PATRIOT NATIONAL BANCORP INC

Note 1. Basis of Financial Statement Presentation

The accompanying unaudited interim condensed Consolidated Financial Statements of Patriot National Bancorp, Inc. (the “Holding Company” or “PNBK”) and its wholly-owned subsidiaries, Patriot Bank, N.A. (the “Bank”) and PinPat Acquisition Corporation (collectively, the “Company” or “Patriot”), have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions to Form 10-Q and applicable Securities and Exchange Commission (“SEC”) rules and regulations. Accordingly, they do not include all of the information and footnote disclosures required by U.S. GAAP for complete annual financial statements. These unaudited interim condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and notes thereto included on the Annual Report on Form 10-K for the year ended December 31, 2025.

The preparation of consolidated financial statements in accordance with US 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 accounting for the allowance for credit losses, the analysis and valuation of its investment securities, the valuation of deferred tax assets, the valuation of derivatives, and the valuation of servicing assets as certain of Patriot’s more significant accounting policies and estimates, in that they are critical to the presentation of Patriot’s financial condition and results of operations. As they concern matters that are inherently uncertain, these estimates require management to make subjective and complex judgments in the preparation of Patriot’s consolidated financial statements.

In the opinion of management, the accompanying unaudited interim condensed Consolidated Financial Statements reflect all adjustments necessary for a fair presentation of the financial position and results of operations for the interim periods presented. The results of operations for the three months and six months ended June 30, 2026 are not necessarily indicative of the results that may be expected for the remainder of 2026.

Reclassification

Certain prior-year amounts have been reclassified to conform to the current-year presentation

Note 2. Summary of Significant Accounting Policies and Transactions

Please refer to the summary of Significant Accounting Policies included in the Company’s 2025 Annual Report on Form 10-K for a list of all policies in effect as of December 31, 2025.

Recently issued Accounting Pronouncements not yet Adopted

The Company continues to monitor the potential impact of recently issued accounting standards, including ASU 2023-06, ASU 2024-01, and ASU 2024-03, as clarified by ASU 2025-01. The Company does not currently expect adoption of these standards to have a material effect on its consolidated financial statements, although they may affect future disclosures.

Recently adopted Accounting Pronouncements

ASU 2025-08

Effective January 1, 2026, the Company adopted ASU 2025-08, Financial Instruments Credit Losses Topic 326 Purchased Loans, on a prospective basis. The ASU requires an allowance for expected credit losses on purchased loans within its scope to be recorded at acquisition as an adjustment to the amortized cost basis rather than through provision expense. The adoption did not impact the Company’s opening retained earnings. For loans purchased during 2026, the Company recorded an initial allowance for credit losses as an adjustment to the amortized cost basis, consistent with the new standard.

Note 3. Available-for-Sale Securities

The amortized cost, gross unrealized gains, gross unrealized losses and fair values of available-for-sale securities at June 30, 2026 and December 31, 2025 are as follows:

The following table presents the available-for-sale securities’ gross unrealized losses and fair value, aggregated by the length of time the individual securities have been in a continuous loss position as of June 30, 2026 and December 31, 2025:

As of June 30, 2026, allfifty-eight available-for-sale securities were in an unrealized loss position, with an aggregate depreciation of 8.0% from amortized cost. As of December 31, 2025, fifty-five ofsixty available-for-sale securities were in an unrealized loss position, with an aggregate depreciation of 7.6% from amortized cost.

At June 30, 2026 and December 31, 2025, no allowance for credit losses has been recognized on available-for-sale debt securities in an unrealized loss position as the Company does not believe any of the debt securities are credit impaired. This is based on the Company’s analysis of the risk characteristics, including credit ratings, and other qualitative factors related to available-for-sale debt securities. The issuers of these debt securities continue to make timely principal and interest payments under the contractual terms of the securities. The Company does not intend to sell these debt securities and it is more likely than not that the Company will not be required to sell the debt securities before recovery of their amortized cost, which may be at maturity. The unrealized losses are due to increases in market interest rates over the yields available at the time the debt securities were purchased.

With regard to U.S. mortgage-backed securities and municipal bonds issued by the U.S. government, or agencies thereof, it is expected that the securities will not be settled at prices less than the amortized cost basis of the securities as such securities are backed by the full faith and credit of and/or guaranteed by the U.S. government. Accordingly, no allowance for credit losses has been recorded for these securities.

With regard to corporate bonds, management considers (i) issuer bond ratings, (ii) historical loss rates for given bond ratings, (iii) whether issuers continue to make timely principal and interest payments under the contractual terms of the securities, and (iv) internal forecasts. Securities under the U.S. Small Business Administration (“SBA”) government guaranteed loan pools program were purchased at a premium and the impairment was attributable primarily to increased prepayment speeds. The timely payment of principal and interest on these securities is guaranteed by the U.S. Government agency. The contractual terms of the subordinated notes do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments. Furthermore, as of June 30, 2026, there were no past due principal or interest payments associated with these securities. Based upon (i) the issuer’s strong bond ratings and (ii) a zero historical loss rate, no allowance for credit losses has been recorded for available-for-sale securities. All debt securities in an unrealized loss position continue to perform as scheduled and the Company does not believe there is a possible credit loss or that an allowance for credit loss on these debt securities is necessary.

As of June 30, 2026 and December 31, 2025, available-for-sale securities of $132.7 million and $15.1 million, respectively, were pledged to either the Federal Home Loan Bank (“FHLB”) or Federal Reserve Bank (“FRB”). The securities were pledged primarily to secure borrowings from the FHLB and/or FRB.

The following summarizes, by class and contractual maturity, the amortized cost and estimated fair value of available-for-sale debt securities held as of June 30, 2026 and December 31, 2025. The mortgages underlying the mortgage-backed securities are not due at a single maturity date. Additionally, these mortgages often are and generally may be pre-paid without penalty, creating a degree of uncertainty that such investments can be held until maturity. For convenience, mortgage-backed securities have been included in the summary as a separate line item.

Note 4. Loans Receivable and Allowance for Credit Losses

As of June 30, 2026 and December 31, 2025, loans receivable, net, consisted of the following:

Existing Loan Portfolio

The Bank’s existing loan portfolio has consisted of commercial real estate (“CRE”) loans, commercial and industrial loans, residential real estate loans (primarily purchased), consumer loans, and a limited volume of construction loans. Commercial and residential real estate loans are collateralized primarily by first or second mortgages on real estate. The ability and willingness of borrowers to satisfy their loan obligations can be dependent to some degree on the regional economy and real estate market conditions.

Patriot maintains credit policies applicable to each lending activity and evaluates the creditworthiness of every borrower. Unless mitigating factors exist, commercial real estate loans are generally limited to 75% of the market value of the underlying collateral; multifamily real estate loans are limited to 75% to 80% loan-to-value; and construction loans (none currently outstanding) were limited to 75% of “as-completed” appraised value. Real estate is the primary form of collateral, although other collateral types include accounts receivable, inventory, marketable securities, time deposits and other business assets.

