PATRIOT NATIONAL BANCORP INC
For the period ended Jun 30, 2026. Filed Aug 14, 2026.
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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.
Jun 30, 2026 · Filed Aug 14, 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-Q
Period ended 2026-03-31; filed 2026-05-15.
0001628280-26-035706
Item 2. : Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-06-30; filed 2026-08-14.
0001628280-26-057183
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 77 previous paragraphs and 84 current paragraphs.
33 unchanged; 26 reworded; 24 added; 18 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 9 previous and 10 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 (24)
Current report
The Company continued to execute its strategic plan during the six months ended June 30, 2026, with a focus on balance sheet growth, capital optimization, and risk management. Significant regulatory milestones were achieved during and shortly after the quarter. On June 30, 2026, when the OCC formally terminated its Formal Agreement with the Bank, resulting in the Bank's reclassification from "adequately capitalized" to "well capitalized" under applicable regulatory standards. On July 7, 2026, the OCC also notified the Bank that it no longer considered the Bank to be in “troubled condition” for purposes of applicable law and regulation.
Current report
At June 30, 2026, securities of $132.7 million were pledged to the FHLB or FRB at June 30, 2026, compared to $15.1 million at December 31, 2025. Of the June 30, 2026 amount, approximately $98.1 million was pledged to the FHLB to support available borrowing capacity, with no FHLB borrowings outstanding at quarter-end. Approximately $34.6 million was pledged to the FRB in connection with requirements applicable to the Bank while it was considered to be in troubled condition; no FRB borrowings were outstanding at June 30, 2026.
Current report
Loans receivable, net, increased to $877.4 million at June 30, 2026 from $585.7 million at December 31, 2025, an increase of approximately $291.7 million or approximately 50%. The increase reflects new loan originations under the Bank's targeted lending initiatives, as well as continued purchases of residential and commercial real estate loans.
Current report
For the three months ended June 30, 2026, net charge-offs decreased $0.7 million to $0.1 net recovery, compared to $(0.5) million and 0.08% for the three months ended June 30, 2025.
Current report
Average loans increased by approximately $180 million to $837.3 million for the three months ended June 30, 2026 from $657.7 million for the three months ended June 30, 2025. For the six-month period, the average loan balance increased $99.4 million, from $684.0 million in 2025 to $783.4 million in 2026. The increase reflects new loan originations under the Bank's targeted lending initiatives, as well as continued purchases of residential and commercial real estate loans.
Current report
The Company reported a net deferred tax asset of approximately $731 thousand at June 30, 2026, compared with a net deferred tax liability of $783 thousand at December 31, 2025. During the second quarter of 2026, management concluded that a portion of the Company’s deferred tax assets met the more-likely-than-not realization threshold and released approximately $1.2 million of the related valuation allowance, resulting in a corresponding discrete income tax benefit. The Company continues to maintain a substantial valuation allowance against its remaining deferred tax assets.
Current report
Management will continue to evaluate the realizability of its deferred tax assets based on all available positive and negative evidence. Changes in operating results, expected taxable income, strategic actions, applicable tax-law limitations or other relevant factors could result in additional changes to the valuation allowance and affect future income tax expense or benefit. See Note 14, Income Taxes, for additional information.
Current report
Total borrowings were $16.5 million at June 30, 2026, compared to $16.4 million at December 31, 2025, relatively unchanged. Subordinated debt and junior subordinated debt remained substantially stable at $8.3 million and $8.2 million, respectively. No FHLB, FRB, or correspondent bank advances were outstanding at June 30, 2026. The Bank maintained standby letters of credit issued by the FHLB for the benefit of Mastercard in connection with card settlement requirements of $70.5 million at June 30, 2026 and $55.0 million at December 31, 2025, which reduced available FHLB borrowing capacity.
Current report
Average Balances
Current report
Net interest income for the three months ended June 30, 2026 was $9.0 million, compared to $4.2 million for the same period in 2025, an increase of $4.8 million, or approximately 114%. For the six months ended June 30, 2026, net interest income was $16.0 million, compared to $8.1 million for the six months ended June 30, 2025. The increase reflects significant growth in the loan portfolio, a higher-yielding investment securities portfolio, and relatively stable funding costs.
