third party as a whole loan sale transaction, priced at Par, thus there is no servicing asset or gain or loss on sale.
Previous wording
In 2024, the Bank reentered the residential mortgage business. The Residential Mortgage Division, located in Jacksonville, FL, generates the loans and typically sells them to third parties. As of September 30, 2024, the Company reported residential mortgage loans held for sale totaling $3.5 million. These loans are recorded at the lower of aggregate cost or market value. For the three and nine months ended September 30, 2024, a total gain on sale of $10,000 and $24,000 was recorded. A servicing asset of $8,000 was recognized as of September 30, 2024.
Current wording
In April 2024, the Bank reentered the residential mortgage business. The Residential Mortgage Division, located in Jacksonville, FL, generates the loans and typically sells them to third parties. As of March 31, 2025 and December 31, 2024, the Company reported residential mortgage loans held for sale totaling $3.2 million and $4.3 million, respectively. These loans are recorded at the lower of aggregate cost or market value. For the three months ended March 31, 2025, a total gain on sale of $43,000 was recorded. A servicing asset of $50,000 was recognized as of March 31, 2025. In April 2025, the Company decided to close the Residential Mortgage Division.
Previous wording
Patriot recognizes income taxes under the asset and liability method. Under this method, deferred tax assets (DTAs) and liabilities (DTLs) are recognized for the estimated tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and loss carry forwards. DTAs and DTLs are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on DTAs and DTLs of a change in tax rates is recognized in income in the period that includes the enactment date.
Current wording
Patriot accounts for income taxes under the liability method of accounting for income taxes. Under the liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. The liability method requires that any tax benefits recognized for net operating loss carry forwards and other items be reduced by a valuation allowance when it is more likely than not that the benefits may not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under the liability method, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
Previous wording
The effective tax provision rate for the three months ended September 30, 2024 was 1067.85%, compared to the effective tax benefit rate for the three months ended September 30, 2023 of (26.12)%. The effective tax provision and benefit rates for the nine months ended September 30, 2024 and September 30, 2023 were 363.40% and (26.37)%, respectively. The Company’s effective rates for both periods were affected by state taxes and non-deductible expenses and the full valuation allowance against all of the DTAs in the third quarter of 2024.
Current wording
The effective tax provision rate for the three months ended March 31, 2025 was zero, compared to the effective tax rate of 28.33% for the three months ended March 31, 2024. The Company’s effective rate for the three months ended March 31, 2025 was affected by the change in the valuation allowance and for the three months ended March 31, 2024 was affected by state taxes and non-deductible expenses.
Previous wording
As of September 30, 2024, Patriot has $54.7 million of net operating losses ("NOLs") available for Connecticut tax purposes at September 30, 2024, which may be used to offset up to 50% of taxable income in any year. The NOLs expire between 2030 and 2044.
Current wording
Patriot has approximately $64.6 million of NOLs available for Connecticut tax purposes at March 31, 2025, which may be used to offset up to 50% of taxable income in any year. The NOL will expire between 2030 and 2044.
Previous wording
Total borrowings were $123.9 million and $201.1 million as of September 30, 2024 and December 31, 2023, respectively. Borrowings consist primarily of FHLB advances, senior notes, subordinated notes, junior subordinated debentures and a note payable. The senior notes, subordinated notes and 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.
Current wording
Total borrowings were $24.0 million and $33.1 million as of March 31, 2025 and December 31, 2024, respectively. Borrowings consist primarily of FHLB advances, FRB advances, senior notes, subordinated notes, junior subordinated debentures and a note payable. The senior notes, subordinated notes and 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.
Previous wording
FHLB-B advances are structured to facilitate the Bank’s management of its balance sheet and liquidity requirements. During the three months ended September 30, 2024, the Company repaid $30.0 million in long-term advances. As a result, the outstanding advances decreased from $101.0 million as of December 31, 2023, to $93.8 million as of September 30, 2024. At September 30, 2024, the FHLB-B advances carried a fixed interest rates of 5.03% with maturities of 1 day.
Current wording
FHLB-B advances are structured to facilitate the Bank’s management of its balance sheet and liquidity requirements. Outstanding advances from the FHLB-B decreased from $3.0 million at December 31, 2024 to zero million at March 31, 2025.