Risk characteristics of the Company’s portfolio classes include the following:

CRE Loans

CRE loans include both owner-occupied and non-owner-occupied properties. Non-owner-occupied CRE repayment depends primarily on rents from leases to third party tenants, successful management, marketing and expense supervision necessary to maintain the property. Repayment of these loans may be adversely affected by conditions in the real estate market or the general economy.

Owner-occupied CRE loans are utilized by a business for the purpose of providing the space needs for that business and the running of its operations. Owner-occupied CRE depends on the borrower’s operating business cash flow. Repayment of these loans may be adversely affected by conditions in the specific owner’s industry in addition to the general economy.

In underwriting CRE loans, Patriot evaluates both the prospective borrower’s ability to make timely payments on the loan, the value of the property(ies) securing the loans and the net operating income generated by such property(ies). Repayment of such loans may be negatively impacted should the borrower default, the value of the property collateralizing the loan substantially declines, or there is deterioration in general economic conditions. Where the owner occupies the property, Patriot also evaluates the business’ ability to repay the loan on a timely basis and may require personal guarantees, lease assignments, and/or the guarantee of the operating company.

No commercial real estate loans were purchased during the three and six months ended June 30, 2026.

Residential Real Estate Loans

The Bank’s residential real estate portfolio consists largely of purchased loans. The repayment of residential real estate loans, as well as the loans secured by residential real estate, may be negatively impacted if borrowers experience financial difficulties, if there is a significant decline in the value of the property securing the loan, or if there are declines in general economic conditions. During the three and six months ended June 30, 2026, Patriot purchased zero and $108 million residential real estate loans, respectively. During the three and six months ended June 30, 2025, Patriot purchased $92 thousand and $178 thousand residential real estate loans, respectively. The Bank didnot sell any purchased residential real estate loans during the three and six months ended June 30, 2026. During the three and six months ended June 30, 2025, the Bank sold $28.9 million of purchased residential loans.

Commercial and Industrial Loans

Patriot’s commercial and industrial loan portfolio consists primarily of commercial business loans and lines of credit to businesses and professionals. These loans are generally for the financing of accounts receivable, purchases of inventory, purchases of new or used equipment, or for other short- or long-term working capital purposes – and in some cases to finance the CRE and physical buildings used by companies to carry out their business activities. These loans are generally secured by business assets but are also offered on an unsecured basis. In granting these types of loans, Patriot considers the borrower’s cash flow as the primary source of repayment, supported by the value of collateral, if any, and personal guarantees, as applicable. Repayment of commercial and industrial loans may be negatively impacted by adverse changes in economic conditions, ineffective management, claims on the borrower’s assets by others that are superior to Patriot’s claims, a loss of demand for the borrower’s products or services, or the death or disability of the borrower or other key management personnel.

Commercial and industrial loans include risks associated with borrower’s cash flow, debt service coverage and management’s expertise. These loans are subject to the risk that the Company may have difficulty converting collateral to a liquid asset if necessary, as well as risks associated with degree of specialization, mobility and general collectability in a default situation. These commercial loans may be subject to many different types of risks, including fraud, bankruptcy, economic downturn, deteriorated or non-existent collateral, and changes in interest rates.

SBA Loans

Patriot originated SBA 7(a) loans, on which the SBA has historically provided guarantees of 75% of the principal balance. However, during the pandemic in 2020, the SBA temporarily increased the guarantees to 90% and reverted to 75% on October 1, 2021. The guaranteed portion of the Company’s SBA loans is generally sold in the secondary market with the unguaranteed portion held in the portfolio as a loan held for investment. SBA loans are for the purpose of providing working capital, financing the purchase of equipment, inventory, or commercial real estate and for other business purposes. Loans are guaranteed by the businesses' major owners. SBA loans are made based primarily on the historical and projected cash flow of the business and secondarily on the underlying collateral provided. SBA loans held for investment are included in the commercial real estate loans and commercial and industrial loan classifications, which totaled $18.0 million and $18.4 million as of June 30, 2026 and December 31, 2025, respectively.

In the second quarter of 2025, the Bank made the decision to voluntarily suspend its status as a participant in SBA’s Preferred Lender Program (“PLP”). This decision was made in response to the Bank’s desire to temporarily exit the SBA lending business and the Bank’s Definitive Agreement with the Office of the Comptroller of the Currency (“OCC”). It is possible that the Bank will determine in the future that it is prudent to petition to the SBA for reinstatement in the PLP.

Consumer Loans

Consumer loans carry a moderate degree of risk compared to other loans. They are generally more risky than traditional residential real estate loans, and carry generally low relative balances across a diverse borrowing pool. Probability of default is assessed based on FICO scores, debt to income ratios, historical loss rates other common consumer loan metrics.

In 2025, the Bank sold a portfolio of 1,092 individual unsecured consumer loans purchased under a program from a third party with unpaid principal balance of $9.0 million. The sale reduced the Bank’s consumer loan exposure and loans outstanding under this program at June 30, 2026 and December 31, 2025 to $0.3 million and $0.7 million respectively. No loans previously purchased under this program were sold during the three and six months ended June 30, 2026 and 2025.

The Company does not have any lending programs commonly referred to as subprime lending. Subprime lending generally targets borrowers with weakened credit histories that are typically characterized by payment delinquencies, previous charge-offs, judgments against the consumer, a history of bankruptcies, or borrowers with questionable repayment capacity as evidenced by low credit scores or high debt-burdened ratios.

During the three and six months ended June 30, 2026 and 2025, Patriot didnot purchase any home equity line of credit loans (“HELOC”). During the three and six months ended June 30, 2026 and 2025, the Bank sold home equity line of credit loans (“HELOC”) totaling zero and $15.9 million, respectively.

No construction loans were outstanding at June 30, 2026. The Bank currently does not offer a construction lending product.

New Lending Programs

During the third quarter of 2025, the Bank re-started its loan origination activities and implemented three targeted lending initiatives designed to prudently diversify revenue and strengthen relationship banking among high-quality entrepreneurial borrowers. These programs are fully aligned with the Bank’s credit risk appetite, underwriting standards, and its overall strategic plan. At this time, no other commercial loan products are offered to our customers. As the successful implementation of these new lending programs progresses and matures, the Bank continues to evaluate additional commercial lending products consistent with its strategic plan and risk appetite.

High Net Worth Line of Credit Program

The Bank introduced a tailored unsecured line of credit product for qualifying high net worth clients. The facility provides short-term liquidity for qualified borrowers with substantial financial strength and established deposit or relationship history with the Bank. The proceeds of the lines of credit are utilized for business and investment purposes. Although contractually unsecured for strong credits, the Bank may require a pledge of eligible assets—including cash, marketable securities, or other high-value property—on an “abundance-of-caution” basis. Lines typically range from $250 thousand to $5 million, with maturities of less thanone year, and are renewable annually subject to the Bank’s approval. The loans have prime-based interest rates with market origination fees.

Rediscount Line of Credit Program

The Bank launched a rediscount lending facility product that provides secured, revolving lines of credit to non-bank loan originators and private credit providers. Borrowers pledge single loans or pools of performing loans and leases. Typically, commercial real estate, residential real estate or equipment loans are provided as collateral, which may be replenished as the underlying loans pay down. Typical commitments range from $1 million to $15 million, with terms of 12 to 36 months and pricing on a floating rate basis. The facilities are full-recourse to the borrower and are governed by defined borrowing-base, collateral-performance, and reporting covenants.

