PATRIOT NATIONAL BANCORP INC
For the period ended Dec 31, 2025. Filed Mar 31, 2026.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2025 · Filed Mar 31, 2026
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-K
Period ended 2024-12-31; filed 2025-04-15.
0001628280-25-017837
ITEM 7. Management’s Discussion and Analysis - Financial Condition & Results of OperationsCurrent report: 10-K
Period ended 2025-12-31; filed 2026-03-31.
0001628280-26-022508
ITEM 7. Management’s Discussion and Analysis of Financial Condition & 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 148 previous paragraphs and 147 current paragraphs.
47 unchanged; 27 reworded; 73 added; 73 removed; 1 previous and 0 current paragraphs rearranged.
Tables are not compared: 18 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 (73)
Current report
2025 FORM 10-K 21
Current report
Critical Accounting Estimates
Current report
The Company determines its allowance for credit losses (“ACL”) under the current expected credit loss (“CECL”) methodology in ASC 326, which requires management to estimate expected credit losses over the remaining contractual life of financial assets carried at amortized cost, adjusted for expected prepayments when appropriate. The ACL is established through a provision for credit losses charged to earnings and is reduced by charge-offs, net of recoveries. The Company also maintains a reserve for unfunded lending commitments for those commitments that are not unconditionally cancellable.
Current report
The ACL is a critical accounting estimate because it requires significant management judgment and is sensitive to changes in assumptions, forecasts, and portfolio conditions. The estimate incorporates both quantitative and qualitative factors, including historical loss experience, portfolio composition, delinquency trends, internal risk ratings, nonperforming asset levels, collateral values, the financial condition of borrowers, and reasonable and supportable forecasts of macroeconomic conditions. For collateral-dependent loans, expected credit losses may depend significantly on the fair value of collateral, less estimated selling costs where applicable.
Current report
Loans that do not share similar risk characteristics with other loans are evaluated individually. For loans evaluated on a collective basis, the Company segments the portfolio by loan type and other relevant risk characteristics and applies estimation methodologies that incorporate historical loss information, current conditions, and reasonable and supportable economic forecasts. Following the forecast period, the Company reverts to historical loss information over an appropriate reversion period. Management also applies qualitative adjustments, as needed, to reflect factors not fully captured in the quantitative model.
Current report
The ACL estimate is particularly sensitive to changes in economic forecasts, borrower performance, collateral values, portfolio mix, and the credit quality of the Company’s loans. Changes in these assumptions or in the condition of the loan portfolio could result in material changes to the ACL and the related provision for credit losses in future periods.
Current report
The Company’s ACL methodology and the judgments used in determining the ACL are described more fully in the Notes to Consolidated Financial Statements included in Item 8.
Current report
The Company’s total assets increased $75.5 million, or 7.5%, from $1.01 billion at December 31, 2024 to $1.09 billion at December 31, 2025. This was primarily reflected as a $140.2 million increase in investment securities and a $44.5 million increase in cash, cash equivalents and restricted cash, which was partially offset by a $114.4 million decline in loans receivable. The change in asset mix reflected the Company’s continued balance sheet repositioning during 2025, including reduced loan exposure, increased liquidity, and deployment of funds into investment securities.
Current report
Cash, cash equivalents and restricted cash increased $44.5 million or 27.4%, to $207.1 million as of December 31, 2025 from $162.6 million as of December 31, 2024. The increase in 2025 was primarily driven by loan repayments, loan sales, and cash proceeds from issuance of common and preferred stock. For further details, refer to the Consolidated Statements of Cash Flows.
Current report
2025 FORM 10-K 22
Current report
The higher liquidity position improved the Bank’s funding flexibility and supported the Company’s balance sheet repositioning during 2025.
Current report
Total investments increased $140.2 million or 166.1%, to $224.7 million at December 31, 2025 from $84.4 million at December 31, 2024. This increase primarily reflected purchases of available-for-sale securities of $145.2 million during 2025, as the Company deployed liquidity into investment securities as part of its balance sheet repositioning. The portfolio at December 31, 2025 consisted primarily of U.S. Government agency and mortgage-backed securities. During 2025, the Bank sold $4.5 million of available-for-sale securities and recognized no net gain or loss on sale, compared to sales of $8.3 million and a net loss of $334 thousand in 2024.
Current report
Gross loans receivable decreased $114.9 million, or 16.2%, to $592.6 million at December 31, 2025 from $707.5 million at December 31, 2024. The decline reflected the Company’s continued balance sheet repositioning during 2025, including restricted loan originations during the first three quarters of the year, portfolio runoff, loan sales and efforts to reduce risk and improve liquidity. The Company sold 1539 loans with an unpaid principal balance of $67.8 million during 2025. Net loans receivable decreased to $585.7 million at December 31, 2025 from $700.2 million at December 31, 2024.