Previous wording
Patriot has entered into unsecured federal funds sweep and federal funds line of credit facility agreements with certain correspondent banks. Borrowings available under the agreements totaled $5.0 million and $22.0 million at September 30, 2024 and December 31, 2023, 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, Automated Clearing House (ACH), and other clearinghouse transactions.
Current wording
Patriot has entered into unsecured federal funds sweep and federal funds line of credit facility agreements with certain correspondent banks. As of March 31, 2025, no unsecured lines of credit were available. Borrowings available under the agreements totaled $5 million at December 31, 2024. 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, Automated Clearing House (ACH), and other clearinghouse transactions.
Previous wording
There was no outstanding balance under the agreements at September 30, 2024 and December 31, 2023. Interest expense incurred for the three and nine months ended September 30, 2024 was $2,000 and $4,000, respectively. For three and nine months ended September 30, 2023, interest expense incurred was nil and $117,000, respectively.
Current wording
There was no outstanding balance under the agreements at March 31, 2025 and December 31, 2024. Interest expense incurred for the three months ended March 31, 2025 and March 31, 2024 was zero and $2,000, respectively.
Previous wording
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 September 30, 2024, the book value of the pledged loans totaled $25.5 million, with a collateral value of $19.4 million. No funds were borrowed from the Discount Window under the FRBNY's Borrower-in-Custody ('BIC") program, and no interest expense was incurred for the three and nine months ended September 30, 2024. For the three and nine months ended September 30, 2023, a total of $12.0 million was borrowed, and interest expense incurred was $43,000 and $48,000, respectively.
Current wording
The Federal Reserve Bank of New York (“FRBNY”) accepts securities and loan pledges from qualifying depository institutions to secure borrowings from the Federal Reserve Discount Window ("Discount Window"). Patriot has pledged eligible securities and loans as collateral to support its borrowing capacity at the FRBNY. As of March 31, 2025, Patriot had pledged eligible securities and loans with a book value of $149.3 million and a collateral value of $91.6 million. A total of $30.0 million was borrowed from the Discount Window and fully repaid during the three months ended March 31, 2025. No funds were borrowed from the Discount Window during the three months ended March 31, 2024. No interest expense incurred for the three months ended March 31, 2025 and March 31, 2024.
Previous wording
In July 2023, the Bank established a collateralized funding line of $73.8 million at par value under the Federal Reserve's newly established Bank Term Funding Program ("BTFP"). The program provided additional funding to eligible depository institutions, assuring they can meet the needs of all their depositors. The program served 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 allowed for a fixed rate borrowing at market rates, for up to one year, with repayment permitted at any time without penalty. The BTFP ceased allowing any new advances after March 11, 2024. As of September 30, 2024, Patriot paid off the BTFP borrowing of $70.0 million that was outstanding as of December 31, 2023. Interest expense incurred for the three and nine months ended September 30, 2024 was $632,000 and $2.3 million, respectively. Interest expense incurred for the three and nine months ended September 30, 2023 was $833,000.
Current wording
In July 2023, the Bank established a collateralized funding line of $73.8 million at par value under the Federal Reserve's temporary Bank Term Funding Program ("BTFP"). The program provided additional funding to eligible depository institutions, assuring they can meet the needs of all their depositors. The program served 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 allowed for a fixed rate borrowing at market rates, for up to one year, with repayment permitted at any time without penalty. The BTFP ceased allowing any new advances after March 11, 2024. The outstanding BTFP borrowing was paid off as of December 31, 2024. Interest expense incurred for the three months ended March 31, 2025 and March 31, 2024 was nil and $853,000, respectively.
Previous wording
On June 22, 2022, the Company amended and restated the 2016 Senior Notes. The maturity date of the Senior Notes was further extended to December 31, 2022, and the interest rate increased from (i) 7% to 7.25% from July 1, 2022 until September 30, 2022 and (ii) from 7.25% to 7.50% thereafter. The 2016 Senior Notes was repaid in December 2022.
Current wording
On June 22, 2022, the Company amended and restated the 2016 Senior Notes. The maturity date of the 2016 Senior Notes was further extended to December 31, 2022, and the interest rate increased from (i) 7% to 7.25% from July 1, 2022 until September 30, 2022 and (ii) from 7.25% to 7.50% thereafter. The 2016 Senior Notes was repaid in December 2022.