Current report
Interest and fees on loans increased $3.1 million for the quarter and $3.2 million year-to-date, driven by substantial loan portfolio growth since year-end 2025.
Current report
Interest on investment securities increased $2.5 million for the quarter and $4.8 million year-to-date, reflecting the Company's strategic reallocation of liquidity from cash to investment securities.
Current report
Total interest expense increased $152 thousand for the quarter and decreased $794 thousand year-to-date, as the elimination of senior note interest expense following the March 2025 debt conversion partially offset volume-driven increases in deposit interest costs.
Current report
Net interest margin of 3.03% for the three months ended June 30, 2026, compared to 1.85% for the three months ended June 30, 2025. For the six months ended June 30, 2026 and 2025, net interest margin was 2.75% and 1.74%, respectively.
Current report
The Company recorded $590 thousand in provision for credit losses for the three months ended June 30, 2026, compared to $1.5 million for the same period in 2025. For the six months ended June 30, 2026 and 2025, provision for credit losses was $409 thousand and $2.3 million, respectively. The lower provision in 2026 reflects a broadly improving credit quality profile in the loan portfolio following actions taken during 2025 to address higher-risk legacy assets, including increased provisioning and loan sales, partially offset by growth in new originations. As noted above, the initial ACL of $925 thousand on purchased loans was recorded under ASU 2025-08 as an adjustment to amortized cost rather than through provision expense.
Current report
Non-interest income for the three months ended June 30, 2026 was $3.1 million, compared to $2.0 million for the same period in 2025, an increase of $1.1 million. For the six months ended June 30, 2026, non-interest income was $6.3 million, compared to $4.8 million for the prior-year period.
Current report
The primary driver was Digital Payments income, which increased $0.4 million to $2.6 million for the quarter and $1.5 million to $5.3 million year-to-date. The increase primarily reflected higher transaction volumes from certain existing program managers, partially offset by the Bank’s risk-based reduction of activity with other program manager relationships. This growth was partially offset by a decline in deposit fees and service charges and lower loan-related fee income compared to the prior year.
Current report
Non-interest expense for the three months ended June 30, 2026 was $12.8 million, compared to $9.7 million for the same period in 2025, an increase of $3.1 million. For the six months ended June 30, 2026, non-interest expense was $25.1 million, compared to $18.5 million for the prior-year period. Salaries and benefits increased $1.1 million for the quarter and $3.4 million year-to-date, reflecting investments in new leadership and management talent as well as higher equity-based compensation expense. A significant portion of the equity-based compensation relates to awards with relatively short vesting periods, which resulted in elevated expense recognition during the period.
Current report
Professional and outside services increased $1.3 million for the quarter and $1.8 million year-to-date, driven largely by legal, compliance, advisory and other remediation-related costs associated with the Bank’s former Formal Agreement with the OCC. Occupancy and equipment increased $0.4 million for the quarter and $0.5 million year-to-date, reflecting the opening of a new Beverly Hills, California office in the first quarter of 2026.
Current report
Income Taxes
Current report
For the three months ended June 30, 2026, the Company recorded an income tax benefit of $1.5 million, compared to a benefit of $49 thousand for the three months ended June 30, 2025. The 2026 benefit reflects the partial release of the valuation allowance on deferred tax assets, which resulted in the recognition of a $3.3 million deferred tax asset. For the six months ended June 30, 2026, the income tax benefit was $1.5 million, compared to $48 thousand for the same period in 2025.
Current report
On-hand liquidity declined by $171.6 million during the six months ended June 30, 2026, as the Company redeployed excess cash into higher-yielding earning assets, including loan originations and acquisitions, resulting in net loan growth of $291.6 million. The Company also enhanced its contingent liquidity position by increasing the amount of available for sale securities pledged to the FHLB, which increased available borrowing capacity to $158.6 million at June 30, 2026 from $76.0 million at December 31, 2025. On-hand liquidity to total liabilities decreased to 18.06% from 39.62%, and total liquidity to total liabilities declined to 40.90% from 53.40%, primarily reflecting the deployment of liquidity into earning assets, and increased available borrowing capacity.