Current report
2025 FORM 10-K 23
Current report
Commercial real estate and commercial and industrial loans represented approximately 83.2% of total gross loans at December 31, 2025. Accordingly, the Company’s credit performance remains significantly influenced by borrower operating performance, collateral values, and economic conditions in the markets and customer segments served by the Bank. For purposes of internal and regulatory CRE concentration monitoring, owner-occupied CRE loans are excluded from CRE totals and classified as commercial and industrial loans, although owner-occupied CRE loans are included in the CRE portfolio presentation above.
Current report
The Company estimates its ACL under the CECL methodology in ASC 326.
Current report
The allowance for credit losses was $6.8 million at December 31, 2025, compared to $7.3 million at December 31, 2024. Based on management’s evaluation of the loan portfolio at December 31, 2025, the ACL of $6.8 million, or 1.15% of gross loans, was considered appropriate to absorb expected credit losses in the loan portfolio as of that date.
Current report
The following table summarizes activity in the ACL:
Current report
2025 FORM 10-K 24
Current report
Average loans decreased by $153.2 million to $642.1 million for the year ended December 31, 2025 from$795.2 million for the year ended December 31, 2024. The decline reflected the Company’s continued balance sheet repositioning during 2025, including restricted loan growth, portfolio runoff, and efforts to reduce risk and improve liquidity.
Current report
Although the ACL decreased to $6.8 million at December 31, 2025 from $7.3 million at December 31, 2024, the ACL-to-total loans ratio increased to 1.15% from 1.03%, primarily because gross loans declined during 2025. The 2024 ACL balance and related coverage ratios were also affected by significant charge-offs of reserved commercial real estate and consumer loans during 2024.
Current report
The following table presents non-accrual loans and other real estate owned (“OREO”) as of the dates indicated:
Current report
Non-accrual loans decreased $1.5 million, to $24.4 million at December 31, 2025 from $25.9 million at December 31, 2024. Total nonperforming assets decreased $4.4 million to $24.4 million from $28.7 million, primarily reflecting the resolution of certain troubled loans and the sale of the sole OREO asset during 2025.
Current report
At December 31, 2025, non-accrual loans were comprised of 151 borrowers, compared to 335 borrowers at December 31, 2024. At December 31, 2025, 9 loans were individually evaluated and a specific reserve of $2.1 million was established, compared to 14 individually evaluated loans and a specific reserve of $463 thousand at December 31, 2024. The increase in specific reserves on individually evaluated loans reflected enhanced loan-level analysis performed during 2025 on certain credits within the portfolio, which resulted in refined reserve estimates for those loans. Individually evaluated loans are measured based on collateral value or discounted expected cash flows, as applicable.
Current report
Nonperforming assets to total assets improved to 2.24% at December 31, 2025 from 2.84% at December 31, 2024. Nonperforming loans to total loans, net increased to 4.16% from 3.69%, primarily because total loans declined during 2025.
Current report
2025 FORM 10-K 25
Current report
Loans held for sale totaled $24.5 million at December 31, 2025, compared to $15.7 million at December 31, 2024.
Current report
These balances primarily consist of credit card receivables originated for certain digital payments customers and sold shortly after origination to a third party. These loans are fully cash-secured by deposits and are typically sold within three days at par value.
Current report
Premises and equipment totaled $28.1 million at December 31, 2025, compared to $28.9 million at December 31, 2024. The decrease was primarily due to depreciation expense during 2025.
Current report
Management continues to evaluate its branch and office footprint in connection with operating efficiency, client service, and the Company’s strategic repositioning.
Current report
As of December 31, 2025, the Bank had no other real estate owned, compared to $2.8 million at December 31, 2024.
Current report
During 2025, the Bank sold its remaining OREO asset and recognized a gain of approximately $176 thousand following a valuation allowance recorded prior to sale.
Current report
The Company had no goodwill recorded on its Consolidated Balance Sheets at December 31, 2025 or December 31, 2024. During 2023, the Company recorded a goodwill impairment charge of $1.1 million, which eliminated its remaining goodwill balance.
Current report
As of December 31, 2025 and 2024 the carrying value of the deferred tax assets (“DTAs”) was zero because a full valuation allowance was maintained against all DTAs.
Current report
As of December 31, 2025, Patriot had available approximately $50.8 million of Federal net operating loss carryforwards (“NOL”), of which approximately $15.5 million was subject to limitations under Internal Revenue Code §382. After giving effect to those limitations, the Company had approximately $35.3 million post-change federal NOL carryforwards, which do not expire. These amounts reflect the Company’s existing Section 382 analysis and do not reflect the effect, if any, of ownership changes or additional limitations that may have resulted from the Private Placement or the registered direct offerings completed during 2025, as no updated Section 382 analysis with respect to those transactions had been completed as of the date of these consolidated financial statements. Because the Company maintained a full valuation allowance against its deferred tax assets at December 31, 2025, management does not expect completion of such analysis to materially affect the net deferred tax asset balance reported as of that date, although it could affect the amount and availability of NOL carryforwards for future periods.
Current report
The Company evaluates the realizability of DTAs on a quarterly basis. In assessing whether a valuation allowance is required, management considers all available positive and negative evidence, including recent operating results, cumulative earnings or losses, projections of future taxable income, reversal of existing taxable temporary differences, and tax planning strategies. The principal factor supporting the full valuation allowance at December 31, 2025 was the existence of cumulative losses in recent years, which constituted significant negative evidence regarding realizability.