Previous wording
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 2022 Senior Notes, the Company incurred $326,000 of costs, which are being amortized over the term of the 2022 Senior Notes to recognize a constant rate of interest expense. At September 30, 2024 and December 31, 2023, $173,000 and $277,000 of unamortized debt issuance costs were deducted from the face amount of the 2022 Subordinated Notes included in the Consolidated Balance Sheet, respectively.
Current wording
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 2022 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 March 31, 2025 and December 31, 2024, unamortized debt issuance cost of $84,000 and $139,000, respectively, was deducted from the face amount of the 2022 Senior Notes included in the Consolidated Balance Sheets.
Previous wording
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.
Current wording
The 2022 Senior Note Purchase Agreement contains certain customary representations, warranties, and covenants made by each of the Company and the Note 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.
Previous wording
The Subordinated Notes initially bore 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.
Current wording
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.
Previous wording
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 September 30, 2024 and December 31, 2023, $109,000 and $131,000 of unamortized debt issuance costs were deducted from the face amount of the Subordinated Notes included in the consolidated balance sheet, respectively.
Current wording
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 March 31, 2025 and December 31, 2024, $76,000 and $102,000 of unamortized debt issuance costs were deducted from the face amount of the Subordinated Notes included in the Consolidated Balance Sheets, respectively.
Previous wording
Trust preferred securities currently qualify for up to 25% of the Company’s Tier I Capital, with the excess qualifying as Tier 2 Capital.
Current wording
Trust preferred securities currently qualify for up to 25% of the Company’s Tier 1 Capital, with the excess qualifying as Tier 2 Capital.
Previous wording
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 September 30, 2024 and December 31, 2023, the unamortized placement fee deducted from the face amount of the junior subordinated debt owed to the unconsolidated trust amounted to $104,000 and $111,000, respectively, and accrued interest on the junior subordinated debentures was $9,000 and $12,000, respectively.
Current wording
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.
Previous wording
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 September 30, 2024 and December 31, 2023, the outstanding balance on the note was $216,000 and $376,000, respectively. The note is secured by a first Mortgage Deed and Security Agreement on the purchased property. The note originally set to mature in August 2024, was extended from August 25, 2024 to September 1, 2025, with the Bank continuing its scheduled principal and interest payments.
Current wording
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 March 31, 2025 and December 31, 2024, the note had a balance outstanding of $109,000 and $162,000, respectively. The note originally set to mature in August 2024, was extended from August 25, 2024 to September 1, 2025, with the Bank continuing its scheduled principal and interest payments. The note is secured by a first mortgage deed and security agreement on the purchased property.
Previous wording
For the three and nine months ended September 30, 2024, the Company recognized interest expense of $1,000 and $4,000, respectively. Interest expense incurred for the three and nine months ended September 30, 2023 was $2,000 and $7,000, respectively.
Current wording
For the three months ended March 31, 2025 and 2024, the Company recognized interest expense of $1,000 and $1,000, respectively.
Previous wording
As of September 30, 2024, Patriot has two interest rate swaps (“swaps”). One swap is with a loan customer to provide a facility to mitigate the fluctuations in the variable rate on the respective loan. The other swap is with an outside third party. The customer interest rate swap is matched in offsetting terms to the third party interest rate swap. The swaps are reported at fair value in other assets or other liabilities on the consolidated balance sheets. Patriot’s swaps are derivatives, but are not designated as hedging instruments, thus any net gain or loss resulting from changes in the fair value is recognized in other noninterest income. The Company recognized no gain on the swaps for the three and nine months ended September 30, 2024 and 2023.
Current wording
As of March 31, 2025, Patriot has two interest rate swaps (“swaps”). One swap is with a loan customer to provide a facility to mitigate the fluctuations in the variable rate on the respective loan. The other swap is with an outside third party. The customer interest rate swap is matched in offsetting terms to the third party interest rate swap. The swaps are reported at fair value in other assets or other liabilities on the consolidated balance sheets. Patriot’s swaps are derivatives, but are not designated as hedging instruments, thus any net gain or loss resulting from changes in the fair value is recognized in other noninterest income. The Company recognized no gain on the swaps for the three months ended March 31, 2025 and 2024.
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Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
Capital adequacy is one of the most important factors used to determine the safety and soundness of individual banks and the banking system. From September 2021 to September 30, 2023, the Company elected to adopt the CBLR framework. In the fourth quarter of 2023, the Company elected to use the instituted regulatory risk-based capital approach.