Current report
Net cash provided by financing activities was $233.3 million for the six months ended June 30, 2026, compared to $76.3 million used in the prior-year period. Total deposits increased by $235.2 million, reflecting growth in core deposits and deposit activity associated with the Company’s digital payments business. Deposits served as the primary funding source for the Company's asset growth during the period.
Current report
Cash, cash equivalents and restricted cash decreased $85.6 million during the six months ended June 30, 2026, compared to an increase of $40.4 million during the same period in 2025. The decrease primarily reflects the Company's strategic deployment of liquidity into higher-yielding earning assets, including loans and investment securities, while funding balance sheet growth through deposit growth and increased borrowing capacity.
Removed paragraphs (18)
Previous report
During the first quarter of 2026, the Company continued to execute its strategic plan, emphasizing balance sheet management, capital and liquidity management, and risk mitigation in response to ongoing regulatory expectations and evolving market conditions. The Company remains subject to the OCC Agreement, which continues to influence its capital, compliance, and operational priorities.
Previous report
Loans receivable, net, increased to $751.2 million from $585.7 million at year‑end, driven primarily by $133.1 million of loan purchases concentrated primarily in residential and commercial real estate.
Previous report
Average loans increased by $18.2 million to $728.7 million for the three months ended March 31, 2026 from $710.5 million for the three months ended March 31, 2025. The net increase reflected the Company’s repositioning efforts continuing in the first quarter of 2026, including restricted loan growth, portfolio runoff, and efforts to reduce risk and maintain liquidity.
Previous report
As of March 31, 2026 and December 31, 2025 the carrying value of the deferred tax assets (“DTAs”) was zero because a full valuation allowance was maintained against all DTAs. Patriot evaluates the realizability of its deferred tax assets on a quarterly basis, considering all available evidence, both positive and negative, including recent operating results, cumulative earnings or losses, projections of future taxable income, reversal of existing taxable temporary differences, and tax planning strategies.
Previous report
At March 31, 2026, the Company continued to maintain a full valuation allowance, primarily due to cumulative losses in recent years, which constituted significant negative evidence regarding realizability. Although the Bank returned to profitability at the bank level during 2025, the Company remained unprofitable on a consolidated basis for the three months ended March 31, 2026 and for the year ended December 31, 2025. Based on improved operating performance and current projections, the Company continues to evaluate whether a full valuation allowance will remain appropriate 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.
Previous report
As of March 31, 2026, Patriot had available approximately $56.5 million of Federal net operating loss carryforwards (“NOL”), of which approximately $15.5 million was subject to limitations under Internal Revenue Code §382. 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 March 31, 2026, 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.
Previous report
For the three months ended March 31, 2026, the Company recorded income tax expense of $13 thousand.
Previous report
Total borrowings were $26.4 million at March 31, 2026, compared to $16.4 million at December 31, 2025. The increase was primarily attributable to $10.0 million of short-term Federal Home Loan Bank (“FHLB”), FRB and correspondent bank borrowings outstanding at quarter-end, while subordinated debt and junior subordinated debt remained substantially unchanged at $8.3 million and $8.2 million, respectively.
Previous report
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 report
Net interest income increased to $7.1 million for the quarter, up from $4.0 million in the prior year period, driven by higher yields on loans and investment securities, and a reduction in interest expense as deposit costs stabilized.
Previous report
Interest expense decreased $1.0 million, or 11.6%, to $7.6 million for the period ended March 31, 2026, primarily reflecting lower average rates on interest‑bearing deposit liabilities and the payoff of senior notes in 2025, which contributed $322 thousand of the decrease.
Previous report
Net interest margin increased to 2.46% for the quarter from 1.64% in the first quarter of 2025, reflecting higher earning asset yields and stabilized funding costs. Balance sheet optimization efforts, including the reduction of lower yielding assets and management of deposit costs, supported the margin expansion.