Current report
During 2025, the Bank returned to profitability at the bank level, although the Company remained unprofitable on a consolidated basis for the year ended December 31, 2025. Based on improved operating performance and current projections, the Company is evaluating whether a full valuation allowance will remain appropriate in future periods. The Company will continue to reassess
Current report
2025 FORM 10-K 26 the appropriateness of the valuation allowance in future periods. If management concludes, based on sufficient positive evidence, that some or all of the valuation allowance is no longer necessary, the release of all or a portion of the valuation allowance could materially affect income tax expense and net income in the period of release.
Current report
Deposits are the Company’s primary source of funding for lending and investment activities and an important component of liquidity management. Total deposits were $965.8 million at December 31, 2025, compared to $966.6 million at December 31, 2024.
Current report
Deposit composition changed during 2025 as the Company continued to reposition its funding base, including reductions in brokered deposits and uninsured deposits. Brokered deposits decreased $26.3 million to $54.7 million at December 31, 2025 from $69.7 million at December 31, 2024, while uninsured deposits decreased $103.6 million to $194.3 million from $297.8 million over the same period. Deposits associated with digital payments customers decreased $43.9 million to $297.7 million at December 31, 2025 from $265.5 million at December 31, 2024. These changes reflected the Company’s ongoing efforts to manage liquidity, reduce certain deposit concentrations, and support its broader balance sheet repositioning during 2025.
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Removed paragraphs (73)
Previous report
Critical Accounting Policies
Previous report
Due to the judgments, assumptions, and estimates inherent in the following policies, management considers such accounting policies critical to an understanding of the Consolidated Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations.
Previous report
The Company adopted Accounting Standards Update (“ASU”) 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, Accounting Standard Codification (“ASC”) 326, effective January 1, 2023, which introduced the current expected credit loss (“CECL”) methodology for estimating all expected losses over the life of a financial asset. The allowance for credit losses represents management’s estimate of expected credit losses over the life of a financial asset carried at amortized cost. Determining the amount of the allowance for credit losses is considered a critical accounting estimate because it requires significant judgment and the use of estimates related to the fair value of the underlying collateral and amount and timing of expected future cash flows on individually assessed financial assets, estimated credit losses on pools of loans with similar risk characteristics, and consideration of reasonable and supportable forecasts of macroeconomic conditions, all of which are susceptible to significant change. The Company also maintains an allowance for lending-related commitments, specifically unfunded loan commitments, which relates to certain amounts the Company is committed to lend (not unconditionally cancellable) but for which funds have not yet been disbursed.
Previous report
Loans deemed uncollectible are charged against and reduce the allowance. A provision for credit losses is charged to current expense and acts to replenish the ACL in order to maintain the allowance at a level that management deems adequate. Determining the allowance involves significant judgments and assumptions by management. Because of the nature of the judgments and assumptions made by management, actual results may differ from these judgments and assumptions.
Previous report
The Company’s total assets decreased $81.1 million, or 7.4%, from $1.09 billion at December 31, 2023 to $1.01 billion at December 31, 2024. The decrease was primarily driven by a $141.4 million decline in gross loans held for investment, which was partially offset by a rise in cash, cash equivalents and restricted cash of $96.1 million.
Previous report
Cash, cash equivalents and restricted cash increased $96.1 million or 144.4%, from $66.5 million as of December 31, 2023 to $162.6 million as of December 31, 2024. The increase in cash reflects the Company’s efforts to increase balance sheet liquidity due to the cumulative losses incurred by the Company in the prior two years and decreases in borrowing capacity.
Previous report
The following table is a summary of the Company’s available-for-sale securities portfolio and other investments at the dates shown:
Previous report
Total investments decreased $9.2 million or 9.8%, from $93.6 million at December 31, 2023 to $84.4 million at December 31, 2024. This decrease in 2024 was primarily attributable to $8.3 million sale of available-for-sale securities and $3.6 million in repayments and maturity of principal on available-for-sale securities, which was partially offset by the purchases of available-for-sale securities of $2.3 million, and net unrealized gain of $614,000 for the available-for-sale securities, associated with rising market interest rates. During the year ended December 31, 2024, the Bank sold $8.3 million available-for-sale securities and recognized $334,000 net loss on sale. In 2023, the Bank sold $1.8 million available-for-sale securities and recognized net gain on sale of securities of $24,000. There was no sale of available-for-sale securities during the year ended December 31, 2022.
Previous report
The gross loans receivable decreased $141.4 million or 16.7%, from $848.9 million at December 31, 2023 to $707.5 million at December 31, 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.
Previous report
The following table provides the composition of the commercial real estate loan portfolio segment as of December 31, for each of the years shown:
Previous report
The following table provides the commercial real estate loan portfolio segment by geographic concentrations as of December 31, for each of the years shown:
Previous report
(1) Outside Market consists of loans in all other states, none of which are greater than 5% of the total.
