10q10k10q10k.net

What changed in PATRIOT NATIONAL BANCORP INC's 10-K — 2023 vs 2024

vs

Paragraph-level year-over-year comparison of PATRIOT NATIONAL BANCORP INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+192 added−169 removedSource: 10-K (2025-04-15) vs 10-K (2024-04-01)

Top changes in PATRIOT NATIONAL BANCORP INC's 2024 10-K

192 paragraphs added · 169 removed · 111 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

24 edited+17 added−11 removed47 unchanged
Biggest changeThe Bank’s lending activities are conducted principally in Fairfield and New Haven Counties in Connecticut and Westchester County in New York, although the Bank’s loan business is not necessarily limited to these areas. The Bank previously had offered loans on residential real estate but discontinued doing so during 2013. Since 2016, Patriot has purchased residential real estate loans.
Biggest changeSmall Business Administration ("SBA") 7(a) program, and limited consumer loans with an emphasis on serving the needs of individuals, small and medium‑sized businesses and professionals. The Bank’s lending activities are conducted principally in Fairfield and New Haven Counties in Connecticut and Westchester County in New York, although the Bank’s loan business is not necessarily limited to these areas.
In addition to traditional retail banking services, the Bank generates deposit balances through its digital payments division (DPD). The DPD works with fully vetted and approved program managers to serve as their co-partner in processing high-volume payment transactions. The business is an increasing source of lower cost deposit balances and non-interest income to the Bank.
In addition to traditional retail banking services, the Bank generates deposit balances through its Digital Payments Division (“DPD”). The DPD works with fully vetted and approved program managers to serve as their co-partner in processing high-volume payment transactions. The business is an increasing source of lower cost deposit balances and non-interest income to the Bank.
In September 2019, the community bank leverage ratio (CBLR) framework was jointly issued by the FDIC, OCC and Federal Reserve Bank (“FRB”). The final rule gives qualifying community banks the option to use a simplified measure of capital adequacy instead of risk based capital, beginning with their March 31, 2020 Call Report.
In September 2019, the community bank leverage ratio (“CBLR”) framework was jointly issued by the FDIC, OCC and Federal Reserve Bank (“FRB”). The final rule gives qualifying community banks the option to use a simplified measure of capital adequacy instead of risk based capital, beginning with their March 31, 2020 Call Report.
The Company makes available free of charge on its website (under the links entitled “For Investors”, then “SEC filings”, then “Documents”), its annual report on Form 10-K, its quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) of the Exchange Act, as soon as reasonably practicable after such reports are electronically filed with or furnished to the SEC. 7 Table of Contents
The Company makes available free of charge on its website (under the links entitled “For Investors”, then “SEC filings”, then “Documents”), its annual report on Form 10-K, its quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) of the Exchange Act, as soon as reasonably practicable after such reports are electronically filed with or furnished to the SEC.
Other services offered by the Bank include Automated Clearing House (“ACH”) transfers, lockbox, internet banking, bill paying, remote deposit capture, debit cards, money orders, traveler’s checks, and automatic teller machines (“ATMs”). In addition, the Bank may in the future offer other financial services. 2 Table of Contents The Bank’s branch office locations are summarized as follows: Branch No.
Other services offered by the Bank include Automated Clearing House (“ACH”) transfers, lockbox, internet banking, bill paying, remote deposit capture, debit cards, money orders, traveler’s checks, and automatic teller machines (“ATMs”). In addition, the Bank may in the future offer other financial services. The Bank’s branch office locations are summarized as follows: Branch No.
The Company and the Bank have not and will not adopt any policies or practices, which discourage credit applications from, or unlawfully discriminate against, individuals or segments of the communities served by the Bank.
The Company and the Bank have not and will not adopt any policies or 5 Table of Contents practices, which discourage credit applications from, or unlawfully discriminate against, individuals or segments of the communities served by the Bank.
The Bank has a total of nine branch offices comprised of eight branch offices located in Fairfield and New Haven Counties, Connecticut and one branch office located in Westchester County, New York as of December 31, 2023.
The Bank has a total of eight branch offices comprised of seven branch offices located in Fairfield and New Haven Counties, Connecticut and one branch office located in Westchester County, New York as of December 31, 2024.
Additionally, the Bank also operates a loan origination office at its Stamford location. The Bank’s employees perform most routine day-to-day banking transactions. The Bank has entered into a number of arrangements with third-party outside service providers, who provide services such as correspondent banking, check clearing, data processing services, credit card processing and armored car carrier transport.
The Bank’s employees perform most routine day-to-day banking transactions. The Bank has entered into a number of arrangements with third-party outside service providers, who provide services such as correspondent banking, check clearing, data processing services, credit card processing and armored car carrier transport.
The Fed has issued a policy statement on the payment of cash dividends by bank holding companies, which expresses its view that a bank holding company should pay cash dividends only to the extent that the bank holding company’s net income for the past year is sufficient to cover both the cash dividend and a rate of earnings retention that is consistent with the bank holding company’s capital needs, asset quality, and overall financial condition.
If the Company wants to engage in businesses permitted to financial holding companies, but not to bank holding companies, it would need to register with the Fed as a financial holding company. 4 Table of Contents The Fed has issued a policy statement on the payment of cash dividends by bank holding companies, which expresses its view that a bank holding company should pay cash dividends only to the extent that the bank holding company’s net income for the past year is sufficient to cover both the cash dividend and a rate of earnings retention that is consistent with the bank holding company’s capital needs, asset quality, and overall financial condition.
City County State 1 Darien Fairfield Connecticut 2 Fairfield Fairfield Connecticut 3 Greenwich Fairfield Connecticut 4 Milford New Haven Connecticut 5 Norwalk Fairfield Connecticut 6 Orange New Haven Connecticut 7 Stamford Fairfield Connecticut 8 Westport Fairfield Connecticut 9 Scarsdale Westchester New York The Stamford, Connecticut location serves as Patriot’s headquarters.
City County State 1 Darien Fairfield Connecticut 2 Fairfield Fairfield Connecticut 3 Greenwich Fairfield Connecticut 4 Milford New Haven Connecticut 5 Norwalk Fairfield Connecticut 6 Stamford Fairfield Connecticut 7 Westport Fairfield Connecticut 8 Scarsdale Westchester New York The Stamford, Connecticut location serves as Patriot’s headquarters. Additionally, the Bank also operates a loan origination office at its Stamford location.
The Fed may disapprove of such a purchase or redemption, if it determines that the proposal would constitute an unsafe or unsound practice or would violate any law, regulation, Fed order, or any condition imposed by, or written agreement with, the Fed. 4 Table of Contents The Company is subject to capital adequacy rules and guidelines issued by the Fed and the FDIC and the Bank is subject to capital adequacy rules and guidelines issued by the OCC.
The Fed may disapprove of such a purchase or redemption, if it determines that the proposal would constitute an unsafe or unsound practice or would violate any law, regulation, Fed order, or any condition imposed by, or written agreement with, the Fed.
Verification of customer identification, maintenance of said verification records, and cross-checking names of new customers against government lists of known or suspected terrorists is also required.
Verification of customer identification, maintenance of said verification records, and cross-checking names of new customers against government lists of known or suspected terrorists is also required. The Patriot Act was reauthorized and modified with the enactment of The USA Patriot Act Improvement and Reauthorization Act of 2005.
As of the date hereof, the only business of the Company is its ownership of all of the issued and outstanding capital stock of the Bank and the Trust. Except as specifically noted otherwise herein, the balance of the description of the Company’s business is a description of the Bank’s business.
As of the date hereof, the only business of the Company is its ownership of all of the issued and outstanding capital stock of the Bank and the Trust.
The Bank is not dependent on one or a few major customers for its lending or deposit activities, the loss of any one of which would have a material adverse effect on the business of the Bank. 3 Table of Contents The Bank’s loan customers extend beyond the towns and cities in which the Bank has branch offices, including nearby towns in Fairfield and New Haven Counties in Connecticut, and Westchester County and the five boroughs of New York City in New York, although the Bank’s loan business is not necessarily limited to these areas.
The Bank’s loan customers extend beyond the towns and cities in which the Bank has branch offices, including nearby towns in Fairfield and New Haven Counties in Connecticut, and Westchester County and the five boroughs of New York City in New York, although the Bank’s loan business is not necessarily limited to these areas.
The Patriot Act was reauthorized and modified with the enactment of The USA Patriot Act Improvement and Reauthorization Act of 2005. 5 Table of Contents Many of the provisions of The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank) are aimed at financial institutions that are significantly larger than Patriot.
Many of the provisions of The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank”) are aimed at financial institutions that are significantly larger than Patriot.
For purposes of the regulatory capital requirements, common equity Tier 1 capital is generally defined as common stockholders’ equity and retained earnings. Tier 1 capital is generally defined as common equity Tier 1 and Additional Tier 1 capital.
PCA restricts or prohibits certain activities for an insured depository institution that are not Adequately Capitalized. For purposes of the regulatory capital requirements, common equity Tier 1 capital is generally defined as common stockholders’ equity and retained earnings. Tier 1 capital is generally defined as common equity Tier 1 and Additional Tier 1 capital.
The Bank received a satisfactory audit by the SBA in 2022 and expects its PLP status to be renewed for another term prior to the current expiration period. Available Information The Company’s website address is https://www.bankpatriot.com ; however, information found on, or that can be accessed through, the website is not incorporated by reference into this Form 10-K.
Available Information The Company’s website address is https://www.bankpatriot.com ; however, information found on, or that can be accessed through, the website is not incorporated by reference into this Form 10-K.
The Company is also subject to applicable provisions of Connecticut law, insofar as they do not conflict with, or are not otherwise preempted by, federal banking law. Patriot’s operations are subject to regulation, supervision, and examination by the FDIC and the OCC.
Under the provisions of the FDIC Improvements Act of 1991, the federal regulatory agencies are required to implement and enforce these rules in a stringent manner. The Company is also subject to applicable provisions of Connecticut law, insofar as they do not conflict with, or are not otherwise preempted by, federal banking law.
Federal regulations require FDIC-insured depository institutions, including national banks, to meet several minimum capital standards: a common equity Tier 1 capital to risk-based assets ratio of 5%, a Tier 1 capital to risk-based assets ratio of 6.0%, a total capital to risk-based assets ratio of 8% and a Tier 1 capital to total assets leverage ratio of 4%.
Under this framework, the Bank reports leverage and risk-based capital ratios and compares those ratios to its own internally designed risk-based capital policy. 6 Table of Contents Federal regulations require FDIC-insured depository institutions, including national banks, to meet several minimum capital standards to be considered Adequately Capitalized under the Prompt Corrective Action (“PCA”) section of the Federal Deposit Insurance Act: a common equity Tier 1 capital to risk-based assets ratio of 4.5%, a Tier 1 capital to risk-based assets ratio of 6.0%, a total capital to risk-based assets ratio of 8% and a Tier 1 capital to total average assets leverage ratio of 4%.
In the fourth quarter of 2023, the Bank elected to shift to the use the risk-based capital framework. Under this framework, the Bank reports leverage and risk-based capital ratios and compares those ratios to its own internally designed risk-based capital policy.
In the fourth quarter of 2023, the Bank elected to shift to the use the risk-based capital framework.
Conditionally guaranteed or Government sponsored, U.S. federal government issues comprise the majority of the Bank’s investment portfolio. Employees As of December 31, 2023, Patriot had 117 full-time equivalent employees. None of Patriot’s employees are covered by a collective bargaining agreement. Competition The Bank competes with a variety of financial institutions for loans and deposits in its market area.
None of Patriot’s employees are covered by a collective bargaining agreement. 3 Table of Contents Competition The Bank competes with a variety of financial institutions for loans and deposits in its market area.
Financial reform legislation and the implementation of any rules ultimately issued could have adverse implications on the financial industry, the competitive environment, and the Bank’s ability to conduct business. Capital Requirements In July 2013, the Fed, the FDIC, and the OCC approved final rules establishing a new comprehensive capital framework for U.S. Banking organizations (the “New Capital Rules”).
Financial reform legislation and the implementation of any rules ultimately issued could have adverse implications on the financial industry, the competitive environment, and the Bank’s ability to conduct business. On October 24, 2023, the OCC, the Fed, and the FDIC released the final rule to strengthen and modernize their regulations implementing the CRA.
These substantially identical rules and guidelines require Patriot to maintain certain minimum ratios of capital to adjusted total assets and/or risk-weighted assets. Under the provisions of the FDIC Improvements Act of 1991, the federal regulatory agencies are required to implement and enforce these rules in a stringent manner.
The Company is subject to capital adequacy rules and guidelines issued by the Fed and the Bank is subject to capital adequacy rules and guidelines issued by the OCC and FDIC. These substantially identical rules and guidelines require Patriot to maintain certain minimum ratios of capital to adjusted total assets and/or risk-weighted assets.
During 2023, the Bank began the process of establishing its own national mortgage origination business, with new originations expected to begin in early 2024. Further information of the purchased residential real estate loans is set forth in Note 4 to the consolidated financial statements.
Further information of the residential mortgage loans held-for-sale is set forth in Note 5 to the consolidated financial statements.
Removed
On October 15, 2010, pursuant to a Securities Purchase Agreement (the “Securities Purchase Agreement”), the Company issued and sold to PNBK Holdings LLC (“Holdings”), an investment limited liability company controlled by Michael Carrazza, 3.36 million shares of its common stock at a purchase price of $15.00 per share (adjusted for a 1-for-10 reverse stock split discussed below) for an aggregate purchase price of $50.4 million.
Added
On March 20, 2025, the Company entered into (i) securities purchase agreements (the “Co-Lead Investors Agreements”) with its President and director, Steven Sugarman (the “Lead Party”), and three co-lead investors (the “Co-Lead Investors”), and (ii) securities purchase agreements (the “Purchasers Agreements”, and together with the Co-Lead Investors Agreements, the “Securities Purchase Agreements”) with other accredited investors (collectively, and together with the Co-Lead Investors and the Lead Party, the “Purchasers”).
Removed
The shares sold to Holdings represented 87.6% of the Company’s then issued and outstanding common stock. In connection with the reverse stock split, the par value of the common stock was changed to $0.01 per share. Also, in connection with the sale of the shares, certain directors and officers of both the Company and the Bank resigned.
Added
Also on March 20, 2025, the Company completed a $57.75 million private placement of: (i) shares of the Company’s common stock, par value $0.01 per share (“Common Stock”), at a purchase price of $0.75 per share, and (ii) shares of a new series of the Company’s preferred stock, no par value per share, designated as Series A Non-Cumulative Perpetual Convertible Preferred Stock (the “Series A Preferred Stock”), with a liquidation preference of $60 per share (the “Private Placement”).
Removed
Such directors and officers were replaced with nominees of Holdings and Michael Carrazza became the Chairman of the Board of Directors (the “Board”) of the Company. Pursuant to its Operating Agreement, on March 31, 2021, Holdings completed a pro-rata in-kind distribution of shares of restricted common stock of Patriot. Following these distributions, Holdings no longer owns any shares of Patriot.
Added
The Private Placement included the issuance of: (i) 60,400,106 shares of Common Stock, and (ii) 90,832 shares of Series A Preferred Stock, convertible, in the aggregate, into 7,266,560 shares of Common Stock.
Removed
Business Operations The Bank offers commercial real estate loans, commercial business loans, SBA loans originated under the U.S. Small Business Administration ("SBA") 7(a) program, and a variety of consumer loans with an emphasis on serving the needs of individuals, small and medium‑sized businesses and professionals.
Added
In addition, as part of the Private Placement, on March 20, 2025, the Company’s amendments to (i) 6.25% Fixed to Floating Subordinated Note due June 30, 2028 (the “Subordinated Note”), and (ii) 8.5% Fixed Rate Senior Notes Due 2026 (the “Senior Notes” and together with the Subordinated Note, the “Notes”) became effective and noteholders converted approximately $7.0 million of the aggregate principal amount of the Notes into 9,333,334 shares of Common Stock.
Removed
If the Company wants to engage in businesses permitted to financial holding companies, but not to bank holding companies, it would need to register with the Fed as a financial holding company.
Added
The amendment to the Subordinated Note provides that the interest on the Subordinated Note will be paid-in-kind (“PIK”) and the aggregate outstanding principal amount of the Subordinated Note will be automatically increased on each interest payment date by the amount of such PIK interest for all accrued and unpaid interest payments as of the closing date of the Private Placement and for future scheduled interest payments owed through and including the March 30, 2026 interest payment date.
Removed
The capital conservation buffer requirement was fully implemented at 2.5% on January 1, 2019. 6 Table of Contents At December 31, 2023, the Bank’s capital exceeded all applicable regulatory requirements, the Bank was considered well-capitalized under the prompt corrective action framework, as subsequently discussed, and it had a capital conservation buffer above the applicable requirement.
Added
In addition, pursuant to such amendment, the noteholder agreed to convert $2.0 million of the outstanding principal amount of the Subordinated Note into shares of Common Stock effective on the closing date of the Private Placement.
Removed
Recent Developments with Regulators In November 2018 the Bank entered into a formal written agreement (the “Agreement”) with the Office of the OCC.
Added
The amendment to the Senior Notes provides that (i) the maturity date of the Senior Notes will be extended to April 15, 2028, (ii) the interest rate will be increased to 10% effective as of January 1, 2026, and (iii) at any time prior to the maturity date, the Company may repay any amount of the outstanding principal amount of the Senior Notes, in whole or in part, without penalty.
Removed
The Agreement stated that the Board and the Bank would develop, implement and revise written documents and policies related to executive compensation, conflict of interest, internal audit, liquidity and asset/liability management, commercial loan administration, leveraged lending, practices relating to the allowance for loan and lease losses, and assumptions used in the Bank’s interest rate risk model.
Added
In addition, pursuant to such amendment, the noteholders agreed to convert into shares of Common Stock an amount of the outstanding Senior Notes, on a pro rata basis, equal to $5.0 million based on the terms of the amendment and the closing of the private placement, and all accrued and unpaid interest payments as of the closing date of the Private Placement and for future scheduled interest payments owed through the January 15, 2026 payment may be PIK.
Removed
Under the Agreement the Bank agreed to provide a revised written 3-year strategic and capital plan for the Bank. The existence of this Agreement also resulted in increased supervision from the SBA with respect to the Bank’s SBA division and the loss of its preferred lender status.
Added
Except as specifically noted otherwise herein, the balance of the description of the Company’s business is a description of the Bank’s business. 2 Table of Contents Business Operations The Bank offers, on a limited basis to satisfy Community Reivestment Act requirements, commercial real estate loans, commercial business loans, SBA loans originated under the U.S.
Removed
On September 1, 2021, the OCC terminated the Agreement concluding that the safety and soundness of the Bank and its now established compliance with laws and regulations did not require continued existence of the Agreement. Shortly after the termination of the Agreement, the SBA removed the increased supervision.
Added
The Bank previously had offered loans on residential real estate but discontinued doing so during 2013. Since 2016, Patriot has purchased residential real estate loans. In 2024, the Bank reentered the residential mortgage business and began originating mortgage loans through its mortgage origination unit, Residential Mortgage Division, based in Jacksonville, Florida. These mortgage loans are typically sold to third parties.
Removed
In October 2022, the SBA renewed the Bank’s Preferred Lender Program (“PLP”) status, with an expiration date of November 15, 2023. As a normal course of business, the PLP is renewed on an annual basis by the SBA.
Added
Conditionally guaranteed or Government sponsored, U.S. federal government issues comprise the majority of the Bank’s investment portfolio. Employees As of December 31, 2024, Patriot had 129 full-time employees.
Added
The Bank establishes concentration limits to monitor the risk and implements mitigating controls and procedures related to the limits.
Added
Patriot’s operations are subject to regulation, supervision, and examination by the FDIC and the OCC.
Added
The final rule revises the CRA regulations to better achieve the CRA’s core purpose of encouraging banks to help meet the credit needs of their local communities.
Added
It also adapts to changes in the banking industry, including the expanded role of mobile and online banking; provides greater clarity and consistency in the application of CRA regulations; tailors performance standards, data collection, and reporting requirements to account for differences in bank size, business model, and local conditions; promotes transparency and public engagement; confirms that CRA and fair lending responsibilities are mutually reinforcing; and promotes a consistent regulatory approach that applies to banks regulated by all three agencies.
Added
The final rule took effect on April 1, 2024, with staggered compliance dates of January 1, 2026, and January 1, 2027. Capital Requirements In July 2013, the Fed, the FDIC, and the OCC approved final rules establishing a new comprehensive capital framework for U.S. Banking organizations (the “New Capital Rules”).
Added
The capital conservation buffer requirement was fully implemented at 2.5% on January 1, 2019. For further discussion of the regulatory capital requirements, refer to Management's Discussion and Analysis - Regulatory Capital Requirements and Note 19. Regulatory and Operational Matters to the Consolidated Financial Statements.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

16 edited+1 added−3 removed91 unchanged
Biggest changeThere can be no assurance that Patriot will achieve its anticipated effective tax rate, due to a change in a tax law, or the result of a tax audit that disallows previously recognized tax benefits. Changing regulation of corporate governance and public disclosure.
Biggest changeSince Patriot has a full valuation allowance recorded against its deferred tax assets, there is no risk of further reduction to Patriot’s equity position and net income or loss from changes in expectations about the future realizability of deferred tax assets.There can be no assurance that Patriot will achieve its anticipated effective tax rate, due to a change in a tax law, or the result of a tax audit that disallows previously recognized tax benefits.
A decline in available funding could adversely impact Patriot’s ability to originate loans, invest in securities, and meet its expenses, or to fulfill such obligations as repaying its borrowings or meeting deposit withdrawal demands. Risks Related to the Company ’ s Common Stock The price of the Company ’ s common stock may fluctuate.
A decline in available funding could adversely impact Patriot’s ability to originate loans, invest in securities, and meet its expenses, or to fulfill such obligations as repaying its borrowings or meeting deposit withdrawal demands. Risks Related to the Company’s Common Stock The price of the Company ’ s common stock may fluctuate.
Natural disasters (including severe weather events of increasing strength and frequency due to climate change), acts of war or terrorism, such as the recent outbreak of hostilities between Russia & Ukraine, occurrence of health epidemics and other adverse external events could have a significant negative impact on our ability to conduct business or upon third parties who perform operational services for us or our customers.
Natural disasters (including severe weather events of increasing strength and frequency due to climate change), acts of war or terrorism, such as the war between Russia & Ukraine, occurrence of health epidemics and other adverse external events could have a significant negative impact on our ability to conduct business or upon third parties who perform operational services for us or our customers.
ITEM 1A. Risk Factors Patriot’s financial condition and results of operation are subject to various risks inherent to its business, including those noted below. Risks Related to General Economic and Market Conditions We have been and may continue to be adversely affected by national financial markets and economic conditions, as well as local conditions.
ITEM 1A. Risk Factors Patriot’s financial condition and results of operation are subject to various risks inherent to its business, including those noted below. 7 Table of Contents Risks Related to General Economic and Market Conditions We have been and may continue to be adversely affected by national financial markets and economic conditions, as well as local conditions.
Furthermore, a prolonged period of inflation could cause wages and other costs to the Company to increase, which could adversely affect our results of operations and financial condition. Credit Risk The risks involved in the Bank ’ s commercial real estate loan portfolio are material.
Furthermore, a prolonged period of inflation could cause wages and other costs to the Company to increase, which could adversely affect our results of operations and financial condition. 9 Table of Contents Credit Risk The risks involved in the Bank ’ s commercial real estate loan portfolio are material.
The inability to hold its securities until market conditions are favorable for a sale, or until payments are received on mortgage-backed securities, could adversely affect Patriot’s earnings and profitability. 9 Table of Contents Inflationary pressures and rising prices may affect our results of operations and financial condition.
The inability to hold its securities until market conditions are favorable for a sale, or until payments are received on mortgage-backed securities, could adversely affect Patriot’s earnings and profitability. Inflationary pressures and rising prices may affect our results of operations and financial condition.
Legislative and regulatory changes are expected, but cannot be predicted. For example, new legislation or regulation could limit the manner in which Patriot may conduct its business, including the Bank’s ability to obtain financing, attract deposits, make loans, and achieve satisfactory interest spreads.
Legislative and regulatory changes are expected, but cannot be predicted. For example, new legislation or regulation could limit the way Patriot may conduct its business, including the Bank’s ability to obtain financing, attract deposits, make loans, and achieve satisfactory interest spreads.
Patriot’s primary sources of liquidity are the deposits the Bank acquires organically through its branch network and through the activities of its Digital Payments Division.
Patriot’s primary sources of liquidity are the deposits the Bank acquires organically through its branch network, through the activities of its Digital Payments Division, and through its online deposit channels.
Funds are also acquired through the brokered deposit market, borrowed funds, primarily in the form of collateralized borrowings from the Federal Reserve Bank and the Federal Home Loan Bank, and the cash flows generated through the collection of loan payments and on mortgage-related securities.
Funds are also acquired through borrowed funds primarily in the form of collateralized borrowings from the Federal Reserve Bank and the Federal Home Loan Bank, deposits raised through listing services, and the cash flows generated through the collection of loan payments and on mortgage-related securities.
As a result, Patriot’s efforts to comply with evolving laws, regulations and standards have resulted in, and are likely to continue to result in, increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities.
Patriot is committed to maintaining high standards of corporate governance and public disclosure. As a result, Patriot’s efforts to comply with evolving laws, regulations and standards have resulted in, and are likely to continue to result in, increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities.
The loss of mortgage and construction loan asset-value caused many financial institutions to seek additional capital, to merge with larger and financially stronger financial institutions and, in some cases, to fail.
The loss of mortgage and construction loan asset-value caused many financial institutions to seek additional capital, to merge with larger and financially stronger financial institutions and, in some cases, to fail. Many lenders and institutional investors reduced or ceased providing funding to borrowers, including other financial institutions.
Inflation risk is the risk that the value of assets or income from investments will be worthless in the future as inflation decreases the value of money. Inflation has risen sharply since the end of 2021 to levels not seen in more than 40 years.
Inflation risk is the risk that the value of assets or income from investments will be limited in the future as inflation decreases the value of money. Inflation rose sharply in 2021 and 2022 to levels not seen in more than 40 years. Inflation dropped in 2023 and 2024, but could begin to rise in the future.
Market turmoil, and the tightening of credit by the Fed, could lead to an increased level of commercial and consumer delinquencies, lack of consumer confidence, increased market volatility, and generally widespread reductions in business activity.
The Company is unable to predict, however, future economic conditions and their impact on the Company’s business. 8 Table of Contents Market turmoil, and the tightening of credit by the Fed, could lead to an increased level of commercial and consumer delinquencies, lack of consumer confidence, increased market volatility, and generally widespread reductions in business activity.
Patriot is subject to laws, regulations, and standards relating to corporate governance and public disclosure, SEC rules and regulations, and NASDAQ rules. These laws, regulations, and standards are subject to varying interpretations, and as a result, their practical application may evolve over time as new guidance is provided by regulatory and governing bodies.
These laws, regulations, and standards are subject to varying interpretations, and as a result, their practical application may evolve over time as new guidance is provided by regulatory and governing bodies. Due to the evolving legal and regulatory environment, compliance may become more difficult and result in higher costs.
During the course of the COVID-19 pandemic covering all of 2020 and a significant portion of 2021 and 2022, a temporary disruption and level of uncertainty existed. For a period of time, delinquencies, deferrals and problem assets rose, however foreclosures were relatively unaffected due to the moratorium that was issued by many states.
For a period of time, delinquencies, deferrals and problem assets rose, however foreclosures were relatively unaffected due to the moratorium that was issued by many states. Much of this has stabilized and returned to previous operating levels.
Many lenders and institutional investors reduced or ceased providing funding to borrowers, including other financial institutions. 8 Table of Contents During 2010 through 2019, however, the economic climate generally improved, contributing to decreases in the Bank’s problem assets, delinquencies and foreclosures from the levels experienced in the earlier period of economic turbulence.
During 2010 through 2019, however, the economic climate generally improved, contributing to decreases in the Bank’s problem assets, delinquencies and foreclosures from the levels experienced in the earlier period of economic turbulence. During the course of the COVID-19 pandemic covering all of 2020 and a significant portion of 2021 and 2022, a temporary disruption and level of uncertainty existed.
Removed
Much of this has stabilized and returned to previous operating levels. The Company is unable to predict, however, future economic conditions and their impact on the Company’s business.
Added
Changing regulation of corporate governance and public disclosure. Patriot is subject to laws, regulations, and standards relating to corporate governance and public disclosure, SEC rules and regulations, and NASDAQ rules.
Removed
Patriot’s equity position and net income or loss can also be reduced if all or apportion of its deferred tax assets are deemed to be unrealizable and require a valuation allowance.
Removed
Due to the evolving legal and regulatory environment, compliance may become more difficult and result in higher costs. Patriot is committed to maintaining high standards of corporate governance and public disclosure.

Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−0 removed0 unchanged
Biggest changeProperties The following table summarizes Patriot’s owned and leased properties, as of December 31, 2023: Street Address City County State Owned: 233 Post Road Darien Fairfield Connecticut 1755 Black Rock Turnpike Fairfield Fairfield Connecticut 100 Mason Street Greenwich Fairfield Connecticut 900 Bedford Street Stamford Fairfield Connecticut 999 Bedford Street Stamford Fairfield Connecticut 771 Boston Post Road Milford New Haven Connecticut 50 Charles Street Westport Fairfield Connecticut Leased: 16 River Street Norwalk Fairfield Connecticut 415 Post Road East Westport Fairfield Connecticut 495 Central Park Avenue Scarsdale Westchester New York 7 Old Tavern Road Orange New Haven Connecticut 30 Oak Street Stamford Fairfield Connecticut 300 Centerville Rd Warwick Kent County Rhode Island
Biggest changeProperties The following table summarizes Patriot’s owned and leased properties as of December 31, 2024: Street Address City County State Owned: 233 Post Road Darien Fairfield Connecticut 1755 Black Rock Turnpike Fairfield Fairfield Connecticut 100 Mason Street Greenwich Fairfield Connecticut 900 Bedford Street Stamford Fairfield Connecticut 999 Bedford Street Stamford Fairfield Connecticut 771 Boston Post Road Milford New Haven Connecticut 50 Charles Street Westport Fairfield Connecticut Leased: 16 River Street Norwalk Fairfield Connecticut 415 Post Road East Westport Fairfield Connecticut 495 Central Park Avenue Scarsdale Westchester New York 7 Old Tavern Road Orange New Haven Connecticut 1200 Riverplace Blvd Jacksonville Duval County Florida

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

1 edited+0 added−0 removed0 unchanged
Biggest changeITEM 4. Mine Safety Disclosures 17 PART II 18 ITEM 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities 18 ITEM 6.[Reserved] 19 ITEM 7. Management’s Discussion and Analysis - Financial Condition & Results of Operations 20 ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk 36 ITEM 8.
Biggest changeITEM 4. Mine Safety Disclosures 17 PART II 18 ITEM 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities 18 ITEM 6.[Reserved] 19 ITEM 7. Management’s Discussion and Analysis - Financial Condition & Results of Operations 19 ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk 39 ITEM 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

2 edited+1 added−1 removed8 unchanged
Biggest changeIn addition to the capital program, certain other restrictions exist regarding the ability of the Bank to transfer funds to the Company in the form of cash dividends, loans or advances.
Biggest changeIn addition to the capital program, certain other restrictions exist regarding the ability of the Bank to transfer funds to the Company in the form of cash dividends or return of capital.
ITEM 5. Market for Registrant ’ s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities Market Information The Company’s Common Stock is traded on the Nasdaq Global Market under the Symbol “PNBK.” Holders There were approximately 243 shareholders of record of the Company’s Common Stock as of December 31, 2023.
ITEM 5. Market for Registrant ’ s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities Market Information The Company’s Common Stock is traded on the Nasdaq Global Market under the Symbol “PNBK.” Holders There were approximately 260 registered shareholders of record of the Company’s Common Stock as of December 31, 2024.
Removed
Period Ending 2018 2019 2020 2021 2022 2023 Patriot National Bancorp ("PNBK") 100.00 % 89.54 % 69.75 % 109.12 % 74.39 % 26.88 % Nasdaq Community Bank Index Total Return Index ("XABQ") 100.00 % 121.23 % 108.34 % 151.34 % 123.55 % 115.31 % S&P 500 Total Return Index ("SP500TR") 100.00 % 131.49 % 155.68 % 200.88 % 164.08 % 207.21 %
Added
Period Ending 2019 2020 2021 2022 2023 2024 Patriot National Bancorp ("PNBK") 100.00 % 77.90 % 121.87 % 83.07 % 30.02 % 15.20 % Nasdaq Community Bank Index Total Return Index ("XABQ") 100.00 % 89.37 % 124.84 % 101.92 % 95.12 % 111.03 % S&P 500 Total Return Index ("SP500TR") 100.00 % 118.40 % 152.78 % 124.79 % 157.59 % 197.02 %

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

63 edited+62 added−43 removed20 unchanged
Biggest changeThe Company used the CECL methodology in 2023 while the incurred loss methodology was used in prior years: Year Ended December 31, (In thousands) 2023 2022 2021 Balance at beginning of the period $ 10,310 $ 9,905 $ 10,584 Impact of ASC 326 adoption 13,001 — — Charge-offs: Commercial Real Estate (6,346) — (51) Residential Real Estate (515) — (3) Commercial and Industrial (927) (70) (212) Consumer and Other (10,479) (1,690) (23) Construction (150) (68) (69) Total charge-offs (18,417) (1,828) (358) Recoveries: Commercial Real Estate — 154 — Residential Real Estate 14 4 3 Commercial and Industrial 34 69 65 Consumer and Other 1,080 121 111 Total recoveries 1,128 348 179 Net charge-offs (17,289) (1,480) (179) Provision (credit) for credit losses 9,903 1,885 (500) Balance at end of the period $ 15,925 $ 10,310 $ 9,905 Ratios: Net charge-offs to average loans (1.93) % (0.18) % (0.03) % Allowance for credit losses to total loans 1.88 % 1.22 % 1.34 % 24 Table of Contents The following table provides an allocation of allowance for credit losses by portfolio segment and the percentage of the loans to total loans: December 31, (In thousands) 2023 2022 2021 Allowance for credit losses Percent of loans in each category to total loans Allowance for loan losses Percent of loans in each category to total loans Allowance for loan losses Percent of loans in each category to total loans Commercial Real Estate $ 6,089 55.62 % $ 6,966 51.57 % $ 5,063 49.38 % Residential Real Estate 607 12.58 % 665 14.63 % 1,700 21.45 % Commercial and Industrial 1,269 19.27 % 1,403 16.36 % 2,532 16.61 % Consumer and Other 7,843 11.74 % 1,207 16.63 % 253 8.03 % Construction 4 0.50 % 24 0.58 % 78 2.95 % Construction to permanent - CRE 113 0.29 % 10 0.23 % 41 1.58 % Unallocated — N/A 35 N/A 238 N/A Total Allowance for credit losses $ 15,925 100.00 % $ 10,310 100.00 % $ 9,905 100.00 % Nonperforming Assets The following table presents non-accrual and accruing loans which were past due by over 90 days for the dates indicated: (In thousands) December 31, 2023 2022 2021 Non-accruing loans: Commercial Real Estate $ 12,775 $ 11,241 $ 15,704 Residential Real Estate — 2,470 3,148 Commercial and Industrial 3,921 4,833 4,101 Consumer and Other 977 49 142 Construction 454 — — Total non-accruing loans 18,127 18,593 23,095 Loans past due over 90 days and still accruing 341 1,155 2 Other real estate owned 2,843 — — Total nonperforming assets $ 21,311 $ 19,748 $ 23,097 Nonperforming assets to total assets 1.95 % 1.89 % 2.44 % Nonperforming loans to total loans, net 2.22 % 2.36 % 3.17 % Non-accrual loans decreased $466,000, from $18.6 million at December 31, 2022 to $18.1 million at December 31, 2023.
Biggest changeThe following table provides an allocation of allowance for credit losses by portfolio segment and the percentage of the loans to total loans: December 31, 2024 2023 2022 (In thousands) Allowance for credit losses Percent of loans in each category to total loans Allowance for credit losses Percent of loans in each category to total loans Allowance for loan losses Percent of loans in each category to total loans Commercial Real Estate $ 2,241 59.30 % $ 6,089 55.62 % $ 6,966 51.57 % Residential Real Estate 596 13.03 % 607 12.58 % 665 14.63 % Commercial and Industrial 1,077 18.32 % 1,269 19.27 % 1,403 16.36 % Consumer and Other 3,386 8.48 % 7,843 11.74 % 1,207 16.63 % Construction 5 0.54 % 4 0.50 % 24 0.58 % Construction to permanent - CRE — 0.33 % 113 0.29 % 10 0.23 % Unallocated — N/A — N/A 35 N/A Total Allowance for credit losses $ 7,305 100.00 % $ 15,925 100.00 % $ 10,310 100.00 % 25 Table of Contents Nonperforming Assets The following table presents non-accrual and accruing loans which were past due by over 90 days for the dates indicated: December 31, (In thousands) 2024 2023 2022 Non-accruing loans: Commercial Real Estate $ 19,334 $ 12,775 $ 11,241 Residential Real Estate 109 — 2,470 Commercial and Industrial 3,341 3,921 4,833 Consumer and Other 730 977 49 Construction — 454 — Construction to Permanent - CRE 2,357 — — Total non-accruing loans 25,871 18,127 18,593 Loans past due over 90 days and still accruing — 341 1,155 Other real estate owned 2,843 2,843 — Total nonperforming assets $ 28,714 $ 21,311 $ 19,748 Nonperforming assets to total assets 2.84 % 1.95 % 1.89 % Nonperforming loans to total loans, net 3.69 % 2.22 % 2.36 % Non-accrual loans increased $7.7 million, from $18.1 million at December 31, 2023 to $25.9 million at December 31, 2024.
Management continuously reviews its branch locations and corporate offices evaluating operating efficiencies and market share as well as effective customer service and delivery. Other Real Estate Owned (“OREO”) As of December 31, 2023, the Bank recorded one OREO of $2.8 million.
Management continuously reviews its branch locations and corporate offices evaluating operating efficiencies and market share as well as effective customer service and delivery. Other Real Estate Owned (“OREO”) As of December 31, 2024 and 2023, the Bank recorded one OREO of $2.8 million.
Investment securities The following table is a summary of the Company’s available-for-sale securities portfolio and other investments at the dates shown: December 31, (In thousands) 2023 2022 2021 U. S.
Investment securities The following table is a summary of the Company’s available-for-sale securities portfolio and other investments at the dates shown: December 31, (In thousands) 2024 2023 2022 U. S.
The Company performed a review of the CDI as of October 31, 2023 and determined that there was no impairment of the CDI as of December 31, 2023.
The Company performed a review of the CDI as of October 31, 2024 and determined that there was no impairment of the CDI as of December 31, 2024.
These capital returns are subject to OCC approval and are needed periodically to provide funds needed to service debt payments at the Company. Return of Capital payments from the Bank to the Company totaled $2.5 million for the year ended December 31, 2023, $900,000 for the year ended December 31, 2022, and $500,000 for the year ended December 31, 2021.
These capital returns are subject to OCC approval and are needed periodically to provide funds needed to service debt payments at the Company. Return of capital payments from the Bank to the Company totaled $950,000 for the year ended December 31, 2024, $2.5 million for the year ended December 31, 2023, and $900,000 for the year ended December 31, 2022.
Approximately 24.4% of the variable rate loan portfolio reprices with changes in interest rates within three months of the rate change. The balance of the loan portfolio has an initial rate for a fixed period, for example one, three or five years and then reprice annually after the initial fixed period.
Approximately 20.2% of the variable rate loan portfolio reprices with changes in interest rates within three months of the rate change. The balance of the loan portfolio has an initial rate for a fixed period, for example one, three or five years and then reprice annually after the initial fixed period.
Discussions of fiscal 2022 items and year-to-year comparisons between fiscal 2022 and fiscal 2021 that are not included in this Form 10-K can be found under Item 7 of Part II of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, as filed with the SEC on March 29, 2023.
Discussions of fiscal 2023 items and year-to-year comparisons between fiscal 2023 and fiscal 2022 that are not included in this Form 10-K can be found under Item 7 of Part II of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as filed with the SEC on April 1, 2024.
As of December 31, 2023 , the Bank had credit card loans held for sale totaling $10.8 million. The credit card loans expected to be held for no longer than three days before being sold to the buyer. The credit card receivable are fully cash-secured by deposits at Patriot.
As of December 31, 2024 , the Bank had credit card loans held for sale totaling $11.4 million. The credit card loans expected to be held for no longer than three days before being sold to the buyer. The credit card receivable are fully cash-secured by deposits at Patriot.
Based upon the overall assessment and evaluation of the loan portfolio at December 31, 2023, management believes the allowance for credit losses of $15.9 million, which represents 1.9% of gross loans outstanding, was adequate under prevailing economic conditions to absorb existing losses in the loan portfolio. The following table provides detail of activity in the allowance for credit losses.
Based upon the overall assessment and evaluation of the loan portfolio at December 31, 2024, management believes the allowance for credit losses of $7.3 million, which represents 1.0% of gross loans outstanding, was adequate under prevailing economic conditions to absorb existing losses in the loan portfolio. The following table provides detail of activity in the allowance for credit losses.
Net interest income depends on the relative amounts of interest earning assets and interest-bearing liabilities and the interest rates earned or paid on them, respectively.
Net interest income Net interest income is the difference between interest income on interest earning assets and interest expense on interest-bearing liabilities. Net interest income depends on the relative amounts of interest earning assets and interest-bearing liabilities and the interest rates earned or paid on them, respectively.
Premises and equipment As of December 31, 2023 and 2022, Patriot recorded premises and equipment of $29.9 million and $30.6 million, respectively. The decreases in premises and equipment were normal depreciation of the active premises and equipment during the year ended December 31, 2023.
Premises and equipment As of December 31, 2024 and 2023, Patriot recorded premises and equipment of $28.9 million and $29.9 million, respectively. The decreases in premises and equipment were normal depreciation of the active premises and equipment during the year ended December 31, 2024.
Borrowings consist of Federal Home Loan Bank (“FHLB”) advances, FRB borrowing, senior notes, junior subordinated debentures, and a note payable to the seller from whom the Fairfield branch building was purchased in 2015. Shareholders’ Equity Equity decreased $15.2 million from $59.6 million at December 31, 2022 to $44.4 million at December 31, 2023.
Borrowings consist of Federal Home Loan Bank (“FHLB”) advances, FRB borrowing, senior notes, junior subordinated debentures, and a note payable to the seller from whom the Fairfield branch building was purchased in 2015. Shareholders’ Equity Equity decreased $40.1 million from $44.4 million at December 31, 2023 to $4.3 million at December 31, 2024.
As of December 31, 2023, total two interest rate swaps remained outstanding. One swap is held with a loan customer to provide a facility to mitigate the fluctuations in the variable rate on the respective loan. The other swaps is with an outside third party.
Derivatives As of December 31, 2024, the Company had two interest rate swaps outstanding. One swap is held with a loan customer to provide a facility to mitigate the fluctuations in the variable rate on the respective loan. The other swaps is with an outside third party.
As of December 31, 2023, the investments in Commercial Real Estate and Commercial and Industrial were approximately 74.9% of total loans receivable. These loans generally are collateralized by the underlying real estate and supported by personal guarantees of the borrowers. Allowance for credit losses The Company adopted ASU 2016-13 effective January 1, 2023.
As of December 31, 2024, the investments in Commercial Real Estate and Commercial and Industrial were approximately 77.6% of total loans receivable. These loans generally are collateralized by the underlying real estate and supported by personal guarantees of the borrowers. 23 Table of Contents Allowance for Credit Losses on Loans The Company adopted ASU 2016-13 effective January 1, 2023.
Additionally, Patriot has approximately $47.3 million of NOLs available for Connecticut tax purposes at December 31, 2023, which may be used to offset up to 50% of taxable income in any year. The NOLs will expire between 2030 and 2040.
Additionally, Patriot has approximately $63.4 million of NOLs available for Connecticut tax purposes at December 31, 2024, which may be used to offset up to 50% of taxable income in any year. The NOLs will expire between 2030 and 2044.
Average balances have been computed using daily averages. 31 Table of Contents Selected Quarterly Financial Data: The following tables present the summarized quarterly results of operations (unaudited) to the Consolidated Financial Statements for the calendar year 2023: (In thousands, except per share amounts) First Quarter Second Quarter Third Quarter Fourth Quarter 2023 Interest and dividend income $ 13,646 $ 15,309 $ 15,070 $ 14,932 Interest expense 5,633 7,596 8,545 8,683 Net interest income 8,013 7,713 6,525 6,249 Provision (credit) for credit losses 2,220 1,325 4,688 (804) (1) Non-interest income 835 829 1,169 3,172 (2) Non-interest expense 7,584 8,063 8,109 8,953 (3) (Loss) income before income taxes (956) (846) (5,103) 1,272 (Benefit) provision for income taxes (257) (231) (1,333) 367 Net (loss) income $ (699) $ (615) $ (3,770) $ 905 (4) (Loss) earnings per share Basic $ (0.18) $ (0.16) $ (0.95) $ 0.23 Diluted $ (0.18) $ (0.16) $ (0.95) $ 0.23 (5) Weighted average shares outstanding - Basic 3,965,186 3,965,186 3,965,186 3,965,733 (6) Weighted average shares outstanding - Diluted 3,965,186 3,965,186 3,965,186 3,965,733 (6) (1) I n the fourth quarter of 2023, the provision for credit loss decreased to a credit , primarily due to decrease in loan balance and the reversal of a commitment reserve associated with its consumer loan portfolio that was no longer needed as the result of the termination of the commitments.
(4) The weighted average diluted shares outstanding did not include 22,269, 8,695, 91,697, and 93,710 anti-dilutive restricted shares of common stock as of March 31, 2024, June 30, 2024, September 30, 2024 and December 31, 2024, respectively. 34 Table of Contents The following tables present the summarized quarterly results of operations (unaudited) to the Consolidated Financial Statements for the calendar year 2023: (In thousands, except per share amounts) First Quarter Second Quarter Third Quarter Fourth Quarter 2023 Interest and dividend income $ 13,646 $ 15,309 $ 15,070 $ 14,932 Interest expense 5,633 7,596 8,545 8,683 Net interest income 8,013 7,713 6,525 6,249 Provision (credit) for credit losses 2,220 1,325 4,688 (804) (1) Non-interest income 835 829 1,169 3,172 (2) Non-interest expense 7,584 8,063 8,109 8,953 (3) (Loss) income before income taxes (956) (846) (5,103) 1,272 (Benefit) provision for income taxes (257) (231) (1,333) 367 Net (loss) income $ (699) $ (615) $ (3,770) $ 905 (4) (Loss) earnings per share Basic $ (0.18) $ (0.16) $ (0.95) $ 0.23 Diluted $ (0.18) $ (0.16) $ (0.95) $ 0.23 (5) Weighted average shares outstanding - Basic 3,965,186 3,965,186 3,965,186 3,965,733 (6) Weighted average shares outstanding - Diluted 3,965,186 3,965,186 3,965,186 3,965,733 (6) (1) I n the fourth quarter of 2023, the provision for credit loss decreased to a credit , primarily due to decrease in loan balance and the reversal of a commitment reserve associated with its consumer loan portfolio that was no longer needed as the result of the termination of the commitments.
Net interest income for the years ended December 31, 2023 and 2022 was $28.5 million and $33.3 million, respectively. The Bank’s net interest margin decreased to 2.8% for the year ended December 31, 2023, compared with 3.5% for the year ended December 31, 2022.
Net interest income for the years ended December 31, 2024 and 2023 was $20.1 million and $28.5 million, respectively. The Bank’s net interest margin decreased to 2.1% for the year ended December 31, 2024, compared with 2.8% for the year ended December 31, 2023.
After applying the limitation, at December 31, 2022, Patriot has no post-change net operating loss carry-forwards. For the years ended December 31, 2023 and 2022, the Bank did not record any uncertain tax position (“UTP”) related to the utilization of certain federal net operating losses.
After applying the limitation, at December 31, 2024, Patriot has $26.4 million post-change net operating loss carry-forwards which do not expire. For the years ended December 31, 2024 and 2023, the Bank did not record any uncertain tax position (“UTP”) related to the utilization of certain federal net operating losses.
Patriot’s swaps are derivatives, but are not designated as hedging instruments, thus any net gain or loss resulting from changes in the fair value is recognized in other non-interest income. No gain on the swaps was recognized for the year ended December 31, 2023, 2022 and 2021.
Patriot’s swaps are derivatives, but are not designated as hedging instruments, thus any net gain or loss resulting from changes in the fair value is recognized in other non-interest income. The Company did not recognize any unrealized and realized gain or loss for the year ended December 31, 2024, 2023 and 2022.
For the year ended December 31, 2023, total interest expense increased to $30.5 million, as compared to $10.8 million for the year ended December 31, 2022, primarily due to an increase in average deposits balance of $139.2 million. The increase in deposit interest expense reflects higher deposit balances and higher market interest rates.
For the year ended December 31, 2024, total interest expense increased to $32.3 million, as compared to $30.5 million for the year ended December 31, 2023, primarily due to an increase in average deposits balance of $19.4 million. The increase in deposit interest expense reflects higher deposit balances and higher market interest rates.
During 2023, 2022 and 2021, no loans held for investment were transferred to loans held for sale. Other consumer loans held for sale In July 2023, Patriot Bank's Digital Payments Division has entered into a Program Management Agreement with a buyer. Under the agreement, Patriot originates various types of consumer loans that are marketed by the buyer.
In 2023 and 2022, no loans held for investment were transferred to loans held for sale. 26 Table of Contents In July 2023, Patriot Bank's Digital Payments Division has entered into a Program Management Agreement with a buyer. Under the agreement, Patriot originates credit card loans that are marketed by the buyer.
Comparison of Results of Operations for the years 2023 and 2022 For the year ended December 31, 2023, the Company recorded net loss of $4.2 million ($(1.05) basic and diluted loss per share) compared to net income of $6.2 million ($1.56 basic and diluted loss per share) for the year ended December 31, 2022.
Comparison of Results of Operations for the years 2024 and 2023 For the year ended December 31, 2024, the Company recorded net loss of $39.9 million ($(10.03) basic and diluted loss per share) compared to net loss of $4.2 million ($(1.05) basic and diluted loss per share) for the year ended December 31, 2023.
A provision for credit losses is charged to current expense and acts to replenish the ACL in order to maintain the allowance at a level that management deems adequate. Determining the allowance involves significant judgments and assumptions by management. Because of the nature of the judgments and assumptions made by management, actual results may differ from these judgments and assumptions.
A provision for credit losses is charged to current expense and acts to replenish the ACL in order to maintain the allowance at a level that management deems adequate. Determining the allowance involves significant judgments and assumptions by management.
This increase was primarily attributable to the purchases of available-for-sale securities of $10.4 million in 2023, which was partially offset by $4.3 million in repayments and maturity of principal on available-for-sale securities, and net unrealized loss of $216,000 for the available-for-sale securities, associated with rising market interest rates.
This decrease in 2024 was primarily attributable to $8.3 million sale of available-for-sale securities and $3.6 million in repayments and maturity of principal on available-for-sale securities, which was partially offset by the purchases of available-for-sale securities of $2.3 million, and net unrealized gain of $614,000 for the available-for-sale securities, associated with rising market interest rates.
Non-interest expense For the year ended December 31, 2023, non-interest expense increased to $32.7 million, as compared to $27.2 million for the year ended December 31, 2022.
Non-interest expense For the year ended December 31, 2024, non-interest expense decreased to $32.1 million, as compared to $32.7 million for the year ended December 31, 2023.
(Dollar amounts in thousands) Amount Ratio Amount Ratio Total Capital (to risk weighted assets) $ 89,727 10.00 % $ 100,683 11.22 % Tier 1 Capital (to risk weighted assets) 73,282 8.17 % 94,238 10.50 % Common Equity Tier 1 Capital (to risk weighted assets) 65,282 7.27 % 94,238 10.50 % Tier 1 Leverage Capital (to average assets) 73,282 6.76 % 94,238 8.70 % Capital adequacy is one of the most important factors used to determine the safety and soundness of individual banks and the banking system.
(Dollar amounts in thousands) Amount Ratio Amount Ratio Amount Ratio Amount Ratio Total Capital (to risk weighted assets) $ 44,534 6.07 % $ 56,536 7.71 % $ 89,727 10.00 % $ 100,683 11.22 % Individual minimum capital ratio $ — — % $ 84,306 11.50 % $ — — % N/A N/A Tier 1 Capital (to risk weighted assets) 33,545 4.57 % 55,546 7.58 % 73,282 8.17 % 94,238 10.50 % Individual minimum capital ratio — — % 73,309 10.00 % — — % N/A N/A Common Equity Tier 1 Capital (to risk weighted assets) 25,545 3.48 % 55,546 7.58 % 65,282 7.27 % 94,238 10.50 % Individual minimum capital ratio — — % 73,309 10.00 % — — % N/A N/A Tier 1 Leverage Capital (to average assets) 33,545 3.50 % 55,546 5.79 % 73,282 6.76 % 94,238 8.70 % Individual minimum capital ratio — — % 86,306 9.00 % — — % N/A N/A Capital adequacy is one of the most important factors used to determine the safety and soundness of individual banks and the banking system.
During the year ended December 31, 2023, the Bank sold $1.8 million available-for-sale securities and recognized $24,000 net gain on sale. There was no sale of available-for-sales securities during the year ended December 31, 2022. In 2021, the Bank sold $58.8 million available-for-sale securities and recognized net gain on sale of securities of $76,000.
During the year ended December 31, 2024, the Bank sold $8.3 million available-for-sale securities and recognized $334,000 net loss on sale. In 2023, the Bank sold $1.8 million available-for-sale securities and recognized net gain on sale of securities of $24,000.
Government agency and mortgage-backed securities $ 65,671 $ 59,046 $ 66,629 Corporate bonds 13,766 14,655 16,921 Subordinated notes 4,227 4,602 4,626 SBA loan pools 5,037 5,718 5,603 Municipal bonds 486 499 562 Total available-for-sale securities, at fair value 89,187 84,520 94,341 Other investments, at cost 4,450 4,450 4,450 $ 93,637 $ 88,970 $ 98,791 Total investments increased $4.6 million or 5.2%, from $89.0 million at December 31, 2022 to $93.6 million at December 31, 2023.
Government agency and mortgage-backed securities $ 60,223 $ 65,671 $ 59,046 Corporate bonds 12,735 13,766 14,655 Subordinated notes 3,461 4,227 4,602 SBA loan pools 3,573 5,037 5,718 Municipal bonds — 486 499 Total available-for-sale securities, at fair value 79,992 89,187 84,520 Other investments, at cost 4,450 4,450 4,450 $ 84,442 $ 93,637 $ 88,970 Total investments decreased $9.2 million or 9.8%, from $93.6 million at December 31, 2023 to $84.4 million at December 31, 2024.
(In thousands) Year Ended December 31, 2023 2022 2021 Average Balance Interest Yield Average Balance Interest Yield Average Balance Interest Yield ASSETS Interest Earning Assets: Loans $ 896,500 $ 54,310 6.06 % $ 831,634 $ 40,823 4.91 % $ 705,353 $ 30,115 4.27 % Investments 99,546 3,157 3.17 % 96,770 2,691 2.78 % 102,466 2,147 2.10 % Cash equivalents and restricted cash 25,140 1,490 5.93 % 32,229 498 1.55 % 57,753 89 0.15 % Total interest earning assets 1,021,186 58,957 5.77 % 960,633 44,012 4.58 % 865,572 32,351 3.74 % Cash and due from banks 3,172 8,091 4,016 Allowance for credit losses (22,596) (9,762) (10,384) OREO 138 — 893 Other assets 69,923 66,440 61,182 Total Assets $ 1,071,823 $ 1,025,402 $ 921,279 Liabilities Interest bearing liabilities: Deposits $ 711,479 $ 21,668 3.05 % $ 572,295 $ 5,300 0.93 % $ 525,537 $ 2,243 0.43 % Borrowings 134,570 6,141 4.56 % 106,292 3,509 3.30 % 94,511 2,986 3.16 % Senior notes 11,654 1,159 9.95 % 12,002 866 7.22 % 11,963 913 7.63 % Subordinated debt 17,985 1,481 8.23 % 17,947 1,066 5.94 % 17,910 933 5.21 % Note Payable and other 469 8 1.71 % 678 12 1.77 % 881 15 1.70 % Total interest bearing liabilities 876,157 30,457 3.48 % 709,214 10,753 1.52 % 650,802 7,090 1.09 % Demand deposits 140,654 244,128 196,287 Other liabilities 8,505 9,651 8,485 Total Liabilities 1,025,316 962,993 855,574 Shareholders' equity 46,507 62,409 65,705 Total Liabilities and Shareholders' Equity $ 1,071,823 $ 1,025,402 $ 921,279 Net interest income $ 28,500 $ 33,259 $ 25,261 Interest margin 2.79 % 3.46 % 2.92 % Interest spread 2.29 % 3.06 % 2.65 % 29 Table of Contents 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 years ended December 31, 2023 to 2022 and December 31, 2022 to 2021.
(In thousands) Year Ended December 31, 2024 2023 2022 Average Balance Interest Yield Average Balance Interest Yield Average Balance Interest Yield Assets Interest earning assets: Loans $ 795,236 $ 47,322 5.93 % $ 896,500 $ 54,310 6.06 % $ 831,634 $ 40,823 4.91 % Investments 95,838 2,852 2.98 % 99,546 3,157 3.17 % 96,770 2,691 2.78 % Cash equivalents and restricted cash 43,125 2,188 5.06 % 25,140 1,490 5.93 % 32,229 498 1.55 % Total interest earning assets 934,199 52,362 5.59 % 1,021,186 58,957 5.77 % 960,633 44,012 4.58 % Cash and due from banks 2,711 3,172 8,091 Allowance for credit losses (14,139) (22,596) (9,762) OREO 2,843 138 — Other assets 62,827 69,923 66,440 Total Assets $ 988,441 $ 1,071,823 $ 1,025,402 Liabilities Interest bearing liabilities: Deposits $ 730,836 $ 26,049 3.55 % $ 711,479 $ 21,668 3.05 % $ 572,295 $ 5,300 0.93 % Borrowings 80,048 3,476 4.33 % 134,570 6,141 4.56 % 106,292 3,509 3.30 % Senior notes 11,787 1,159 9.83 % 11,654 1,159 9.95 % 12,002 866 7.22 % Subordinated debt 18,024 1,596 8.83 % 17,985 1,481 8.23 % 17,947 1,066 5.94 % Note Payable 258 5 1.93 % 469 8 1.71 % 678 12 1.77 % Total interest bearing liabilities 840,953 32,285 3.83 % 876,157 30,457 3.48 % 709,214 10,753 1.52 % Demand deposits 101,290 140,654 244,128 Other liabilities 10,063 8,505 9,651 Total Liabilities 952,306 1,025,316 962,993 Shareholders' equity 36,135 46,507 62,409 Total Liabilities and Shareholders' Equity $ 988,441 $ 1,071,823 $ 1,025,402 Net interest income $ 20,077 $ 28,500 $ 33,259 Interest margin 2.14 % 2.79 % 3.46 % Interest spread 1.76 % 2.29 % 3.06 % 31 Table of Contents 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 years ended December 31, 2024 to 2023 and December 31, 2023 to 2022.
ASU 2016-13 requires the measurement of expected credit losses for financial assets, including loans and certain off-balance-sheet credit exposures, measured at amortized cost.
ASU 2016-13 requires the measurement of expected credit losses for financial assets, including loans and certain off-balance-sheet credit exposures, measured at amortized cost. The allowance for credit losses was $7.3 million at December 31, 2024, compared to the allowance for credit losses of $15.9 million at December 31, 2023.
Loans held for investment The following table provides the composition of the Company’s loan held for investment portfolio as of December 31, for each of the years shown: December 31, (In thousands) 2023 2022 2021 Amount % Amount % Amount % Loan portfolio segment: Commercial Real Estate $ 472,093 55.62 % $ 437,443 51.57 % $ 365,247 49.38 % Residential Real Estate 106,783 12.58 % 124,140 14.63 % 158,591 21.45 % Commercial and Industrial 163,565 19.27 % 138,787 16.36 % 122,810 16.61 % Consumer and Other 99,688 11.74 % 141,091 16.63 % 59,364 8.03 % Construction 4,266 0.50 % 4,922 0.58 % 21,781 2.95 % Construction to permanent - CRE 2,464 0.29 % 1,933 0.23 % 11,695 1.58 % Loans receivable, gross 848,859 100.00 % 848,316 100.00 % 739,488 100.00 % Allowance for credit losses (15,925) (10,310) (9,905) Loans receivable, net $ 832,934 $ 838,006 $ 729,583 22 Table of Contents The gross loans receivable increased $543,000 or 0.1%, from $848.3 million at December 31, 2022 to $848.9 million at December 31, 2023.
There was no sale of available-for-sale securities during the year ended December 31, 2022. 21 Table of Contents Loans held for investment The following table provides the composition of the Company’s loan held for investment portfolio as of December 31, for each of the years shown: December 31, (In thousands) 2024 2023 2022 Amount % Amount % Amount % Loan portfolio segment: Commercial Real Estate $ 419,489 59.30 % $ 472,093 55.62 % $ 437,443 51.57 % Residential Real Estate 92,215 13.03 % 106,783 12.58 % 124,140 14.63 % Commercial and Industrial 129,608 18.32 % 163,565 19.27 % 138,787 16.36 % Consumer and Other 59,973 8.48 % 99,688 11.74 % 141,091 16.63 % Construction 3,830 0.54 % 4,266 0.50 % 4,922 0.58 % Construction to permanent - CRE 2,357 0.33 % 2,464 0.29 % 1,933 0.23 % Loans receivable, gross 707,472 100.00 % 848,859 100.00 % 848,316 100.00 % Allowance for credit losses (7,305) (15,925) (10,310) Loans receivable, net $ 700,167 $ 832,934 $ 838,006 The gross loans receivable decreased $141.4 million or 16.7%, from $848.9 million at December 31, 2023 to $707.5 million at December 31, 2024.
For the year ended December 31, 2023, the Bank recorded total provision for credit losses of $7.4 million, consisting of a $9.9 million provision for credit loss on loans and a credit in reserve for the off-balance sheet exposure of $(2.5) million.
Provision (Credit) for credit losses For the year ended December 31, 2024, the provision for credit losses was $12.5 million, consisting of a $12.5 million provision for credit loss on loans and a $89,000 credit in reserve for the off-balance sheet exposure.
The decline in net interest margin was primarily associated with an increase in the cost of deposits and other borrowings due to the significant rise in market interest rates, only partially mitigated by the rise in variable rate interest earning assets. Provision (Credit) for credit losses Beginning January 1, 2023, the Company adopted the CECL accounting standard.
The decline in net interest margin was primarily associated with an increase in the cost of deposits due to the significant rise in market interest rates, only partially mitigated by the rise in variable rate interest earning assets.
Other financial measures and ratios: As of and for the year ended December 31, 2023 2022 2021 (Loss) return on average assets (0.39) % 0.60 % 0.55 % (Loss) return on average equity (8.99) % 9.87 % 7.75 % Average equity to average assets 4.34 % 6.09 % 7.13 % We derived the selected balance sheet measures as of December 31, 2023, 2022 and 2021 and the selected statement of income measures for the years ended December 31, 2023, 2022 and 2021 from our audited Consolidated Financial Statements included elsewhere in this annual report.
The provision for income taxes for year 2024 included a valuation allowance recorded against all deferred tax assets of $27.6 million, See Note 14 - Income Taxes. 33 Table of Contents Other financial measures and ratios: As of and for the year ended December 31, 2024 2023 2022 (Loss) return on average assets (4.03) % (0.39) % 0.60 % (Loss) return on average equity (110.37) % (8.99) % 9.87 % Average equity to average assets 3.66 % 4.34 % 6.09 % We derived the selected balance sheet measures as of December 31, 2024, 2023 and 2022 and the selected statement of income measures for the years ended December 31, 2024, 2023 and 2022 from our audited Consolidated Financial Statements included elsewhere in this annual report.
Year Ended December 31, 2023 compared to 2022 2022 compared to 2021 (In thousands) Increase/(Decrease) Increase/(Decrease) Volume Rate Total Volume Rate Total Interest Earning Assets: Loans $ 3,850 $ 9,637 $ 13,487 $ 5,063 $ 5,645 $ 10,708 Investments 59 407 466 (115) 659 544 Cash equivalents and other (109) 1,101 992 (42) 451 409 Total interest earning assets 3,800 11,145 14,945 4,906 6,755 11,661 Interest bearing liabilities: Deposit 2,430 13,938 16,368 463 2,594 3,057 Borrowings 937 1,695 2,632 376 147 523 Senior notes (27) 320 293 3 (50) (47) Subordinated debt — 415 415 2 131 133 Note payable and other (4) — (4) (3) — (3) Total interest bearing liabilities 3,336 16,368 19,704 841 2,822 3,663 Net interest income $ 464 $ (5,223) $ (4,759) $ 4,065 $ 3,933 $ 7,998 RESULTS OF OPERATIONS A discussion regarding the financial condition and results of operations for fiscal 2023 compared to fiscal 2022 is presented below.
Year Ended December 31, 2024 compared to 2023 2023 compared to 2022 (In thousands) Increase/(Decrease) Increase/(Decrease) Volume Rate Total Volume Rate Total Interest earning assets: Loans $ (6,572) $ (416) $ (6,988) $ 3,850 $ 9,637 $ 13,487 Investments (233) (72) (305) 59 407 466 Cash equivalents and other 1,074 (376) 698 (109) 1,101 992 Total interest earning assets (5,731) (864) (6,595) 3,800 11,145 14,945 Interest bearing liabilities: Deposit (2,032) 6,413 4,381 2,430 13,938 16,368 Borrowings (2,490) (175) (2,665) 937 1,695 2,632 Senior notes 13 (13) — (27) 320 293 Subordinated debt — 115 115 — 415 415 Note payable and other (3) — (3) (4) — (4) Total interest bearing liabilities (4,512) 6,340 1,828 3,336 16,368 19,704 (Decrease) increase in net interest income $ (1,219) $ (7,204) $ (8,423) $ 464 $ (5,223) $ (4,759) RESULTS OF OPERATIONS A discussion regarding the financial condition and results of operations for fiscal 2024 compared to fiscal 2023 is presented below.
SBA loans held for sale at December 31, 2022, consisted of $3.1 million SBA commercial and industrial loans and $2.1 million SBA commercial real estate. The Company sold $4.6 million SBA loans during the year ended December 31, 2023, compared to $21.6 million for the year ended December 31, 2022.
SBA loans held for sale at December 31, 2023, consisted of $3.5 million SBA commercial and industrial loans and $6.4 million SBA commercial real estate. The Company sold $8.4 million SBA loans and recorded $378,000 gain on sale for the year ended December 31, 2024.
The $18.1 million of non-accrual loans at December 31, 2023 was comprised of 139 borrowers. Of these, 19 loans were individually evaluated and a specific reserve of $4.2 million was established as of December 31, 2023.
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. As of December 31, 2023, the $18.1 million of non-accrual loans was comprised of 139 borrowers. Of these, 19 loans were individually evaluated and a specific reserve of $4.2 million was established.
Non-interest income For the year ended December 31, 2023, non-interest income increased to $6.0 million, as compared to $3.6 million in 2022. The increase was primarily attributable to higher non-interest income from the digital payments program in 2023, partially offset by a lower gain on sale of SBA loans.
Consequently, the ACL for loans outstanding decreased from $15.9 million as of December 31, 2023, to $7.3 million as of December 31, 2024. Non-interest income For the year ended December 31, 2024, non-interest income increased to $8.4 million, as compared to $6.0 million in 2023. The increase was primarily attributable to higher non-interest income from the digital payments program.
As of December 31, 2023, the maturities of Patriot’s contractual obligations are as follows: (In thousands) Contractual Obligations Due Contractual Obligation Category Less than One Year One to Three Years Three to Five Years Over Five Years Total Certificates of deposit $ 200,178 $ 40,219 $ 336 $ — $ 240,733 Brokered deposits 33,853 6,673 — — 40,526 FHB, FRB and correspondent bank borrowings 171,000 — — — 171,000 Senior notes — 12,000 — — 12,000 Subordinated debt — — 10,000 — 10,000 Junior subordinated debt — — — 8,248 8,248 Note payable 376 — — — 376 Operating lease obligations 457 634 403 679 2,173 Total contractual obligations $ 405,864 $ 59,526 $ 10,739 $ 8,927 $ 485,056 Management manages its capital resources by seeking to maintain a capital structure that will ensure an adequate level of capital to support anticipated asset growth and absorb potential losses while effectively leveraging capital to enhance profitability and return to shareholders.
As of December 31, 2024, the maturities of Patriot’s contractual obligations are as follows: (In thousands) Contractual Obligations Due Contractual Obligation Category Less than One Year One to Three Years Three to Five Years Over Five Years Total Certificates of deposit $ 198,260 $ 40,785 $ 328 $ — $ 239,373 Brokered deposits 14,959 54,743 — — 69,702 FHB, FRB and correspondent bank borrowings 3,000 — — — 3,000 Senior notes — 12,000 — — 12,000 Subordinated debt — — 10,000 — 10,000 Junior subordinated debt — — — 8,248 8,248 Note payable 162 — — — 162 Operating lease obligations 401 579 229 601 1,810 Total contractual obligations $ 216,782 $ 108,107 $ 10,557 $ 8,849 $ 344,295 Management manages its capital resources by seeking to maintain a capital structure that will ensure an adequate level of capital to support anticipated asset growth and absorb potential losses while effectively leveraging capital to enhance profitability and return to shareholders.
The OREO balance represents the lower of the carrying value of loan receivable due from the mortgage of the foreclosed residential property or the estimated net realized value of the underlying property acquired through foreclosure. As of December 31, 2022, no OREO balance was record on the balance sheet.
The OREO balance represents the lower of the carrying value of loan receivable due from the mortgage of the foreclosed residential property or the estimated net realized value of the underlying property acquired through foreclosure. During 2024 and 2023, no OREO balance was sold. Goodwill The Company performs its annual impairment analysis of goodwill.
The primary drivers of this increase in 2023 were a $1.1 million goodwill impairment recorded in the fourth quarter of 2023, and increased salaries and benefit expenses in 2023, some of which related to the build up of the mortgage origination business expected to begin operations in the first quarter of 2024.
The decrease primary associated with a $1.1 million goodwill impairment recorded in the fourth quarter of 2023, which was offset by increased salaries and benefit expenses and professional services in 2024, some of which related to the buildup of the mortgage origination business.
This trend is expected to continue during 2024. SBA loans held for investment were included in the commercial real estate loans and commercial and industrial loan classifications above. As of December 31, 2023 and 2022, SBA loans included in the commercial real estate loans were $12.9 million and $12.2 million, respectively.
As of December 31, 2024 and 2023, SBA loans included in the commercial real estate loans were $18.7 million and $12.9 million, respectively. SBA loans included in the commercial and industrial loan were $11.2 million and $17.1 million as of December 31, 2024 and 2023, respectively.
SBA loans included in the commercial and industrial loan were $17.1 million and $20.3 million as of December 31, 2023 and 2022, respectively. At December 31, 2023, the net loan to deposit ratio was 99.1% and the net loan to total assets ratio was 76.2%. At December 31, 2022, these ratios were 97.4% and 80.3%, respectively.
At December 31, 2024, the net loan to deposit ratio was 72.4% and the net loan to total assets ratio was 69.2%. At December 31, 2023, these ratios were 99.1% and 76.2%, respectively.
Significant variances are summarized below and discussed in detail subsequently: • Interest and dividend income increased $14.9 million; • Interest expense increased $19.7 million; • Net interest income decreased $4.8 million; • Provision for credit losses increased $5.5 million; • Non-interest income increased $2.4 million; and • Non-interest expense increased $5.5 million. 30 Table of Contents Net interest income Net interest income is the difference between interest income on interest earning assets and interest expense on interest-bearing liabilities.
Significant variances are summarized below and discussed in detail subsequently: • Interest and dividend income decreased $6.6 million; • Interest expense increased $1.8 million; • Net interest income decreased $8.4 million; • Provision for credit losses increased $5.0 million; • Non-interest income increased $2.4 million; and • Non-interest expense decreased $628,000.
As of December 31, 2023 and 2022, the Bank’s off-balance sheet commitments were $92.5 million and $154.3 million, respectively. 34 Table of Contents REGULATORY CAPITAL REQUIREMENTS The following tables illustrate the Company’s and the Bank’s regulatory capital ratios at December 31, 2023: December 31, 2023 Patriot National Bancorp, Inc. Patriot Bank, N.A.
REGULATORY CAPITAL REQUIREMENTS The following tables illustrate the Company’s and the Bank’s regulatory capital ratios at December 31, 2024 and 2023: December 31, 2024 December 31, 2023 Patriot National Bancorp, Inc. Patriot Bank, N.A. Patriot National Bancorp, Inc. Patriot Bank, N.A.
OFF-BALANCE SHEET ARRANGEMENTS The Bank’s off-balance sheet commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee by the borrower. Since these commitments could expire without being drawn upon or are contingent upon the customer adhering to the terms of the agreements, the total commitment amounts do not necessarily represent future cash requirements.
Since these commitments could expire without being drawn upon or are contingent upon the customer adhering to the terms of the agreements, the total commitment amounts do not necessarily represent future cash requirements. As of December 31, 2024 and 2023, the Bank’s off-balance sheet commitments were $87.6 million and $92.5 million, respectively.
In addition, off-balance sheet funding sources include collateral based borrowing available from the FHLB, correspondent bank borrowing lines, and advised borrowing lines through an interbank borrowing network. Liquidity is a measure of the Company’s ability to generate adequate cash to meet its financial obligations. The principal cash requirements of a financial institution are to cover downward fluctuations in deposit accounts.
Liquidity is a measure of the Company’s ability to generate adequate cash to meet its financial obligations. The principal cash requirements of a financial institution are to cover downward fluctuations in deposit accounts.
Further discussion of the final derivatives is set forth in Note 11 and Note 21 to the Consolidated Financial Statements. 27 Table of Contents Deposits The following table is a summary of the Company’s deposits at the dates shown: (In thousands) December 31, 2023 2022 2021 Non-interest bearing: Non-interest bearing $ 95,109 $ 118,541 $ 140,384 Non-interest bearing DDA- Digital Payments 14,947 151,095 86,329 Total non-interest bearing 110,056 269,636 226,713 Interest bearing: Negotiable order of withdrawal accounts (NOW) 42,416 34,440 34,741 Savings 44,104 71,002 109,744 Interest bearing DDA - Digital Payments 162,196 — — Money market 166,294 164,827 111,957 Money market - Digital Payments 33,986 46,173 52,561 Certificates of deposit, less than $250,000 175,988 165,793 142,246 Certificates of deposit, $250,000 or greater 64,745 59,877 53,584 Brokered deposits 40,526 48,698 17,016 Total Interest bearing 730,255 590,810 521,849 Total Deposits $ 840,311 $ 860,446 $ 748,562 Total Digital Payments deposits $ 213,383 $ 197,268 $ 138,890 Total retail bank deposits $ 394,819 $ 430,650 $ 493,066 As of December 31, 2023, total deposits decreased $20.1 million, primarily due to a decline in retail branch deposits partially offset by a growth in digital payments deposits.
Further discussion of the final derivatives is set forth in Note 11 and Note 21 to the Consolidated Financial Statements. 28 Table of Contents Deposits The following table is a summary of the Company’s deposits at the dates shown: (In thousands) December 31, 2024 2023 2022 Non-interest bearing: Non-interest bearing $ 106,689 $ 95,109 $ 118,541 Non-interest bearing DDA- Digital Payments 12,523 14,947 151,095 Total non-interest bearing 119,212 110,056 269,636 Interest bearing: Negotiable order of withdrawal accounts (NOW) 31,549 33,035 34,440 Savings 38,743 44,104 71,002 Interest bearing DDA 19,630 7,127 — Interest bearing DDA - Digital Payments 186,365 164,450 — Money market 195,369 166,294 164,827 Money market - Digital Payments 66,654 33,986 46,173 Certificates of deposit, $250,000 or less 174,095 175,988 165,793 Certificates of deposit, more than $250,000 65,278 64,745 59,877 Brokered deposits 69,702 40,526 48,698 Total Interest bearing 847,385 730,255 590,810 Total Deposits $ 966,597 $ 840,311 $ 860,446 Total Digital Payments deposits $ 265,542 $ 213,383 $ 197,268 Total retail branch bank deposits $ 412,960 $ 394,819 $ 430,650 Total uninsured deposits $ 297,845 $ 334,300 $ 343,980 Uninsured deposits to total deposits 30.81 % 39.78 % 39.98 % Non-GAAP uninsured deposits to total deposits excluding Digital Payments deposits 15.80 % 20.06 % 22.35 % Total deposits increased by $126.3 million during 2024, rising from $840.3 million as of December 31, 2023, to $966.6 million as of December 31, 2024.
In 2021, Patriot sold one OREO of $1.9 million and recognized a gain of $2,000. Goodwill The Company performed its annual impairment analysis of goodwill as of October 31, 2023. The analysis determined that the estimated fair value of the reporting unit was less than its carrying value as of October 31, 2023.
In 2023, the impairment analysis determined that the estimated fair value of the reporting unit was less than its carrying value as of October 31, 2023. As a result, a full impairment charge of $1.1 million was recorded for the year ended December 31, 2023. As of December 31, 2024 and 2023, the goodwill balance was zero.
In comparison, at December 31, 2022, loans held for sale solely for SBA loans amounted to $5.2 million. SBA loans made by the Bank under the SBA 7(a) program generally are made to small businesses to provide working capital or to provide funding for the purchase of businesses, real estate, or equipment.
SBA loans made by the Bank under the SBA 7(a) program generally are made to small businesses to provide working capital or to provide funding for the purchase of businesses, real estate, or equipment. SBA loans are made based primarily on the historical and projected cash flow of the business and secondarily on the underlying collateral provided.
Loans held for sale represent the guaranteed portion of SBA loans and are reflected at the lower of aggregate cost or market value. SBA loans held for sale at December 31, 2023 consisted of $3.5 million SBA commercial and industrial loans and $6.4 million SBA commercial real estate.
Patriot sells the guaranteed portion of SBA loans for liquidity purposes and to generate non-interest income. Loans held for sale represent the guaranteed portion of SBA loans and are reflected at the lower of aggregate cost or market value. No SBA loans held for sale were recorded as of December 31, 2024.
As of December 31, 2022, the $18.6 million of non-accrual loans was comprised of twenty-eight borrowers, for which a specific reserve of $6.0 million was established. 25 Table of Contents Loans held for sale As of December 31, 2023, loans held for sale totaled $20.8 million, consisting of $9.9 million of SBA loans and $10.8 million loans held for sale for digital payments of credit cards.
In comparison, at December 31, 2023, loans held for sale totaled $20.8 million, consisting of $9.9 million SBA loans and $10.8 million loans held for sale for digital payments of credit cards.
Pre-tax loss was $5.6 million for the year ended December 31, 2023, compared to pre-tax income of $7.8 million for the year ended December 31, 2022.
Provision for income taxes The Company reported a provision for income taxes of $23.8 million for the year ended December 31, 2024, compared to a benefit for income taxes of $1.5 million for the year ended December 31, 2023.
For the year ended December 31, 2023, interest income increased to $59.0 million, as compared to $44.0 million for the year ended December 31, 2022, which was primarily attributable to an increase of $64.9 million in average loan balances, along with an increase in rates earned on loans reflecting the increase in interest rates during 2023.
For the year ended December 31, 2024, interest income decreased to $52.4 million, as compared to $59.0 million for the year ended December 31, 2023, which was primarily attributable to a reduction of $101.3 million in average loan balances in 2024, and narrower net interest margin due to higher deposit costs and increase in nonaccrual loans.
The decrease was primarily due to a cumulative adjustment to the opening balance of accumulated deficit of $11.5 million upon adoption of CECL effective January 1, 2023, and $4.2 million net loss for the year ended December 31, 2023. 28 Table of Contents The following table presents average balance sheets, interest income, interest expense and the corresponding yields earned, and rates paid for each of the years in the three-year period ended December 31, 2023.
For more information on the net loss for the year ended December 31, 2024 see Results of Operations section of this Management’s Discussion and Analysis. 30 Table of Contents Average Balances The following table presents average balance sheets, interest income, interest expense and the corresponding yields earned, and rates paid for each of the years in the three-year period ended December 31, 2024.
The decrease in CDI of $46,000 from $249,000 at December 31, 2022 to $203,000 at December 31, 2023, was solely due to the amortization of the CDI for the year ended December 31, 2023. 26 Table of Contents Deferred Taxes As of December 31, 2023, Patriot had available approximately $15.5 million of Federal net operating loss carryforwards (“NOL”) that are offset by $15.5 million in Internal Revenue Code §382 limitations.
As of December 31, 2023, DTAs were $24.1 million, consisting predominately of Federal and state net operating losses, capitalized costs and allowance for credit losses. As of December 31, 2024, Patriot had available approximately $41.9 million of Federal net operating loss carryforwards (“NOL”) that are offset by $15.5 million in Internal Revenue Code §382 limitations.
For the year ended December 31, 2022, a provision for loan losses of $1.9 million was recorded, with no recorded reserve for the off-balance-sheet exposure .
For the year ended December 31, 2023, the provision for credit losses was $7.4 million, consisting of a $9.9 million provision for loan losses and a $2.5 million credit in reserve for the off-balance-sheet exposure. The Bank has been selectively managing down its credit exposure in certain higher-risk areas in 2024.
Management believes the Company’s liquid assets provide sufficient coverage to satisfy loan demand, cover potential fluctuations in deposit accounts, and to meet other anticipated operational cash requirements for next 12 months and beyond. The Company is a member of the Federal Home Loan Bank of Boston ("FHLB-B"). At December 31, 2023, the outstanding advances from the FHLB-B aggregated $171.0 million.
Management believes the Company’s liquid assets are sufficient to cover probable and reasonable fluctuations in deposit accounts, and to meet other anticipated operational cash requirements at the Bank.
Valuation allowances are established when necessary to reduce deferred tax assets to the amounts that are more likely than not expected to be realized based on the weighting of positive and negative evidence.
When appropriate, the Company records a valuation allowance to reduce deferred tax assets to the amount that is more likely than not to be realized. A valuation allowance is subject to ongoing adjustment based on changes in circumstances that affect management’s judgment about the realizability of the deferred tax asset.
Maturities and Sensitivities of Loans to Changes in Interest Rates The following table presents loans receivable, gross by portfolio segment, by contractual maturity as of December 31, 2023: Contractual Maturity of Loan Balance (In thousands) One year or less One through Five Years After Five Years Total Loan portfolio segment: Commercial Real Estate $ 38,127 $ 275,055 $ 158,911 $ 472,093 Residential Real Estate 1,085 7,710 97,988 106,783 Commercial and Industrial 14,518 80,378 68,669 163,565 Consumer and Other 1,194 46,206 52,288 99,688 Construction 3,812 454 — 4,266 Construction to permanent - CRE — — 2,464 2,464 Total $ 58,736 $ 409,803 $ 380,320 $ 848,859 Fixed rate loans $ 9,501 $ 275,775 $ 129,754 $ 415,030 Variable rate loans 49,235 134,028 250,566 433,829 Total $ 58,736 $ 409,803 $ 380,320 $ 848,859 All variable rate loans account for 51.1% of the total loan portfolio.
Maturities and Sensitivities of Loans to Changes in Interest Rates The following table presents loans receivable, gross by portfolio segment, by contractual maturity as of December 31, 2024: Contractual Maturity of Loan Balance (In thousands) One year or less One through Five Years After Five Years Total Loan portfolio segment: Commercial Real Estate $ 44,799 $ 240,063 $ 134,627 $ 419,489 Residential Real Estate 2,513 5,582 84,120 92,215 Commercial and Industrial 24,822 53,195 51,591 129,608 Consumer and Other 3,370 20,004 36,599 59,973 Construction 3,830 — — 3,830 Construction to permanent - CRE — — 2,357 2,357 Total $ 79,334 $ 318,844 $ 309,294 $ 707,472 Fixed rate loans $ 38,459 $ 215,984 $ 104,949 $ 359,392 Variable rate loans 40,875 102,860 204,345 348,080 Total $ 79,334 $ 318,844 $ 309,294 $ 707,472 All variable rate loans account for 49.2% of the total loan portfolio.
The increase was primarily driven by a rise in cash, cash equivalents and restricted cash of $28.0 million, and an increase in loans held for sale of $15.6 million. 21 Table of Contents Cash, cash equivalents and restricted cash Cash, cash equivalents and restricted cash increased $28.0 million or 72.9%, from $38.5 million at December 31, 2022 to $66.5 million as of December 31, 2023.
Cash, cash equivalents and restricted cash Cash, cash equivalents and restricted cash increased $96.1 million or 144.4%, from $66.5 million as of December 31, 2023 to $162.6 million as of December 31, 2024.
Further discussion of the derivatives is set forth in Note 1, Note 11, and Note 21 to the consolidated financial statements. FINANCIAL CONDITION Assets The Company’s total assets increased $50.1 million, or 4.8%, from $1.04 billion at December 31, 2022 to $1.09 billion at December 31, 2023.
Because of the nature of the judgments and assumptions made by management, actual results may differ from these judgments and assumptions. 20 Table of Contents FINANCIAL CONDITION Assets The Company’s total assets decreased $81.1 million, or 7.4%, from $1.09 billion at December 31, 2023 to $1.01 billion at December 31, 2024.
The increase in loans was primarily attributable to $145.5 million in loan origination and $21.1 million in purchases of loans receivable which was partially offset by a net decrease in loan payoffs of $144.0 million for the year ended December 31, 2023.
The decrease was primarily due to a net loss of $39.9 million for the year ended December 31, 2024.
Removed
Allowance for Credit Losses - Debt Securities Available for Sale The Company receives estimated fair values of debt securities from independent valuation services and brokers. In developing these fair values, the valuation services and brokers use estimates of cash flows based on historical performance of similar instruments in similar rate environments. Available-for-sale debt securities consist primarily of U.S.
Added
The decrease was primarily driven by a $141.4 million decline in gross loans held for investment, which was partially offset by a rise in cash, cash equivalents and restricted cash of $96.1 million.
Removed
Government agency debt and mortgage-backed securities issued by the U.S. government, corporate bonds, subordinated notes and SBA loan pools. Effective January1, 2023, as a result of adopting ASU No. 2016-13, quarterly assessments are conducted to evaluate impairment credit losses on available-for-sale debt securities.
Added
The increase in cash reflects the Company’s efforts to increase balance sheet liquidity due to the cumulative losses incurred by the Company in the prior two years and decreases in borrowing capacity.
Removed
These evaluations consider factors like fair value deviation from cost, issuer financial health, and the Company's intent to hold securities for fair value recovery. Impairments due to non-credit factors are recorded in other comprehensive income, while credit-related impairments are recognized as allowances for credit losses on the balance sheet.
Added
The Company has continued the trend of restricting loan growth and allowing loans to pay down as the balance sheet is reduced in order to strengthen capital ratios. SBA loans held for investment were included in the commercial real estate loans and commercial and industrial loan classifications above.
Removed
If a security is likely to be sold before amortized cost basis recovery, the entire impairment is recognized in net income with an adjustment to the security's basis.
Added
The net loan to deposit ratio and net loan to total assets improvement as of December 31, 2024 compared to as of December 31, 2023 was due to the loan runoff as well as increasing deposits and cash and cash equivalents to supplement liquidity at the Company during 2024.
Removed
No allowance for ALC-Securities was recorded for available -for-sale securities as of December 31, 2023. 20 Table of Contents Deferred Income Taxes The Company uses the asset and liability method of accounting for income taxes.
Added
The following table provides the composition of the commercial real estate loan portfolio segment as of December 31, for each of the years shown: December 31, (In thousands) 2024 2023 2022 Amount % Amount % Amount % Commercial Real Estate CRE owner occupied $ 83,934 20.01 % $ 83,120 17.61 % $ 72,896 16.67 % CRE multifamily 77,443 18.46 % 82,342 17.44 % 52,550 12.01 % CRE office 55,900 13.33 % 61,368 13.00 % 50,179 11.47 % CRE retail 46,946 11.19 % 63,918 13.54 % 56,471 12.91 % Other CRE non-owner occupied 155,266 37.01 % 181,345 38.41 % 205,347 46.94 % Total $ 419,489 100.00 % $ 472,093 100.00 % $ 437,443 100.00 % 22 Table of Contents The following table provides the commercial real estate loan portfolio segment by geographic concentrations as of December 31, for each of the years shown: December 31, (In thousands) 2024 2023 2022 Amount % Amount % Amount % New York $ 208,093 49.61 % $ 241,711 51.20 % $ 189,851 43.40 % Connecticut 98,342 23.44 % 111,523 23.62 % 130,605 29.86 % New Jersey 26,861 6.40 % 37,277 7.90 % 37,591 8.59 % Outside Market (1) 86,193 20.55 % 81,582 17.28 % 79,396 18.15 % Total Commercial Real Estate $ 419,489 100.00 % $ 472,093 100.00 % $ 437,443 100.00 % (1) Outside Market consists of loans in all other states, none of which are greater than 5% of the total.
Removed
Under this method, deferred tax assets and liabilities are determined based on temporary differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.
Added
The decrease was primarily driven by charge-offs totaling $13.6 million from two large commercial real estate loans in December 2024.
Removed
The effect on deferred tax assets and liabilities of a change in tax laws is recognized in the consolidated statements of operations in the period that includes the enactment date.
Added
The Company used the CECL methodology in 2024 and 2023 while the incurred loss methodology was used in 2022: Year Ended December 31, (In thousands) 2024 2023 2022 Balance at beginning of the period $ 15,925 $ 10,310 $ 9,905 Impact of ASC 326 adoption — 13,001 — Charge-offs: Commercial Real Estate (13,889) (6,346) — Residential Real Estate (21) (515) — Commercial and Industrial (1,252) (927) (70) Consumer and Other (7,431) (10,479) (1,690) Construction — (150) (68) Total charge-offs (22,593) (18,417) (1,828) Recoveries: Commercial Real Estate — — 154 Residential Real Estate — 14 4 Commercial and Industrial 369 34 69 Consumer and Other 1,060 1,080 121 Total recoveries 1,429 1,128 348 Net charge-offs (21,164) (17,289) (1,480) Provision for credit losses 12,544 9,903 1,885 Balance at end of the period $ 7,305 $ 15,925 $ 10,310 Ratios: Net charge-offs to average loans (2.66) % (1.93) % (0.18) % Allowance for credit losses to total loans 1.03 % 1.88 % 1.22 % Allowance for credit losses to nonaccrual loans 28.24 % 87.85 % 55.45 % 24 Table of Contents The net charge-offs increased $3.9 million from $17.3 million as of December 31, 2023 to $21.2 million as of December 31, 2024, with an increase in net charge-offs to average loans ratio of 2.66% for the year ended December 31, 2024 , from 1.93% for the year ended December 31, 2023.
Removed
Future realization of deferred tax assets ultimately depends on the existence of sufficient taxable income of the appropriate character (for example, ordinary income or capital gain) within the carryback or carryforward periods available under the applicable tax law.
Added
The increase in net charge-offs for the year ended December 31, 2024 was primarily associated charge-offs totaling $13.6 million from two large commercial real estate loans in December 2024. The average loan balance decreased by $101.3 million, from $896.5 million for the year ended December 31, 2023, to $795.2 million for the year ended December 31, 2024.
Removed
The Company regularly reviews the deferred tax assets for recoverability based on historical taxable income, projected future taxable income, the expected timing of the reversals of existing temporary differences and tax planning strategies. The Company’s judgments regarding future profitability may change due to many factors, including future market conditions and the ability to successfully execute its business plans.

… 88 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

4 edited+0 added−0 removed12 unchanged
Biggest change(In thousands) Net Portfolio Value - Performance Summary As of December 31, 2023 As of December 31, 2022 Projected Interest Rate Scenario Estimated Value Change from Base ($) Change from Base (%) Estimated Value Change from Base ($) Change from Base (%) +200 $ 107,524 $ (5,779) (5.10) % $ 146,888 $ (15,357) (9.47) % +100 112,036 (1,267) (1.12) % 157,368 (4,877) (3.01) % BASE 113,303 — — 162,245 — — -100 114,032 729 0.64 % 163,472 1,227 0.76 % -200 106,718 (6,585) (5.81) % 155,386 (6,859) (4.23) % 36 Table of Contents Net Interest Income - Performance Summary December 31, 2023 December 31, 2022 Projected Interest Rate Scenario Estimated Value Change from Base ($) Change from Base (%) Estimated Value Change from Base ($) Change from Base (%) +200 $ 34,529 $ 483 1.42 % $ 46,131 $ (1,177) (2.49) % +100 34,425 379 1.11 % 46,938 (370) (0.78) % BASE 34,046 — — 47,308 — — -100 34,120 74 0.22 % 47,657 349 0.74 % -200 34,595 549 1.61 % 46,747 (561) (1.19) % Impact of Inflation and Changing Prices Patriot’s financial statements have been prepared in terms of historical dollars, without considering changes in relative purchasing power of money over time due to inflation.
Biggest change(In thousands) Net Portfolio Value - Performance Summary As of December 31, 2024 As of December 31, 2023 Projected Interest Rate Scenario Estimated Value Change from Base ($) Change from Base (%) Estimated Value Change from Base ($) Change from Base (%) +200 $ 87,800 $ (10,733) (10.89) % $ 107,524 $ (5,779) (5.10) % +100 94,983 (3,550) (3.60) % 112,036 (1,267) (1.12) % BASE 98,533 — — 113,303 — — -100 98,886 353 0.36 % 114,032 729 0.64 % -200 96,159 (2,374) (2.41) % 106,718 (6,585) (5.81) % Net Interest Income - Performance Summary December 31, 2024 December 31, 2023 Projected Interest Rate Scenario Estimated Value Change from Base ($) Change from Base (%) Estimated Value Change from Base ($) Change from Base (%) +200 $ 28,274 $ 79 0.28 % $ 34,529 $ 483 1.42 % +100 28,403 208 0.74 % 34,425 379 1.11 % BASE 28,195 — — 34,046 — — -100 28,295 100 0.35 % 34,120 74 0.22 % -200 28,679 484 1.72 % 34,595 549 1.61 % Impact of Inflation and Changing Prices Patriot’s financial statements have been prepared in terms of historical dollars, without considering changes in relative purchasing power of money over time due to inflation.
Management analyzes the Bank’s interest rate sensitivity position to manage the risk associated with interest rate movements through the use of interest income simulation and GAP analysis.
Management analyzes the Bank’s interest rate sensitivity position to manage the risk associated with interest rate movements through the use of interest income simulation and repricing gap analysis.
Interest rates do not necessarily move in the same direction or in the same magnitude as the prices of goods and services. Notwithstanding this, inflation can directly affect the value of loan collateral, in particular, real estate. Inflation, or disinflation, could significantly affect Patriot’s earnings in future periods. 37 Table of Contents
Interest rates do not necessarily move in the same direction or in the same magnitude as the prices of goods and services. Notwithstanding this, inflation can directly affect the value of loan collateral, in particular, real estate. Inflation, or disinflation, could significantly affect Patriot’s earnings in future periods. 40 Table of Contents
Management regularly reviews the potential effect changes in interest rates could have on the repayment of rate sensitive assets and funding requirements of rate sensitive liabilities. The tables below set forth examples of changes in estimated net interest income and the estimated net portfolio value based on projected scenarios of interest rate increases and decreases.
Management regularly reviews the potential effect changes in interest rates could have on the repayment of rate sensitive assets and funding requirements of rate sensitive liabilities. 39 Table of Contents The tables below set forth examples of changes in estimated net interest income and the estimated net portfolio value based on projected scenarios of interest rate increases and decreases.

Other PNBK 10-K year-over-year comparisons