Previous report
The Company recorded a net recovery of $181 thousand in provision for credit losses for the three months ended March 31, 2026, compared to a $733 thousand provision for the same period in the prior year. The net recovery in the current-year period reflected improved credit performance and reserve dynamics during the quarter. The increase in the ACL balance at March 31, 2026 from December 31, 2025 also reflected the initial allowance recorded on loans purchased during the first quarter of 2026 under ASU 2025-08; however, consistent with that standard, the initial allowance was recorded as an adjustment to amortized cost basis rather than through provision expense.
Previous report
Non-interest income increased to $3.2 million, primarily due to growth in fee income from digital payments customers, partially offset by lower deposit and loan fee income.
Previous report
Non-interest expense increased to $12.2 million, reflecting higher salaries and benefits, professional services, and regulatory costs associated with operational and compliance and risk management initiatives.
Previous report
On-hand liquidity decreased by $175.8 million from December 31, 2025 primarily reflecting the Company's reallocation of cash and cash equivalents to higher yielding assets, including the acquisition and originations of loan receivables, resulting in a net increase of $165.5 million in the period. The Company also increased the amount of available-for-sale securities pledged to the FHLB during the quarter. Although that pledge reduced on-hand liquidity as defined for this measure, it increased immediately available borrowing capacity from the FHLB and improved the Company’s contingent liquidity. On-hand liquidity to total liabilities was 20.0% at quarter-end.
Previous report
Net cash provided by financing activities was $91.1 million from $54.9 million used in the prior-year period. Total deposits increased by $82.6 million and The Company drew $10.0 million in FHLB advances to manage short-term liquidity, with no new long-term debt issued during the quarter.
Previous report
As a result of the foregoing, cash, cash equivalents and restricted cash decreased $97.9 million during 2026, compared to an decrease of $26.4 million for the same period in 2025. The decrease in cash and equivalents during the quarter primarily reflects the Company’s strategic redeployment of liquidity into higher-yielding loans and securities, as well as the normalization of deposit flows and funding sources.
Reworded paragraphs (26)
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 as one of the Company’s most critical accounting estimates because it is important to the portrayal of the Company’s financial condition and results of operations and requires management to make subjective and complex judgments about matters that are inherently uncertain. See the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 for additional information regarding the Company’s critical accounting policies and estimates.
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 related disclosures. Actual results could differ from those estimates. Management has identified the allowance for credit losses and the realizability of deferred tax assets as among the Company’s most critical accounting estimates because they are important to the portrayal of the Company’s financial condition and results of operations and require management to make subjective and complex judgments about matters that are inherently uncertain. See the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 and Note 14, Income Taxes, for additional information.
Previous wording
For the three months ended March 31, 2026, the Company reported a net loss of $1.8 million, or $(0.02) per basic and diluted share, compared to a net loss of $2.8 million, or $(0.21) per share, for the same period in 2025. The improvement in net loss reflects higher net interest income, increased non-interest income, and a reversal of provision for credit losses, partially offset by higher non-interest expenses.
Current wording
For the three months ended June 30, 2026, the Company reported net income of $0.1 million, or $0.00 per basic and diluted share, compared to a net loss of $5.0 million, or $(0.06) per share, for the same period in 2025. For the six months ended June 30, 2026, the Company reported a net loss of $1.6 million, or $(0.01) per share, compared to a net loss of $7.8 million, or $(0.17) per share, for the same period in 2025. The improvement reflects higher net interest income and increased non-interest income, partially offset by higher operating expenses.
Previous wording
Total assets increased to $1.18 billion at March 31, 2026, from $1.09 billion at December 31, 2025, primarily due to growth in loans receivable and investment securities.
Current wording
Total assets increased to $1.32 billion at June 30, 2026, from $1.09 billion at December 31, 2025, primarily driven by loan origination and purchase activity and continued growth of the investment securities portfolio.
Previous wording
Cash, cash equivalents and restricted cash decreased from $207.1 million at December 31, 2025 to $109.2 million at March 31, 2026. The decrease was driven primarily by a strategic reallocation of liquidity into higher yielding asset classes, consistent with the Company’s strategic objectives and regulatory capital requirements. For further details, refer to the Consolidated Statements of Cash Flows.