Previous report
Maturities and Sensitivities of Loans to Changes in Interest Rates
Previous report
As a community bank, the Bank is invested in a local economy, which may be subject to the vagaries of general economic conditions. As of December 31, 2024, the investments in Commercial Real Estate and Commercial and Industrial were approximately 77.6% of total loans receivable. These loans generally are collateralized by the underlying real estate and supported by personal guarantees of the borrowers.
Previous report
The Company adopted ASU 2016-13 effective January 1, 2023. ASU 2016-13 requires the measurement of expected credit losses for financial assets, including loans and certain off-balance-sheet credit exposures, measured at amortized cost.
Previous report
The allowance for credit losses was $7.3 million at December 31, 2024, compared to the allowance for credit losses of $15.9 million at December 31, 2023. The decrease was primarily driven by charge-offs totaling $13.6 million from two large commercial real estate loans in December 2024.
Previous report
Based upon the overall assessment and evaluation of the loan portfolio at December 31, 2024, management believes the allowance for credit losses of $7.3 million, which represents 1.0% of gross loans outstanding, was adequate under prevailing economic conditions to absorb existing losses in the loan portfolio.
Previous report
The following table provides detail of activity in the allowance for credit losses. The Company used the CECL methodology in 2024 and 2023 while the incurred loss methodology was used in 2022:
Previous report
The average loan balance decreased by $101.3 million, from $896.5 million for the year ended December 31, 2023, to $795.2 million for the year ended December 31, 2024. The 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 report
As of December 31, 2024 and December 31, 2023, the ACL was $7.3 million and $15.9 million, respectively. The decrease was due to significant charge-offs of reserved CRE and consumer loans in 2024, which also impacted the ACL to loans ratio of 1.03% as of December 31, 2024, compared to ACL to loans ratio of 1.88% as of December 31, 2023.
Previous report
The following table provides an allocation of allowance for credit losses by portfolio segment and the percentage of the loans to total loans:
Previous report
The following table presents non-accrual and accruing loans which were past due by over 90 days for the dates indicated:
Previous report
Non-accrual loans increased $7.7 million, from $18.1 million at December 31, 2023 to $25.9 million at December 31, 2024. The $25.9 million of non-accrual loans at December 31, 2024 was comprised of 335 borrowers. Of these, 14 loans were individually evaluated and a specific reserve of $463,000 was established as of December 31, 2024. 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.
Previous report
As of December 31, 2023, the $18.1 million of non-accrual loans was comprised of 139 borrowers. Of these, 19 loans were individually evaluated and a specific reserve of $4.2 million was established.
Previous report
As of December 31, 2024, loans held for sale totaled $15.7 million, consisting of nil of SBA loans, $11.4 million loans held for sale for digital payments of credit cards and $4.3 million residential mortgage loans held for sale. In comparison, at December 31, 2023, loans held for sale totaled $20.8 million, consisting of $9.9 million SBA loans and $10.8 million loans held for sale for digital payments of credit cards.
Previous report
SBA loans made by the Bank under the SBA 7(a) program generally are made to small businesses to provide working capital or to provide funding for the purchase of businesses, real estate, or equipment. SBA loans are made based primarily on the historical and projected cash flow of the business and secondarily on the underlying collateral provided.
Previous report
Patriot sells the guaranteed portion of SBA loans for liquidity purposes and to generate non-interest income. Loans held for sale represent the guaranteed portion of SBA loans and are reflected at the lower of aggregate cost or market value. No SBA loans held for sale were recorded as of December 31, 2024. 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. The Company sold $8.4 million SBA loans and recorded $378,000 gain on sale for the year ended December 31, 2024. For the year ended December 31, 2023, the Company sold $4.6 million SBA loans and recorded $169,000 gain on sale. Total servicing assets recognized as of December 31, 2024 and December 31, 2023 were $739,000 and $857,000, respectively.
Previous report
During 2024, $4.3 million loans held for investment were transferred to loans held for sale, and sold in 2024. In 2023 and 2022, no loans held for investment were transferred to loans held for sale.
Previous report
In July 2023, Patriot Bank's Digital Payments Division has entered into a Program Management Agreement with a buyer. Under the agreement, Patriot originates credit card loans that are marketed by the buyer. As of December 31, 2024 , the Bank had credit card loans held for sale totaling $11.4 million. The credit card loans expected to be held for no longer than three days before being sold to the buyer. 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 report
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 December 31, 2024, the Company reported residential mortgage loans held for sale totaling $4.3 million. These loans are recorded at the lower of aggregate cost or market value. For the year ended December 31, 2024, a total gain on sale of $62,000 was recorded. A servicing asset of $27,000 was recognized as of December 31, 2024.
Previous report
As of December 31, 2024 and 2023, Patriot recorded premises and equipment of $28.9 million and $29.9 million, respectively. The decreases in premises and equipment were normal depreciation of the active premises and equipment during the year ended December 31, 2024.
Previous report
Management continuously reviews its branch locations and corporate offices evaluating operating efficiencies and market share as well as effective customer service and delivery.