Commercial Real Estate Program

The Bank also established a CRE-lending program to finance properties for depositor and relationship clients. Loans generally range from $1 million to $15 million, are secured by first mortgages, and are underwritten to maximum loan-to-value ratios and appropriate debt-service coverage metrics. Interest rates are typically floating rates with terms of 12 to 60 months, and may include extension options.

Allthree programs are subject to the Bank’s existing credit policies, together with new, enhanced standards and underwriting guidelines. The new lending programs comply with the Bank’s concentration limits, and risk-management controls, including heightened portfolio management routines, borrower and guarantor liquidity testing, and ongoing regulatory reporting. Early production volumes remain modest as the Bank completes pilot transactions and validates credit performance metrics. Each of the new loan products includes minimum deposit requirements designed to strengthen client relationships and promote additional business activities such as treasury management and card services.

Allowance for Credit Losses

The Company estimates expected credit losses under the current expected credit loss (“CECL”) methodology. Under the CECL, the ACL is measured on a collective basis for pools of loans with similar risk characteristics. For loans that do not share similar risk characteristics with the collectively evaluated pools, evaluations are performed on an individual basis. For all loan categories collectively evaluated, losses are estimated over a period of time determined to be reasonable and supportable, and at the end of the reasonable and supportable forecast period, loss estimates revert to long-term historical averages. Estimated credit losses are also adjusted for changes in qualitative factors not inherently considered in the quantitative analyses.

The Company estimates expected credit losses for pooled loans using a modeling method that incorporates probability of default (“PD”) and loss given default (“LGD”). The PD model employs a quarterly risk-rating transition method to estimate the probability of default by simulating loan downgrades and assigning increasing default probabilities to each loan. This captures the likelihood that borrowers will be unable to repay their loans according to the original terms. The LGD calculation considers characteristics such as collateral value and vintage, underlying collateral characteristics (e.g., CRE vs. residential, owner-occupied vs. investment), a floor for the LGD calculation (minimum loss in event of default regardless of collateral protection), and other relevant underwriting characteristics. Also calculated is the exposure at default. The probability of default is multiplied by the loss given default and the exposure at default. This calculation is forecasted for every year remaining in the life of each loan, and the results are aggregated to determine the necessary level of ACL for the pooled loans. Forecasted exposure at default can be influenced by prepayments speeds, which management adjusted in part to reflect the expectation of slower voluntary prepayments in the current interest rate environment. Estimated credit losses are also adjusted for qualitative factors not inherently captured in the quantitative analyses.

The Company also maintains an ACL on unfunded lending commitments and letters of credit to provide for the risk of loss inherent in these arrangements. The allowance is computed using a methodology similar to that used to determine the ACL for loans, modified to take into account the probability of a drawdown on the commitment. The ACL on unfunded loan commitments is classified as other liabilities on the Consolidated Balance Sheets, while the corresponding provision for these credit losses is recorded as a component of provision for credit losses. The allowance for credit losses on unfunded commitments was $113 thousand at June 30, 2026 and $80 thousand at December 31, 2025.

Effective January 1, 2026, the Company adopted ASU 2025-08, Financial Instruments—Credit Losses (Topic 326): Purchased Loans, on a prospective basis. The adoption did not impact the Company’s opening retained earnings. For loans purchased during the first quarter of 2026, the Company recorded an initial allowance for credit losses of $925 thousand as an adjustment to the amortized cost basis, consistent with the new standard.

The following table summarizes activity in the ACL on loans for the three-month period ended June 30, 2026 and 2025:

(1) The provision on credit losses included in the above table for the three months ended June 30, 2026 does not include the provision on unfunded loan commitments of $18 thousand.

(2) The provision on credit losses included in the above table for the three months ended June 30, 2025 does not include the credit on unfunded loan commitments of $78 thousand.

The following table summarizes activity in the ACL on loans for the six months ended June 30, 2026 and 2025:

(3) The provision on credit losses for the six months ended June 30, 2026 does not include the provision on unfunded loan commitments of $33 thousand.

(4) The provision on credit losses for the six months ended June 30, 2025 does not include the credit on unfunded loan commitments of $101 thousand.

The following table summarizes the ACL on loans as of June 30, 2026 and December 31, 2025:

Patriot monitors the credit quality of its loans on an ongoing basis. Credit quality is monitored by reviewing certain indicators, including covenant compliance, cash flow from business operations, loan to value ratios, debt service coverage ratios, and credit scores.

Patriot employs a risk rating system as part of the risk assessment of its loan portfolio. At origination, credit officers are required to assign a risk rating to each loan in their portfolio, which is ratified or modified by the Internal Asset Review Committee (“IARC”) to which the loan is submitted for approval. If developments occur on a loan that manifest as potential or well-defined weaknesses, the risk rating is reviewed and adjusted, as applicable. In carrying out its oversight responsibilities, the IARC can adjust a risk rating based on available information from the borrower and from asset valuations in the market. In addition, the risk ratings on all commercial loans over $250,000 are reviewed by the IARC annually.

The IARC ensures the Bank identifies, monitors, and reports credit risk accurately and in a timely manner. IARC is charged with oversight of the Bank’s programs for monitoring, reviewing and dispositioning of the loan portfolio. IARC is responsible for ensuring that risk ratings are updated in a timely fashion, are accurate and that appropriate changes are made anytime there is a significant occurrence with a credit. IARC meets at least quarterly and reviews emerging risk trends with a focus toward the mitigation of risk, improvement of operations, and compliance with regulatory guidance and the Bank's risk appetite.

Additionally, Patriot retains an independent third-party loan review firm to perform an analysis of the results of its risk rating process, among other credit and portfolio management functions. The semi-annual review is based on a randomly selected sample of loans within established parameters (e.g., value, concentration), in order to assess and validate the risk ratings assigned to individual loans. Any changes to the assigned risk ratings, based on the semi-annual review, are required to be reported to the IARC.

When assigning a risk rating to a loan, management utilizes the Bank’s internal eleven grade risk rating system. An asset is considered “special mention” when it has a potential weakness based on objective evidence, but does not currently expose the Company to sufficient risk to warrant classification in one of the following categories:

•Substandard: An asset is classified “substandard” if it is not adequately protected by the current net worth and paying capacity of the obligor or the collateral pledged, if any. Substandard assets have well defined weaknesses based on objective evidence, and are characterized by the distinct possibility that the Company will sustain some loss, if noted deficiencies are not corrected.

•Doubtful: Assets classified as “doubtful” have all of the weaknesses inherent in those classified as “substandard”, with the added characteristic that the identified weaknesses make collection or liquidation-in-full improbable, on the basis of currently existing facts, conditions, and values.