Current wording
Cash, cash equivalents and restricted cash decreased from $207.1 million at December 31, 2025 to $121.5 million at June 30, 2026. The decrease was driven primarily by a strategic reallocation of liquidity into higher yielding asset classes, consistent with the Company’s strategic objectives. For further details, refer to the Consolidated Statements of Cash Flows.
Previous wording
Total investments increased by $18.6 million, or 8.3%, to $243.3 million at March 31, 2026, compared to $224.7 million at December 31, 2025. The investment portfolio continues to be composed primarily of U.S. Government agency and mortgage‑backed securities. The net increase was driven principally by $51.0 million in purchases of available‑for‑sale securities during 2026, reflecting the Company’s ongoing deployment of liquidity into investment securities as part of its balance sheet repositioning strategy. These purchases were partially offset by $29.1 million in sales proceeds, $2.0 million in principal paydowns, and a $2.2 million increase in unrealized losses. During the first quarter of 2026, the Bank recognized a net loss on sales of $34 thousand, compared to $4.5 million of sales with no net gain or loss during the same period in 2025.
Current wording
Total investments increased by $15.7 million, or 7.0%, to $240.3 million at June 30, 2026, compared to $224.7 million at December 31, 2025. The investment portfolio continues to be composed primarily of U.S. Government agency and mortgage‑backed securities. The net increase was driven principally by $51.0 million in purchases of available‑for‑sale securities during 2026, reflecting the Company’s ongoing deployment of liquidity into investment securities as part of its balance sheet repositioning strategy. These purchases were partially offset by $29.1 million in sales proceeds, $3.9 million in principal paydowns, and a $4.1 million increase in unrealized losses.
Previous wording
Commercial real estate remained the largest loan category as of March 31, 2026, comprising 52.2% of total gross loans, compared to 58.4% at December 31, 2025. Residential real estate loans increased to 23.3% of total gross loans from 13.4% at year‑end, driven primarily by loan purchases completed during the first quarter of 2026. SBA loans held for investment are included within the commercial real estate and commercial and industrial loan categories. As of March 31, 2026 and December 31, 2025, SBA loans classified as commercial real estate totaled $9.7 million. SBA loans included in the commercial and industrial loan category totaled $8.5 million at March 31, 2026, compared to $8.7 million at December 31, 2025.
Current wording
Commercial real estate remained the largest loan category as of June 30, 2026, comprising 55.0% of total gross loans, compared to 58.4% at December 31, 2025. Residential real estate loans increased to 22.7% of total gross loans from 13.4% at year‑end, driven primarily by loan purchases completed during the first quarter of 2026. SBA loans held for investment are included within the commercial real estate and commercial and industrial loan categories. As of June 30, 2026 and December 31, 2025, SBA loans classified as commercial real estate totaled $10.4 million. SBA loans included in the commercial and industrial loan category totaled $7.6 million at June 30, 2026, compared to $8.7 million at December 31, 2025.
Previous wording
As of March 31, 2026, the Company’s net loan‑to‑deposit ratio increased to 71.7% from 60.6% at December 31, 2025, while the net loan‑to‑total assets ratio increased to 63.8% from 53.8% over the period. These increases are consistent with the Company’s balance sheet repositioning strategy.
Current wording
As of June 30, 2026, the Company’s net loan‑to‑deposit ratio increased to 73.1% from 60.6% at December 31, 2025, while the net loan‑to‑total assets ratio increased to 66.6% from 53.8% over the period. These increases are consistent with the Company’s balance sheet repositioning strategy.
Previous wording
The following table provides the composition of the commercial real estate loan portfolio segment as of March 31, 2026 and December 31, 2025:
Current wording
The following table provides the composition of the commercial real estate loan portfolio as of June 30, 2026 and December 31, 2025:
Previous wording
The following table provides the commercial real estate loan portfolio segment by geographic concentrations as of March 31, 2026 and December 31, 2025:
Current wording
The following table provides the commercial real estate loan portfolio by geographic concentrations as of June 30, 2026 and December 31, 2025:
Previous wording
(1) Outside Market consists of loans in all other states, none of which are greater than 5% of the total.