Previous report
As of December 31, 2024 and 2023, the Bank recorded one OREO of $2.8 million. The OREO balance represents the lower of the carrying value of loan receivable due from the mortgage of the foreclosed residential property or the estimated net realized value of the underlying property acquired through foreclosure. During 2024 and 2023, no OREO balance was sold.
Previous report
The Company performs its annual impairment analysis of goodwill. In 2023, the impairment analysis determined that the estimated fair value of the reporting unit was less than its carrying value as of October 31, 2023. As a result, a full impairment charge of $1.1 million was recorded for the year ended December 31, 2023. As of December 31, 2024 and 2023, the goodwill balance was zero.
Previous report
As of December 31, 2024 the carrying value of the deferred tax assets (“DTAs”) 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
As of December 31, 2024, Patriot had available approximately $41.9 million of Federal net operating loss carryforwards (“NOL”) that are offset by $15.5 million in Internal Revenue Code §382 limitations. After applying the limitation, at December 31, 2024, Patriot has $26.4 million post-change net operating loss carry-forwards which do not expire. For the years ended December 31, 2024 and 2023, the Bank did not record any uncertain tax position (“UTP”) related to the utilization of certain federal net operating losses.
Previous report
The Company recognizes 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. 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 or, in certain circumstances, to accumulated other comprehensive income.
Previous report
The key factor for providing a full valuation allowance was our 3-year cumulative operating losses. Once the Company begins generating profits, we will re-evaluate whether a full valuation allowance remains appropriate or if the allowance should be reduced. 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
Total deposits increased by $126.3 million during 2024, rising from $840.3 million as of December 31, 2023, to $966.6 million as of December 31, 2024. The growth was primarily driven by higher deposits in the Digital Payments Division, an increase in brokered deposits, increased online money market deposits and higher retail branch deposits. The Company raised additional deposits to lower borrowings, including the Fed Bank Term Funding Program (“BTFP”) as $70 million of BTFP borrowings were repaid during 2024, as well as a reduction in outstanding advances with the FHLB.
Previous report
Non-GAAP Financial Measures:
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Reworded paragraphs (27)
Previous wording
ITEM 7. Management’s Discussion and Analysis - Financial Condition & Results of Operations
Current wording
ITEM 7. Management’s Discussion and Analysis of Financial Condition & Results of Operations
Previous wording
The accounting and reporting policies of Patriot conform to accounting principles generally accepted in the United States of America (“U.S. GAAP”) and to general practices within the financial services industry. A summary of Patriot’s significant accounting policies is included in the Notes to consolidated financial statements that are referenced in Item 8. Financial Statements and Supplementary Data. Although all of Patriot’s policies are integral to understanding its consolidated financial statements, certain accounting policies involve management to exercise judgment, develop assumptions, and make estimates that may have a material impact on the financial information presented in the consolidated financial statements or Notes thereto. The assumptions and estimates are based on historical experience and other factors representing the best available information to management as of the date of the consolidated financial statements, up to and including the date of issuance or availability for issuance. As the basis for the assumptions and estimates incorporated in the consolidated financial statements may change, as new information comes to light, the consolidated financial statements could reflect different assumptions and estimates.
Current wording
The Company’s consolidated financial statements are prepared in accordance with United States of America (“U.S. GAAP”) and follow general practices within the financial services industry. A summary of Patriot’s significant accounting policies is included in the Notes to consolidated financial statements that are referenced in Item 8. Financial Statements and Supplementary Data. Although all of Patriot’s policies are integral to understanding its consolidated financial statements, certain accounting policies involve management to exercise judgment, develop assumptions, and make estimates that may have a material impact on the financial information presented in the consolidated financial statements or Notes thereto. Management considers an accounting estimate to be critical if it requires assumptions that are highly uncertain at the time the estimate is made and changes in those assumptions are reasonably likely to have a material effect on the Company’s financial condition or results of operations. Management has discussed the development and selection of its critical accounting estimates with the Audit Committee. The assumptions and estimates are based on historical experience and other factors representing the best available information to management as of the date of the consolidated financial statements, up to and including the date of issuance or availability for issuance. As the basis for the assumptions and estimates incorporated in the consolidated financial statements may change, actual results could differ from those estimates.
Previous wording
The following table provides the composition of the Company’s loan held for investment portfolio as of December 31, for each of the years shown:
Current wording
The following table provides the composition of the Company’s loan held for investment portfolio as of December 31, for the years indicated:
Previous wording
SBA loans held for investment were included in the commercial real estate loans and commercial and industrial loan classifications above. As of December 31, 2024 and 2023, SBA loans included in the commercial real estate loans were $18.7 million and $12.9 million, respectively. SBA loans included in the commercial and industrial loan were $11.2 million and $17.1 million as of December 31, 2024 and 2023, respectively.