Charge-offs of loans to reduce the loan to its recoverable value that are solely collateral dependent, generally occur immediately upon confirmation of the partial loss amount. Loans that are cash flow dependent are modeled to reflect the expected cash flows through expected loan maturity, including any proceeds from refinancing or principal curtailment. A specific reserve may be established for the amount by which the net investment in the loan exceeds the present value of discounted cash flows. Charge-offs on cash flow dependent loans also generally occur immediately upon confirmation of the partial loss amount. If either type of loan is classified as “Loss”, meaning full loss on the loan is expected, the full balance of the loan receivable is charged off, regardless of the potential recovery from a sale of the underlying collateral. Any amount that may be recovered on the sale of collateral underlying a loan is recognized as a “recovery” in the period in which the collateral is sold. In accordance with Federal Financial Institutions Examination Council published policies establishing uniform criteria for the classification of retail credit based on delinquency status, “Open-end” credits are typically charged off once they reach 180 days past due and “Closed-end” credits are typically charged off once they reach 120 days past due, with limited exceptions for loans secured by 1-4 family residential real estate.

Loan Portfolio Vintage Analysis

The following tables summarize loans by vintage, credit quality indicator, class of loans and charge-offs based on year of origination as of June 30, 2026:

The following tables summarize loan amortized cost by vintage, credit quality indicator, class of loans and charge-offs based on year of origination as of December 31, 2025:

(1) Total current period gross-charge offs includes $43 thousand related to Construction to Permanent - CRE loan with an origination year of 2021.

Loan Portfolio Aging Analysis

The following tables summarize performing and non-performing (i.e., non-accruing) loans receivable by portfolio, by aging category, by delinquency status as of June 30, 2026:

The following tables summarize performing and non-performing loans (i.e., non-accruing) receivable by portfolio, by aging category, by delinquency status as of December 31, 2025:

The following tables summarize non-performing (i.e., non-accruing) loans by aging category and status, within the applicable loan portfolio as of June 30, 2026 and December 31, 2025:

The accrual of interest on loans is discontinued at the time the loan is 90 days past due for payment unless the loan is well-secured and in process of collection. Consumer installment loans are typically charged-off when they become 120 days past due (180 days for open ended consumer credit). Past due status is based on contractual terms of the loan. In all cases, loans are placed on non-accrual status or charged-off, at an earlier date, if collection of principal or interest is considered doubtful.

All interest accrued, but not collected for loans that are placed on non-accrual status or charged-off, is reversed against interest income. The interest on these loans is generally accounted for on the cash-basis method until qualifying for return to accrual status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current, future payments are reasonably assured, after at least six months of timely payment history. The Bank considers loans under $100,000 and consumer installment loans to be pools of smaller homogeneous loan balances, and therefore are collectively evaluated for credit losses, and not individually evaluated for credit losses.

If non-accrual loans had been performing in accordance with the original contractual terms, additional interest income (net of cash collected) of approximately $1.0 million and $2.0 million would have been recognized during the three and six months ended June 30, 2026, respectively. During the three and six months ended June 30, 2025, additional interest income (net of cash collected) of approximately $0.9 million and $2.1 million would have been recognized, respectively.

Individually Evaluated Loans

The following table reflects information about the individually evaluated loans by class as of June 30, 2026 and December 31, 2025:

The following table summarizes additional information regarding individually evaluated loans for the three and six months ended June 30, 2026 and 2025:

Credit losses for loans that no longer share similar risk characteristics with the collectively evaluated pools are excluded from the collective evaluation and estimated on an individual basis (individually evaluated loans). Individual evaluations are performed for non-accrual loans in excess of $100,000 as well as selected substandard loans. Specific allowances were estimated based on one of several methods, including the estimated fair value of the underlying collateral, observable market value of similar debt or the present value of expected cash flows.

For collateral dependent loans, appraisal reports of the underlying collateral have been obtained from independent licensed appraisal firms. For non-performing loans, the independently determined appraised values were reduced by 8% in selling costs, in order to estimate the potential loss, if any, that may eventually be realized. Performing loans are monitored to determine when, if at all, additional credit loss reserves may be required for a loss of underlying collateral value. 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.

Loans not requiring specific reserves had fair values exceeding the total recorded investment, supporting the net investment in the loan which includes principal balance, unamortized fees and costs and accrued interest, if any. Once a borrower is in default, Patriot is under no obligation to advance additional funds on unused commitments.

Loan Modifications Made to Borrowers Experiencing Financial Difficulty

On a case-by-case basis, Patriot may agree to modify the contractual terms of a borrower’s loan to assist customers who may be experiencing financial difficulty. Most loan modifications involve an extension of the term of the loan. In addition, when modifying commercial loans, Patriot frequently obtains additional collateral, principal curtailments and/or enhanced guarantor support. If the borrower has performed under the existing contractual terms of the loan and the Bank's underwriters determine that the borrower has the capacity to continue to perform under the terms of the loan, interest continues to be accrued. Non-accruing modified loans may be returned to accrual status when there has been a sustained period of performance (generally six consecutive months of payments) and both principal and interest are reasonably assured of collection.

During the three and six months ended June 30, 2026 and 2025, the Company modified certain loans made to borrowers experiencing financial difficulty, which modifications were comprised of non-material changes to loan terms such as covenant breach forbearance, and short term (six months or less) extensions of maturity. Among loans modified in the preceding twelve months, one loan with a balance of $2.7 million was 30 days past due as of June 30, 2026. As of June 30, 2026 and December 31, 2025, there were no commitments to advance additional funds under the modified loans.

Note 5. Loans Held for Sale

SBA Loans held for sale

As of June 30, 2026 and December 31, 2025, the Company hadno SBA loans held for sale. During the three and six months ended June 30, 2026 and 2025, no SBA loans previously classified as held for sale were transferred to held for investment.

Loans serviced for others totaled approximately $30.6 million and $32.1 million at June 30, 2026 and December 31, 2025, respectively. The related servicing asset was $0.6 million at both June 30, 2026 and December 31, 2025 and is included in other assets on the Consolidated Balance Sheets. Servicing assets represent the estimated fair value of retained servicing rights, net of servicing costs, at the time loans are sold. Servicing assets are amortized in proportion to, and over the period of, estimated net servicing revenues. Impairment will be evaluated based on stratifying the underlying financial assets by date of origination and term. Fair value is determined using prices for similar assets with similar characteristics, when available, or based upon discounted cash flows using market-based assumptions. Any impairment, if temporary, would be reported as a valuation allowance.

The Company retains servicing rights on certain SBA loans previously sold to third parties. Serviced loans sold to others are not included in the accompanying Consolidated Balance Sheets. Loans serviced for others totaled approximately $30.6 million and $32.1 million at June 30, 2026 and December 31, 2025, respectively. The related servicing asset was $0.6 million and $0.6 million at both June 30, 2026 and December 31, 2025 and is included in other assets on the Consolidated Balance Sheets. Income and fees collected for loan servicing are credited to non-interest income when earned, net of amortization on the related servicing assets.

In the second quarter of 2025, the Bank made the decision to voluntarily suspend its status as a participant in SBA’s Preferred Lender Program (“PLP”).

Residential Mortgage Loans held for sale

In the second quarter of 2025, the Bank suspended the residential mortgage originations. As of June 30, 2026 and December 31, 2025, the Company had no residential mortgage loans held for sale. The related mortgage servicing asset was $70 thousand and $71 thousand, respectively. During the three and six months ended June 30, 2026, no residential mortgage loans were transferred from held for sale to held for investment. For the three and six months ended June 30, 2025, $3.8 million residential mortgage loans were transferred to held for investment from held for sale.

The following table presents an analysis of the activity in the servicing assets for SBA loans and residential mortgage loans for the three and six months ended June 30, 2026 and 2025:

Credit Card Receivables held for sale

Patriot is party to program management arrangements under which the Bank originates commercial credit card receivables for certain card programs. The applicable card program manager markets the program and purchases the related receivables from the Bank shortly after origination. These receivables are classified as loans held for sale. As of June 30, 2026 and December 31, 2025, the Bank had credit card loans held for sale totaling $23.7 million and $24.5 million, respectively. The credit card loans are sold to the buyer as a whole loan sale transaction, priced at par, thus there is no servicing asset or gain or loss on sale.

At June 30, 2026, approximately $20.0 million of credit card receivables that had been expected to be sold to a program manager remained on the Bank’s Consolidated Balance Sheets after the anticipated sale was not completed. Management determined that classification of these receivables as held for sale remained appropriate based on the Bank’s continuing intent to sell the receivables and the short-term nature of the portfolio. Accordingly, the receivables remain outside the scope of the current expected credit loss model.

During the quarter ended June 30, 2026, the Company recorded a valuation allowance of approximately $5.5 million on these receivables through other expense, resulting in a carrying value of approximately $14.6 million at June 30, 2026. Fair value was estimated using discounted expected cash flows and significant unobservable inputs, including expected collections, credit losses, timing of collections and costs and uncertainties associated with administering and resolving the portfolio. Accordingly, the measurement is classified within Level 3 of the fair value hierarchy.

In connection with the program manager’s failure to purchase certain receivables and other breaches of its contractual obligations, the Bank incurred losses subject to contractual indemnification. Upon the program manager’s breach, the Bank exercised its contractual indemnification and setoff rights, including its contractual right to apply funds on deposit against obligations owed to the Bank, and applied approximately $5.3 million of the program manager’s deposit balances against such indemnifiable losses. The Company recognized this amount as other income during the second quarter of 2026, partially offsetting the $5.5 million fair value adjustment recorded on the related credit card receivables.

The Bank is pursuing additional contractual, insurance and legal remedies for losses not covered by the amounts applied; no potential recoveries from such additional remedies have been recognized.

Note 6. Deposits

The following table presents the balance of deposits held, by category as of June 30, 2026 and December 31, 2025:

The Company’s total deposits include deposits associated with prepaid debit cards for corporate, consumer and government clients administered by card program managers. These digital-payment-related deposits are included in the non-interest-bearing deposits, negotiable order of withdrawal accounts, interest bearing DDA and money market deposits, which totaled approximately $385.0 million and $297.7 million as of June 30, 2026 and December 31, 2025, respectively.

As of June 30, 2026, contractual maturities of Certificates of Deposit (“CDs”), and brokered deposits is summarized as follows:

Note 7. Derivatives

Patriot is party to interest rate swap derivatives that are not designated as hedging instruments. Under a program, Patriot will execute interest rate swaps with commercial lending customers to facilitate their respective risk management strategies. These interest rate swaps with customers are simultaneously offset by interest rate swaps that Patriot executes with a third party, such that Patriot minimizes its net risk exposure resulting from such transactions. Because the interest rate swaps associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings. The changes in the fair value of the swaps offset each other, except for the credit risk of the counterparties, which is determined by taking into consideration the risk rating, probability of default and loss given default for all counterparties.

As of June 30, 2026 and December 31, 2025, Patriot did not have any cash pledged for collateral on its interest rate swaps. No net gain or loss was recognized in other non-interest income on the Consolidated Statements of Operations during the three and six months ended June 30, 2026 and 2025.

Information about the valuation methods used to measure the fair value of derivatives is provided in Note 12 to the Consolidated Financial Statements.

The following table presents summary information regarding these derivatives for the periods presented (dollars in thousands):

Note 8. Share-Based Compensation and Employee Benefit Plan

Below table summarizes the Company’s share-based compensation activity for the three and six months ended June 30, 2026 and 2025:

Awards granted under the 2025 Plan are in the form of Restricted Stock Units (RSUs). The share amounts presented in the table above reflect the number of RSUs granted and vested, where vested amounts represent RSUs for which the vesting conditions were satisfied during the period; RSUs granted under the 2025 Plan settled into shares of Common Stock totaling 0.6 million and 2.7 million for the three and six months ended June 30, 2026, respectively. No shares granted under the 2025 Plan settled into shares of Common Stock during the three and six months ended June 30, 2025.

The Company recognizes share based compensation expense on a straight-line basis over the vesting schedule of each award, for each vesting portion of an award equal to its grant date fair value. For the three months and six months ended June 30, 2026 the Company recognized total share-based compensation expense of $1.1 million and $3.3 million, respectively and total share-based compensation expense of $1.1 million and $1.3 million, for the three and six months ended June 30, 2025, respectively.

The share-based compensation expense attributable to the Company’s Directors totaled $75 thousand and $321 thousand for the three and six months ended June 30, 2026, respectively and $64 thousand and $73 thousand for the three and six months ended June 30, 2025, respectively.

For the three and six months ended June 30, 2026, share-based compensation expense attributable to employees of Patriot was $1.0 million and $3.0 million, respectively and $1.1 million and $1.2 million for the three and six months ended June 30, 2025, respectively.

Unrecognized compensation expense attributable to the unvested restricted shares outstanding as of June 30, 2026 amounted to $6.2 million, which amount is expected to be recognized over the weighted average remaining life of the awards of 1.9 years.

Stock Options

On June 26, 2025, the Company granted stock options to purchase 400,000 shares of Common Stock at an exercise price of $1.40 per share. The options vest and become exercisable starting on the grant date, subject to the terms and conditions outlined in the 2025 Plan and award agreement, including any applicable acceleration provisions. As of June 30, 2026, no stock options remained outstanding, as all such options had expired.

Stock-based compensation expense associated with the options was recognized in accordance with ASC 718, "Compensation—Stock Compensation."

Retirement Plan

Patriot offers employees participation in the Patriot Bank, N.A. 401(k) Savings Plan (the "401(k) Plan") under Section 401(k) of the Internal Revenue Code, along with the ROTH feature to the Plan. The 401(k) Plan covers substantially all employees who have completed one month of service, are 21 years of age and who elect to participate. Under the terms of the 401(k) Plan, participants can contribute up to the maximum amount allowed, subject to Federal limitations. At its discretion, Patriot may match eligible participating employee contributions at the rate of 50% of the first 6% of the participants’ salary contributed to the 401(k) Plan. During the three and six months ended June 30, 2026, Patriot made matching contributions to the 401(k) Plan of $57 thousand and $99 thousand, respectively. During the three and six months ended June 30, 2025, Patriot made matching contributions to the 401(k) Plan of $55 thousand and $147 thousand, respectively.

Note 9. Earnings per share

The Company is required to present basic earnings per share and diluted earnings per share ("EPS") in its Consolidated Statements of Operations. Basic EPS amounts are computed by dividing net income by the weighted average number of shares of common stock outstanding. Diluted EPS reflects additional shares of common stock that would have been outstanding if potentially dilutive shares of common stock had been issued, as well as any adjustment to income that would result from the assumed issuance. Potential shares of common stock that may be issued by the Company relate to outstanding unvested RSAs and RSUs granted to directors and employees, and stock options. The dilutive effect resulting from these potential shares is determined using the treasury stock method. The Company is also required to provide a reconciliation of the numerator and denominator used in the computation of both basic and diluted EPS.

The following table summarizes the computation of basic and diluted income (loss) per share for the three and six months ended June 30, 2026 and 2025.

Note 10. Commitments and Contingencies

Financial Instruments with Off-Balance Sheet Risk

In the normal course of business, Patriot is a party to financial instruments with off-balance-sheet risk to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit and involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the balance sheet. The contractual amounts of these instruments reflect the extent of involvement Patriot has in particular classes of financial instruments.

The contractual amount of commitments to extend credit and standby letters of credit represents the maximum amount of potential accounting loss should: the contract be fully drawn upon; the customer default; and the value of any existing collateral become worthless. Patriot applies its credit policies to entering commitments and conditional obligations and, as with its lending activates, evaluates each customer’s creditworthiness on a case-by-case basis. Management believes that it effectively mitigates the credit risk of these financial instruments through its credit approval processes, establishing credit limits, monitoring the on-going creditworthiness of recipients and grantees, and the receipt of collateral as deemed necessary.

Financial instruments with credit risk at June 30, 2026 and December 31, 2025 are as follows:

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments to extend credit 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, the total commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if deemed necessary upon extending credit, is based on management’s credit evaluation of the customer. Collateral held varies, but may include commercial property, residential property, deposits and securities. Patriot has established an allowance for credit loss of $113 thousand and $80 thousand as of June 30, 2026 and December 31, 2025, respectively, which is included in accrued expenses and other liabilities.

Standby letters of credit are written commitments issued by Patriot to guarantee the performance of a customer to a third party. The credit risk involved in issuing standby letters of credit is essentially the same as that involved in extending loan facilities to customers. Guarantees that are not derivative contracts are recorded at fair value and included in the Consolidated Balance Sheet.

As of June 30, 2026, the Bank has an irrevocable stand-by letter of credit for a maximum of $70.5 million, issued by the Federal Home Loan Bank of Boston on behalf of the Bank, with Mastercard as the beneficiary. This letter of credit was originally set to expire on April 30, 2026 but has been extended to April 30, 2027.

Legal Matters

Patriot is from time to time a party to legal proceedings arising in connection with its business. Management believes that the ultimate disposition of all pending legal matters will not have a material adverse effect on the consolidated financial condition, results of operations, or liquidity of Patriot; however litigation is inherently uncertain and the outcome of such matters cannot be predicted with certainty.

Note 11. Regulatory and Operational Matters

On January 14, 2025, the Bank entered into an agreement with the OCC (the "OCC Agreement"), pursuant to which the Bank agreed, through its board of directors to take certain actions in the areas of strategic planning, capital planning, Bank Secrecy Act / Anti-Money Laundering risk management, payment activities oversight, credit administration and concentrations risk management. The Bank’s Board appointed a Compliance Committee in January 2025, as required, to oversee the progress and compliance with the OCC Agreement.

On January 17, 2025, the OCC notified the Bank that the individual minimum capital ratios previously established on April 17, 2024 had been terminated and that the same minimum capital ratios were instead incorporated into the OCC Agreement. Under the OCC Agreement, the Bank was required to maintain, on an ongoing basis, a common equity tier 1 capital ratio of 10.00%, a Tier 1 capital ratio of 10.00%, a Tier 1 leverage ratio of 9.00% and a total capital ratio of 11.50%.

On June 30, 2026, the OCC terminated the OCC Agreement. Accordingly, the Bank is no longer subject to the higher minimum capital ratios or other requirements imposed by the OCC Agreement. As of June 30, 2026, the Bank’s capital ratios exceeded the applicable regulatory thresholds for classification as “well capitalized” under the prompt corrective action framework. A bank generally cannot qualify as well capitalized while subject to a written agreement requiring it to maintain specified capital levels; termination of the OCC Agreement therefore removed that impediment.

The Company and Bank’s regulatory capital amounts and ratios at June 30, 2026 and December 31, 2025 are summarized as follows:

(1)Designation as "Well Capitalized" does not apply to bank holding companies - the Company. Such categorization of capital adequacy only applies to insured depository institutions - the Bank. Under the terms of the OCC Agreement, terminated June 30, 2026, the Bank was not eligible to be “Well Capitalized” while the OCC Agreement was in effect and was designated as “Adequately Capitalized” regardless of its capital ratios being in excess of the regulatory defined Well Capitalized ratios.

Note 12. Fair Value and Interest Rate Risk

Patriot measures the carrying value of certain financial assets and liabilities at fair value, as required by its policies as a financial institution and by US GAAP. The carrying values of certain assets and liabilities are measured at fair value on a recurring basis, such as available-for-sale securities; while other assets and liabilities are measured at fair value on a non-recurring basis due to external factors requiring management’s judgment to estimate potential losses of value resulting in asset impairments or the establishment of valuation reserves. Measuring assets and liabilities at fair value may result in fluctuations to carrying value that have a significant impact on the results of operations or other comprehensive income for the period and period over period.

Following is a detailed summary of the guidance provided by US GAAP regarding the application of fair value measurements and Patriot’s application thereof. Additionally, the following information includes detailed summaries of the effects fair value measurements have on the carrying amounts of asset and liabilities presented in the consolidated financial statements.

The objective of fair value measurement is to value an asset that may be sold or a liability that may be transferred at the estimated value which might be obtained in a transaction between unrelated parties under current market conditions. US GAAP establishes a framework for measuring assets and liabilities at fair value, as well as certain financial instruments classified in equity. The framework provides a fair value hierarchy, which prioritizes quoted prices in active markets for identical assets and liabilities and minimizes unobservable inputs, which are inputs for which market data are not available and that are developed by management using the best information available to develop assumptions about the value market participants might place on the asset to be sold or liability to be transferred.

The three levels of the fair value hierarchy consist of:

Level 1 Unadjusted quoted market prices for identical assets or liabilities in active markets that the entity has ability to access at the measurement date (such as active exchange-traded equity securities and certain U.S. and government agency debt securities).

Level 2 Observable inputs other than quoted prices included in Level 1, such as:

–Quoted prices for similar assets or liabilities in active markets (such as U.S. agency and government sponsored mortgage-backed securities)

–Quoted prices for identical or similar assets or liabilities in less active markets (such as certain U.S. and government agency debt securities, and corporate and municipal debt securities that trade infrequently)

–Other inputs that are observable for substantially the full term of the asset or liability (i.e. interest rates, yield curves, prepayment speeds, default rates, etc.).

Level 3 Valuation techniques that require unobservable inputs that are supported by little or no market activity and are significant to the fair value measurement of the asset or liability (such as pricing and discounted cash flow models that typically reflect management’s estimates of the assumptions a market participant would use in pricing the asset or liability).

A description of the valuation methodologies used for assets and liabilities recorded at fair value, and for estimating fair value for financial and non-financial instruments not recorded at fair value, is set forth below.

Cash and due from banks, restricted cash, and accrued interest receivable and payable

The carrying amount is a reasonable estimate of fair value and accordingly these are classified as Level 1. These financial instruments are not recorded at fair value on a recurring basis.

Available-for-sale securities

The fair value of securities available-for-sale (carried at fair value) are determined by obtaining quoted market prices on nationally recognized securities exchanges (Level 1), or matrix pricing (Level 2), which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities, but rather by relying on the securities' relationship to other benchmark quoted prices, or using unobservable inputs employing various techniques and assumptions (Level 3).

Federal Reserve Bank Stock and Federal Home Loan Bank Stock

Shares in the FRB and FHLB are purchased and redeemed based upon their $100 par value. The stocks are non-marketable equity securities, and as such, are considered restricted securities that are carried at cost.

Loans

The fair value of loans is using an exit price approach by discounting expected future cash flows at market rates for loans with similar credit characteristics and remaining maturities. The valuation incorporates factors that market participants would consider, including credit risk, liquidity, transaction costs and current market conditions. The determination of fair value requires significant judgment. The determination of fair value requires the use of significant judgment.

Loans Held for Sale

The fair value of loans held for sale is generally estimated by using a market approach based on observable market prices and other market inputs. Such loans are classified within Level 2 of the fair value hierarchy.

Certain credit card receivables held for sale at June 30, 2026 were valued using an income approach based on discounted expected cash flows. Significant assumptions included expected collections, anticipated credit losses, timing of collections, costs and uncertainties associated with administering and resolving the portfolio, and a market participant discount rate. Because significant inputs to the valuation are unobservable, these receivables are classified within Level 3 of the fair value hierarchy.

Servicing Asset

Servicing assets do not trade in an active, open market with readily observable prices. The Company estimates the fair value of servicing assets using discounted cash flow models incorporating numerous assumptions from the perspective of a market participant including market discount rates and prepayment speeds. Due to the significant unobservable input related to the servicing rights, the servicing asset is classified within Level 3 of the valuation hierarchy.

Retained Beneficial Interest

The Company retained its rights to sold loans under a loss share agreement and did not transfer such rights to the loan purchasers. Accordingly, the Company has continuing involvement in the transferred financial assets. The retained interest is recognized as a separate asset and represents the present value of expected future reimbursements. The fair value of this asset is estimated using a discounted cash flow methodology that incorporates significant unobservable inputs, including expected credit losses, timing of cash flows, and appropriate discount rates. Due to the use of these unobservable inputs, the asset is classified as a Level 3 measurement within the fair value hierarchy in accordance with ASC 820.

The Company evaluates the retained interest on a recurring basis for changes in expected cash flows and records adjustments to fair value as necessary. Changes in the fair value of the retained interest are recognized in earnings in the period in which they occur.

Derivative asset (liability) - Interest Rate Swaps

The Company’s derivative assets and liabilities consist of transactions as part of management’s strategy to manage interest rate risk. The valuation of interest rate swap agreements does not contain any counterparty risk. The valuation of the Company’s interest rate swaps is obtained from a third-party pricing service and is determined using a discounted cash flow analysis on the expected cash flows of each derivative. The pricing analysis is based on observable inputs for the contractual terms of the derivatives, including the period to maturity and interest rate curves. The Company has determined that the inputs used to value its interest rate derivatives fall within Level 2 of the fair value hierarchy. See Note 7 for additional disclosures on derivatives.

Deposits

The fair value of demand deposits, regular savings and certain money market deposits is the amount payable on demand at the reporting date.

The fair value of certificates of deposit and other time deposits is estimated using a discounted cash flow calculation that applies interest rates currently being offered for deposits of similar remaining maturities, estimated using local market data, to a schedule of aggregated expected maturities on such deposits. Patriot does not record deposits at fair value on a recurring basis.

Subordinated Notes and Junior Subordinated Debt

Patriot does not record subordinated notes at fair value on a recurring basis. The fair value of the subordinated notes was estimated by discounting future cash flows at rates at which similar notes would be made. The carrying value is considered comparable to fair value.

Patriot does not record junior subordinated debt at fair value on a recurring basis. Junior subordinated debt reprices quarterly, as a result, the carrying amount is considered a reasonable estimate of fair value.

The Company considers its own credit worthiness in determining the fair value of its subordinated notes, notes and junior subordinated debt.

Federal Home Loan Bank, Federal Reserve Bank and Correspondent Bank Borrowings

The fair value of FHLB advances, FRB and other correspondent bank borrowings are estimated using a discounted cash flow calculation that applies current interest rates for advances of similar maturity to a schedule of maturities of such advances. Patriot does not record FHLB advances, FRB and other correspondent bank borrowings at fair value on a recurring basis.

Off-balance-sheet financial instruments

Off-balance-sheet financial instruments are based on interest rate changes and fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. The off-balance-sheet financial instruments (i.e., commitments to extend credit) are insignificant and are not recorded on a recurring basis.

The following table provides a comparison of the carrying amounts and estimated fair values of Patriot’s financial assets and liabilities as of June 30, 2026 and December 31, 2025:

The carrying amount of cash and non-interest-bearing balances due from banks, interest-bearing deposits due from banks, and demand deposits approximates fair value, due to the short-term nature and high turnover of these balances. These amounts are included in the table above for informational purposes.

In the normal course of its operations, Patriot assumes interest rate risk (i.e., the risk that general interest rate levels will fluctuate). As a result, the fair value of Patriot’s financial assets and liabilities are affected when interest market rates change, which change may be either favorable or unfavorable. Management attempts to mitigate interest rate risk by matching the maturities of its financial assets and liabilities. However, borrowers with fixed rate obligations are less likely to prepay their obligations in a rising interest rate environment and more likely to prepay their obligations in a falling interest rate environment. Conversely, depositors receiving fixed rates are more likely to withdraw funds before maturity in a rising interest rate environment and less likely to do so in a falling interest rate environment. Management monitors market rates of interest and the maturities of its financial assets and financial liabilities, adjusting the terms of new loans and deposits in an attempt to minimize interest rate risk. Additionally, management mitigates its overall interest rate risk through its available funds investment strategy.

The following tables detail the financial assets measured at fair value on a recurring basis and the valuation techniques utilized relative to the fair value hierarchy, as of June 30, 2026 and December 31, 2025:

Patriot measures certain financial assets and financial liabilities at fair value. When circumstances dictate (e.g., impairment of long-lived assets, other than temporary impairment of collateral value), the carrying values of such financial assets and financial liabilities are adjusted to fair value or fair value less costs to sell, as may be appropriate. At June 30, 2026, such measurements included certain loans held for sale, individually evaluated loans, servicing assets and retained beneficial interests.

As of June 30, 2026 and December 31, 2025, four corporate bonds were classified as Level 3 instruments. The fair values of these securities were determined using a present value approach. The discount rate assumed was determined based on unobservable inputs in a pricing model. During the three and six months ended June 30, 2026, the Company had loans held for sale transfer into Level 3.