Current wording
(1) Other Market consists of loans in all other states, of which California is $143.6 million as of June 30, 2026. No others are greater than 5% of the total as of the periods ending June 30,2026 and December 31, 2025.
Previous wording
Commercial real estate and commercial and industrial loans represented approximately 74.3% of total gross loans at March 31, 2026. 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, including under OCC Bulletin 2006-46, 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 wording
Commercial real estate and commercial and industrial loans represented approximately 76.4% of total gross loans at June 30, 2026. 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, including under OCC Bulletin 2006-46, 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.
Previous wording
As of March 31, 2026, the Bank’s CRE concentration was 292% of Tier 1 capital plus allowance for credit loss, below the Bank’s concentration policy limit of 350%. Exceeding this threshold would not, by itself, indicate unsafe or unsound banking practices; however, it subjects the Bank to heightened supervisory expectations for portfolio management, risk assessment, and capital planning. Management maintains portfolio management procedures, underwriting standards, and stress testing practices consistent with these regulatory expectations.
Current wording
As of June 30, 2026, the Bank’s CRE concentration was 289% of Tier 1 capital plus allowance for credit loss, below the Bank’s concentration policy limit of 350%. Exceeding this threshold would not, by itself, indicate unsafe or unsound banking practices; however, it subjects the Bank to heightened supervisory expectations for portfolio management, risk assessment, and capital planning. Management maintains portfolio management procedures, underwriting standards, and stress testing practices consistent with these regulatory expectations.
Previous wording
The Company estimates its ACL under the CECL methodology in ASC 326. The allowance for credit losses was $7.8 million at March 31, 2026, compared to $6.8 million at December 31, 2025. Based on management’s evaluation of the loan portfolio at March 31, 2026, management believed the ACL of $7.8 million, or 1.02% of gross loans, was appropriate to absorb expected credit losses in the loan portfolio as of that date. The increase from December 31, 2025 reflected, in part, the initial allowance recorded on loans purchased during the first quarter of 2026 under ASU 2025-08.
Current wording
The Company estimates its ACL under the CECL methodology in ASC 326. The allowance for credit losses was $8.5 million at June 30, 2026, compared to $6.8 million at December 31, 2025. Based on management’s evaluation of the loan portfolio at June 30, 2026, management believed the ACL of $8.5 million, or 0.96% of gross loans, was appropriate to absorb expected credit losses in the loan portfolio as of that date. The increase from December 31, 2025 reflected, in part, the initial allowance recorded on loans purchased during the first quarter of 2026 under ASU 2025-08.
Previous wording
The net charge-offs decreased $1.5 million to $0.2 million as of March 31, 2026 from $(1.3) million as of March 31, 2025, Net charge-offs to average loans improved to a nominal net recovery for the three months ended March 31, 2026 from 0.19% for the period ended March 31, 2025. The decrease in net charge-offs in 2026 was primarily due to reductions and repositioning of the portfolio completed in 2025.
Current wording
For the six months ended June 30,2026, net charge-offs decreased $2.2 million to $0.3 million net recovery, from $(1.9) million as of June 30, 2025, Net charge-offs to average loans improved to a nominal net recovery for the six months ended June 30, 2026 from 0.55% for the period ended June 30, 2025. The decrease in net charge-offs in 2026 was primarily due to reductions and repositioning of the portfolio completed in 2025.
Previous wording
Non-accrual loans were $22.9 million as of March 31, 2026, compared to $29.7 million as of March 31, 2025. The ACL-to-non-accrual loans ratio was 34.01% as of March 31, 2026, compared to 22.65% as of March 31, 2025. The Company continues to actively manage and monitor credit risk, particularly in commercial real estate and consumer loan portfolios.
Current wording
Non-accrual loans were $25.0 million as of June 30, 2026, compared to $24.2 million as of June 30, 2025. The ACL-to-non-accrual loans ratio was 33.8% as of June 30, 2026, compared to 32.15% as of June 30, 2025. The Company continues to actively manage and monitor credit risk, particularly in commercial real estate and consumer loan portfolios.