Current wording
Commercial real estate remained the largest loan category at December 31, 2025, representing 58.4% of total gross loans, compared to 59.3% at December 31, 2024. Commercial and industrial loans increased as a percentage of the portfolio to 24.8% from 18.3%, while consumer and other loans declined to 3.4% from 8.5%. SBA loans held for investment are included in the commercial real estate loans and commercial and industrial loan classifications above. As of December 31, 2025 and 2024, SBA loans included in the commercial real estate loans were $9.7 million and $18.7 million, respectively, and SBA loans included in the commercial and industrial loan were $8.7 million and $11.2 million as of December 31, 2025 and 2024, respectively.
Previous wording
At December 31, 2024, the net loan to deposit ratio was 72.4% and the net loan to total assets ratio was 69.2%. At December 31, 2023, these ratios were 99.1% and 76.2%, respectively. The net loan to deposit ratio and net loan to total assets improvement as of December 31, 2024 compared to as of December 31, 2023 was due to the loan runoff as well as increasing deposits and cash and cash equivalents to supplement liquidity at the Company during 2024.
Current wording
As of December 31, 2025, the net loan-to-deposit ratio was 60.6%, compared to 72.4% at December 31, 2024, and the net loan to total assets ratio was 53.8%, compared to 69.2% at December 31, 2024. These declines reflected lower loan balances and higher deposits and liquidity during 2025.
Previous wording
All variable rate loans account for 49.2% of the total loan portfolio. Approximately 20.2% of the variable rate loan portfolio reprices with changes in interest rates within three months of the rate change. The balance of the loan portfolio has an initial rate for a fixed period, for example one, three or five years and then reprice annually after the initial fixed period. These repricing characteristics are reflected in the Bank’s aggregate analysis of net interest sensitivity included in Item 7A. of this report.
Current wording
At December 31, variable-rate loans represented 57.0% of the total loan portfolio. Approximately 30.8% of the variable-rate loan portfolio reprices within three months of a change in interest rates. The remainder of the variable-rate portfolio generally carries an initial fixed-rate period, such as one, three, or five years, followed by periodic repricing. These repricing characteristics are reflected in the Bank’s aggregate analysis of net interest sensitivity included in Item 7A.
Previous wording
The net charge-offs increased $3.9 million from $17.3 million as of December 31, 2023 to $21.2 million as of December 31, 2024, with an increase in net charge-offs to average loans ratio of 2.66% for the year ended December 31, 2024 , from 1.93% for the year ended December 31, 2023.
Current wording
The net charge-offs decreased $19.1 million to $2.1 million as of December 31, 2025 from $21.2 million as of December 31, 2024, Net charge-offs to average loans improved to 0.32% for the year ended December 31, 2025 from 2.66% for the year ended December 31, 2024. The decrease in net charge-offs in 2025 was primarily due to charge-offs totaling $13.6 million related to two large commercial real estate loans recognized in the fourth quarter of 2024.
Previous wording
Nonaccrual loans was $25.9 million as of December 31, 2024, compared to $18.1 million as of December 31, 2023. The ACL to nonaccrual loans ratio was 28.24% as of December 31, 2024, compared to 87.85% as of December 31, 2023. The rate at December 31, 2023 was significantly higher due to reserves on individually evaluated CRE loans that were subsequently charged-off in the fourth quarter of 2024. Nonaccrual CRE loans of $13.6 million have been charged-off to net realizable value as of December 31, 2024.
Current wording
Non-accrual loans were $24.4 million as of December 31, 2025, compared to $25.9 million as of December 31, 2024. The ACL-to-non-accrual loans ratio was 26.44% as of December 31, 2025, compared to 28.24% as of December 31, 2024. The 2024 ratio was higher primarily due to reserves on individually evaluated commercial real estate loans that were subsequently charged off in the fourth quarter of 2024. Non-accrual CRE loans of $376 thousand have been charged-off to net realizable value as of December 31, 2025.
Previous wording
Core deposit intangible (“CDI”) was recorded as part of the Prime Bank business combination in May 2018. The CDI is amortized over a 10-year period using the straight-line method. The Company performed a review of the CDI as of October 31, 2024 and determined that there was no impairment of the CDI as of December 31, 2024. The decrease in CDI of $47,000 from $203,000 at December 31, 2023 to $156,000 at December 31, 2024, was solely due to the amortization of the CDI for the year ended December 31, 2024.
Current wording
Core deposit intangible (“CDI”) represents the value assigned to deposit relationships acquired in connection with the Prime Bank business combination in 2018. The CDI is amortized over a 10-year period using the straight-line method. CDI decreased $47 thousand to $109 thousand at December 31, 2025 from $156 thousand at December 31, 2024, solely due to the amortization.
Previous wording
Additionally, Patriot has approximately $63.4 million of NOLs available for Connecticut tax purposes at December 31, 2024, which may be used to offset up to 50% of taxable income in any year. The NOLs will expire between 2030 and 2044.
Current wording
In addition, at December 31, 2025, the Company had approximately $64.2 million of Connecticut NOL carryforwards, which may be used to offset up to 50% of taxable income in any year and expire between 2030 and 2055.
Previous wording
Based on our assessment performed in September 2024, we determined that a full valuation allowance was appropriate against the Company’s U.S. federal and state deferred tax assets. For the year ended December 31, 2024, the Company recorded income tax expense of $23.8 million which includes $25.1 million of expense from the initial recognition of the full valuation allowance.