At June 30, 2026, certain credit card receivables held for sale with a carrying value of approximately $14.6 million were measured at fair value using a discounted cash flow approach. Significant unobservable inputs included assumptions regarding expected collections, credit losses, timing of collections, costs associated with administering and resolving the portfolio, and the market participant discount rate.

For the three and six months ended June 30, 2025, the Company had no transfers into or out of Levels 1, 2 or 3.

The reconciliation of the beginning and ending balances during the three and six months ended June 30, 2026 and 2025 for Level 3 assets is as follows:

The table below presents the valuation methodology and unobservable inputs for level 3 assets measured at fair value as of June 30, 2026 and December 31, 2025:

Patriot discloses fair value information about financial instruments, whether or not recognized in the consolidated balance sheet, for which it is practicable to estimate that value. Certain financial instruments are excluded from disclosure requirements and, accordingly, the aggregate fair value amounts presented do not necessarily represent the complete underlying value of financial instruments included in the Consolidated Financial Statements.

The estimated fair value amounts have been measured as of June 30, 2026 and December 31, 2025, and have not been reevaluated or updated for purposes of these Consolidated Financial Statements subsequent to those respective dates. As such, the estimated fair values of the financial instruments measured may be different than if they had been subsequently valued.

The information presented should not be interpreted as an estimate of the total fair value of Patriot’s assets and liabilities, since only a portion of Patriot’s assets and liabilities are required to be measured at fair value for financial reporting purposes. Due to the wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between Patriot’s fair value disclosures and those of other bank holding companies may not be meaningful.

In the normal course of its operations, Patriot assumes interest rate risk (i.e., the risk that general interest rate levels will fluctuate). As a result, the fair value of Patriot’s financial assets and liabilities are affected when interest market rates change, which change may be either favorable or unfavorable. Management attempts to mitigate interest rate risk by matching the maturities of its financial assets and liabilities. However, borrowers with fixed rate obligations are less likely to prepay their obligations in a rising interest rate environment and more likely to prepay their obligations in a falling interest rate environment. Conversely, depositors receiving fixed rates are more likely to withdraw funds before maturity in a rising interest rate environment and less likely to do so in a falling interest rate environment. Management monitors market rates of interest and the maturities of its financial assets and financial liabilities, adjusting the terms of new loans and deposits in an attempt to minimize interest rate risk. Additionally, management mitigates its overall interest rate risk through its available funds investment strategy.

Note 13. Leases

We have operating leases for offices, branches, equipment and other items.

In the first quarter of 2026, the Bank opened a leased banking office in Beverly Hills, California that supports relationship development and client coverage in the Los Angeles market.

The variable lease cost primarily represents variable payments such as common area maintenance and utilities, which are included in the occupancy and equipment expenses on the Consolidated Statements of Operations.

Supplemental balance sheet information related to our operating lease arrangements is presented below:

The table below presents the supplemental cash flow information related to the leases:

Note 14. Income Taxes

Accounting Policy

The Company accounts for income taxes under the liability method in accordance with ASC 740, Income Taxes. Under this method, deferred tax assets ("DTAs") and deferred tax liabilities ("DTLs") are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, as well as for net operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Deferred tax assets are reduced by a valuation allowance when, based on all available positive and negative evidence, it is more likely than not that some or all of those assets will not be realized.

Income Tax Benefit

The Company recorded an income tax benefit of $1.5 million for the three months ended June 30, 2026, compared to a benefit of $49 thousand for the three months ended June 30, 2025. For the six months ended June 30, 2026 and 2025, the income tax benefit was $1.5 million and $48 thousand, respectively.

The effective tax rate for the three months ended June 30, 2026 was approximately 110%, compared to approximately 1% for the three months ended June 30, 2025. The income tax benefit and effective tax rate for the 2026 period were primarily attributable to a discrete benefit of approximately $1.2 million resulting from the partial release of the valuation allowance maintained against the Company's deferred tax assets, as described below. Other significant items affecting the effective tax rate include state income tax impacts, executive compensation limitations under IRC Section 162(m) and stock compensation related adjustments. The effective tax rate for the current period is not indicative of the Company’s expected annual effective tax rate.

Deferred Tax Assets and Valuation Allowance

The following table presents the change in the net deferred tax position:

At December 31, 2025, the Company maintained a full valuation allowance against its deferred tax assets and reported a net deferred tax liability of $783 thousand. At June 30, 2026, the Company recognized a deferred tax asset, net of the remaining valuation allowance and before offsetting deferred tax liabilities, of approximately $3.3 million. After offsetting deferred tax labilities of approximately $2.6 million, the Company reported a net deferred tax asset of $731 thousand.

During the quarter ended June 30, 2026, management evaluated all available positive and negative evidence and concluded that a portion of the Company’s deferred tax assets met the more likely than not recognition threshold. This conclusion was supported primarily by objectively verifiable positive evidence, including expected taxable income from sufficiently developed strategic actions, together with forecasted future taxable income as corroborative evidence. Accordingly, the Company released approximately $1.2 million of the valuation allowance previously maintained against those deferred tax assets and recognized a corresponding discrete income tax benefit. The change in the valuation allowance balance also reflects current period changes in the underlying deferred tax assets and temporary differences.

The Company continues to maintain a substantial valuation allowance against the remaining deferred tax assets, as cumulative consolidated losses in recent years constitute significant negative evidence regarding realizability. Management will continue to reassess the valuation allowance as additional objective evidence becomes available.

Section 382 Limitations

As of June 30, 2026, the Company had approximately $44.1 million of Federal net operating loss and recognized built-in loss carryforwards. Based on management’s preliminary Section 382 analysis, approximately $33.8 million of these tax attributes are expected to be subject to annual utilization limitation under Internal Revenue Code Section 382. The formal Section 382 study remains in process and is expected to be completed during 2026. Management will evaluate any additional refinements necessary for each reporting period completed. The Company has reflected the applicable Section 382 limitations, including those resulting from the 2025 ownership change, in its assessment of the realizability of its deferred tax assets.

Note 15. Segment Information

The Company’s Chief Executive Officer is the designated chief operating decision maker (“CODM”). The Company hasone reportable segment, Banking, which reflects the manner in which the CODM reviews financial information and allocates resources.

The CODM evaluates performance and allocates resources on a consolidated basis using information about net interest income, provision for credit losses, non-interest income, non-interest expense, budget-to-actual results, and consolidated net income. Consolidated net income is also used by the CODM for benchmarking the Company’s performance against peers and in assessing performance for compensation purposes.

Interest-earning assets within the Banking segment consist primarily of commercial and consumer loans, investment securities, and cash, which generate the substantial majority of interest income. Interest-bearing liabilities consist primarily of deposits, Federal Home Loan Bank and Federal Reserve borrowings, and other borrowings, which generate the substantial majority of interest expense. All of the Company’s operations are domestic.

The accounting policies of the Banking segment are the same as those described in the summary of significant accounting policies. Segment assets for the Banking segment are the same as total assets presented in the Consolidated Balance Sheets.

The Company's segment assets represent its total assets as presented in the Consolidated Balance Sheet.

Note 16. Subsequent Events

Patriot evaluated subsequent events through the date of issuance of the accompanying consolidated financial statements and determined that there were no subsequent events requiring recognition or disclosure in the accompanying consolidated financial statements.