Previous wording
Non-accrual loans decreased $1.5 million, to $22.3 million at March 31, 2026 from $24.4 million at December 31, 2025. At March 31, 2026, non-accrual loans were comprised of 71 loans, compared to 151 loans at December 31, 2025. At March 31, 2026, 35 loans were individually evaluated and a specific reserve of $2.3 million was established, compared to 9 individually evaluated loans and a specific reserve of $2.1 million at December 31, 2025. The increase in loan count and specific reserves on individually evaluated loans reflects continued enhanced loan-level analysis 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 wording
Non-accrual loans increased $0.6 million, to $25.0 million at June 30, 2026 from $24.4 million at December 31, 2025. At June 30, 2026, non-accrual loans were comprised of 105 loans, compared to 151 loans at December 31, 2025. At June 30, 2026, 40 loans were individually evaluated and a specific reserve of $2.7 million was established, compared to 9 individually evaluated loans and a specific reserve of $2.1 million at December 31, 2025. The increase in loan count and specific reserves on individually evaluated loans reflects continued enhanced loan-level analysis 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.
Previous wording
Nonperforming assets to total assets improved to 1.94% at March 31, 2026 from 2.24% at December 31, 2025. Nonperforming loans to total loans, net decreased to 3.04% from 4.16%, primarily due to total loans increasing during the first quarter of 2026.
Current wording
Nonperforming assets to total assets improved to 1.90% at June 30, 2026 from 2.24% at December 31, 2025. Nonperforming loans to total loans, net decreased to 2.85% from 4.16%, primarily due to total loans increasing during 2026.
Previous wording
Loans held for sale totaled $20.1 million at March 31, 2026, compared to $24.5 million at December 31, 2025. These balances primarily consist of credit card receivables originated for certain digital payments customers and sold shortly after origination to third parties.
Current wording
Loans held for sale totaled $23.7 million at June 30, 2026, compared to $24.5 million at December 31, 2025. These balances primarily consist of credit card receivables originated for certain digital payments customers and sold shortly after origination to third parties. During the second quarter of 2026, certain credit card receivables that had been expected to be sold remained on the Company’s balance sheet after the anticipated sale was not completed. The Company recorded a valuation allowance of approximately $5.5 million on these receivables during the quarter to reflect their estimated fair value. The Company also recognized approximately $5.3 million of other income during the quarter related to contractual indemnification rights associated with the same program manager relationship.
Previous wording
Total deposits increased to $1.05 billion, with further reductions in brokered deposits. Brokered deposits decreased $22.8 million to $31.9 million at March 31, 2026 from $54.7 million at December 31, 2025. These changes reflect the Company’s ongoing efforts to manage liquidity, reduce certain deposit concentrations, and support its broader balance sheet repositioning.
Current wording
Total deposits increased to $1.2 billion, with further reductions in brokered deposits. Brokered deposits decreased $22.8 million to $31.9 million at June 30, 2026 from $54.7 million at December 31, 2025. These changes reflect the Company’s ongoing efforts to manage liquidity, reduce certain deposit concentrations, and support its broader balance sheet repositioning.
Previous wording
Equity decreased $4.5 million to $90.2 million at March 31, 2026 from $94.7 million at December 31, 2025. The decrease was primarily driven by the change in unrealized loss on available for sale securities of $2.2 million and a net loss of $1.8 million,
Current wording
Total shareholders' equity decreased to $88.9 million at June 30, 2026 from $94.7 million at December 31, 2025, a decrease of $5.8 million. The decrease was primarily driven by a $4.3 million increase in accumulated other comprehensive loss, reflecting higher unrealized losses on available-for-sale securities, and a year-to-date net loss of $1.6 million.
Previous wording
The following table presents the change in interest-earning assets and interest-bearing liabilities by major category and the related change in the interest income earned and interest expense incurred thereon attributable to the change in transactional volume in the financial instruments and the rates of interest applicable thereto, comparing the three months ended March 31, 2026 and 2025.
Current wording
The following table presents the change in interest-earning assets and interest-bearing liabilities by major category and the related change in the interest income earned and interest expense incurred thereon attributable to the change in transactional volume in the financial instruments and the rates of interest applicable thereto, comparing the three and six months ended June 30, 2026 and 2025.