Current wording
For the year ended December 31, 2025, the Company recorded income tax expense of $0.1 million.
Previous wording
As of December 31, 2024, the Company had two interest rate swaps outstanding. One swap is held with a loan customer to provide a facility to mitigate the fluctuations in the variable rate on the respective loan. The other swaps is with an outside third party. The customer interest rate swap is matched in offsetting terms to the third-party interest rate swaps. These 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 non-interest income. The Company did not recognize any unrealized and realized gain or loss for the year ended December 31, 2024, 2023 and 2022.
Current wording
As of December 31, 2025, the Company had two interest rate swaps outstanding. One swap was executed with a loan customer to provide a facility to mitigate fluctuations in the variable rate on the related loan, and the other was executed with an outside third party. The customer interest rate swap is matched in offsetting terms with the third-party interest rate swap. These swaps are reported at fair value in other assets or other liabilities on the Consolidated Balance Sheets. Because the swaps are not designated as hedging instruments, changes in the fair value are recognized in other non-interest income. The Company did not recognize any unrealized and realized gain or loss for the year ended December 31, 2025 and 2024.
Previous wording
The following table is a summary of the Company’s deposits at the dates shown:
Current wording
The following table summarizes the Company’s deposits at the dates indicated:
Previous wording
As of December 31, 2024 and 2023, total borrowings were $33.1 million and $201.1 million, respectively. Borrowings consist of Federal Home Loan Bank (“FHLB”) advances, FRB borrowing, senior notes, junior subordinated debentures, and a note payable to the seller from whom the Fairfield branch building was purchased in 2015.
Current wording
Total borrowings were $16.4 million compared to $33.1 million at December 31, 2024. Borrowings consist of Federal Home Loan Bank (“FHLB”) advances, FRB borrowing, and junior subordinated debt.
Previous wording
Equity decreased $40.1 million from $44.4 million at December 31, 2023 to $4.3 million at December 31, 2024. The decrease was primarily due to a net loss of $39.9 million for the year ended December 31, 2024. For more information on the net loss for the year ended December 31, 2024 see Results of Operations section of this Management’s Discussion and Analysis.
Current wording
Equity increased $90.4 million to $94.7 million at December 31, 2025 from $4.3 million at December 31, 2024. The increase was primarily due to the Company’s recapitalization and related capital raises during 2025, partially offset by a net loss of $12.7 million for the year ended December 31, 2025. For more information on shareholders’ equity and the net loss for the year ended December 31, 2025 see Note 16 and “Results of Operations” included elsewhere in this Management’s Discussion and Analysis.
Previous wording
The following table presents average balance sheets, interest income, interest expense and the corresponding yields earned, and rates paid for each of the years in the three-year period ended December 31, 2024.
Current wording
The following table presents average balances, interest income, interest expense and the corresponding yields earned, and rates paid for each of the years in the three-year period ended December 31, 2025.
Previous wording
For the year ended December 31, 2024, the Company recorded net loss of $39.9 million ($(10.03) basic and diluted loss per share) compared to net loss of $4.2 million ($(1.05) basic and diluted loss per share) for the year ended December 31, 2023.
Current wording
For the year ended December 31, 2025, the Company reported a net loss of $12.7 million, or $(0.17) per basic and diluted share, compared to a net loss of $39.9 million, or $(10.03) per basic and diluted share, for the year ended December 31, 2024.
Previous wording
Net interest income is the difference between interest income on interest earning assets and interest expense on interest-bearing liabilities. Net interest income depends on the relative amounts of interest earning assets and interest-bearing liabilities and the interest rates earned or paid on them, respectively.
Current wording
Net interest income represents the difference between interest income earned on interest-earning assets and interest expense paid on interest-bearing liabilities. It is affected by the relative levels of interest-earning assets and interest-bearing liabilities, as well as the interest rates earned or paid on these balances.
Previous wording
For the year ended December 31, 2024, the provision for credit losses was $12.5 million, consisting of a $12.5 million provision for credit loss on loans and a $89,000 credit in reserve for the off-balance sheet exposure. For the year ended December 31, 2023, the provision for credit losses was $7.4 million, consisting of a $9.9 million provision for loan losses and a $2.5 million credit in reserve for the off-balance-sheet exposure.
Current wording
For the year ended December 31, 2025, the provision for credit losses was $1.5 million, consisting of a $1.6 million provision for credit loss on loans and a $0.1 million credit in reserve for the off-balance-sheet credit exposures. For the year ended December 31, 2024, the provision for credit losses was $12.5 million, consisting of a $12.5 million provision for loan losses and a $0.1 million credit in reserve for the off-balance-sheet exposure.
Previous wording
For the year ended December 31, 2024, non-interest income increased to $8.4 million, as compared to $6.0 million in 2023. The increase was primarily attributable to higher non-interest income from the digital payments program.
Current wording
For the year ended December 31, 2025, non-interest income increased to $10.5 million from $8.4 million in 2024. The increase was primarily attributable to higher fee income associated with increased business activity from certain existing larger digital payments program managers during 2025, as well as gains on certain financial instruments.
Previous wording
The Company reported a provision for income taxes of $23.8 million for the year ended December 31, 2024, compared to a benefit for income taxes of $1.5 million for the year ended December 31, 2023. The provision for income taxes for year 2024 included a valuation allowance recorded against all deferred tax assets of $27.6 million, See Note 14 - Income Taxes.
Current wording
The Company reported a provision for income taxes of $0.1 million for the year ended December 31, 2025, compared to a provision for income taxes of $23.8 million for the year ended December 31, 2024. The 2024 provision was significantly affected by the recording of a full valuation allowance against deferred tax assets during that year. At December 31, 2025, the Company continued to maintain a full valuation allowance against its deferred tax assets. See Note 14 - Income Taxes to the Consolidated Financial Statements.
Previous wording
(6) The weighted average diluted shares outstanding did not include 491, 1,528, 1,651, and 15,622 anti-dilutive restricted shares of common stock as of March 31, 2023, June 30, 2023, September 30, 2023 and December 31, 2023, respectively.
Current wording
(c) The weighted average diluted shares outstanding did not include 112,771, 4,597,710, 5,809,410, and 10,000,970 anti-dilutive restricted shares of common stock as of March 31, 2025, June 30, 2025, September 30, 2025 and December 31, 2025, respectively.
Previous wording
The Company measures liquidity in two primary ratios: on-hand liquidity to total liabilities, and total liquidity to total liabilities. On-hand liquidity is comprised of interest-bearing cash and cash equivalents and unpledged available-for-sale securities. Total liquidity includes on-hand liquidity, plus total available credit lines, plus availability of brokered deposits which is subject to internal limitations. The Company monitors other metrics in addition to on-hand liquidity and total liquidity to manage concentration risk in certain types of liabilities.
Current wording
The Company monitors liquidity using, among other measures, on-hand liquidity to total liabilities, and total liquidity to total liabilities. On-hand liquidity is comprised of interest-bearing cash and cash equivalents and unpledged available-for-sale securities. Total liquidity includes on-hand liquidity plus unused borrowing capacity and other available contingent funding
Previous wording
The primary source of liquidity at the Company as a stand-alone parent company is return of capital from the Bank. These capital returns are subject to OCC approval and are needed periodically to provide funds needed to service debt payments at the Company. Return of capital payments from the Bank to the Company totaled $950,000 for the year ended December 31, 2024, $2.5 million for the year ended December 31, 2023, and $900,000 for the year ended December 31, 2022. The return of capital payments for the year ended December 31, 2024 compared to the year ended December 31, 2023 were lower as the Company obtained an interest deferral on its senior notes until April 1, 2025, which is described in Note 25 Subsequent Events.
Current wording
The primary source of liquidity at the parent company is dividends or other return of capital from the Bank. Such payments are subject to regulatory restrictions, including OCC supervisory requirements and the Bank’s capital plan, and are used in part to service debt payments at the Company. Return of capital payments from the Bank to the Company totaled zero for the year ended December 31, 2025, $1.0 million for the year ended December 31, 2024, and $2.5 million for the year ended December 31, 2023.
Previous wording
The Bank’s off-balance sheet commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee by the borrower. Since these commitments could expire without being drawn upon or are contingent upon the customer adhering to the terms of the agreements, the total commitment amounts do not necessarily represent future cash requirements. As of December 31, 2024 and 2023, the Bank’s off-balance sheet commitments were $87.6 million and $92.5 million, respectively.
Current wording
The Bank’s off-balance sheet arrangements consist primarily of unfunded loan commitments and standby letters of credit. Because these commitments may expire unused or are contingent on the customer’s compliance with the underlying terms, the total commitment amounts do not necessarily represent future cash requirements. As of December 31, 2025 and 2024, the Bank’s off-balance sheet commitments were $69 million and $87.6 million, respectively.
Previous wording
As of December 31, 2024, the Bank has an irrevocable stand-by letter of credit for a maximum of $45 million, issued by the Federal Home Loan Bank of Boston on behalf of the Bank, with Mastercard as the beneficiary, which expires on April 30, 2025.
Current wording
As of December 31, 2025, the Bank had an irrevocable stand-by letter of credit for a maximum of $55 million, issued by the Federal Home Loan Bank of Boston on behalf of the Bank, with Mastercard as the beneficiary, which expires on April 30, 2026.
Previous wording
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 wording
In April 2024, the OCC established individual minimum capital ratios for the Bank. On January 17, 2025, in connection with the Bank’s entry into the Formal Agreement on January 14, 2025, the OCC notified the Bank that the April 2024 individual minimum capital ratios had been terminated. As reflected in the table above, the minimum capital ratios applicable to the Bank at December 31, 2025 were those established by the Formal Agreement.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
The increase in net charge-offs for the year ended December 31, 2024 was primarily associated charge-offs totaling $13.6 million from two large commercial real estate loans in December 2024.