QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2026
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number 000-29599
PATRIOT NATIONAL BANCORP, INC.
(Exact name of registrant as specified in its charter)
Connecticut
06-1559137
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
900 Bedford Street, Stamford, Connecticut
06901
(Address of principal executive offices)
(Zip Code)
(203) 252-5900
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock
PNBK
NASDAQ Global Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesx No o
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yesx No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act
Large accelerated filer
o
Accelerated filer
o
Non-accelerated filer
x
Smaller reporting company
x
Emerging growth company
o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and reports to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes o No o
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
As of August 14, 2026, there were 118,742,200 shares of the registrant’s common stock outstanding.
Notes to consolidated financial statements (Unaudited)
Note 1. Basis of Financial Statement Presentation
The accompanying unaudited interim condensed Consolidated Financial Statements of Patriot National Bancorp, Inc. (the “Holding Company” or “PNBK”) and its wholly-owned subsidiaries, Patriot Bank, N.A. (the “Bank”) and PinPat Acquisition Corporation (collectively, the “Company” or “Patriot”), have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions to Form 10-Q and applicable Securities and Exchange Commission (“SEC”) rules and regulations. Accordingly, they do not include all of the information and footnote disclosures required by U.S. GAAP for complete annual financial statements. These unaudited interim condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and notes thereto included on the Annual Report on Form 10-K for the year ended December 31, 2025.
The preparation of consolidated financial statements in accordance with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and to disclose contingent assets and liabilities. Actual results could differ from those estimates. Management has identified accounting for the allowance for credit losses, the analysis and valuation of its investment securities, the valuation of deferred tax assets, the valuation of derivatives, and the valuation of servicing assets as certain of Patriot’s more significant accounting policies and estimates, in that they are critical to the presentation of Patriot’s financial condition and results of operations. As they concern matters that are inherently uncertain, these estimates require management to make subjective and complex judgments in the preparation of Patriot’s consolidated financial statements.
In the opinion of management, the accompanying unaudited interim condensed Consolidated Financial Statements reflect all adjustments necessary for a fair presentation of the financial position and results of operations for the interim periods presented. The results of operations for the three months and six months ended June 30, 2026 are not necessarily indicative of the results that may be expected for the remainder of 2026.
Reclassification
Certain prior-year amounts have been reclassified to conform to the current-year presentation
Note 2. Summary of Significant Accounting Policies and Transactions
Please refer to the summary of Significant Accounting Policies included in the Company’s 2025 Annual Report on Form 10-K for a list of all policies in effect as of December 31, 2025.
Recently issued Accounting Pronouncements not yet Adopted
The Company continues to monitor the potential impact of recently issued accounting standards, including ASU 2023-06, ASU 2024-01, and ASU 2024-03, as clarified by ASU 2025-01. The Company does not currently expect adoption of these standards to have a material effect on its consolidated financial statements, although they may affect future disclosures.
Recently adopted Accounting Pronouncements
ASU 2025-08
Effective January 1, 2026, the Company adopted ASU 2025-08, Financial Instruments Credit Losses Topic 326 Purchased Loans, on a prospective basis. The ASU requires an allowance for expected credit losses on purchased loans within its scope to be recorded at acquisition as an adjustment to the amortized cost basis rather than through provision expense. The adoption did not impact the Company’s opening retained earnings. For loans purchased during 2026, the Company recorded an initial allowance for credit losses as an adjustment to the amortized cost basis, consistent with the new standard.
Notes to Consolidated Financial Statements (Unaudited)
Note 3. Available-for-Sale Securities
The amortized cost, gross unrealized gains, gross unrealized losses and fair values of available-for-sale securities at June 30, 2026 and December 31, 2025 are as follows:
(In thousands)
Amortized Cost
Gross Unrealized Gains
Gross Unrealized (Losses)
Fair Value
June 30, 2026
Government sponsored enterprise "GSE" debentures
18,859
—
(3,498)
15,361
U. S. Government agency mortgage-backed-securities
195,814
—
(8,910)
186,905
GSE mortgage-backed-securities
22,706
—
(4,866)
17,840
Total mortgage-backed-securities
218,520
—
(13,776)
204,745
Corporate bonds
15,997
—
(2,844)
13,153
Subordinated notes
4,000
—
(139)
3,861
SBA loan pools
3,931
—
(705)
3,226
Total available-for-sale securities
$
261,307
$
—
$
(20,961)
$
240,345
December 31, 2025:
Government sponsored enterprise "GSE" debentures
18,850
—
(3,392)
15,458
U. S. Government agency mortgage-backed-securities
Notes to Consolidated Financial Statements (Unaudited)
The following table presents the available-for-sale securities’ gross unrealized losses and fair value, aggregated by the length of time the individual securities have been in a continuous loss position as of June 30, 2026 and December 31, 2025:
(In thousands)
Less than 12 Months
12 Months or More
Total
Fair Value
Unrealized (Loss)
Fair Value
Unrealized (Loss)
Fair Value
Unrealized (Loss)
June 30, 2026
Government sponsored enterprise "GSE" debentures
$
—
$
—
$
15,361
$
(3,498)
$
15,361
$
(3,498)
U. S. Government agency mortgage-backed-securities
161,792
(4,336)
25,112
(4,573)
186,905
(8,910)
GSE mortgage-backed-securities
—
—
17,840
(4,866)
17,840
(4,866)
Total mortgage-backed-securities
161,792
(4,336)
42,953
(9,439)
204,745
(13,776)
Corporate bonds
—
—
13,153
(2,844)
13,153
(2,844)
Subordinated notes
—
—
3,861
(139)
3,861
(139)
SBA loan pools
—
—
3,226
(705)
3,226
(705)
Total available-for-sale securities
$
161,792
$
(4,336)
$
78,553
$
(16,625)
$
240,345
$
(20,961)
December 31, 2025:
Government sponsored enterprise "GSE" debentures
$
—
$
—
$
15,458
$
(3,392)
$
15,458
$
(3,392)
U. S. Government agency mortgage-backed-securities
119,770
(855)
25,986
(4,218)
145,756
(5,073)
GSE mortgage-backed-securities
4,452
(61)
18,778
(4,848)
23,230
(4,909)
Total mortgage-backed-securities
124,222
(917)
44,764
(9,066)
168,986
(9,982)
Corporate bonds
—
—
13,464
(2,533)
13,464
(2,533)
Subordinated notes
—
—
3,752
(248)
3,752
(248)
SBA loan pools
—
—
3,393
(752)
3,393
(752)
Total available-for-sale securities
$
124,222
$
(917)
$
80,831
$
(15,991)
$
205,052
$
(16,908)
As of June 30, 2026, all fifty-eight available-for-sale securities were in an unrealized loss position, with an aggregate depreciation of 8.0% from amortized cost. As of December 31, 2025, fifty-five of sixty available-for-sale securities were in an unrealized loss position, with an aggregate depreciation of 7.6% from amortized cost.
At June 30, 2026 and December 31, 2025, no allowance for credit losses has been recognized on available-for-sale debt securities in an unrealized loss position as the Company does not believe any of the debt securities are credit impaired. This is based on the Company’s analysis of the risk characteristics, including credit ratings, and other qualitative factors related to available-for-sale debt securities. The issuers of these debt securities continue to make timely principal and interest payments under the contractual terms of the securities. The Company does not intend to sell these debt securities and it is more likely than not that the Company will not be required to sell the debt securities before recovery of their amortized cost, which may be at maturity. The unrealized losses are due to increases in market interest rates over the yields available at the time the debt securities were purchased.
With regard to U.S. mortgage-backed securities and municipal bonds issued by the U.S. government, or agencies thereof, it is expected that the securities will not be settled at prices less than the amortized cost basis of the securities as such securities are backed by the full faith and credit of and/or guaranteed by the U.S. government. Accordingly, no allowance for credit losses has been recorded for these securities.
With regard to corporate bonds, management considers (i) issuer bond ratings, (ii) historical loss rates for given bond ratings, (iii) whether issuers continue to make timely principal and interest payments under the contractual terms of the securities, and (iv) internal forecasts. Securities under the U.S. Small Business Administration (“SBA”) government guaranteed loan pools program were purchased at a premium and the impairment was attributable primarily to increased prepayment speeds. The timely payment of principal and interest on these securities is guaranteed by the U.S. Government agency. The contractual terms of the subordinated notes do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments. Furthermore, as of June 30, 2026, there were no past due principal or interest payments associated with these securities. Based
Notes to Consolidated Financial Statements (Unaudited)
upon (i) the issuer’s strong bond ratings and (ii) a zero historical loss rate, no allowance for credit losses has been recorded for available-for-sale securities. All debt securities in an unrealized loss position continue to perform as scheduled and the Company does not believe there is a possible credit loss or that an allowance for credit loss on these debt securities is necessary.
As of June 30, 2026 and December 31, 2025, available-for-sale securities of $132.7 million and $15.1 million, respectively, were pledged to either the Federal Home Loan Bank (“FHLB”) or Federal Reserve Bank (“FRB”). The securities were pledged primarily to secure borrowings from the FHLB and/or FRB.
The following summarizes, by class and contractual maturity, the amortized cost and estimated fair value of available-for-sale debt securities held as of June 30, 2026 and December 31, 2025. The mortgages underlying the mortgage-backed securities are not due at a single maturity date. Additionally, these mortgages often are and generally may be pre-paid without penalty, creating a degree of uncertainty that such investments can be held until maturity. For convenience, mortgage-backed securities have been included in the summary as a separate line item.
(In thousands)
Amortized Cost
Fair Value
Due Within 5 years
Due After 5 years through 10 years
Due After 10 years
Total
Due Within 5 years
Due After 5 years through 10 years
Due After 10 years
Total
June 30, 2026
Corporate bonds
$
15,997
$
—
$
—
$
15,997
$
13,153
$
—
$
—
$
13,153
Subordinated notes
3,000
1,000
—
4,000
2,919
941
—
3,861
SBA loan pools
—
—
3,931
3,931
—
—
3,226
3,226
Government sponsored enterprise "GSE" debentures
—
8,869
9,990
18,859
—
7,339
8,021
15,361
Total debt securities
18,997
9,869
13,921
42,787
16,072
8,280
11,247
35,601
U. S. Government agency mortgage-backed-securities
$
—
$
—
$
195,814
$
195,814
$
—
$
—
$
186,905
$
186,905
GSE mortgage-backed-securities
$
—
$
173
$
22,533
$
22,706
$
—
$
165
$
17,675
$
17,840
Total mortgage-backed-securities
$
—
$
173
$
218,347
$
218,520
$
—
$
165
$
204,580
$
204,745
Total available-for-sale securities
$
18,997
$
10,042
$
232,268
$
261,307
$
16,073
$
8,446
$
215,827
$
240,345
December 31, 2025:
Corporate bonds
$
—
$
15,996
$
—
$
15,996
$
—
$
13,464
$
—
$
13,464
Subordinated notes
3,000
1,000
—
4,000
2,807
945
—
3,752
SBA loan pools
—
—
4,146
4,146
—
—
3,393
3,393
Government sponsored enterprise "GSE" debentures
—
4,946
13,904
18,850
—
4,191
11,267
15,458
Total debt securities
3,000
21,942
18,050
42,992
2,807
18,600
14,660
36,067
U. S. Government agency mortgage-backed-securities
Notes to Consolidated Financial Statements (Unaudited)
Note 4. Loans Receivable and Allowance for Credit Losses
As of June 30, 2026 and December 31, 2025, loans receivable, net, consisted of the following:
(In thousands)
June 30, 2026
December 31, 2025
Loan portfolio segment:
Commercial Real Estate
$
487,265
$
346,191
Residential Real Estate
201,153
79,667
Commercial and Industrial
189,094
146,828
Consumer and Other
8,396
19,877
Loans receivable, gross
885,909
592,562
Allowance for credit losses
(8,469)
(6,839)
Loans receivable, net
$
877,440
$
585,723
Existing Loan Portfolio
The Bank’s existing loan portfolio has consisted of commercial real estate (“CRE”) loans, commercial and industrial loans, residential real estate loans (primarily purchased), consumer loans, and a limited volume of construction loans. Commercial and residential real estate loans are collateralized primarily by first or second mortgages on real estate. The ability and willingness of borrowers to satisfy their loan obligations can be dependent to some degree on the regional economy and real estate market conditions.
Patriot maintains credit policies applicable to each lending activity and evaluates the creditworthiness of every borrower. Unless mitigating factors exist, commercial real estate loans are generally limited to 75% of the market value of the underlying collateral; multifamily real estate loans are limited to 75% to 80% loan-to-value; and construction loans (none currently outstanding) were limited to 75% of “as-completed” appraised value. Real estate is the primary form of collateral, although other collateral types include accounts receivable, inventory, marketable securities, time deposits and other business assets.
Risk characteristics of the Company’s portfolio classes include the following:
CRE Loans
CRE loans include both owner-occupied and non-owner-occupied properties. Non-owner-occupied CRE repayment depends primarily on rents from leases to third party tenants, successful management, marketing and expense supervision necessary to maintain the property. Repayment of these loans may be adversely affected by conditions in the real estate market or the general economy.
Owner-occupied CRE loans are utilized by a business for the purpose of providing the space needs for that business and the running of its operations. Owner-occupied CRE depends on the borrower’s operating business cash flow. Repayment of these loans may be adversely affected by conditions in the specific owner’s industry in addition to the general economy.
In underwriting CRE loans, Patriot evaluates both the prospective borrower’s ability to make timely payments on the loan, the value of the property(ies) securing the loans and the net operating income generated by such property(ies). Repayment of such loans may be negatively impacted should the borrower default, the value of the property collateralizing the loan substantially declines, or there is deterioration in general economic conditions. Where the owner occupies the property, Patriot also evaluates the business’ ability to repay the loan on a timely basis and may require personal guarantees, lease assignments, and/or the guarantee of the operating company.
No commercial real estate loans were purchased during the three and six months ended June 30, 2026.
Notes to Consolidated Financial Statements (Unaudited)
Residential Real Estate Loans
The Bank’s residential real estate portfolio consists largely of purchased loans. The repayment of residential real estate loans, as well as the loans secured by residential real estate, may be negatively impacted if borrowers experience financial difficulties, if there is a significant decline in the value of the property securing the loan, or if there are declines in general economic conditions. During the three and six months ended June 30, 2026, Patriot purchased zero and $108 million residential real estate loans, respectively. During the three and six months ended June 30, 2025, Patriot purchased $92 thousand and $178 thousand residential real estate loans, respectively. The Bank did not sell any purchased residential real estate loans during the three and six months ended June 30, 2026. During the three and six months ended June 30, 2025, the Bank sold $28.9 million of purchased residential loans.
Commercial and Industrial Loans
Patriot’s commercial and industrial loan portfolio consists primarily of commercial business loans and lines of credit to businesses and professionals. These loans are generally for the financing of accounts receivable, purchases of inventory, purchases of new or used equipment, or for other short- or long-term working capital purposes – and in some cases to finance the CRE and physical buildings used by companies to carry out their business activities. These loans are generally secured by business assets but are also offered on an unsecured basis. In granting these types of loans, Patriot considers the borrower’s cash flow as the primary source of repayment, supported by the value of collateral, if any, and personal guarantees, as applicable. Repayment of commercial and industrial loans may be negatively impacted by adverse changes in economic conditions, ineffective management, claims on the borrower’s assets by others that are superior to Patriot’s claims, a loss of demand for the borrower’s products or services, or the death or disability of the borrower or other key management personnel.
Commercial and industrial loans include risks associated with borrower’s cash flow, debt service coverage and management’s expertise. These loans are subject to the risk that the Company may have difficulty converting collateral to a liquid asset if necessary, as well as risks associated with degree of specialization, mobility and general collectability in a default situation. These commercial loans may be subject to many different types of risks, including fraud, bankruptcy, economic downturn, deteriorated or non-existent collateral, and changes in interest rates.
SBA Loans
Patriot originated SBA 7(a) loans, on which the SBA has historically provided guarantees of 75% of the principal balance. However, during the pandemic in 2020, the SBA temporarily increased the guarantees to 90% and reverted to 75% on October 1, 2021. The guaranteed portion of the Company’s SBA loans is generally sold in the secondary market with the unguaranteed portion held in the portfolio as a loan held for investment. SBA loans are for the purpose of providing working capital, financing the purchase of equipment, inventory, or commercial real estate and for other business purposes. Loans are guaranteed by the businesses' major owners. SBA loans are made based primarily on the historical and projected cash flow of the business and secondarily on the underlying collateral provided. SBA loans held for investment are included in the commercial real estate loans and commercial and industrial loan classifications, which totaled $18.0 million and $18.4 million as of June 30, 2026 and December 31, 2025, respectively.
In the second quarter of 2025, the Bank made the decision to voluntarily suspend its status as a participant in SBA’s Preferred Lender Program (“PLP”). This decision was made in response to the Bank’s desire to temporarily exit the SBA lending business and the Bank’s Definitive Agreement with the Office of the Comptroller of the Currency (“OCC”). It is possible that the Bank will determine in the future that it is prudent to petition to the SBA for reinstatement in the PLP.
Consumer Loans
Consumer loans carry a moderate degree of risk compared to other loans. They are generally more risky than traditional residential real estate loans, and carry generally low relative balances across a diverse borrowing pool. Probability of default is assessed based on FICO scores, debt to income ratios, historical loss rates other common consumer loan metrics.
In 2025, the Bank sold a portfolio of 1,092 individual unsecured consumer loans purchased under a program from a third party with unpaid principal balance of $9.0 million. The sale reduced the Bank’s consumer loan exposure and loans outstanding under this program at June 30, 2026 and December 31, 2025 to $0.3 million and $0.7 million respectively. No loans previously purchased under this program were sold during the three and six months ended June 30, 2026 and 2025.
Notes to Consolidated Financial Statements (Unaudited)
The Company does not have any lending programs commonly referred to as subprime lending. Subprime lending generally targets borrowers with weakened credit histories that are typically characterized by payment delinquencies, previous charge-offs, judgments against the consumer, a history of bankruptcies, or borrowers with questionable repayment capacity as evidenced by low credit scores or high debt-burdened ratios.
During the three and six months ended June 30, 2026 and 2025, Patriot did not purchase any home equity line of credit loans (“HELOC”). During the three and six months ended June 30, 2026 and 2025, the Bank sold home equity line of credit loans (“HELOC”) totaling zero and $15.9 million, respectively.
No construction loans were outstanding at June 30, 2026. The Bank currently does not offer a construction lending product.
New Lending Programs
During the third quarter of 2025, the Bank re-started its loan origination activities and implemented three targeted lending initiatives designed to prudently diversify revenue and strengthen relationship banking among high-quality entrepreneurial borrowers. These programs are fully aligned with the Bank’s credit risk appetite, underwriting standards, and its overall strategic plan. At this time, no other commercial loan products are offered to our customers. As the successful implementation of these new lending programs progresses and matures, the Bank continues to evaluate additional commercial lending products consistent with its strategic plan and risk appetite.
High Net Worth Line of Credit Program
The Bank introduced a tailored unsecured line of credit product for qualifying high net worth clients. The facility provides short-term liquidity for qualified borrowers with substantial financial strength and established deposit or relationship history with the Bank. The proceeds of the lines of credit are utilized for business and investment purposes. Although contractually unsecured for strong credits, the Bank may require a pledge of eligible assets—including cash, marketable securities, or other high-value property—on an “abundance-of-caution” basis. Lines typically range from $250 thousand to $5 million, with maturities of less than one year, and are renewable annually subject to the Bank’s approval. The loans have prime-based interest rates with market origination fees.
Rediscount Line of Credit Program
The Bank launched a rediscount lending facility product that provides secured, revolving lines of credit to non-bank loan originators and private credit providers. Borrowers pledge single loans or pools of performing loans and leases. Typically, commercial real estate, residential real estate or equipment loans are provided as collateral, which may be replenished as the underlying loans pay down. Typical commitments range from $1 million to $15 million, with terms of 12 to 36 months and pricing on a floating rate basis. The facilities are full-recourse to the borrower and are governed by defined borrowing-base, collateral-performance, and reporting covenants.
Commercial Real Estate Program
The Bank also established a CRE-lending program to finance properties for depositor and relationship clients. Loans generally range from $1 million to $15 million, are secured by first mortgages, and are underwritten to maximum loan-to-value ratios and appropriate debt-service coverage metrics. Interest rates are typically floating rates with terms of 12 to 60 months, and may include extension options.
All three programs are subject to the Bank’s existing credit policies, together with new, enhanced standards and underwriting guidelines. The new lending programs comply with the Bank’s concentration limits, and risk-management controls, including heightened portfolio management routines, borrower and guarantor liquidity testing, and ongoing regulatory reporting. Early production volumes remain modest as the Bank completes pilot transactions and validates credit performance metrics. Each of the new loan products includes minimum deposit requirements designed to strengthen client relationships and promote additional business activities such as treasury management and card services.
Allowance for Credit Losses
The Company estimates expected credit losses under the current expected credit loss (“CECL”) methodology. Under the CECL, the ACL is measured on a collective basis for pools of loans with similar risk characteristics. For loans that do not share similar
Notes to Consolidated Financial Statements (Unaudited)
risk characteristics with the collectively evaluated pools, evaluations are performed on an individual basis. For all loan categories collectively evaluated, losses are estimated over a period of time determined to be reasonable and supportable, and at the end of the reasonable and supportable forecast period, loss estimates revert to long-term historical averages. Estimated credit losses are also adjusted for changes in qualitative factors not inherently considered in the quantitative analyses.
The Company estimates expected credit losses for pooled loans using a modeling method that incorporates probability of default (“PD”) and loss given default (“LGD”). The PD model employs a quarterly risk-rating transition method to estimate the probability of default by simulating loan downgrades and assigning increasing default probabilities to each loan. This captures the likelihood that borrowers will be unable to repay their loans according to the original terms. The LGD calculation considers characteristics such as collateral value and vintage, underlying collateral characteristics (e.g., CRE vs. residential, owner-occupied vs. investment), a floor for the LGD calculation (minimum loss in event of default regardless of collateral protection), and other relevant underwriting characteristics. Also calculated is the exposure at default.The probability of default is multiplied by the loss given default and the exposure at default. This calculation is forecasted for every year remaining in the life of each loan, and the results are aggregated to determine the necessary level of ACL for the pooled loans.Forecasted exposure at default can be influenced by prepayments speeds, which management adjusted in part to reflect the expectation of slower voluntary prepayments in the current interest rate environment. Estimated credit losses are also adjusted for qualitative factors not inherently captured in the quantitative analyses.
The Company also maintains an ACL on unfunded lending commitments and letters of credit to provide for the risk of loss inherent in these arrangements. The allowance is computed using a methodology similar to that used to determine the ACL for loans, modified to take into account the probability of a drawdown on the commitment. The ACL on unfunded loan commitments is classified as other liabilities on the Consolidated Balance Sheets, while the corresponding provision for these credit losses is recorded as a component of provision for credit losses. The allowance for credit losses on unfunded commitments was $113 thousand at June 30, 2026 and $80 thousand at December 31, 2025.
Effective January 1, 2026, the Company adopted ASU 2025-08, Financial Instruments—Credit Losses (Topic 326): Purchased Loans, on a prospective basis. The adoption did not impact the Company’s opening retained earnings. For loans purchased during the first quarter of 2026, the Company recorded an initial allowance for credit losses of $925 thousand as an adjustment to the amortized cost basis, consistent with the new standard.
The following table summarizes activity in the ACL on loans for the three-month period ended June 30, 2026 and 2025:
(In thousands)
Commercial Real Estate
Residential Real Estate
Commercial and Industrial
Consumer and Other
Construction
Total
Three Months Ended June 30, 2026
Allowance for credit losses:
March 31, 2026
$
2,602
$
1,356
$
3,532
$
289
$
—
$
7,779
Charge-offs
—
—
—
(16)
—
(16)
Recoveries
—
1
7
129
—
136
PSL allowance credit losses
—
—
—
—
—
—
Provisions (credits)
279
(115)
577
(169)
—
572
(1)
June 30, 2026
$
2,881
$
1,241
$
4,115
$
233
$
—
$
8,469
Three Months Ended June 30, 2025
Allowance for credit losses:
March 31, 2025
$
2,275
$
639
$
1,168
$
2,607
$
8
$
6,729
Charge-offs
—
—
(11)
(754)
—
(765)
Recoveries
—
—
20
209
—
229
Provisions (credits)
161
(120)
608
988
(3)
1,602
(2)
June 30, 2025
$
2,436
$
519
$
1,785
$
3,050
$
5
$
7,795
(1) The provision on credit losses included in the above table for the three months ended June 30, 2026 does not include the provision on unfunded loan commitments of $18 thousand.
(2) The provision on credit losses included in the above table for the three months ended June 30, 2025 does not include the credit on unfunded loan commitments of $78 thousand.
Notes to Consolidated Financial Statements (Unaudited)
Patriot monitors the credit quality of its loans on an ongoing basis. Credit quality is monitored by reviewing certain indicators, including covenant compliance, cash flow from business operations, loan to value ratios, debt service coverage ratios, and credit scores.
Patriot employs a risk rating system as part of the risk assessment of its loan portfolio. At origination, credit officers are required to assign a risk rating to each loan in their portfolio, which is ratified or modified by the Internal Asset Review Committee (“IARC”) to which the loan is submitted for approval. If developments occur on a loan that manifest as potential or well-defined weaknesses, the risk rating is reviewed and adjusted, as applicable. In carrying out its oversight responsibilities, the IARC can adjust a risk rating based on available information from the borrower and from asset valuations in the market. In addition, the risk ratings on all commercial loans over $250,000 are reviewed by the IARC annually.
The IARC ensures the Bank identifies, monitors, and reports credit risk accurately and in a timely manner. IARC is charged with oversight of the Bank’s programs for monitoring, reviewing and dispositioning of the loan portfolio. IARC is responsible for ensuring that risk ratings are updated in a timely fashion, are accurate and that appropriate changes are made anytime there is a significant occurrence with a credit. IARC meets at least quarterly and reviews emerging risk trends with a focus toward the mitigation of risk, improvement of operations, and compliance with regulatory guidance and the Bank's risk appetite.
Additionally, Patriot retains an independent third-party loan review firm to perform an analysis of the results of its risk rating process, among other credit and portfolio management functions. The semi-annual review is based on a randomly selected sample of loans within established parameters (e.g., value, concentration), in order to assess and validate the risk ratings assigned to individual loans. Any changes to the assigned risk ratings, based on the semi-annual review, are required to be reported to the IARC.
When assigning a risk rating to a loan, management utilizes the Bank’s internal eleven grade risk rating system. An asset is considered “special mention” when it has a potential weakness based on objective evidence, but does not currently expose the Company to sufficient risk to warrant classification in one of the following categories:
•Substandard: An asset is classified “substandard” if it is not adequately protected by the current net worth and paying capacity of the obligor or the collateral pledged, if any. Substandard assets have well defined weaknesses based on objective evidence, and are characterized by the distinct possibility that the Company will sustain some loss, if noted deficiencies are not corrected.
•Doubtful: Assets classified as “doubtful” have all of the weaknesses inherent in those classified as “substandard”, with the added characteristic that the identified weaknesses make collection or liquidation-in-full improbable, on the basis of currently existing facts, conditions, and values.
Charge-offs of loans to reduce the loan to its recoverable value that are solely collateral dependent, generally occur immediately upon confirmation of the partial loss amount. Loans that are cash flow dependent are modeled to reflect the expected cash flows through expected loan maturity, including any proceeds from refinancing or principal curtailment. A specific reserve may be established for the amount by which the net investment in the loan exceeds the present value of discounted cash flows. Charge-offs on cash flow dependent loans also generally occur immediately upon confirmation of the partial loss amount. If either type of loan is classified as “Loss”, meaning full loss on the loan is expected, the full balance of the loan receivable is charged off, regardless of the potential recovery from a sale of the underlying collateral. Any amount that may be recovered on the sale of collateral underlying a loan is recognized as a “recovery” in the period in which the collateral is sold. In accordance with Federal Financial Institutions Examination Council published policies establishing uniform criteria for the classification of retail credit based on delinquency status, “Open-end” credits are typically charged off once they reach 180 days past due and “Closed-end” credits are typically charged off once they reach 120 days past due, with limited exceptions for loans secured by 1-4 family residential real estate.
Notes to Consolidated Financial Statements (Unaudited)
Loan Portfolio Vintage Analysis
The following tables summarize loans by vintage, credit quality indicator, class of loans and charge-offs based on year of origination as of June 30, 2026:
Notes to Consolidated Financial Statements (Unaudited)
The following tables summarize loan amortized cost by vintage, credit quality indicator, class of loans and charge-offs based on year of origination as of December 31, 2025:
Rating of Loans by Origination Year
As of December 31, 2025:
2025
2024
2023
2022
2021
Prior
Revolving
Total Loans Receivable Gross
Loan portfolio:
Commercial Real Estate:
Pass
$
41,492
$
—
$
78,914
$
89,538
$
72,868
$
48,983
$
—
$
331,795
Special mention
—
—
—
—
—
799
—
799
Substandard
—
—
117
4,258
4,479
4,742
—
13,596
Total
41,492
—
79,031
93,796
77,347
54,524
—
346,191
Current period gross charge-offs
—
—
—
547
232
—
—
778
Residential Real Estate:
Pass
1,234
3,119
—
5,283
20,726
47,213
1,128
78,703
Special mention
—
—
—
—
—
907
—
907
Substandard
—
—
—
—
—
57
—
57
Total
1,234
3,119
—
5,283
20,726
48,178
1,128
79,667
Current period gross charge-offs
—
—
—
—
—
—
—
—
Commercial and Industrial:
Pass
14,710
726
3,272
11,013
17,580
5,224
82,101
134,626
Special mention
—
—
2
17
34
392
4,206
4,651
Substandard
—
—
559
381
842
807
4,959
7,547
Total
14,710
726
3,833
11,410
18,457
6,422
91,266
146,828
Current period gross charge-offs
—
—
—
47
72
11
—
129
Consumer and Other:
Pass
192
262
280
407
7
12,997
5,318
19,464
Substandard
—
—
9
7
—
144
252
413
Total
192
262
289
415
7
13,141
5,570
19,877
Current period gross charge-offs
—
—
93
1,744
232
—
—
2,069
Loans receivable, gross:
Pass
$
57,628
$
4,107
$
82,467
$
106,242
$
111,182
$
114,417
$
88,547
$
564,590
Special mention
—
—
2
17
34
2,099
4,206
6,358
Substandard
—
—
685
4,646
5,322
5,750
5,211
21,613
Loans receivable, gross
$
57,628
$
4,107
$
83,154
$
110,905
$
116,538
$
122,265
$
97,964
$
592,562
Total Current period gross charge-offs(1)
$
—
$
—
$
93
$
2,337
$
578
$
11
$
—
$
3,020
(1) Total current period gross-charge offs includes $43 thousand related to Construction to Permanent - CRE loan with an origination year of 2021.
Notes to Consolidated Financial Statements (Unaudited)
Loan Portfolio Aging Analysis
The following tables summarize performing and non-performing (i.e., non-accruing) loans receivable by portfolio, by aging category, by delinquency status as of June 30, 2026:
Notes to Consolidated Financial Statements (Unaudited)
The following tables summarize performing and non-performing loans (i.e., non-accruing) receivable by portfolio, by aging category, by delinquency status as of December 31, 2025:
Notes to Consolidated Financial Statements (Unaudited)
The following tables summarize non-performing (i.e., non-accruing) loans by aging category and status, within the applicable loan portfolio as of June 30, 2026 and December 31, 2025:
(In thousands)
Non-accruing Loans
30 - 59 Days Past Due
60 - 89 Days Past Due
90 Days or Greater Past Due
Total Past Due
Current
Total Non-accruing Loans
June 30, 2026
Loan portfolio:
Commercial Real Estate:
Substandard
—
222
11,200
11,422
—
11,422
Residential Real Estate:
Pass
364
100
—
465
—
465
Substandard
—
—
55
55
268
323
Commercial and Industrial:
Substandard
—
—
12,229
12,229
425
12,654
Consumer and Other:
Substandard
—
—
165
165
10
175
Total non-accruing loans
$
364
$
322
$
23,650
$
24,336
$
703
$
25,039
As of December 31, 2025:
Loan portfolio:
Commercial Real Estate:
Pass
$
—
$
—
$
2,993
$
2,993
$
—
$
2,993
Substandard
—
—
10,708
10,708
—
10,708
Residential Real Estate:
Substandard
—
—
57
57
—
57
Commercial and Industrial:
Pass
—
159
3,096
3,255
—
3,255
Substandard
—
1,846
5,081
6,927
—
6,927
Consumer and Other:
Substandard
—
—
397
397
16
413
Construction to permanent - CRE:
Substandard
—
—
Total non-accruing loans
$
—
$
2,005
$
22,332
$
24,337
$
16
$
24,353
The accrual of interest on loans is discontinued at the time the loan is 90 days past due for payment unless the loan is well-secured and in process of collection. Consumer installment loans are typically charged-off when they become 120 days past due (180 days for open ended consumer credit). Past due status is based on contractual terms of the loan. In all cases, loans are placed on non-accrual status or charged-off, at an earlier date, if collection of principal or interest is considered doubtful.
All interest accrued, but not collected for loans that are placed on non-accrual status or charged-off, is reversed against interest income. The interest on these loans is generally accounted for on the cash-basis method until qualifying for return to accrual status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current, future payments are reasonably assured, after at least six months of timely payment history. The Bank considers loans under $100,000 and consumer installment loans to be pools of smaller homogeneous loan balances, and therefore are collectively evaluated for credit losses, and not individually evaluated for credit losses.
Notes to Consolidated Financial Statements (Unaudited)
If non-accrual loans had been performing in accordance with the original contractual terms, additional interest income (net of cash collected) of approximately $1.0 million and $2.0 million would have been recognized during the three and six months ended June 30, 2026, respectively. During the three and six months ended June 30, 2025, additional interest income (net of cash collected) of approximately $0.9 million and $2.1 million would have been recognized, respectively.
Individually Evaluated Loans
The following table reflects information about the individually evaluated loans by class as of June 30, 2026 and December 31, 2025:
Notes to Consolidated Financial Statements (Unaudited)
The following table summarizes additional information regarding individually evaluated loans for the three and six months ended June 30, 2026 and 2025:
Three Months Ended June 30,
Six Months Ended June 30,
(In thousands)
2026
2025
2026
2025
Average Recorded Investment
Interest Income Recognized
Average Recorded Investment
Interest Income Recognized
Average Recorded Investment
Interest Income Recognized
Average Recorded Investment
Interest Income Recognized
With no related allowance recorded:
Commercial Real Estate
$
8,240
$
123
$
22,847
$
64
$
8,264
$
242
$
23,626
$
82
Residential Real Estate
587
—
—
—
592
1
—
—
Commercial and Industrial
7,095
42
2,873
—
7,108
70
2,979
—
Consumer and Other
144
—
—
—
144
—
—
—
Construction to permanent - CRE
—
—
1,775
—
—
—
2,025
—
16,067
165
27,495
64
16,109
313
28,630
82
With a related allowance recorded:
Commercial Real Estate
4,868
—
—
—
4,868
—
—
—
Commercial and Industrial
4,939
—
—
—
4,939
—
—
—
Consumer and Other
1
—
—
—
1
—
—
—
9,808
—
—
—
9,808
—
—
—
Individually evaluated loans, Total:
Commercial Real Estate
13,108
123
22,847
64
13,132
242
23,626
82
Residential Real Estate
587
—
—
—
592
1
—
—
Commercial and Industrial
12,034
42
2,873
—
12,047
70
2,979
—
Consumer and Other
145
—
—
—
145
—
—
—
Construction to permanent - CRE
—
—
1,775
—
—
—
2,025
—
Total
$
25,875
$
165
$
27,495
$
64
$
25,917
$
313
$
28,630
$
82
Credit losses for loans that no longer share similar risk characteristics with the collectively evaluated pools are excluded from the collective evaluation and estimated on an individual basis (individually evaluated loans). Individual evaluations are performed for non-accrual loans in excess of $100,000 as well as selected substandard loans. Specific allowances were estimated based on one of several methods, including the estimated fair value of the underlying collateral, observable market value of similar debt or the present value of expected cash flows.
For collateral dependent loans, appraisal reports of the underlying collateral have been obtained from independent licensed appraisal firms. For non-performing loans, the independently determined appraised values were reduced by 8% in selling costs, in order to estimate the potential loss, if any, that may eventually be realized. Performing loans are monitored to determine when, if at all, additional credit loss reserves may be required for a loss of underlying collateral value. For cash flow dependent loans, the Bank determined the reserve based on the present value of expected future cash flows discounted at the loan's effective interest rate.
Loans not requiring specific reserves had fair values exceeding the total recorded investment, supporting the net investment in the loan which includes principal balance, unamortized fees and costs and accrued interest, if any. Once a borrower is in default, Patriot is under no obligation to advance additional funds on unused commitments.
Notes to Consolidated Financial Statements (Unaudited)
Loan Modifications Made to Borrowers Experiencing Financial Difficulty
On a case-by-case basis, Patriot may agree to modify the contractual terms of a borrower’s loan to assist customers who may be experiencing financial difficulty. Most loan modifications involve an extension of the term of the loan. In addition, when modifying commercial loans, Patriot frequently obtains additional collateral, principal curtailments and/or enhanced guarantor support. If the borrower has performed under the existing contractual terms of the loan and the Bank's underwriters determine that the borrower has the capacity to continue to perform under the terms of the loan, interest continues to be accrued. Non-accruing modified loans may be returned to accrual status when there has been a sustained period of performance (generally six consecutive months of payments) and both principal and interest are reasonably assured of collection.
During the three and six months ended June 30, 2026 and 2025, the Company modified certain loans made to borrowers experiencing financial difficulty, which modifications were comprised of non-material changes to loan terms such as covenant breach forbearance, and short term (six months or less) extensions of maturity. Among loans modified in the preceding twelve months, one loan with a balance of $2.7 million was 30 days past due as of June 30, 2026. As of June 30, 2026 and December 31, 2025, there were no commitments to advance additional funds under the modified loans.
Note 5. Loans Held for Sale
SBA Loans held for sale
As of June 30, 2026 and December 31, 2025, the Company had no SBA loans held for sale. During the three and six months ended June 30, 2026 and 2025, no SBA loans previously classified as held for sale were transferred to held for investment.
Loans serviced for others totaled approximately $30.6 million and $32.1 million at June 30, 2026 and December 31, 2025, respectively. The related servicing asset was $0.6 million at both June 30, 2026 and December 31, 2025 and is included in other assets on the Consolidated Balance Sheets. Servicing assets represent the estimated fair value of retained servicing rights, net of servicing costs, at the time loans are sold. Servicing assets are amortized in proportion to, and over the period of, estimated net servicing revenues. Impairment will be evaluated based on stratifying the underlying financial assets by date of origination and term. Fair value is determined using prices for similar assets with similar characteristics, when available, or based upon discounted cash flows using market-based assumptions. Any impairment, if temporary, would be reported as a valuation allowance.
The Company retains servicing rights on certain SBA loans previously sold to third parties. Serviced loans sold to others are not included in the accompanying Consolidated Balance Sheets. Loans serviced for others totaled approximately $30.6 million and $32.1 million at June 30, 2026 and December 31, 2025, respectively. The related servicing asset was $0.6 million and $0.6 million at both June 30, 2026 and December 31, 2025 and is included in other assets on the Consolidated Balance Sheets. Income and fees collected for loan servicing are credited to non-interest income when earned, net of amortization on the related servicing assets.
In the second quarter of 2025, the Bank made the decision to voluntarily suspend its status as a participant in SBA’s Preferred Lender Program (“PLP”).
Residential Mortgage Loans held for sale
In the second quarter of 2025, the Bank suspended the residential mortgage originations. As of June 30, 2026 and December 31, 2025, the Company had no residential mortgage loans held for sale. The related mortgage servicing asset was $70 thousand and $71 thousand, respectively. During the three and six months ended June 30, 2026, no residential mortgage loans were transferred from held for sale to held for investment. For the three and six months ended June 30, 2025, $3.8 million residential mortgage loans were transferred to held for investment from held for sale.
Notes to Consolidated Financial Statements (Unaudited)
The following table presents an analysis of the activity in the servicing assets for SBA loans and residential mortgage loans for the three and six months ended June 30, 2026 and 2025:
Three Months Ended June 30,
Six Months Ended June 30,
(In thousands)
2026
2025
2026
2025
Beginning balance
$
650
$
764
$
660
$
766
Servicing rights capitalized
—
22
—
48
Servicing rights amortized
(12)
(20)
(22)
(34)
Servicing rights disposed
—
(20)
—
(34)
Ending balance
$
638
$
746
$
638
$
746
Credit Card Receivables held for sale
Patriot is party to program management arrangements under which the Bank originates commercial credit card receivables for certain card programs. The applicable card program manager markets the program and purchases the related receivables from the Bank shortly after origination. These receivables are classified as loans held for sale. As of June 30, 2026 and December 31, 2025, the Bank had credit card loans held for sale totaling $23.7 million and $24.5 million, respectively. The credit card loans are sold to the buyer as a whole loan sale transaction, priced at par, thus there is no servicing asset or gain or loss on sale.
At June 30, 2026, approximately $20.0 million of credit card receivables that had been expected to be sold to a program manager remained on the Bank’s Consolidated Balance Sheets after the anticipated sale was not completed. Management determined that classification of these receivables as held for sale remained appropriate based on the Bank’s continuing intent to sell the receivables and the short-term nature of the portfolio. Accordingly, the receivables remain outside the scope of the current expected credit loss model.
During the quarter ended June 30, 2026, the Company recorded a valuation allowance of approximately $5.5 million on these receivables through other expense, resulting in a carrying value of approximately $14.6 million at June 30, 2026. Fair value was estimated using discounted expected cash flows and significant unobservable inputs, including expected collections, credit losses, timing of collections and costs and uncertainties associated with administering and resolving the portfolio. Accordingly, the measurement is classified within Level 3 of the fair value hierarchy.
In connection with the program manager’s failure to purchase certain receivables and other breaches of its contractual obligations, the Bank incurred losses subject to contractual indemnification. Upon the program manager’s breach, the Bank exercised its contractual indemnification and setoff rights, including its contractual right to apply funds on deposit against obligations owed to the Bank, and applied approximately $5.3 million of the program manager’s deposit balances against such indemnifiable losses. The Company recognized this amount as other income during the second quarter of 2026, partially offsetting the $5.5 million fair value adjustment recorded on the related credit card receivables.
The Bank is pursuing additional contractual, insurance and legal remedies for losses not covered by the amounts applied; no potential recoveries from such additional remedies have been recognized.
Notes to Consolidated Financial Statements (Unaudited)
Note 6. Deposits
The following table presents the balance of deposits held, by category as of June 30, 2026 and December 31, 2025:
(In thousands)
June 30, 2026
December 31, 2025
Non-interest bearing
$
150,464
$
106,766
Interest bearing:
Savings deposits
83,030
38,036
Interest bearing DDA & NOW accounts
497,349
291,728
Money market
196,762
191,177
Certificates of deposit, $250,000 or less
173,979
206,915
Certificates of deposit, more than $250,000
67,456
76,480
Brokered deposits
31,907
54,683
Interest bearing, total
1,050,483
859,020
Total Deposits
$
1,200,947
$
965,786
The Company’s total deposits include deposits associated with prepaid debit cards for corporate, consumer and government clients administered by card program managers. These digital-payment-related deposits are included in the non-interest-bearing deposits, negotiable order of withdrawal accounts, interest bearing DDA and money market deposits, which totaled approximately $385.0 million and $297.7 million as of June 30, 2026 and December 31, 2025, respectively.
As of June 30, 2026, contractual maturities of Certificates of Deposit (“CDs”), and brokered deposits is summarized as follows:
(In thousands)
Certificates of Deposit $250,000 or less
Certificates of Deposit more than $250,000
Brokered Deposits
Total
1 year or less
$
139,445
$
62,088
$
31,907
$
233,440
More than 1 year through 2 years
2,982
538
—
3,519
More than 2 years through 3 years
105
—
—
105
More than 3 years through 4 years
29,390
4,272
—
33,662
More than 4 years through 5 years
2,057
559
—
2,617
$
173,979
$
67,456
$
31,907
$
273,342
Note 7. Derivatives
Patriot is party to interest rate swap derivatives that are not designated as hedging instruments. Under a program, Patriot will execute interest rate swaps with commercial lending customers to facilitate their respective risk management strategies. These interest rate swaps with customers are simultaneously offset by interest rate swaps that Patriot executes with a third party, such that Patriot minimizes its net risk exposure resulting from such transactions. Because the interest rate swaps associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings. The changes in the fair value of the swaps offset each other, except for the credit risk of the counterparties, which is determined by taking into consideration the risk rating, probability of default and loss given default for all counterparties.
As ofJune 30, 2026and December 31, 2025, Patriot did not have any cash pledged for collateral on its interest rate swaps. No net gain or loss was recognized in other non-interest income on the Consolidated Statements of Operations during thethree and six months ended June 30, 2026 and 2025.
Information about the valuation methods used to measure the fair value of derivatives is provided in Note 12 to the Consolidated Financial Statements.
Notes to Consolidated Financial Statements (Unaudited)
Amended and Restated 2022 Plan
2025 Plan
Six Months Ended June 30,
Number of Shares Awarded
Weighted Average Grant Date Fair Value
Number of Shares Awarded
Weighted Average Grant Date Fair Value
Unvested at December 31, 2025
8,129
$4.37
8,044,611
$1.16
Granted
0
$—
1,386,766
$1.27
Vested
(1,320)
$3.79
(2,827,666)
$1.11
Forfeited
0
$—
(144,444)
$1.00
Unvested at June 30, 2026
6,809
$4.48
6,459,267
$1.21
Unvested at December 31, 2024
146,185
$2.87
0
$—
Granted
0
$—
8,177,520
$1.00
Vested
(5,103)
$6.86
(1,012,398)
$1.00
Forfeited
(125,802)
$3.08
0
$—
Unvested at June 30, 2025
15,280
$4.78
7,165,122
$1.00
Awards granted under the 2025 Plan are in the form of Restricted Stock Units (RSUs). The share amounts presented in the table above reflect the number of RSUs granted and vested, where vested amounts represent RSUs for which the vesting conditions were satisfied during the period; RSUs granted under the 2025 Plan settled into shares of Common Stock totaling 0.6 million and 2.7 millionfor the three and six months ended June 30, 2026, respectively. No shares granted under the 2025 Plan settled into shares of Common Stock during the three and six months ended June 30, 2025.
The Company recognizes share based compensation expense on a straight-line basis over the vesting schedule of each award, for each vesting portion of an award equal to its grant date fair value. For the three months and six months ended June 30, 2026 the Company recognized total share-based compensation expense of $1.1 million and $3.3 million, respectively and total share-based compensation expense of $1.1 million and $1.3 million, for the three and six months ended June 30, 2025, respectively.
The share-based compensation expense attributable to the Company’s Directors totaled $75 thousand and $321 thousand for the three and six months ended June 30, 2026, respectively and $64 thousand and $73 thousand for the three and six months ended June 30, 2025, respectively.
For the three and six months ended June 30, 2026, share-based compensation expense attributable to employees of Patriot was $1.0 million and $3.0 million, respectively and $1.1 million and $1.2 million for the three and six months ended June 30, 2025, respectively.
Unrecognized compensation expense attributable to the unvested restricted shares outstanding as of June 30, 2026 amounted to $6.2 million, which amount is expected to be recognized over the weighted average remaining life of the awards of 1.9 years.
Stock Options
On June 26, 2025, the Company granted stock options to purchase 400,000 shares of Common Stock at an exercise price of $1.40 per share. The options vest and become exercisable starting on the grant date, subject to the terms and conditions outlined in the 2025 Plan and award agreement, including any applicable acceleration provisions. As of June 30, 2026, no stock options remained outstanding, as all such options had expired.
Stock-based compensation expense associated with the options was recognized in accordance with ASC 718, "Compensation—Stock Compensation."
Notes to Consolidated Financial Statements (Unaudited)
Retirement Plan
Patriot offers employees participation in the Patriot Bank, N.A. 401(k) Savings Plan (the "401(k) Plan") under Section 401(k) of the Internal Revenue Code, along with the ROTH feature to the Plan. The 401(k) Plan covers substantially all employees who have completed one month of service, are 21 years of age and who elect to participate. Under the terms of the 401(k) Plan, participants can contribute up to the maximum amount allowed, subject to Federal limitations. At its discretion, Patriot may match eligible participating employee contributions at the rate of 50% of the first 6% of the participants’ salary contributed to the 401(k) Plan. During the three and six months ended June 30, 2026, Patriot made matching contributions to the 401(k) Plan of $57 thousand and $99 thousand, respectively. During the three and six months ended June 30, 2025, Patriot made matching contributions to the 401(k) Plan of $55 thousand and $147 thousand, respectively.
Note 9. Earnings per share
The Company is required to present basic earnings per share and diluted earnings per share ("EPS") in its Consolidated Statements of Operations. Basic EPS amounts are computed by dividing net income by the weighted average number of shares of common stock outstanding. Diluted EPS reflects additional shares of common stock that would have been outstanding if potentially dilutive shares of common stock had been issued, as well as any adjustment to income that would result from the assumed issuance. Potential shares of common stock that may be issued by the Company relate to outstanding unvested RSAs and RSUs granted to directors and employees, and stock options. The dilutive effect resulting from these potential shares is determined using the treasury stock method. The Company is also required to provide a reconciliation of the numerator and denominator used in the computation of both basic and diluted EPS.
The following table summarizes the computation of basic and diluted income (loss) per share for the three and six months ended June 30, 2026 and 2025.
(Net income (loss) in thousands)
Three Months Ended June 30,
Six Months Ended June 30,
2026
2025
2026
2025
Basic income (loss) per share:
Net income (loss) attributable to Common shareholders
$
143
$
(5,001)
$
(1,612)
$
(7,778)
Divided by:
Weighted average shares outstanding
117,479,316
78,123,095
117,283,603
45,885,468
Basic income (loss) per share of common stock
$
0.00
$
(0.06)
$
(0.01)
$
(0.17)
Diluted income (loss) per share:
Net income (loss) attributable to Common shareholders
$
143
$
(5,001)
$
(1,612)
$
(7,778)
Weighted average shares outstanding
117,479,316
78,123,095
117,283,603
45,885,468
Effect of potentially dilutive restricted shares of common stock
—
(1)
—
(2)
—
(3)
—
(4)
Divided by:
Weighted average diluted shares outstanding
117,479,316
78,123,095
117,283,603
45,885,468
Diluted income (loss) per share of common stock
$
0.00
$
(0.06)
$
(0.01)
$
(0.17)
(1)
The weighted average diluted shares outstanding does not include 887,433 anti-dilutive restricted shares of common stock for the three months ended June 30, 2026.
(2)
The weighted average diluted shares outstanding does not include 4,597,710 anti-dilutive restricted shares of common stock for the three months ended June 30, 2025.
(3)
The weighted average diluted shares outstanding does not include 1,315,833 anti-dilutive restricted shares of common stock for the six months ended June 30, 2026.
(4)
The weighted average diluted shares outstanding does not include 5,119,740 anti-dilutive restricted shares of common stock for the six months ended June 30, 2025.
Notes to Consolidated Financial Statements (Unaudited)
Note 10. Commitments and Contingencies
Financial Instruments with Off-Balance Sheet Risk
In the normal course of business, Patriot is a party to financial instruments with off-balance-sheet risk to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit and involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the balance sheet. The contractual amounts of these instruments reflect the extent of involvement Patriot has in particular classes of financial instruments.
The contractual amount of commitments to extend credit and standby letters of credit represents the maximum amount of potential accounting loss should: the contract be fully drawn upon; the customer default; and the value of any existing collateral become worthless. Patriot applies its credit policies to entering commitments and conditional obligations and, as with its lending activates, evaluates each customer’s creditworthiness on a case-by-case basis. Management believes that it effectively mitigates the credit risk of these financial instruments through its credit approval processes, establishing credit limits, monitoring the on-going creditworthiness of recipients and grantees, and the receipt of collateral as deemed necessary.
Financial instruments with credit risk at June 30, 2026 and December 31, 2025 are as follows:
(In thousands)
June 30, 2026
December 31, 2025
Commitments to extend credit:
Unused lines of credit
$
89,607
$
59,567
Home equity lines of credit
9,302
9,193
$
98,910
$
68,760
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments to extend credit generally have fixed expiration dates or other termination clauses, and may require payment of a fee by the borrower. Since these commitments could expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if deemed necessary upon extending credit, is based on management’s credit evaluation of the customer. Collateral held varies, but may include commercial property, residential property, deposits and securities. Patriot has established an allowance for credit loss of $113 thousand and $80 thousand as of June 30, 2026 and December 31, 2025, respectively, which is included in accrued expenses and other liabilities.
Standby letters of credit are written commitments issued by Patriot to guarantee the performance of a customer to a third party. The credit risk involved in issuing standby letters of credit is essentially the same as that involved in extending loan facilities to customers. Guarantees that are not derivative contracts are recorded at fair value and included in the Consolidated Balance Sheet.
As of June 30, 2026, the Bank has an irrevocable stand-by letter of credit for a maximum of $70.5 million, issued by the Federal Home Loan Bank of Boston on behalf of the Bank, with Mastercard as the beneficiary. This letter of credit was originally set to expire on April 30, 2026 but has been extended to April 30, 2027.
Legal Matters
Patriot is from time to time a party to legal proceedings arising in connection with its business. Management believes that the ultimate disposition of all pending legal matters will not have a material adverse effect on the consolidated financial condition, results of operations, or liquidity of Patriot; however litigation is inherently uncertain and the outcome of such matters cannot be predicted with certainty.
Note 11. Regulatory and Operational Matters
On January 14, 2025, the Bank entered into an agreement with the OCC (the "OCC Agreement"), pursuant to which the Bank agreed, through its board of directors to take certain actions in the areas of strategic planning, capital planning, Bank Secrecy Act / Anti-Money Laundering risk management, payment activities oversight, credit administration and concentrations risk management.The Bank’s Board appointed a Compliance Committee in January 2025, as required, to oversee the progress and compliance with the OCC Agreement.
Notes to Consolidated Financial Statements (Unaudited)
On January 17, 2025, the OCC notified the Bank that the individual minimum capital ratios previously established on April 17, 2024 had been terminated and that the same minimum capital ratios were instead incorporated into the OCC Agreement. Under the OCC Agreement, the Bank was required to maintain, on an ongoing basis, a common equity tier 1 capital ratio of 10.00%, a Tier 1 capital ratio of 10.00%, a Tier 1 leverage ratio of 9.00% and a total capital ratio of 11.50%.
On June 30, 2026, the OCC terminated the OCC Agreement. Accordingly, the Bank is no longer subject to the higher minimum capital ratios or other requirements imposed by the OCC Agreement. As of June 30, 2026, the Bank’s capital ratios exceeded the applicable regulatory thresholds for classification as “well capitalized” under the prompt corrective action framework. A bank generally cannot qualify as well capitalized while subject to a written agreement requiring it to maintain specified capital levels; termination of the OCC Agreement therefore removed that impediment.
The Company and Bank’s regulatory capital amounts and ratios at June 30, 2026 and December 31, 2025 are summarized as follows:
June 30, 2026
December 31, 2025
Patriot National Bancorp, Inc.
Patriot Bank, N.A.
Patriot National Bancorp, Inc.
Patriot Bank, N.A.
(Dollar amounts in thousands)
Amount
Ratio
Amount
Ratio
Amount
Ratio
Amount
Ratio
Total Capital (to risk weighted assets):
Actual
$
130,052
14.22
%
$
130,212
14.15
%
$
129,587
20.76
%
$
120,329
19.25
%
To be Well Capitalized
(1)
—
—
92,001
10.00
%
—
—
62,516
10.00
%
For capital adequacy
73,184
8.00
%
73,601
8.00
%
49,934
8.00
%
50,013
8.00
%
OCC Agreement minimum
(1)
—
—
%
—
—
%
—
—
%
71,894
11.50
%
Tier 1 Capital (to risk weighted assets):
Actual
113,122
12.37
%
121,629
13.22
%
117,567
18.84
%
116,657
18.66
%
To be Well Capitalized
(1)
—
—
73,601
8.00
%
—
—
50,013
8.00
%
For capital adequacy
54,888
6.00
%
55,201
6.00
%
37,450
6.00
%
37,510
6.00
%
OCC Agreement minimum
(1)
—
—
%
—
—
%
—
—
%
62,516
10.00
%
Common Equity Tier 1 Capital (to risk weighted assets):
Actual
104,874
11.46
%
121,629
13.22
%
109,567
17.55
%
116,657
18.66
%
To be Well Capitalized
(1)
—
—
59,801
6.50
%
—
—
40,636
6.50
%
For capital adequacy
41,166
4.50
%
41,401
4.50
%
28,088
4.50
%
28,132
4.50
%
OCC Agreement minimum
(1)
—
—
%
—
—
%
—
—
%
62,516
10.00
%
Tier 1 Leverage Capital (to average assets):
Actual
113,122
8.96
%
121,629
9.60
%
117,567
11.52
%
116,657
11.42
%
To be Well Capitalized
(1)
—
—
63,332
5.00
%
—
—
51,097
5.00
%
For capital adequacy
50,482
4.00
%
50,666
4.00
%
40,835
4.00
%
40,878
4.00
%
OCC Agreement minimum
(1)
—
—
%
—
—
%
—
—
%
91,975
9.00
%
(1) Designation as "Well Capitalized" does not apply to bank holding companies - the Company. Such categorization of capital adequacy only applies to insured depository institutions - the Bank. Under the terms of the OCC Agreement, terminated June 30, 2026, the Bank was not eligible to be “Well Capitalized” while the OCC Agreement was in effect and was designated as “Adequately Capitalized” regardless of its capital ratios being in excess of the regulatory defined Well Capitalized ratios.
Notes to Consolidated Financial Statements (Unaudited)
Note 12. Fair Value and Interest Rate Risk
Patriot measures the carrying value of certain financial assets and liabilities at fair value, as required by its policies as a financial institution and by US GAAP. The carrying values of certain assets and liabilities are measured at fair value on a recurring basis, such as available-for-sale securities; while other assets and liabilities are measured at fair value on a non-recurring basis due to external factors requiring management’s judgment to estimate potential losses of value resulting in asset impairments or the establishment of valuation reserves. Measuring assets and liabilities at fair value may result in fluctuations to carrying value that have a significant impact on the results of operations or other comprehensive income for the period and period over period.
Following is a detailed summary of the guidance provided by US GAAP regarding the application of fair value measurements and Patriot’s application thereof. Additionally, the following information includes detailed summaries of the effects fair value measurements have on the carrying amounts of asset and liabilities presented in the consolidated financial statements.
The objective of fair value measurement is to value an asset that may be sold or a liability that may be transferred at the estimated value which might be obtained in a transaction between unrelated parties under current market conditions. US GAAP establishes a framework for measuring assets and liabilities at fair value, as well as certain financial instruments classified in equity. The framework provides a fair value hierarchy, which prioritizes quoted prices in active markets for identical assets and liabilities and minimizes unobservable inputs, which are inputs for which market data are not available and that are developed by management using the best information available to develop assumptions about the value market participants might place on the asset to be sold or liability to be transferred.
The three levels of the fair value hierarchy consist of:
Level 1 Unadjusted quoted market prices for identical assets or liabilities in active markets that the entity has ability to access at the measurement date (such as active exchange-traded equity securities and certain U.S. and government agency debt securities).
Level 2 Observable inputs other than quoted prices included in Level 1, such as:
–Quoted prices for similar assets or liabilities in active markets (such as U.S. agency and government sponsored mortgage-backed securities)
–Quoted prices for identical or similar assets or liabilities in less active markets (such as certain U.S. and government agency debt securities, and corporate and municipal debt securities that trade infrequently)
–Other inputs that are observable for substantially the full term of the asset or liability (i.e. interest rates, yield curves, prepayment speeds, default rates, etc.).
Level 3 Valuation techniques that require unobservable inputs that are supported by little or no market activity and are significant to the fair value measurement of the asset or liability (such as pricing and discounted cash flow models that typically reflect management’s estimates of the assumptions a market participant would use in pricing the asset or liability).
A description of the valuation methodologies used for assets and liabilities recorded at fair value, and for estimating fair value for financial and non-financial instruments not recorded at fair value, is set forth below.
Cash and due from banks, restricted cash, and accrued interest receivable and payable
The carrying amount is a reasonable estimate of fair value and accordingly these are classified as Level 1. These financial instruments are not recorded at fair value on a recurring basis.
Available-for-sale securities
The fair value of securities available-for-sale (carried at fair value) are determined by obtaining quoted market prices on nationally recognized securities exchanges (Level 1), or matrix pricing (Level 2), which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities, but rather by relying on the securities' relationship to other benchmark quoted prices, or using unobservable inputs employing various techniques and assumptions (Level 3).
Notes to Consolidated Financial Statements (Unaudited)
Federal Reserve Bank Stock and Federal Home Loan Bank Stock
Shares in the FRB and FHLB are purchased and redeemed based upon their $100 par value. The stocks are non-marketable equity securities, and as such, are considered restricted securities that are carried at cost.
Loans
The fair value of loans is using an exit price approach by discounting expected future cash flows at market rates for loans with similar credit characteristics and remaining maturities. The valuation incorporates factors that market participants would consider, including credit risk, liquidity, transaction costs and current market conditions. The determination of fair value requires significant judgment. The determination of fair value requires the use of significant judgment.
Loans Held for Sale
The fair value of loans held for sale is generally estimated by using a market approach based on observable market prices and other market inputs. Such loans are classified within Level 2 of the fair value hierarchy.
Certain credit card receivables held for sale at June 30, 2026 were valued using an income approach based on discounted expected cash flows. Significant assumptions included expected collections, anticipated credit losses, timing of collections, costs and uncertainties associated with administering and resolving the portfolio, and a market participant discount rate. Because significant inputs to the valuation are unobservable, these receivables are classified within Level 3 of the fair value hierarchy.
Servicing Asset
Servicing assets do not trade in an active, open market with readily observable prices. The Company estimates the fair value of servicing assets using discounted cash flow models incorporating numerous assumptions from the perspective of a market participant including market discount rates and prepayment speeds. Due to the significant unobservable input related to the servicing rights, the servicing asset is classified within Level 3 of the valuation hierarchy.
Retained Beneficial Interest
The Company retained its rights to sold loans under a loss share agreement and did not transfer such rights to the loan purchasers. Accordingly, the Company has continuing involvement in the transferred financial assets. The retained interest is recognized as a separate asset and represents the present value of expected future reimbursements. The fair value of this asset is estimated using a discounted cash flow methodology that incorporates significant unobservable inputs, including expected credit losses, timing of cash flows, and appropriate discount rates. Due to the use of these unobservable inputs, the asset is classified as a Level 3 measurement within the fair value hierarchy in accordance with ASC 820.
The Company evaluates the retained interest on a recurring basis for changes in expected cash flows and records adjustments to fair value as necessary. Changes in the fair value of the retained interest are recognized in earnings in the period in which they occur.
The Company’s derivative assets and liabilities consist of transactions as part of management’s strategy to manage interest rate risk. The valuation of interest rate swap agreements does not contain any counterparty risk. The valuation of the Company’s interest rate swaps is obtained from a third-party pricing service and is determined using a discounted cash flow analysis on the expected cash flows of each derivative. The pricing analysis is based on observable inputs for the contractual terms of the derivatives, including the period to maturity and interest rate curves. The Company has determined that the inputs used to value its interest rate derivatives fall within Level 2 of the fair value hierarchy. See Note 7 for additional disclosures on derivatives.
Deposits
The fair value of demand deposits, regular savings and certain money market deposits is the amount payable on demand at the reporting date.
The fair value of certificates of deposit and other time deposits is estimated using a discounted cash flow calculation that applies interest rates currently being offered for deposits of similar remaining maturities, estimated using local market data, to a schedule of aggregated expected maturities on such deposits. Patriot does not record deposits at fair value on a recurring basis.
Notes to Consolidated Financial Statements (Unaudited)
Subordinated Notes and Junior Subordinated Debt
Patriot does not record subordinated notes at fair value on a recurring basis. The fair value of the subordinated notes was estimated by discounting future cash flows at rates at which similar notes would be made. The carrying value is considered comparable to fair value.
Patriot does not record junior subordinated debt at fair value on a recurring basis. Junior subordinated debt reprices quarterly, as a result, the carrying amount is considered a reasonable estimate of fair value.
The Company considers its own credit worthiness in determining the fair value of its subordinated notes, notes and junior subordinated debt.
Federal Home Loan Bank, Federal Reserve Bank and Correspondent Bank Borrowings
The fair value of FHLB advances, FRB and other correspondent bank borrowings are estimated using a discounted cash flow calculation that applies current interest rates for advances of similar maturity to a schedule of maturities of such advances. Patriot does not record FHLB advances, FRB and other correspondent bank borrowings at fair value on a recurring basis.
Off-balance-sheet financial instruments
Off-balance-sheet financial instruments are based on interest rate changes and fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. The off-balance-sheet financial instruments (i.e., commitments to extend credit) are insignificant and are not recorded on a recurring basis.
Notes to Consolidated Financial Statements (Unaudited)
The following table provides a comparison of the carrying amounts and estimated fair values of Patriot’s financial assets and liabilities as of June 30, 2026 and December 31, 2025:
(In thousands)
June 30, 2026
December 31, 2025
Fair Value Hierarchy
Carrying Amount
Estimated Fair Value
Carrying Amount
Estimated Fair Value
Financial Assets:
Cash and noninterest bearing balances due from banks
Level 1
$
2,533
$
2,533
$
2,411
$
2,411
Interest-bearing deposits due from banks
Level 1
114,359
114,359
183,980
183,980
Restricted cash
Level 1
4,617
4,617
20,736
20,736
Available-for-sale securities
Level 2
228,942
228,942
212,950
212,950
Available-for-sale securities
Level 3
11,403
11,403
11,727
11,727
Federal Reserve Bank stock
Level 2
3,031
3,031
2,961
2,961
Federal Home Loan Bank stock
Level 2
742
742
679
679
Loans receivable, net
Level 3
877,440
857,856
585,723
571,015
Loans held for sale
Level 2
9,105
9,105
24,513
24,513
Loans held for sale
Level 3
14,592
14,592
—
—
Servicing assets
Level 3
638
626
660
652
Accrued interest receivable
Level 2
6,534
6,534
4,869
4,869
Retained beneficial interest
Level 3
348
348
518
518
Interest rate swap receivable
Level 2
52
52
39
39
Financial assets, total
$
1,274,336
$
1,254,740
$
1,051,675
$
1,037,050
Financial Liabilities:
Demand deposits
Level 2
$
150,464
$
150,464
$
106,766
$
106,766
Savings deposits
Level 2
83,030
83,030
38,036
38,036
Interest bearing DDA
Level 2
497,349
497,349
291,728
285,663
Money market deposits
Level 2
196,762
196,762
191,177
191,177
Time deposits
Level 2
241,435
240,643
283,395
283,401
Brokered deposits
Level 1
31,907
31,907
54,683
54,800
Subordinated debt
Level 2
8,301
8,054
8,289
8,102
Junior subordinated debt owed to unconsolidated trust
Level 2
8,163
8,163
8,157
8,157
Accrued interest payable
Level 2
298
298
615
615
Interest rate swap liability
Level 2
52
52
39
39
Financial liabilities, total
$
1,217,761
$
1,216,722
$
982,885
$
976,756
The carrying amount of cash and non-interest-bearing balances due from banks, interest-bearing deposits due from banks, and demand deposits approximates fair value, due to the short-term nature and high turnover of these balances. These amounts are included in the table above for informational purposes.
In the normal course of its operations, Patriot assumes interest rate risk (i.e., the risk that general interest rate levels will fluctuate). As a result, the fair value of Patriot’s financial assets and liabilities are affected when interest market rates change, which change may be either favorable or unfavorable. Management attempts to mitigate interest rate risk by matching the maturities of its financial assets and liabilities. However, borrowers with fixed rate obligations are less likely to prepay their obligations in a rising interest rate environment and more likely to prepay their obligations in a falling interest rate environment. Conversely, depositors receiving fixed rates are more likely to withdraw funds before maturity in a rising interest rate environment and less likely to do so in a falling interest rate environment. Management monitors market rates of interest and the maturities of its financial assets and financial liabilities, adjusting the terms of new loans and deposits in an attempt to minimize interest rate risk. Additionally, management mitigates its overall interest rate risk through its available funds investment strategy.
Notes to Consolidated Financial Statements (Unaudited)
The following tables detail the financial assets measured at fair value on a recurring basis and the valuation techniques utilized relative to the fair value hierarchy, as of June 30, 2026 and December 31, 2025:
(In thousands)
Quoted Prices in Active Markets for Identical Assets (Level 1)
Significant Observable Inputs (Level 2)
Significant Unobservable Inputs (Level 3)
Total
June 30, 2026
U. S. Government agency and MBS
$
—
$
220,106
$
—
$
220,106
Corporate bonds
—
1,750
11,403
13,153
Subordinated notes
—
3,861
—
3,861
SBA loan pools
—
3,226
—
3,226
Available-for-sale securities
$
—
$
228,942
$
11,403
$
240,345
Loans held for sale
$
—
$
—
$
14,592
$
14,592
Retained beneficial interest
$
—
$
—
$
348
$
348
Interest rate swap receivable
$
—
$
52
$
—
$
52
Interest rate swap liability
$
—
$
52
$
—
$
52
December 31, 2025:
U. S. Government agency and MBS
$
—
$
204,068
$
—
$
204,068
Corporate bonds
—
1,737
11,727
13,464
Subordinated notes
—
3,752
—
3,752
SBA loan pools
—
3,393
—
3,393
Available-for-sale securities
$
—
$
212,950
$
11,727
$
224,677
Retained beneficial interest
$
—
$
—
$
518
$
518
Interest rate swap receivable
$
—
$
39
$
—
$
39
Interest rate swap liability
$
—
$
39
$
—
$
39
Patriot measures certain financial assets and financial liabilities at fair value. When circumstances dictate (e.g., impairment of long-lived assets, other than temporary impairment of collateral value), the carrying values of such financial assets and financial liabilities are adjusted to fair value or fair value less costs to sell, as may be appropriate.At June 30, 2026, such measurements included certain loans held for sale, individually evaluated loans, servicing assets and retained beneficial interests.
As of June 30, 2026 and December 31, 2025, four corporate bonds were classified as Level 3 instruments. The fair values of these securities were determined using a present value approach. The discount rate assumed was determined based on unobservable inputs in a pricing model. During the three and six months ended June 30, 2026, the Company had loans held for sale transfer into Level 3.
At June 30, 2026, certain credit card receivables held for sale with a carrying value of approximately $14.6 million were measured at fair value using a discounted cash flow approach. Significant unobservable inputs included assumptions regarding expected collections, credit losses, timing of collections, costs associated with administering and resolving the portfolio, and the market participant discount rate.
For the three and six months ended June 30, 2025, the Company had no transfers into or out of Levels 1, 2 or 3.
Notes to Consolidated Financial Statements (Unaudited)
The reconciliation of the beginning and ending balances during the three and six months ended June 30, 2026 and 2025 for Level 3 assets is as follows:
Three Months Ended June 30,
Six Months Ended June 30,
(In thousands)
2026
2025
2026
2025
Level 3 fair value, beginning of period
$
12,028
$
10,968
$
12,245
$
11,123
Unrealized (loss)/gain
(277)
509
(494)
354
Transfers in and /or out of Level 3
14,592
—
14,592
—
Level 3 fair value, end of period
$
26,343
$
11,477
$
26,343
$
11,477
The table below presents the valuation methodology and unobservable inputs for level 3 assets measured at fair value as of June 30, 2026 and December 31, 2025:
(In thousands)
Fair Value
Valuation Methodology
Unobservable Inputs
Range of Inputs
June 30, 2026
Individually evaluated loans, net
$
23,096
Real Estate Appraisals
Discount for appraisal type
4
%
-
11%
Loans held for sale
14,592
Discounted Cash Flows
Market discount rates
3
%
14%
Servicing assets
635
Discounted Cash Flows
Market discount rates
12.75
%
-
12.75%
Retained beneficial interest
348
Discounted Cash Flows
Market discount rates
10
%
-
15%
Loss projections (% exposure)
10
%
-
20%
Claim timing (months)
9 months
-
18 months
December 31, 2025:
Individually evaluated loans, net
$
10,394
Real Estate Appraisals
Discount for appraisal type
8
%
-
14%
Servicing assets
652
Discounted Cash Flows
Market discount rates
10
%
-
15%
Retained beneficial interest
518
Discounted Cash Flows
Market discount rates
10
%
-
15%
Loss projections (% exposure)
10
%
-
20%
Claim timing (months)
9 months
-
18 months
Patriot discloses fair value information about financial instruments, whether or not recognized in the consolidated balance sheet, for which it is practicable to estimate that value. Certain financial instruments are excluded from disclosure requirements and, accordingly, the aggregate fair value amounts presented do not necessarily represent the complete underlying value of financial instruments included in the Consolidated Financial Statements.
The estimated fair value amounts have been measured as of June 30, 2026 and December 31, 2025, and have not been reevaluated or updated for purposes of these Consolidated Financial Statements subsequent to those respective dates. As such, the estimated fair values of the financial instruments measured may be different than if they had been subsequently valued.
The information presented should not be interpreted as an estimate of the total fair value of Patriot’s assets and liabilities, since only a portion of Patriot’s assets and liabilities are required to be measured at fair value for financial reporting purposes. Due to the wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between Patriot’s fair value disclosures and those of other bank holding companies may not be meaningful.
Notes to Consolidated Financial Statements (Unaudited)
In the normal course of its operations, Patriot assumes interest rate risk (i.e., the risk that general interest rate levels will fluctuate). As a result, the fair value of Patriot’s financial assets and liabilities are affected when interest market rates change, which change may be either favorable or unfavorable. Management attempts to mitigate interest rate risk by matching the maturities of its financial assets and liabilities. However, borrowers with fixed rate obligations are less likely to prepay their obligations in a rising interest rate environment and more likely to prepay their obligations in a falling interest rate environment. Conversely, depositors receiving fixed rates are more likely to withdraw funds before maturity in a rising interest rate environment and less likely to do so in a falling interest rate environment. Management monitors market rates of interest and the maturities of its financial assets and financial liabilities, adjusting the terms of new loans and deposits in an attempt to minimize interest rate risk. Additionally, management mitigates its overall interest rate risk through its available funds investment strategy.
Notes to Consolidated Financial Statements (Unaudited)
Note 13. Leases
We have operating leases for offices, branches, equipment and other items.
In the first quarter of 2026, the Bank opened a leased banking office in Beverly Hills, California that supports relationship development and client coverage in the Los Angeles market.
The variable lease cost primarily represents variable payments such as common area maintenance and utilities, which are included in the occupancy and equipment expenses on the Consolidated Statements of Operations.
Three Months Ended June 30,
Six Months Ended June 30,
(In thousands)
2026
2025
2026
2025
Operating lease cost
$
368
$
133
$
509
$
241
Supplemental balance sheet information related to our operating lease arrangements is presented below:
(In thousands)
June 30, 2026
December 31, 2025
Operating Leases:
Operating lease right-of-use assets
$
2,856
$
1,134
Operating lease liabilities
$
2,930
$
1,203
Weighted average remaining lease term
5.1 years
8.0 years
Weighted average discount rate %
4.1
%
3.7
%
The table below presents the supplemental cash flow information related to the leases:
Three Months Ended June 30,
Six Months Ended June 30,
(In thousands)
2026
2025
2026
2025
Cash paid for amounts included in the measurement of lease liabilities:
Notes to Consolidated Financial Statements (Unaudited)
Note 14. Income Taxes
Accounting Policy
The Company accounts for income taxes under the liability method in accordance with ASC 740, Income Taxes. Under this method, deferred tax assets ("DTAs") and deferred tax liabilities ("DTLs") are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, as well as for net operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
Deferred tax assets are reduced by a valuation allowance when, based on all available positive and negative evidence, it is more likely than not that some or all of those assets will not be realized.
Income Tax Benefit
The Company recorded an income tax benefit of $1.5 million for the three months ended June 30, 2026, compared to a benefit of $49 thousand for the three months ended June 30, 2025. For the six months ended June 30, 2026 and 2025, the income tax benefit was $1.5 million and $48 thousand, respectively.
The effective tax rate for the three months ended June 30, 2026 was approximately 110%, compared to approximately 1% for the three months ended June 30, 2025. The income tax benefit and effective tax rate for the 2026 period were primarily attributable to a discrete benefit of approximately $1.2 million resulting from the partial release of the valuation allowance maintained against the Company's deferred tax assets, as described below. Other significant items affecting the effective tax rate include state income tax impacts, executive compensation limitations under IRC Section 162(m) and stock compensation related adjustments. The effective tax rate for the current period is not indicative of the Company’s expected annual effective tax rate.
Deferred Tax Assets and Valuation Allowance
The following table presents the change in the net deferred tax position:
(In thousands)
June 30, 2026
December 31, 2025
Gross deferred tax assets
$
31,831
$
30,992
Valuation allowance
(28,482)
(30,992)
Deferred tax asset
3,349
—
Deferred tax liability
(2,618)
(783)
Net deferred tax asset (liability)
731
$
(783)
At December 31, 2025, the Company maintained a full valuation allowance against its deferred tax assets and reported a net deferred tax liability of $783 thousand. At June 30, 2026, the Company recognized a deferred tax asset, net of the remaining valuation allowance and before offsetting deferred tax liabilities, of approximately $3.3 million. After offsetting deferred tax labilities of approximately $2.6 million, the Company reported a net deferred tax asset of $731 thousand.
During the quarter ended June 30, 2026, management evaluated all available positive and negative evidence and concluded that a portion of the Company’s deferred tax assets met the more likely than not recognition threshold. This conclusion was supported primarily by objectively verifiable positive evidence, including expected taxable income from sufficiently developed strategic actions, together with forecasted future taxable income as corroborative evidence. Accordingly, the Company released approximately $1.2 million of the valuation allowance previously maintained against those deferred tax assets and recognized a corresponding discrete income tax benefit. The change in the valuation allowance balance also reflects current period changes in the underlying deferred tax assets and temporary differences.
The Company continues to maintain a substantial valuation allowance against the remaining deferred tax assets, as cumulative consolidated losses in recent years constitute significant negative evidence regarding realizability. Management will continue to reassess the valuation allowance as additional objective evidence becomes available.
Notes to Consolidated Financial Statements (Unaudited)
Section 382 Limitations
As of June 30, 2026, the Company had approximately $44.1 million of Federal net operating loss and recognized built-in loss carryforwards. Based on management’s preliminary Section 382 analysis, approximately $33.8 million of these tax attributes are expected to be subject to annual utilization limitation under Internal Revenue Code Section 382. The formal Section 382 study remains in process and is expected to be completed during 2026. Management will evaluate any additional refinements necessary for each reporting period completed. The Company has reflected the applicable Section 382 limitations, including those resulting from the 2025 ownership change, in its assessment of the realizability of its deferred tax assets.
Notes to Consolidated Financial Statements (Unaudited)
Note 15. Segment Information
The Company’s Chief Executive Officer is the designated chief operating decision maker (“CODM”). The Company has one reportable segment, Banking, which reflects the manner in which the CODM reviews financial information and allocates resources.
The CODM evaluates performance and allocates resources on a consolidated basis using information about net interest income, provision for credit losses, non-interest income, non-interest expense, budget-to-actual results, and consolidated net income. Consolidated net income is also used by the CODM for benchmarking the Company’s performance against peers and in assessing performance for compensation purposes.
Interest-earning assets within the Banking segment consist primarily of commercial and consumer loans, investment securities, and cash, which generate the substantial majority of interest income. Interest-bearing liabilities consist primarily of deposits, Federal Home Loan Bank and Federal Reserve borrowings, and other borrowings, which generate the substantial majority of interest expense. All of the Company’s operations are domestic.
The accounting policies of the Banking segment are the same as those described in the summary of significant accounting policies. Segment assets for the Banking segment are the same as total assets presented in the Consolidated Balance Sheets.
The Company's segment assets represent its total assets as presented in the Consolidated Balance Sheet.
Note 16. Subsequent Events
Patriot evaluated subsequent events through the date of issuance of the accompanying consolidated financial statements and determined that there were no subsequent events requiring recognition or disclosure in the accompanying consolidated financial statements.
Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations
"Safe Harbor" Statement Under Private Securities Litigation Reform Act of 1995
This Quarterly Report on Form 10-Q contains statements that relate to future events and expectations and, as such, constitute forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. Certain statements, other than purely historical information, including estimates, projections, statements relating to our strategies, outlook, business and financial prospects, business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements.” These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Forward-looking statements are not guarantees of future performance. Although Patriot believes that the expectations reflected in any forward-looking statements are based on reasonable assumptions, these expectations may not be attained and it is possible that actual results may differ materially from those indicated by these forward-looking statements due to a variety of risks, uncertainties and changes in circumstances, many of which are beyond Patriot’s control.
For a discussion of certain factors that could cause actual results to differ materially from those anticipated in this report, refer to the disclosures in Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” Part II, Item 1A, “Risk Factors,” of this Quarterly Report on Form 10-Q, and Item 1A, “Risk Factors,” in the Company’s most recent Annual Report on Form 10-K. Patriot undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by applicable law.
Critical Accounting Policies
The preparation of consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures. Actual results could differ from those estimates. Management has identified the allowance for credit losses and the realizability of deferred tax assets as among the Company’s most critical accounting estimates because they are important to the portrayal of the Company’s financial condition and results of operations and require management to make subjective and complex judgments about matters that are inherently uncertain. See the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 and Note 14, Income Taxes, for additional information.
SUMMARY OF RESULTS
The Company continued to execute its strategic plan during the six months ended June 30, 2026, with a focus on balance sheet growth, capital optimization, and risk management. Significant regulatory milestones were achieved during and shortly after the quarter. On June 30, 2026, when the OCC formally terminated its Formal Agreement with the Bank, resulting in the Bank's reclassification from "adequately capitalized" to "well capitalized" under applicable regulatory standards. On July 7, 2026, the OCC also notified the Bank that it no longer considered the Bank to be in “troubled condition” for purposes of applicable law and regulation.
For the three months ended June 30, 2026, the Company reported net income of $0.1 million, or $0.00 per basic and diluted share, compared to a net loss of $5.0 million, or $(0.06) per share, for the same period in 2025. For the six months ended June 30, 2026, the Company reported a net loss of $1.6 million, or $(0.01) per share, compared to a net loss of $7.8 million, or $(0.17) per share, for the same period in 2025. The improvement reflects higher net interest income and increased non-interest income, partially offset by higher operating expenses.
Total assets increased to $1.32 billion at June 30, 2026, from $1.09 billion at December 31, 2025, primarily driven by loan origination and purchase activity and continued growth of the investment securities portfolio.
Cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash decreased from $207.1 million at December 31, 2025 to $121.5 million at June 30, 2026. The decrease was driven primarily by a strategic reallocation of liquidity into higher yielding asset classes, consistent with the Company’s strategic objectives. For further details, refer to the Consolidated Statements of Cash Flows.
Investment securities
Total investments increased by $15.7 million, or 7.0%, to $240.3 million at June 30, 2026, compared to $224.7 million at December 31, 2025. The investment portfolio continues to be composed primarily of U.S. Government agency and mortgage‑backed securities. The net increase was driven principally by $51.0 million in purchases of available‑for‑sale securities during 2026, reflecting the Company’s ongoing deployment of liquidity into investment securities as part of its balance sheet repositioning strategy. These purchases were partially offset by $29.1 million in sales proceeds, $3.9 million in principal paydowns, and a $4.1 million increase in unrealized losses.
At June 30, 2026, securities of $132.7 million were pledged to the FHLB or FRB at June 30, 2026, compared to $15.1 million at December 31, 2025. Of the June 30, 2026 amount, approximately $98.1 million was pledged to the FHLB to support available borrowing capacity, with no FHLB borrowings outstanding at quarter-end. Approximately $34.6 million was pledged to the FRB in connection with requirements applicable to the Bank while it was considered to be in troubled condition; no FRB borrowings were outstanding at June 30, 2026.
Loans held for investment
Loans receivable, net, increased to $877.4 million at June 30, 2026 from $585.7 million at December 31, 2025, an increase of approximately $291.7 million or approximately 50%. The increase reflects new loan originations under the Bank's targeted lending initiatives, as well as continued purchases of residential and commercial real estate loans.
The following table provides the composition of the Company’s loan held for investment portfolio as of June 30, 2026 and December 31, 2025:
(In thousands)
June 30, 2026
December 31, 2025
Amount
%
Amount
%
Loan portfolio:
Commercial Real Estate
$
487,265
55.00
%
346,191
58.42
%
Residential Real Estate
201,153
22.71
%
79,667
13.44
%
Commercial and Industrial
189,094
21.34
%
146,828
24.78
%
Consumer and Other
8,396
0.95
%
19,876
3.35
%
Loans receivable, gross
885,909
100.00
%
592,562
100.00
%
Allowance for credit losses
(8,469)
(6,839)
Loans receivable, net
$
877,440
$
585,723
Commercial real estate remained the largest loan category as of June 30, 2026, comprising 55.0% of total gross loans, compared to 58.4% at December 31, 2025. Residential real estate loans increased to 22.7% of total gross loans from 13.4% at year‑end, driven primarily by loan purchases completed during the first quarter of 2026. SBA loans held for investment are included within the commercial real estate and commercial and industrial loan categories. As of June 30, 2026 and December 31, 2025, SBA loans classified as commercial real estate totaled $10.4 million. SBA loans included in the commercial and industrial loan category totaled $7.6 million at June 30, 2026, compared to $8.7 million at December 31, 2025.
As of June 30, 2026, the Company’s net loan‑to‑deposit ratio increased to 73.1% from 60.6% at December 31, 2025, while the net loan‑to‑total assets ratio increased to 66.6% from 53.8% over the period. These increases are consistent with the Company’s balance sheet repositioning strategy.
Commercial Real Estate Loans ("CRE")
The following table provides the composition of the commercial real estate loan portfolio as of June 30, 2026 and December 31, 2025:
(In thousands)
June 30, 2026
December 31, 2025
Amount
%
Amount
%
Commercial Real Estate
CRE owner occupied
$
111,532
23
%
$
72,883
21
%
CRE multifamily
97,371
20
%
52,502
15
%
CRE office
26,688
5
%
26,347
8
%
CRE retail
59,029
12
%
42,953
12
%
Other CRE non-owner occupied
192,645
40
%
151,505
44
%
Total
$
487,265
100
%
$
346,191
100
%
The following table provides the commercial real estate loan portfolio by geographic concentrations as of June 30, 2026 and December 31, 2025:
(In thousands)
June 30, 2026
December 31, 2025
Amount
%
Amount
%
New York
$
180,761
37
%
$
166,794
48
%
Connecticut
71,075
15
%
64,395
19
%
New Jersey
21,742
4
%
23,534
7
%
Other Markets (1)
213,687
44
%
91,468
26
%
Total Commercial Real Estate
$
487,265
100
%
$
346,191
100
%
(1) Other Market consists of loans in all other states, of which California is $143.6 million as of June 30, 2026. No others are greater than 5% of the total as of the periods ending June 30,2026 and December 31, 2025.
Commercial real estate and commercial and industrial loans represented approximately 76.4% of total gross loans at June 30, 2026. Accordingly, the Company’s credit performance remains significantly influenced by borrower operating performance, collateral values, and economic conditions in the markets and customer segments served by the Bank. For purposes of internal and regulatory CRE concentration monitoring, including under OCC Bulletin 2006-46, owner-occupied CRE loans are excluded from CRE totals and classified as commercial and industrial loans, although owner-occupied CRE loans are included in the CRE portfolio presentation above.
As of June 30, 2026, the Bank’s CRE concentration was 289% of Tier 1 capital plus allowance for credit loss, below the Bank’s concentration policy limit of 350%. Exceeding this threshold would not, by itself, indicate unsafe or unsound banking practices; however, it subjects the Bank to heightened supervisory expectations for portfolio management, risk assessment, and capital planning. Management maintains portfolio management procedures, underwriting standards, and stress testing practices consistent with these regulatory expectations.
The Company estimates its ACL under the CECL methodology in ASC 326. The allowance for credit losses was $8.5 million at June 30, 2026, compared to $6.8 million at December 31, 2025. Based on management’s evaluation of the loan portfolio at June 30, 2026, management believed the ACL of $8.5 million, or 0.96% of gross loans, was appropriate to absorb expected credit losses in the loan portfolio as of that date. The increase from December 31, 2025 reflected, in part, the initial allowance recorded on loans purchased during the first quarter of 2026 under ASU 2025-08.
Effective January 1, 2026, the Company adopted ASU 2025-08, Financial Instruments—Credit Losses (Topic 326): Purchased Loans, on a prospective basis. The adoption did not impact the Company’s opening retained earnings. For loans purchased during the first quarter of 2026, the Company recorded an initial allowance for credit losses of $925 thousand as an adjustment to the amortized cost basis, consistent with the new standard.
The following table summarizes activity in the ACL:
Three Months Ended June 30,
Six Months Ended June 30,
(In thousands)
2026
2025
2026
2025
Balance at beginning of the period
$
7,779
$
6,729
$
6,839
$
7,305
Provision for credit losses
567
1,602
1,300
2,358
Net recovery (charge-offs)
124
(536)
330
(1,868)
Balance at end of the period
$
8,469
$
7,795
$
8,469
$
7,795
Ratios:
Net charge-offs to average loans (annualized)
—
%
(0.08)
%
—
%
(0.55)
%
Allowance for credit losses to total loans
0.96
%
1.33
%
0.96
%
1.33
%
Allowance for credit losses to nonaccrual loans
33.80
%
32.15
%
33.80
%
32.15
%
For the three months ended June 30, 2026, net charge-offs decreased $0.7 million to $0.1 net recovery, compared to $(0.5) million and 0.08% for the three months ended June 30, 2025.
For the six months ended June 30,2026, net charge-offs decreased $2.2 million to $0.3 million net recovery, from $(1.9) million as of June 30, 2025, Net charge-offs to average loans improved to a nominal net recovery for the six months ended June 30, 2026 from 0.55% for the period ended June 30, 2025. The decrease in net charge-offs in 2026 was primarily due to reductions and repositioning of the portfolio completed in 2025.
Average loans increased by approximately $180 million to $837.3 million for the three months ended June 30, 2026 from $657.7 million for the three months ended June 30, 2025. For the six-month period, the average loan balance increased $99.4 million, from $684.0 million in 2025 to $783.4 million in 2026. The increase reflects new loan originations under the Bank's targeted lending initiatives, as well as continued purchases of residential and commercial real estate loans.
Non-accrual loans
Non-accrual loans were $25.0 million as of June 30, 2026, compared to $24.2 million as of June 30, 2025. The ACL-to-non-accrual loans ratio was 33.8% as of June 30, 2026, compared to 32.15% as of June 30, 2025. The Company continues to actively manage and monitor credit risk, particularly in commercial real estate and consumer loan portfolios.
The following table presents non-accrual loans as of the dates indicated:
June 30,
December 31,
(In thousands)
2026
2025
Non-accruing loans:
Commercial Real Estate
$
11,422
$
13,701
Residential Real Estate
788
57
Commercial and Industrial
12,654
10,182
Consumer and Other
175
413
Total non-accruing loans
25,039
24,353
Loans past due over 90 days and still accruing
—
—
Total nonperforming assets
$
25,039
$
24,353
Nonperforming assets to total assets
1.90
%
2.24
%
Nonperforming loans to total loans, net
2.85
%
4.16
%
Non-accrual loans increased $0.6 million, to $25.0 million at June 30, 2026 from $24.4 million at December 31, 2025. At June 30, 2026, non-accrual loans were comprised of 105 loans, compared to 151 loans at December 31, 2025. At June 30, 2026, 40 loans were individually evaluated and a specific reserve of $2.7 million was established, compared to 9 individually evaluated loans and a specific reserve of $2.1 million at December 31, 2025. The increase in loan count and specific reserves on individually evaluated loans reflects continued enhanced loan-level analysis on certain credits within the portfolio, which resulted in refined reserve estimates for those loans. Individually evaluated loans are measured based on collateral value or discounted expected cash flows, as applicable.
Nonperforming assets to total assets improved to 1.90% at June 30, 2026 from 2.24% at December 31, 2025. Nonperforming loans to total loans, net decreased to 2.85% from 4.16%, primarily due to total loans increasing during 2026.
Loans held for sale
Loans held for sale totaled $23.7 million at June 30, 2026, compared to $24.5 million at December 31, 2025. These balances primarily consist of credit card receivables originated for certain digital payments customers and sold shortly after origination to third parties. During the second quarter of 2026, certain credit card receivables that had been expected to be sold remained on the Company’s balance sheet after the anticipated sale was not completed. The Company recorded a valuation allowance of approximately $5.5 million on these receivables during the quarter to reflect their estimated fair value. The Company also recognized approximately $5.3 million of other income during the quarter related to contractual indemnification rights associated with the same program manager relationship.
Deferred Taxes
The Company reported a net deferred tax asset of approximately $731 thousand at June 30, 2026, compared with a net deferred tax liability of $783 thousand at December 31, 2025.During the second quarter of 2026, management concluded that a portion of the Company’s deferred tax assets met the more-likely-than-not realization threshold and released approximately $1.2 million of the related valuation allowance, resulting in a corresponding discrete income tax benefit. The Company continues to maintain a substantial valuation allowance against its remaining deferred tax assets.
Management will continue to evaluate the realizability of its deferred tax assets based on all available positive and negative evidence. Changes in operating results, expected taxable income, strategic actions, applicable tax-law limitations or other relevant factors could result in additional changes to the valuation allowance and affect future income tax expense or benefit. See Note 14, Income Taxes, for additional information.
The following table is a summary of the Company’s deposits at the dates shown:
(In thousands)
June 30, 2026
December 31, 2025
Non-interest bearing:
Total non-interest bearing deposits
150,464
106,766
Interest bearing:
Savings
83,030
38,036
Interest bearing DDA & NOW accounts
497,349
291,728
Money market
196,762
191,177
Certificates of deposit, $250,000 or less
173,979
206,915
Certificates of deposit, more than $250,000
67,456
76,480
Brokered deposits
31,907
54,683
Total interest bearing deposits
1,050,483
1,050,483
859,020
Total Deposits
$
1,200,947
$
965,786
Additional deposit metrics
Deposits associated with digital payments customers
$
384,968
$
297,702
Total retail branch bank deposits
$
332,180
$
341,453
Total uninsured deposits
$
238,938
$
194,254
Total deposits increased to $1.2 billion, with further reductions in brokered deposits. Brokered deposits decreased $22.8 million to $31.9 million at June 30, 2026 from $54.7 million at December 31, 2025. These changes reflect the Company’s ongoing efforts to manage liquidity, reduce certain deposit concentrations, and support its broader balance sheet repositioning.
Borrowings
Total borrowings were $16.5 million at June 30, 2026, compared to $16.4 million at December 31, 2025, relatively unchanged. Subordinated debt and junior subordinated debt remained substantially stable at $8.3 million and $8.2 million, respectively. No FHLB, FRB, or correspondent bank advances were outstanding at June 30, 2026. The Bank maintained standby letters of credit issued by the FHLB for the benefit of Mastercard in connection with card settlement requirements of $70.5 million at June 30, 2026 and $55.0 million at December 31, 2025, which reduced available FHLB borrowing capacity.
Shareholders’ Equity
Total shareholders' equity decreased to $88.9 million at June 30, 2026 from $94.7 million at December 31, 2025, a decrease of $5.8 million. The decrease was primarily driven by a $4.3 million increase in accumulated other comprehensive loss, reflecting higher unrealized losses on available-for-sale securities, and a year-to-date net loss of $1.6 million.
The following tables present daily average balance sheets, interest income, interest expense and the corresponding yields earned and rates paid for the three months ended June 30, 2026 and 2025:
The following tables present daily average balance sheets, interest income, interest expense and the corresponding yields earned and rates paid for the six months ended June 30, 2026 and 2025:
The following table presents the change in interest-earning assets and interest-bearing liabilities by major category and the related change in the interest income earned and interest expense incurred thereon attributable to the change in transactional volume in the financial instruments and the rates of interest applicable thereto, comparing the three and six months ended June 30, 2026 and 2025.
Three Months Ended June 30,
Six Months Ended June 30,
2026 compared to 2025
2026 compared to 2025
(In thousands)
Increase/(Decrease)
Increase/(Decrease)
Volume
Rate
Total
Volume
Rate
Total
Interest earning assets:
Loans
$
2,485
$
661
$
3,146
$
2,775
$
421
$
3,195
Investments
1,012
1,563
2,575
2,018
2,991
5,008
Other Investments
(55)
—
(55)
(110)
—
(110)
Cash equivalents and other
(504)
(240)
(744)
(358)
(639)
(997)
Total interest earning assets
2,938
1,983
4,921
4,324
2,773
7,097
Interest bearing liabilities:
Deposit
(2,255)
1,996
(259)
(3,339)
3,619
280
Borrowings
(90)
(4)
(93)
(109)
22
(87)
Senior notes
183
—
183
505
—
505
Subordinated debt
(8)
25
18
15
80
95
Total interest bearing liabilities
(2,170)
2,018
(152)
(2,927)
3,721
794
Increase (decrease) in net interest income
$
768
$
4,001
$
4,769
$
1,397
$
6,494
$
7,891
Results of Operations
For the three months ended June 30, 2026, the Company reported net income of $0.1 million, or $0.00 per basic and diluted share, compared to a net loss of $5.0 million, or $(0.06) per share, for the same period in 2025. For the six months ended June 30, 2026, the Company reported a net loss of $1.6 million, or $(0.01) per share, compared to a net loss of $7.8 million, or $(0.17) per share, for the same period in 2025. The improvement reflects higher net interest income and increased non-interest income, partially offset by higher operating expenses.
Net interest income
Net interest income for the three months ended June 30, 2026 was $9.0 million, compared to $4.2 million for the same period in 2025, an increase of $4.8 million, or approximately 114%. For the six months ended June 30, 2026, net interest income was $16.0 million, compared to $8.1 million for the six months ended June 30, 2025. The increase reflects significant growth in the loan portfolio, a higher-yielding investment securities portfolio, and relatively stable funding costs.
Interest and fees on loans increased $3.1 million for the quarter and $3.2 million year-to-date, driven by substantial loan portfolio growth since year-end 2025.
Interest on investment securities increased $2.5 million for the quarter and $4.8 million year-to-date, reflecting the Company's strategic reallocation of liquidity from cash to investment securities.
Total interest expense increased $152 thousand for the quarter and decreased $794 thousand year-to-date, as the elimination of senior note interest expense following the March 2025 debt conversion partially offset volume-driven increases in deposit interest costs.
Net interest margin of 3.03% for the three months ended June 30, 2026, compared to 1.85% for the three months ended June 30, 2025. For the six months ended June 30, 2026 and 2025, net interest margin was 2.75% and 1.74%, respectively.
The Company recorded $590 thousand in provision for credit losses for the three months ended June 30, 2026, compared to $1.5 million for the same period in 2025. For the six months ended June 30, 2026 and 2025, provision for credit losses was $409 thousand and $2.3 million, respectively. The lower provision in 2026 reflects a broadly improving credit quality profile in the loan portfolio following actions taken during 2025to address higher-risk legacy assets, including increased provisioning and loan sales, partially offset by growth in new originations. As noted above, the initial ACL of $925 thousand on purchased loans was recorded under ASU 2025-08 as an adjustment to amortized cost rather than through provision expense.
Non-interest income
Non-interest income for the three months ended June 30, 2026 was $3.1 million, compared to $2.0 million for the same period in 2025, an increase of $1.1 million. For the six months ended June 30, 2026, non-interest income was $6.3 million, compared to $4.8 million for the prior-year period.
The primary driver was Digital Payments income, which increased $0.4 million to $2.6 million for the quarter and $1.5 million to $5.3 million year-to-date. The increase primarily reflected higher transaction volumes from certain existing program managers, partially offset by the Bank’s risk-based reduction of activity with other program manager relationships. This growth was partially offset by a decline in deposit fees and service charges and lower loan-related fee income compared to the prior year.
Non-interest expense
Non-interest expense for the three months ended June 30, 2026 was $12.8 million, compared to $9.7 million for the same period in 2025, an increase of $3.1 million. For the six months ended June 30, 2026, non-interest expense was $25.1 million, compared to $18.5 million for the prior-year period. Salaries and benefits increased $1.1 million for the quarter and $3.4 million year-to-date, reflecting investments in new leadership and management talentas well as higher equity-based compensation expense. A significant portion of the equity-based compensation relates to awards with relatively short vesting periods, which resulted in elevated expense recognition during the period.
Professional and outside services increased $1.3 million for the quarter and $1.8 million year-to-date, driven largely by legal, compliance, advisory and other remediation-related costsassociated with the Bank’s former Formal Agreement with the OCC. Occupancy and equipment increased $0.4 million for the quarter and $0.5 million year-to-date, reflecting the opening of a new Beverly Hills, California office in the first quarter of 2026.
Income Taxes
For the three months ended June 30, 2026, the Company recorded an income tax benefit of $1.5 million, compared to a benefit of $49 thousand for the three months ended June 30, 2025. The 2026 benefit reflects the partial release of the valuation allowance on deferred tax assets, which resulted in the recognition of a $3.3 million deferred tax asset. For the six months ended June 30, 2026, the income tax benefit was $1.5 million, compared to $48 thousand for the same period in 2025.
The Company monitors liquidity using, among other measures, on-hand liquidity to total liabilities, and total liquidity to total liabilities. On-hand liquidity is comprised of interest-bearing cash and cash equivalents and unpledged available-for-sale securities. Total liquidity includes on-hand liquidity plus unused borrowing capacity and other available contingent funding sources, including brokered deposit capacity subject to internal limits. The Company also monitors other metrics to manage liquidity and concentration risk in its funding base.
The Company's on-hand liquidity and total liquidity ratios as of June 30, 2026 and December 31, 2025, are as follows:
(In thousands)
June 30, 2026
December 31, 2025
On-hand liquidity
Interest-bearing cash and cash equivalents
$
114,359
$
183,980
Available-for-sale securities, at fair value
240,345
224,677
Less: pledged available-for-sale securities
(132,738)
(15,138)
Total on-hand liquidity
221,966
393,519
Borrowing capacity
FHLB borrowing capacity
158,615
76,003
FRB borrowing capacity
44,898
26,357
Brokered deposit capacity
180,142
144,868
Total borrowing capacity
383,655
247,228
Less: used borrowing capacity
FHLB capacity used (including the standby letter of credit)
(71,161)
(55,671)
FRB capacity used
—
—
Outstanding brokered deposits
(31,907)
(54,683)
Total used borrowing capacity
(103,068)
(110,354)
Total liquidity
$
502,553
$
530,393
Total liabilities
$
1,228,782
$
993,160
On-hand liquidity to total liabilities
18.06
%
39.62
%
Total liquidity to total liabilities
40.90
%
53.40
%
On-hand liquidity declined by $171.6 million during the six months ended June 30, 2026, as the Company redeployed excess cash into higher-yielding earning assets, including loan originations and acquisitions, resulting in net loan growth of $291.6 million. The Company also enhanced its contingent liquidity position by increasing the amount of available for sale securities pledged to the FHLB, which increased available borrowing capacity to $158.6 million at June 30, 2026 from $76.0 million at December 31, 2025. On-hand liquidity to total liabilities decreased to 18.06% from 39.62%, and total liquidity to total liabilities declined to 40.90% from 53.40%, primarily reflecting the deployment of liquidity into earning assets, and increased available borrowing capacity.
Liquidity represents the Company's ability to meet its financial obligations as they come due, including deposit withdrawals, funding commitments, debt service, and other operating needs. Management believes the Company's liquidity position at June 30, 2026 was sufficient to meet expected funding needs and reasonably anticipated deposit fluctuations.
Net cash used in operating activities for the six months ended June 30, 2026 was $8.5 million, compared to $4.9 million used in the same period of 2025. The increase in cash used reflects higher net originations of loans held for sale, net of proceeds, as well as increases in accrued interest receivable and other assets and a reduction in accrued expenses and other liabilities, which together resulted in net cash outflows from working capital of $8.1 million during the period. These outflows were partially offset by a lower net loss and higher share-based compensation of $3.3 million compared to $1.3 million in the prior-year period.
Net cash used in investing activities was $310.3 million for the six months ended June 30, 2026, compared to $121.5 million provided by investing activities in the prior-year period. The primary driver of the period-over-period change was $291.6 million in net loan originations and purchases, primarily in residential and commercial real estate, as well as net purchases of available for sale securities of $18.0 million.
Net cash provided by financing activities was $233.3 million for the six months ended June 30, 2026, compared to $76.3 million used in the prior-year period. Total deposits increased by $235.2 million, reflecting growth in core deposits and deposit activity associated with the Company’s digital payments business. Deposits served as the primary funding source for the Company's asset growth during the period.
Cash, cash equivalents and restricted cash decreased $85.6 million during the six months ended June 30, 2026, compared to an increase of $40.4 million during the same period in 2025. The decrease primarily reflects the Company's strategic deployment of liquidity into higher-yielding earning assets, including loans and investment securities, while funding balance sheet growth through deposit growth and increased borrowing capacity.
REGULATORY CAPITAL REQUIREMENTS
As of June 30, 2026, the Bank’s regulatory capital ratios exceeded the minimum levels required for classification as “well capitalized” under applicable federal banking regulations. On June 30, 2026, the OCC terminated the Formal Agreement with the Bank, and the Bank is no longer subject to the higher minimum capital ratios previously established thereunder. At June 30, 2026, the Bank’s total risk-based capital ratio was 14.15%, its Tier 1 risk-based capital ratio was 13.22%, its common equity Tier 1 capital ratio was 13.22%, and its Tier 1 leverage ratio was 9.60%. See Note 11 to the consolidated financial statements for additional information regarding the Company’s and the Bank’s regulatory capital amounts and ratios.
Item 3: Quantitative and Qualitative Disclosures about Market Risk
Market risk is the risk of loss from adverse changes in market prices and rates. The Bank’s market risk is primarily limited to interest rate risk, which is the risk that changes in interest rates may adversely affect net interest income, capital, and the economic value of assets and liabilities.
The Bank seeks to manage interest rate risk while maintaining appropriate earnings performance and liquidity. Interest rate risk arises from differences in the timing of the repricing or maturity of assets and liabilities, the effect of embedded options, and changes in funding mix. In managing this risk, the Bank considers asset and liability structure, loan and investment repricing characteristics, deposit behavior, and wholesale funding sources.
Interest rate risk is monitored by Management’s Asset and Liability Committee, which consists of senior management personnel. At the Board level, interest rate risk and related balance sheet exposures are reviewed through the Enterprise Risk Committee, which receives periodic reporting on interest rate risk, liquidity, and investment activities.
Management evaluates interest rate risk using net interest income simulation and net portfolio value analysis, each of which is prepared on a quarterly basis. These models estimate the effect of instantaneous changes in interest rates under a range of rate scenarios. The analyses incorporate assumptions regarding asset and liability repricing, prepayments, deposit behavior, and
changes in spreads between market rates. Because these analyses are based on assumptions and estimates, actual results may differ materially from those reflected in the model outputs.
The tables below present estimated changes in net portfolio value and net interest income under selected instantaneous interest rate shock scenarios at June 30, 2026 and December 31, 2025.
Net Portfolio Value - Performance Summary
(In thousands)
As of June 30, 2026
As of December 31, 2025
Projected Interest Rate Scenario
Estimated Value
Change from Base ($)
Change from Base (%)
Estimated Value
Change from Base ($)
Change from Base (%)
+200
$
163,201
$
(20,713)
(11.26)
%
$
118,478
$
(25,935)
(17.96)
%
+100
175,893
(8,021)
(4.36)
%
132,666
(11,747)
(8.13)
%
BASE
183,914
—
—
144,413
—
—
-100
187,545
3,631
1.97
%
156,122
11,709
8.11
%
-200
189,280
5,366
2.92
%
163,243
18,830
13.04
%
Net Interest Income - Performance Summary
(In thousands)
June 30, 2026
December 31, 2025
Projected Interest Rate Scenario
Estimated Value
Change from Base ($)
Change from Base (%)
Estimated Value
Change from Base ($)
Change from Base (%)
+200
$
39,548
$
(817)
(2.02)
%
$
24,099
$
(2,580)
(9.67)
%
+100
40,070
(295)
(0.73)
%
25,470
(1,209)
(4.53)
%
BASE
40,365
—
—
26,679
—
—
-100
40,903
538
1.33
%
28,374
1,695
6.35
%
-200
42,190
1,825
4.52
%
29,634
2,955
11.08
%
These measures are analytical tools used by management to assess interest rate risk exposure at a point in time and should not be viewed as forecasts. The results are subject to limitations, including the use of assumptions regarding balance sheet composition, pricing behavior, and customer response to changes in interest rates.
Impact of Inflation and Changing Prices
The Company’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. Because virtually all of the assets and liabilities of a financial institution are monetary in nature, interest rates generally have a more significant effect on the Bank’s performance than the effect of general inflation. However, inflation may affect customer repayment capacity, funding costs, operating expenses, and the value of loan collateral, including real estate, and therefore could affect the Company’s results of operations in future periods.
Item 4: Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of June 30, 2026, the Company carried out an evaluation, under the supervision and with the participation of its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were not effective as of June 30, 2026 because the Company had not yet completed the testing and evaluation necessary to conclude that the material weakness in internal control over financial reporting previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 had been remediated.
As previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, management concluded that a material weakness existed in the Company’s internal control over financial reporting related to deficiencies in documentation, evidential support, and consistent execution of controls, including information technology general controls, financial close and reconciliation controls, and controls over certain third party and digital payments activities.
During the six months ended June 30, 2026, management continued to implement remediation measures designed to address the material weakness, including formalizing additional documentation protocols, enhancing evidence retention and monitoring, refining financial close and reconciliation review procedures, continuing implementation of information technology general control enhancements, and further clarifying control responsibilities and oversight. Many of these remediation measures remain in process, and the Company will not consider the material weakness remediated until the applicable remediated controls have operated effectively for a sufficient period of time and management has completed testing sufficient to conclude that the material weakness has been remediated.
Changes in Internal Control Over Financial Reporting
During the quarter ended June 30, 2026, the Company continued to implement remediation measures related to the previously disclosed material weakness, including enhancements to documentation, evidencing, monitoring, financial close and reconciliation procedures, information technology general controls, and controls over certain third party and digital payments activities. These remediation activities resulted in changes to the Company’s internal control over financial reporting during the quarter. Other than such remediation measures, there were no changes in the Company’s internal control over financial reporting during the quarter ended June 30, 2026 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
On May 7, 2026, First-Citizens Bank & Trust Company d/b/a Silicon Valley Bank filed a complaint against Patriot Bank, N.A. in the United States District Court for the Southern District of New York (Case No. 1:26-cv-3810), alleging breach of contract and tortious interference with contract, and seeking declaratory and injunctive relief in connection with a credit card receivables program for which Patriot served as originating bank. The Court denied SVB’s request for a temporary restraining order on May 13, 2026 and, following an evidentiary hearing, denied SVB’s motion for a preliminary injunction on May 21, 2026. On July 30, 2026, the Court also denied SVB’s renewed motion for a preliminary injunction. Patriot believes the complaint is without merit and intends to defend the action vigorously.
Patriot has also asserted claims against SVB, its servicer, Carmel, and certain affiliates of the program manager arising from the same underlying circumstances. Patriot’s claims include unjust enrichment, conversion, constructive trust, tortious interference with business relationships and contractual rights, accounting, declaratory relief, and civil violations of the federal Racketeer Influenced and Corrupt Organizations Act (“RICO”). Patriot is seeking damages and other appropriate relief.
Item 1A: Risk Factors
Except as set forth below, there have been no material changes to the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, as supplemented by our Quarterly Report on Form 10-Q for the quarter ended March 31, 2026.
Our reliance on third-party vendors, program managers, fintech service providers, and other counterparties exposes us to significant third-party risk.
Our institutional banking, digital payments, treasury, compliance, regulatory reporting, audit, and technology activities depend on third-party relationships, including program managers, processors, technology providers, compliance and monitoring vendors, professional service providers, and other counterparties. Banking regulators expect banks to maintain risk-based due diligence, ongoing monitoring, periodic reviews, and appropriate oversight of significant third-party relationships.
Third parties may fail to comply with law, contract, or our policies; may have inadequate controls; may experience financial distress, fraud, cyber incidents, operational failures, or business interruption; or may not provide us with timely and accurate data. Because regulators increasingly expect banks to manage third-party risk as if the activity were conducted internally, failures by our vendors or partners could expose us to losses, remediation costs, litigation, regulatory criticism, and reputational damage even where the immediate failure occurred outside the Bank.
From time to time, we receive reports from vendors, regulators, or other third parties concerning cybersecurity, privacy, or other data incidents that may involve Bank or customer information maintained by third parties. We investigate and evaluate such matters to determine their nature and scope and any appropriate response. Such incidents could require significant and costly notification, remediation, investigation, or other response measures and could result in regulatory inquiries, litigation, or other liabilities. Although we may have contractual indemnification rights against responsible third parties and insurance coverage for certain losses, such rights and coverage may be insufficient, subject to limitations or exclusions, or exceed the financial resources of the responsible party or applicable policy limits. Any such incident could materially adversely affect our business, financial condition, and results of operations.
In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: August 14, 2026
Patriot National Bancorp, Inc. (Registrant)
By:
/s/ Carlos P. Salas
Carlos P. Salas
Executive Vice President and Chief Financial Officer