Previous wording
For the three months ended March 31, 2026, the Company reported a net loss of $1.8 million, or $(0.02) per basic and diluted share, compared to a net loss of $2.8 million, or $(0.21) per share, for the same period in 2025. The improvement in net loss reflects higher net interest income, increased non-interest income, and a reversal of provision for credit losses, partially offset by higher non-interest expenses.
Current wording
For the three months ended June 30, 2026, the Company reported net income of $0.1 million, or $0.00 per basic and diluted share, compared to a net loss of $5.0 million, or $(0.06) per share, for the same period in 2025. For the six months ended June 30, 2026, the Company reported a net loss of $1.6 million, or $(0.01) per share, compared to a net loss of $7.8 million, or $(0.17) per share, for the same period in 2025. The improvement reflects higher net interest income and increased non-interest income, partially offset by higher operating expenses.
Previous wording
The Company's on-hand liquidity and total liquidity ratios for the year ended March 31, 2026 and December 31, 2025, are as follows:
Current wording
The Company's on-hand liquidity and total liquidity ratios as of June 30, 2026 and December 31, 2025, are as follows:
Previous wording
Net cash used in operating activities for the three months ended March 31, 2026 was $2.9 million, representing an improvement of $2.9 million compared to $5.8 million used in the same period of 2025, primarily due to a lower net loss and more favorable working capital movements.
Current wording
Net cash used in operating activities for the six months ended June 30, 2026 was $8.5 million, compared to $4.9 million used in the same period of 2025. The increase in cash used reflects higher net originations of loans held for sale, net of proceeds, as well as increases in accrued interest receivable and other assets and a reduction in accrued expenses and other liabilities, which together resulted in net cash outflows from working capital of $8.1 million during the period. These outflows were partially offset by a lower net loss and higher share-based compensation of $3.3 million compared to $1.3 million in the prior-year period.
Previous wording
Net cash used in investing activities was $186.2 million, compared to $34.3 million provided by investing activities in the prior-year period. The primary drivers for the period-over-period change is the $165.5 million in net new loan investments in residential and commercial real estate and the net purchase amount of available for sale securities of $51 million.
Current wording
Net cash used in investing activities was $310.3 million for the six months ended June 30, 2026, compared to $121.5 million provided by investing activities in the prior-year period. The primary driver of the period-over-period change was $291.6 million in net loan originations and purchases, primarily in residential and commercial real estate, as well as net purchases of available for sale securities of $18.0 million.
Previous wording
As of March 31, 2026, the Bank’s regulatory capital ratios remained in excess of the minimum levels required under the OCC Agreement. Although the Bank’s capital ratios exceeded both the standard “well capitalized” thresholds and the higher minimums established by the OCC Agreement, the Bank remained classified as “adequately capitalized” rather than “well capitalized” due to the terms of the OCC Agreement. At March 31, 2026, the Bank’s total risk-based capital ratio was 16.25%, its Tier 1 risk-based capital ratio was 15.21%, its common equity Tier 1 capital ratio was 15.21%, and its Tier 1 leverage ratio was 9.45%. See Note 11 to the consolidated financial statements for additional information regarding the Company’s and the Bank’s regulatory capital amounts and ratios.
Current wording
As of June 30, 2026, the Bank’s regulatory capital ratios exceeded the minimum levels required for classification as “well capitalized” under applicable federal banking regulations. On June 30, 2026, the OCC terminated the Formal Agreement with the Bank, and the Bank is no longer subject to the higher minimum capital ratios previously established thereunder. At June 30, 2026, the Bank’s total risk-based capital ratio was 14.15%, its Tier 1 risk-based capital ratio was 13.22%, its common equity Tier 1 capital ratio was 13.22%, and its Tier 1 leverage ratio was 9.60%. See Note 11 to the consolidated financial statements for additional information regarding the Company’s and the Bank’s regulatory capital amounts and ratios.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
The following tables present daily average balance sheets, interest income, interest expense and the corresponding yields earned and rates paid for the six months ended June 30, 2026 and 2025: