PATRIOT NATIONAL BANCORP INC (PNBK) FY 2025 MD&A
This page reproduces the company's own Item 7 MD&A text from the linked SEC filing. It is filer text, not grepcent analysis, scoring, or investment advice.
ITEM 7. Management’s Discussion and Analysis of Financial Condition & Results of Operations
General
Management's Discussion and Analysis of Financial Condition and Results of Operations is intended to assist in understanding the consolidated financial condition and results of operations of the Company. The information contained in this section should be read in conjunction with the consolidated financial statements and accompanying notes thereto included in Item 8 of this Annual Report on Form 10-K.
2025 FORM 10-K 21
Critical Accounting Estimates
The Company’s consolidated financial statements are prepared in accordance with United States of America (“U.S. GAAP”) and follow general practices within the financial services industry. A summary of Patriot’s significant accounting policies is included in the Notes to consolidated financial statements that are referenced in Item 8. Financial Statements and Supplementary Data. Although all of Patriot’s policies are integral to understanding its consolidated financial statements, certain accounting policies involve management to exercise judgment, develop assumptions, and make estimates that may have a material impact on the financial information presented in the consolidated financial statements or Notes thereto. Management considers an accounting estimate to be critical if it requires assumptions that are highly uncertain at the time the estimate is made and changes in those assumptions are reasonably likely to have a material effect on the Company’s financial condition or results of operations. Management has discussed the development and selection of its critical accounting estimates with the Audit Committee. The assumptions and estimates are based on historical experience and other factors representing the best available information to management as of the date of the consolidated financial statements, up to and including the date of issuance or availability for issuance. As the basis for the assumptions and estimates incorporated in the consolidated financial statements may change, actual results could differ from those estimates.
Allowance for Credit Losses (ACL)
The Company determines its allowance for credit losses (“ACL”) under the current expected credit loss (“CECL”) methodology in ASC 326, which requires management to estimate expected credit losses over the remaining contractual life of financial assets carried at amortized cost, adjusted for expected prepayments when appropriate. The ACL is established through a provision for credit losses charged to earnings and is reduced by charge-offs, net of recoveries. The Company also maintains a reserve for unfunded lending commitments for those commitments that are not unconditionally cancellable.
The ACL is a critical accounting estimate because it requires significant management judgment and is sensitive to changes in assumptions, forecasts, and portfolio conditions. The estimate incorporates both quantitative and qualitative factors, including historical loss experience, portfolio composition, delinquency trends, internal risk ratings, nonperforming asset levels, collateral values, the financial condition of borrowers, and reasonable and supportable forecasts of macroeconomic conditions. For collateral-dependent loans, expected credit losses may depend significantly on the fair value of collateral, less estimated selling costs where applicable.
Loans that do not share similar risk characteristics with other loans are evaluated individually. For loans evaluated on a collective basis, the Company segments the portfolio by loan type and other relevant risk characteristics and applies estimation methodologies that incorporate historical loss information, current conditions, and reasonable and supportable economic forecasts. Following the forecast period, the Company reverts to historical loss information over an appropriate reversion period. Management also applies qualitative adjustments, as needed, to reflect factors not fully captured in the quantitative model.
The ACL estimate is particularly sensitive to changes in economic forecasts, borrower performance, collateral values, portfolio mix, and the credit quality of the Company’s loans. Changes in these assumptions or in the condition of the loan portfolio could result in material changes to the ACL and the related provision for credit losses in future periods.
The Company’s ACL methodology and the judgments used in determining the ACL are described more fully in the Notes to Consolidated Financial Statements included in Item 8.
FINANCIAL CONDITION
Assets
The Company’s total assets increased $75.5 million, or 7.5%, from $1.01 billion at December 31, 2024 to $1.09 billion at December 31, 2025. This was primarily reflected as a $140.2 million increase in investment securities and a $44.5 million increase in cash, cash equivalents and restricted cash, which was partially offset by a $114.4 million decline in loans receivable. The change in asset mix reflected the Company’s continued balance sheet repositioning during 2025, including reduced loan exposure, increased liquidity, and deployment of funds into investment securities.
Cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash increased $44.5 million or 27.4%, to $207.1 million as of December 31, 2025 from $162.6 million as of December 31, 2024. The increase in 2025 was primarily driven by loan repayments, loan sales, and cash proceeds from issuance of common and preferred stock. For further details, refer to the Consolidated Statements of Cash Flows.
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The higher liquidity position improved the Bank’s funding flexibility and supported the Company’s balance sheet repositioning during 2025.
Investment securities
Total investments increased $140.2 million or 166.1%, to $224.7 million at December 31, 2025 from $84.4 million at December 31, 2024. This increase primarily reflected purchases of available-for-sale securities of $145.2 million during 2025, as the Company deployed liquidity into investment securities as part of its balance sheet repositioning. The portfolio at December 31, 2025 consisted primarily of U.S. Government agency and mortgage-backed securities. During 2025, the Bank sold $4.5 million of available-for-sale securities and recognized no net gain or loss on sale, compared to sales of $8.3 million and a net loss of $334 thousand in 2024.
Loans held for investment
Gross loans receivable decreased $114.9 million, or 16.2%, to $592.6 million at December 31, 2025 from $707.5 million at December 31, 2024. The decline reflected the Company’s continued balance sheet repositioning during 2025, including restricted loan originations during the first three quarters of the year, portfolio runoff, loan sales and efforts to reduce risk and improve liquidity. The Company sold 1539 loans with an unpaid principal balance of $67.8 million during 2025. Net loans receivable decreased to $585.7 million at December 31, 2025 from $700.2 million at December 31, 2024.
The following table provides the composition of the Company’s loan held for investment portfolio as of December 31, for the years indicated:
| December 31, | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2025 | 2024 | ||||||||||||
| (In thousands) | Amount | % | Amount | % | |||||||||
| Loan portfolio segment: | |||||||||||||
| Commercial Real Estate | $ | 346,191 | 58.42 | % | $ | 419,489 | 59.30 | % | |||||
| Residential Real Estate | 79,667 | 13.44 | % | 92,215 | 13.03 | % | |||||||
| Commercial and Industrial | 146,828 | 24.78 | % | 129,608 | 18.32 | % | |||||||
| Consumer and Other | 19,876 | 3.35 | % | 59,973 | 8.48 | % | |||||||
| Construction | — | — | % | 3,830 | 0.54 | % | |||||||
| Construction to permanent - CRE | — | — | % | 2,357 | 0.33 | % | |||||||
| Loans receivable, gross | 592,562 | 100.00 | % | 707,472 | 100.00 | % | |||||||
| Allowance for credit losses | (6,839) | (7,305) | |||||||||||
| Loans receivable, net | $ | 585,723 | $ | 700,167 |
Commercial real estate remained the largest loan category at December 31, 2025, representing 58.4% of total gross loans, compared to 59.3% at December 31, 2024. Commercial and industrial loans increased as a percentage of the portfolio to 24.8% from 18.3%, while consumer and other loans declined to 3.4% from 8.5%. SBA loans held for investment are included in the commercial real estate loans and commercial and industrial loan classifications above. As of December 31, 2025 and 2024, SBA loans included in the commercial real estate loans were $9.7 million and $18.7 million, respectively, and SBA loans included in the commercial and industrial loan were $8.7 million and $11.2 million as of December 31, 2025 and 2024, respectively.
As of December 31, 2025, the net loan-to-deposit ratio was 60.6%, compared to 72.4% at December 31, 2024, and the net loan to total assets ratio was 53.8%, compared to 69.2% at December 31, 2024. These declines reflected lower loan balances and higher deposits and liquidity during 2025.
The following table presents loans receivable, gross by portfolio segment, by contractual maturity as of December 31, 2025:
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| Contractual Maturity of Loan Balance | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (In thousands) | One year or less | One through Five Years | After Five Years | Total | ||||||||||
| Loan portfolio segment: | ||||||||||||||
| Commercial Real Estate | $ | 32,978 | $ | 189,737 | $ | 123,476 | $ | 346,191 | ||||||
| Residential Real Estate | 3,008 | 3,465 | 73,195 | 79,667 | ||||||||||
| Commercial and Industrial | 38,407 | 23,480 | 84,941 | 146,828 | ||||||||||
| Consumer and Other | 1,324 | 1,574 | 16,978 | 19,876 | ||||||||||
| Total | $ | 75,716 | $ | 218,255 | $ | 298,589 | $ | 592,562 | ||||||
| Fixed rate loans | $ | 27,926 | $ | 139,287 | $ | 87,630 | $ | 254,843 | ||||||
| Variable rate loans | 47,790 | 78,968 | 210,959 | 337,717 | ||||||||||
| Total | $ | 75,716 | $ | 218,255 | $ | 298,589 | $ | 592,562 |
At December 31, variable-rate loans represented 57.0% of the total loan portfolio. Approximately 30.8% of the variable-rate loan portfolio reprices within three months of a change in interest rates. The remainder of the variable-rate portfolio generally carries an initial fixed-rate period, such as one, three, or five years, followed by periodic repricing. These repricing characteristics are reflected in the Bank’s aggregate analysis of net interest sensitivity included in Item 7A.
Commercial real estate and commercial and industrial loans represented approximately 83.2% of total gross loans at December 31, 2025. Accordingly, the Company’s credit performance remains significantly influenced by borrower operating performance, collateral values, and economic conditions in the markets and customer segments served by the Bank. For purposes of internal and regulatory CRE concentration monitoring, owner-occupied CRE loans are excluded from CRE totals and classified as commercial and industrial loans, although owner-occupied CRE loans are included in the CRE portfolio presentation above.
Allowance for Credit Losses on Loans
The Company estimates its ACL under the CECL methodology in ASC 326.
The allowance for credit losses was $6.8 million at December 31, 2025, compared to $7.3 million at December 31, 2024. Based on management’s evaluation of the loan portfolio at December 31, 2025, the ACL of $6.8 million, or 1.15% of gross loans, was considered appropriate to absorb expected credit losses in the loan portfolio as of that date.
The following table summarizes activity in the ACL:
| Year Ended December 31, | ||||||
|---|---|---|---|---|---|---|
| (In thousands) | 2025 | 2024 | ||||
| Balance at beginning of the period | $ | 7,305 | $ | 15,925 | ||
| Provision for credit losses | 1,607 | 12,544 | ||||
| Net charge-offs | (2,073) | (21,164) | ||||
| Balance at end of the period | $ | 6,839 | $ | 7,305 | ||
| Ratios: | ||||||
| Net charge-offs to average loans | 0.32 | % | 2.66 | % | ||
| Allowance for credit losses to total loans | 1.15 | % | 1.03 | % | ||
| Allowance for credit losses to nonaccrual loans | 26.44 | % | 28.24 | % |
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The net charge-offs decreased $19.1 million to $2.1 million as of December 31, 2025 from $21.2 million as of December 31, 2024, Net charge-offs to average loans improved to 0.32% for the year ended December 31, 2025 from 2.66% for the year ended December 31, 2024. The decrease in net charge-offs in 2025 was primarily due to charge-offs totaling $13.6 million related to two large commercial real estate loans recognized in the fourth quarter of 2024.
Average loans decreased by $153.2 million to $642.1 million for the year ended December 31, 2025 from$795.2 million for the year ended December 31, 2024. The decline reflected the Company’s continued balance sheet repositioning during 2025, including restricted loan growth, portfolio runoff, and efforts to reduce risk and improve liquidity.
Although the ACL decreased to $6.8 million at December 31, 2025 from $7.3 million at December 31, 2024, the ACL-to-total loans ratio increased to 1.15% from 1.03%, primarily because gross loans declined during 2025. The 2024 ACL balance and related coverage ratios were also affected by significant charge-offs of reserved commercial real estate and consumer loans during 2024.
Non-accrual loans were $24.4 million as of December 31, 2025, compared to $25.9 million as of December 31, 2024. The ACL-to-non-accrual loans ratio was 26.44% as of December 31, 2025, compared to 28.24% as of December 31, 2024. The 2024 ratio was higher primarily due to reserves on individually evaluated commercial real estate loans that were subsequently charged off in the fourth quarter of 2024. Non-accrual CRE loans of $376 thousand have been charged-off to net realizable value as of December 31, 2025.
Nonperforming Assets
The following table presents non-accrual loans and other real estate owned (“OREO”) as of the dates indicated:
| December 31, | ||||||
|---|---|---|---|---|---|---|
| (In thousands) | 2025 | 2024 | ||||
| Non-accruing loans: | ||||||
| Commercial Real Estate | $ | 13,701 | $ | 19,334 | ||
| Residential Real Estate | 57 | 109 | ||||
| Commercial and Industrial | 10,182 | 3,341 | ||||
| Consumer and Other | 413 | 730 | ||||
| Construction to Permanent - CRE | — | 2,357 | ||||
| Total non-accruing loans | 24,353 | 25,871 | ||||
| Loans past due over 90 days and still accruing | — | — | ||||
| Other real estate owned | — | 2,843 | ||||
| Total nonperforming assets | $ | 24,353 | $ | 28,714 | ||
| Nonperforming assets to total assets | 2.24 | % | 2.84 | % | ||
| Nonperforming loans to total loans, net | 4.16 | % | 3.69 | % |
Non-accrual loans decreased $1.5 million, to $24.4 million at December 31, 2025 from $25.9 million at December 31, 2024. Total nonperforming assets decreased $4.4 million to $24.4 million from $28.7 million, primarily reflecting the resolution of certain troubled loans and the sale of the sole OREO asset during 2025.
At December 31, 2025, non-accrual loans were comprised of 151 borrowers, compared to 335 borrowers at December 31, 2024. At December 31, 2025, 9 loans were individually evaluated and a specific reserve of $2.1 million was established, compared to 14 individually evaluated loans and a specific reserve of $463 thousand at December 31, 2024. The increase in specific reserves on individually evaluated loans reflected enhanced loan-level analysis performed during 2025 on certain credits within the portfolio, which resulted in refined reserve estimates for those loans. Individually evaluated loans are measured based on collateral value or discounted expected cash flows, as applicable.
Nonperforming assets to total assets improved to 2.24% at December 31, 2025 from 2.84% at December 31, 2024. Nonperforming loans to total loans, net increased to 4.16% from 3.69%, primarily because total loans declined during 2025.
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Loans held for sale
Loans held for sale totaled $24.5 million at December 31, 2025, compared to $15.7 million at December 31, 2024.
These balances primarily consist of credit card receivables originated for certain digital payments customers and sold shortly after origination to a third party. These loans are fully cash-secured by deposits and are typically sold within three days at par value.
Premises and equipment
Premises and equipment totaled $28.1 million at December 31, 2025, compared to $28.9 million at December 31, 2024. The decrease was primarily due to depreciation expense during 2025.
Management continues to evaluate its branch and office footprint in connection with operating efficiency, client service, and the Company’s strategic repositioning.
Other Real Estate Owned (“OREO”)
As of December 31, 2025, the Bank had no other real estate owned, compared to $2.8 million at December 31, 2024.
During 2025, the Bank sold its remaining OREO asset and recognized a gain of approximately $176 thousand following a valuation allowance recorded prior to sale.
Goodwill
The Company had no goodwill recorded on its Consolidated Balance Sheets at December 31, 2025 or December 31, 2024. During 2023, the Company recorded a goodwill impairment charge of $1.1 million, which eliminated its remaining goodwill balance.
Core deposit intangible (“CDI”)
Core deposit intangible (“CDI”) represents the value assigned to deposit relationships acquired in connection with the Prime Bank business combination in 2018. The CDI is amortized over a 10-year period using the straight-line method. CDI decreased $47 thousand to $109 thousand at December 31, 2025 from $156 thousand at December 31, 2024, solely due to the amortization.
Deferred Taxes
As of December 31, 2025 and 2024 the carrying value of the deferred tax assets (“DTAs”) was zero because a full valuation allowance was maintained against all DTAs.
As of December 31, 2025, Patriot had available approximately $50.8 million of Federal net operating loss carryforwards (“NOL”), of which approximately $15.5 million was subject to limitations under Internal Revenue Code §382. After giving effect to those limitations, the Company had approximately $35.3 million post-change federal NOL carryforwards, which do not expire. These amounts reflect the Company’s existing Section 382 analysis and do not reflect the effect, if any, of ownership changes or additional limitations that may have resulted from the Private Placement or the registered direct offerings completed during 2025, as no updated Section 382 analysis with respect to those transactions had been completed as of the date of these consolidated financial statements. Because the Company maintained a full valuation allowance against its deferred tax assets at December 31, 2025, management does not expect completion of such analysis to materially affect the net deferred tax asset balance reported as of that date, although it could affect the amount and availability of NOL carryforwards for future periods.
In addition, at December 31, 2025, the Company had approximately $64.2 million of Connecticut NOL carryforwards, which may be used to offset up to 50% of taxable income in any year and expire between 2030 and 2055.
The Company evaluates the realizability of DTAs on a quarterly basis. In assessing whether a valuation allowance is required, management considers all available positive and negative evidence, including recent operating results, cumulative earnings or losses, projections of future taxable income, reversal of existing taxable temporary differences, and tax planning strategies. The principal factor supporting the full valuation allowance at December 31, 2025 was the existence of cumulative losses in recent years, which constituted significant negative evidence regarding realizability.
During 2025, the Bank returned to profitability at the bank level, although the Company remained unprofitable on a consolidated basis for the year ended December 31, 2025. Based on improved operating performance and current projections, the Company is evaluating whether a full valuation allowance will remain appropriate in future periods. The Company will continue to reassess
2025 FORM 10-K 26
the appropriateness of the valuation allowance in future periods. If management concludes, based on sufficient positive evidence, that some or all of the valuation allowance is no longer necessary, the release of all or a portion of the valuation allowance could materially affect income tax expense and net income in the period of release.
For the year ended December 31, 2025, the Company recorded income tax expense of $0.1 million.
Derivatives
As of December 31, 2025, the Company had two interest rate swaps outstanding. One swap was executed with a loan customer to provide a facility to mitigate fluctuations in the variable rate on the related loan, and the other was executed with an outside third party. The customer interest rate swap is matched in offsetting terms with the third-party interest rate swap. These swaps are reported at fair value in other assets or other liabilities on the Consolidated Balance Sheets. Because the swaps are not designated as hedging instruments, changes in the fair value are recognized in other non-interest income. The Company did not recognize any unrealized and realized gain or loss for the year ended December 31, 2025 and 2024.
Further discussion of the final derivatives is set forth in Note 11 and Note 21 to the Consolidated Financial Statements.
Deposits
Deposits are the Company’s primary source of funding for lending and investment activities and an important component of liquidity management. Total deposits were $965.8 million at December 31, 2025, compared to $966.6 million at December 31, 2024.
The following table summarizes the Company’s deposits at the dates indicated:
| December 31, | ||||||
|---|---|---|---|---|---|---|
| (In thousands) | 2025 | 2024 | ||||
| Non-interest bearing: | ||||||
| Total non-interest bearing deposits | 106,766 | 119,212 | ||||
| Interest bearing: | ||||||
| Negotiable order of withdrawal accounts (NOW) | 24,281 | 31,549 | ||||
| Savings | 38,036 | 38,743 | ||||
| Interest bearing DDA | 267,447 | 205,995 | ||||
| Money market | 191,177 | 262,023 | ||||
| Certificates of deposit, $250,000 or less | 206,915 | 174,095 | ||||
| Certificates of deposit, more than $250,000 | 76,480 | 65,278 | ||||
| Brokered deposits | 54,683 | 69,702 | ||||
| Total interest bearing deposits | 859,020 | 847,385 | ||||
| Total Deposits | $ | 965,786 | $ | 966,597 | ||
| Additional deposit metrics | ||||||
| Deposits associated with digital payments customers | $ | 297,702 | $ | 265,542 | ||
| Total retail branch bank deposits | $ | 341,453 | $ | 412,960 | ||
| Total uninsured deposits | $ | 194,254 | $ | 297,845 |
Deposit composition changed during 2025 as the Company continued to reposition its funding base, including reductions in brokered deposits and uninsured deposits. Brokered deposits decreased $26.3 million to $54.7 million at December 31, 2025 from $69.7 million at December 31, 2024, while uninsured deposits decreased $103.6 million to $194.3 million from $297.8 million over the same period. Deposits associated with digital payments customers decreased $43.9 million to $297.7 million at December 31, 2025 from $265.5 million at December 31, 2024. These changes reflected the Company’s ongoing efforts to manage liquidity, reduce certain deposit concentrations, and support its broader balance sheet repositioning during 2025.
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Borrowings
Total borrowings were $16.4 million compared to $33.1 million at December 31, 2024. Borrowings consist of Federal Home Loan Bank (“FHLB”) advances, FRB borrowing, and junior subordinated debt.
The decrease reflected reduced reliance on wholesale funding during 2025 as part of the Company’s broader balance sheet repositioning and liquidity management efforts. During 2025, the Bank’s funding flexibility also benefited from improved FHLB terms following an upgrade in the Bank’s FHLB status.
Shareholders’ Equity
Equity increased $90.4 million to $94.7 million at December 31, 2025 from $4.3 million at December 31, 2024. The increase was primarily due to the Company’s recapitalization and related capital raises during 2025, partially offset by a net loss of $12.7 million for the year ended December 31, 2025. For more information on shareholders’ equity and the net loss for the year ended December 31, 2025 see Note 16 and “Results of Operations” included elsewhere in this Management’s Discussion and Analysis.
Average Balances
Average interest-earning assets were substantially unchanged at $935.7 million for 2025 compared to $934.2 million for 2024, but asset mix changed significantly during the year. Average loans declined $153.2 million, while average cash equivalents and restricted cash increased $147.1 million, reflecting the Company’s balance sheet repositioning and higher liquidity levels during 2025. The yield on average interest-earning assets declined to 5.11% in 2025 from 5.59% in 2024, primarily due to the reduction in average loan balances and the shift into higher average balances of cash equivalents and restricted cash, which earned lower yields in 2025 than in 2024.
Average interest-bearing liabilities declined $23.5 million to $817.5 million for 2025 from $841.0 million for 2024, primarily due to lower average borrowings, partially offset by higher average interest-bearing deposits. The average rate paid on interest-bearing liabilities declined to 3.51% in 2025 from 3.83% in 2024. Net interest income decreased to $19.1 million in 2025 from $20.1 million in 2024, and net interest margin decreased to 2.04% from 2.14%.
The following table presents average balances, interest income, interest expense and the corresponding yields earned, and rates paid for each of the years in the three-year period ended December 31, 2025.
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| Year Ended December 31, | ||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2025 | 2024 | 2023 | ||||||||||||||||||||||||||||||
| (In thousands) | Average Balance | Interest | Yield | Average Balance | Interest | Yield | Average Balance | Interest | Yield | |||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||||||||
| Interest earning assets: | ||||||||||||||||||||||||||||||||
| Loans | $ | 642,082 | $ | 36,564 | 5.69 | % | $ | 795,236 | $ | 47,322 | 5.93 | % | $ | 896,500 | $ | 54,310 | 6.06 | % | ||||||||||||||
| Investments | 103,469 | 3,101 | 3.00 | % | 95,838 | 2,852 | 2.98 | % | 99,546 | 3,157 | 3.17 | % | ||||||||||||||||||||
| Cash equivalents and restricted cash | 190,184 | 8,177 | 4.30 | % | 43,125 | 2,188 | 5.06 | % | 25,140 | 1,490 | 5.93 | % | ||||||||||||||||||||
| Total interest earning assets | 935,735 | 47,843 | 5.11 | % | 934,199 | 52,362 | 5.59 | % | 1,021,186 | 58,957 | 5.77 | % | ||||||||||||||||||||
| Cash and due from banks | 2,618 | 2,711 | 3,172 | |||||||||||||||||||||||||||||
| Allowance for credit losses | (7,842) | (14,139) | (22,596) | |||||||||||||||||||||||||||||
| OREO | 1,445 | 2,843 | 138 | |||||||||||||||||||||||||||||
| Other assets | 41,139 | 62,827 | 69,923 | |||||||||||||||||||||||||||||
| Total Assets | $ | 973,096 | $ | 988,441 | $ | 1,071,823 | ||||||||||||||||||||||||||
| Liabilities | ||||||||||||||||||||||||||||||||
| Interest bearing liabilities: | ||||||||||||||||||||||||||||||||
| Deposits | $ | 793,336 | $ | 26,663 | 3.36 | % | $ | 730,836 | $ | 26,049 | 3.55 | % | $ | 711,479 | $ | 21,668 | 3.05 | % | ||||||||||||||
| Borrowings | 2,233 | 100 | 4.49 | % | 80,048 | 3,476 | 4.33 | % | 134,570 | 6,141 | 4.56 | % | ||||||||||||||||||||
| Senior notes | 5,150 | 610 | 11.85 | % | 11,787 | 1,159 | 9.83 | % | 11,654 | 1,159 | 9.95 | % | ||||||||||||||||||||
| Subordinated debt | 16,726 | 1,355 | 8.10 | % | 18,024 | 1,596 | 8.83 | % | 17,985 | 1,481 | 8.23 | % | ||||||||||||||||||||
| Note Payable and other | 52 | 1 | 1.73 | % | 258 | 5 | 1.93 | % | 469 | 8 | 1.71 | % | ||||||||||||||||||||
| Total interest bearing liabilities | 817,498 | 28,730 | 3.51 | % | 840,953 | 32,285 | 3.83 | % | 876,157 | 30,457 | 3.48 | % | ||||||||||||||||||||
| Demand deposits | 86,388 | 101,290 | 140,654 | |||||||||||||||||||||||||||||
| Other liabilities | 7,686 | 10,063 | 8,505 | |||||||||||||||||||||||||||||
| Total Liabilities | 911,572 | 952,306 | 1,025,316 | |||||||||||||||||||||||||||||
| Shareholders' equity | 61,524 | 36,135 | 46,507 | |||||||||||||||||||||||||||||
| Total liabilities and equity | $ | 973,096 | $ | 988,441 | $ | 1,071,823 | ||||||||||||||||||||||||||
| Net interest income | $ | 19,112 | $ | 20,077 | $ | 28,500 | ||||||||||||||||||||||||||
| Net interest margin | 2.04 | % | 2.14 | % | 2.79 | % | ||||||||||||||||||||||||||
| Interest spread | 1.60 | % | 1.76 | % | 2.29 | % |
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The following table presents the change in interest-earning assets and interest-bearing liabilities by major category and the related change in the interest income earned and interest expense incurred thereon attributable to the change in transactional volume in the financial instruments and the rates of interest applicable thereto, comparing the years ended December 31, 2025 to 2024 and December 31, 2024 to 2023.
| Year Ended December 31, | ||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2025 compared to 2024 | 2024 compared to 2023 | |||||||||||||||||||||
| Increase/(Decrease) | Increase/(Decrease) | |||||||||||||||||||||
| (In thousands) | Volume | Rate | Total | Volume | Rate | Total | ||||||||||||||||
| Interest earning assets: | ||||||||||||||||||||||
| Loans | $ | (11,959) | $ | 1,204 | $ | (10,755) | $ | (6,572) | $ | (416) | $ | (6,988) | ||||||||||
| Investments | 120 | 129 | 249 | (233) | (72) | (305) | ||||||||||||||||
| Cash equivalents and restricted cash | 7,446 | (1,445) | 6,001 | 1,074 | (376) | 698 | ||||||||||||||||
| Total interest earning assets | (4,393) | (112) | (4,505) | (5,731) | (864) | (6,595) | ||||||||||||||||
| Interest bearing liabilities: | ||||||||||||||||||||||
| Deposits | 2,727 | (2,112) | 615 | (2,032) | 6,413 | 4,381 | ||||||||||||||||
| Borrowings | (3,316) | (61) | (3,377) | (2,490) | (175) | (2,665) | ||||||||||||||||
| Senior notes | (1,049) | 494 | (555) | 13 | (13) | — | ||||||||||||||||
| Subordinated debt | — | 526 | 526 | — | 115 | 115 | ||||||||||||||||
| Note payable and other | (4) | — | (4) | (3) | — | (3) | ||||||||||||||||
| Total interest bearing liabilities | (1,642) | (1,153) | (2,795) | (4,512) | 6,340 | 1,828 | ||||||||||||||||
| (Decrease) increase in net interest income | $ | (2,751) | $ | 1,041 | $ | (1,710) | $ | (1,219) | $ | (7,204) | $ | (8,423) |
RESULTS OF OPERATIONS
A discussion regarding the financial condition and results of operations for fiscal 2025 compared to fiscal 2024 is presented below. Discussions of fiscal 2024 items and year-to-year comparisons between fiscal 2024 and fiscal 2023 that are not included in this Form 10-K can be found under Item 7 of Part II of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, as filed with the SEC on April 15, 2025.
Comparison of Results of Operations for the years 2025 and 2024
For the year ended December 31, 2025, the Company reported a net loss of $12.7 million, or $(0.17) per basic and diluted share, compared to a net loss of $39.9 million, or $(10.03) per basic and diluted share, for the year ended December 31, 2024.
The Company reported a pre-tax loss of $12.7 million for 2025, an improvement from a pre-tax loss of $16.1 million in 2024. The improvement in pre-tax results was primarily driven by a substantially lower provision for credit losses in 2025, following significant credit-related charges in 2024, including large charge-offs associated with two commercial real estate credits, as the Company continued to address legacy credit issues. This improvement was partially offset by lower net interest income and higher non-interest expense. Net interest income decreased $1.0 million in 2025, while non-interest expense increased $8.7 million, reflecting higher compensation expense, including equity-based compensation, as well as elevated professional fees and other transition-related operating costs associated with management changes, remediation efforts, and the Company’s broader
2025 FORM 10-K 30
strategic repositioning. Non-interest income increased $2.2 million in 2025. The year-over-year improvement in net loss was also affected by a significantly lower provision for income taxes in 2025 compared to 2024.
Net interest income
Net interest income represents the difference between interest income earned on interest-earning assets and interest expense paid on interest-bearing liabilities. It is affected by the relative levels of interest-earning assets and interest-bearing liabilities, as well as the interest rates earned or paid on these balances.
For the year ended December 31, 2025, interest income decreased to $47.8 million, compared with $52.4 million for the year ended December 31, 2024. The decrease primarily reflected lower average loan balances a shift in asset mix toward higher average balances of cash equivalents and restricted cash, which earned lower yields in 2025 than in 2024.
Interest expense for the year ended December 31, 2025 decreased to $28.7 million from $32.3 million in 2024, reflecting lower average wholesale borrowings and a lower average rate paid on interest-bearing liabilities, partially offset by higher average interest-bearing deposit balances.
As a result, net interest income decreased to $19.1 million in 2025 from $20.1 million in 2024. Net interest margin decreased to 2.04% in 2025 from 2.14% in 2024.
Provision (Credit) for credit losses
For the year ended December 31, 2025, the provision for credit losses was $1.5 million, consisting of a $1.6 million provision for credit loss on loans and a $0.1 million credit in reserve for the off-balance-sheet credit exposures. For the year ended December 31, 2024, the provision for credit losses was $12.5 million, consisting of a $12.5 million provision for loan losses and a $0.1 million credit in reserve for the off-balance-sheet exposure.
The substantially lower provision in 2025 reflected the absence of the unusually elevated credit costs recognized in 2024, as well as lower net charge-offs and lower reserve requirements in 2025. The 2024 provision was significantly affected by large charge-offs associated with two commercial real estate credits and the related reserve implications. Gross loans declined from $707.5 million at December 31, 2024 to $592.6 million at December 31, 2025 as the Company continued its balance sheet repositioning and allowed portions of the loan portfolio to run off. The allowance for credit losses on loans decreased to $6.8 million at December 31, 2025 from $7.3 million at December 31, 2024.
Non-interest income
For the year ended December 31, 2025, non-interest income increased to $10.5 million from $8.4 million in 2024. The increase was primarily attributable to higher fee income associated with increased business activity from certain existing larger digital payments program managers during 2025, as well as gains on certain financial instruments.
Non-interest expense
For the year ended December 31, 2025, non-interest expense increased to $40.8 million from $32.1 million in 2024. The increase reflected higher compensation expense, including equity-based compensation, as well as elevated professional fees and other transition-related operating costs associated with management changes, remediation efforts, and the Company’s broader strategic repositioning. Non-interest expense in 2025 also reflected overlap costs incurred during the transition as the Company added executive management and other personnel while retaining significant legacy staffing during portions of the year.
Provision for income taxes
The Company reported a provision for income taxes of $0.1 million for the year ended December 31, 2025, compared to a provision for income taxes of $23.8 million for the year ended December 31, 2024. The 2024 provision was significantly affected by the recording of a full valuation allowance against deferred tax assets during that year. At December 31, 2025, the Company continued to maintain a full valuation allowance against its deferred tax assets. See Note 14 - Income Taxes to the Consolidated Financial Statements.
2025 FORM 10-K 31
Other financial measures and ratios:
| As of and for the year ended December 31, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2025 | 2024 | 2023 | ||||||
| (Loss) return on average assets | (1.31) | % | (4.03) | % | (0.39) | % | ||
| (Loss) return on average equity | (20.66) | % | (110.37) | % | (8.99) | % | ||
| Average equity to average assets | 6.32 | % | 3.66 | % | 4.34 | % |
We derived the selected balance sheet measures as of December 31, 2025, 2024, and 2023 and the selected statement of income measures for the years ended December 31, 2025, 2024, and 2023 from our audited Consolidated Financial Statements included elsewhere in this annual report. Average balances have been computed using daily averages.
Selected Quarterly Financial Data:
The following tables present the summarized quarterly results of operations (unaudited) to the Consolidated Financial Statements for the calendar year 2025:
| (In thousands, except per share amounts) | First Quarter | Second Quarter | Third Quarter | Fourth Quarter | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2025 | ||||||||||||||
| Interest and dividend income | $ | 12,548 | $ | 11,494 | $ | 11,543 | $ | 12,258 | ||||||
| Interest expense | 8,594 | 7,306 | 6,533 | 6,296 | ||||||||||
| Net interest income | 3,954 | 4,188 | 5,010 | 5,962 | ||||||||||
| Provision for credit losses(a) | 733 | 1,524 | (431) | (321) | ||||||||||
| Non-interest income | 2,728 | 2,030 | 2,207 | 3,549 | ||||||||||
| Non-interest expense | 8,725 | 9,744 | 10,310 | 11,992 | ||||||||||
| Loss before income taxes | (2,776) | (5,050) | (2,662) | (2,160) | ||||||||||
| Provision (benefit) for income taxes | 1 | (49) | (5) | 112 | ||||||||||
| Net loss(b) | $ | (2,777) | $ | (5,001) | $ | (2,657) | $ | (2,272) | ||||||
| Loss per share | ||||||||||||||
| Basic | $ | (0.21) | $ | (0.06) | $ | (0.03) | $ | (0.02) | ||||||
| Diluted | $ | (0.21) | $ | (0.06) | $ | (0.03) | $ | (0.02) | ||||||
| Weighted average shares outstanding - Basic(c) | 13,289,644 | 78,123,095 | 99,937,915 | 114,991,078 | ||||||||||
| Weighted average shares outstanding - Diluted(c) | 13,289,644 | 78,123,095 | 99,937,915 | 114,991,078 |
(a) In the second quarter of 2025, the increase in allowance was mainly attributed to qualitative factors incorporated into the ACL calculations, even though a reduction in loan balances and the recognition of charge-offs on the unsecured consumer loan portfolio would typically suggest a decrease.
(b) Due to significant changes above, the net loss in the second quarter 2025 was mainly attributed to loss on sales of loans and increased non-interest expenses primarily attributed to the higher salaries and benefits, along with other operating expenses.
(c) The weighted average diluted shares outstanding did not include 112,771, 4,597,710, 5,809,410, and 10,000,970 anti-dilutive restricted shares of common stock as of March 31, 2025, June 30, 2025, September 30, 2025 and December 31, 2025, respectively.
2025 FORM 10-K 32
The following tables present the summarized quarterly results of operations (unaudited) to the Consolidated Financial Statements for the calendar year 2024:
| (In thousands, except per share amounts) | First Quarter | Second Quarter | Third Quarter | Fourth Quarter | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2024 | ||||||||||||||
| Interest and dividend income | $ | 14,001 | $ | 13,217 | $ | 12,814 | $ | 12,330 | ||||||
| Interest expense | 8,597 | 8,194 | 7,815 | 7,679 | ||||||||||
| Net interest income | 5,404 | 5,023 | 4,999 | 4,651 | ||||||||||
| Provision for credit losses(a) | 658 | 3,092 | 1,026 | 7,679 | ||||||||||
| Non-interest income | 2,247 | 2,063 | 2,115 | 1,937 | ||||||||||
| Non-interest expense | 7,226 | 7,999 | 8,396 | 8,460 | ||||||||||
| Loss before income taxes | (233) | (4,005) | (2,308) | (9,551) | ||||||||||
| Provision (benefit) for income taxes(b) | 66 | (924) | 24,646 | (3) | ||||||||||
| Net loss(c) | $ | (299) | $ | (3,081) | $ | (26,954) | $ | (9,548) | ||||||
| Loss per share | ||||||||||||||
| Basic | $ | (0.08) | $ | (0.77) | $ | (6.78) | $ | (2.40) | ||||||
| Diluted | $ | (0.08) | $ | (0.77) | $ | (6.78) | $ | (2.40) | ||||||
| Weighted average shares outstanding - Basic(d) | 3,976,073 | 3,976,073 | 3,976,073 | 3,976,673 | ||||||||||
| Weighted average shares outstanding - Diluted(d) | 3,976,073 | 3,976,073 | 3,976,073 | 3,976,673 |
(a) In the fourth quarter of 2024, the provision for credit loss increased , primarily attributable to significant charge-offs for two individually evaluated commercial real estate loans.
(b) In the third quarter of 2024, a full valuation allowance on the Company’s U.S. federal and state deferred tax assets was recorded. This resulted in an increase in the Company’s income tax expense of approximately $25 million.
(c) Due to significant changes above, the net loss in the fourth quarter of 2024 decreased to $9.5 million, compared to a $27.0 million net loss in the third quarter of 2024.
(d) The weighted average diluted shares outstanding did not include 22,269, 8,695, 91,697, and 93,710 anti-dilutive restricted shares of common stock as of March 31, 2024, June 30, 2024, September 30, 2024 and December 31, 2024, respectively.
LIQUIDITY AND CAPITAL RESOURCES
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
2025 FORM 10-K 33
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 for the year ended December 31, 2025 and December 31, 2024, are as follows:
| (In thousands) | December 31, 2025 | December 31, 2024 | ||||
|---|---|---|---|---|---|---|
| On-hand liquidity | ||||||
| Interest-bearing cash and cash equivalents | $ | 183,980 | $ | 144,273 | ||
| Available-for-sale securities, at fair value | 224,677 | 79,992 | ||||
| Less: pledged available-for-sale securities | (15,138) | (60,223) | ||||
| Total on-hand liquidity | 393,519 | 164,042 | ||||
| Borrowing capacity | ||||||
| FHLB borrowing capacity | 76,003 | 48,692 | ||||
| FRB borrowing capacity | 26,357 | 64,742 | ||||
| Unsecured credit lines from correspondent banks | — | 5,000 | ||||
| Brokered deposit capacity | 144,868 | 69,702 | ||||
| Total borrowing capacity | 247,228 | 188,136 | ||||
| Less: used borrowing capacity | ||||||
| FHLB capacity used (including the standby letter of credit) | (55,671) | (48,459) | ||||
| FRB capacity used | — | — | ||||
| Outstanding brokered deposits | (54,683) | (69,702) | ||||
| Total used borrowing capacity | (110,354) | (118,161) | ||||
| Total liquidity | $ | 530,393 | $ | 234,017 | ||
| Total liabilities | $ | 993,160 | $ | 1,008,027 | ||
| On-hand liquidity to total liabilities | 39.62 | % | 16.27 | % | ||
| Total liquidity to total liabilities | 53.40 | % | 23.22 | % |
On-hand liquidity increased $229.5 million from December 31, 2024 to December 31, 2025 primarily reflecting higher balances of cash, cash equivalents, and unpledged available-for-sale securities following the Company’s capital raises and broader balance sheet repositioning during 2025. These changes improved the Company’s funding flexibility and contingent liquidity position.
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 December 31, 2025 was sufficient to meet expected funding needs and reasonably anticipated deposit fluctuations.
Capital raised during 2025, including the March 2025 private placement and subsequent capital transactions, provided additional liquidity and enhanced both the Bank’s and the Company’s funding flexibility.
Net cash provided by operating activities was $14.3 million for the year ended December 31, 2025, compared to net cash provided by operating activities of $2.7 million for the year ended December 31, 2024. The year-over-year change was primarily driven by a larger net cash outflow related to loans held for sale activity, as originations exceeded sale proceeds by a greater amount in 2025 than in 2024, and by a lower provision for credit losses, which reduced a non-cash add-back to operating cash flow. These factors were partially offset by higher share-based compensation, which increased non-cash expense in 2025. Activity in loans held for sale primarily related to credit card receivables originated for certain digital payments customer programs, which are generally sold shortly after origination.
Net cash used in investing activities was $20.7 million for the year ended December 31, 2025, compared to net cash provided by investing activities of $135.0 million for the year ended December 31, 2024. The 2025 investing cash outflow primarily reflected
2025 FORM 10-K 34
$145.2 million of purchases of available-for-sale securities. That outflow was partially offset by $114.9 million of payments received on loans receivable, $4.5 million of proceeds from the maturity of other investments, and the absence of loan originations in 2025 compared to $48.9 million of loan originations in 2024. In 2024, investing activities also benefited from higher loan repayments and materially lower securities purchases.
Net cash provided by financing activities was $79.1 million for the year ended December 31, 2025, compared to net cash used in financing activities of $41.6 million for the year ended December 31, 2024. The 2025 financing cash inflow was primarily driven by proceeds from issuances of common stock and preferred stock, net of offering costs. Financing activities in 2025 also reflected lower reliance on wholesale funding, including a $3.0 million net repayment of Federal Home Loan Bank advances and no net Federal Reserve Bank or correspondent bank borrowings outstanding at year end, as well as $3.0 million of senior note repayments and a modest net decrease in deposits. In 2024, financing activities reflected a $126.3 million increase in deposits that was more than offset by $68.0 million of net repayments of Federal Home Loan Bank advances and $70.0 million of net repayments of Federal Reserve Bank and correspondent bank borrowings.
As a result of the foregoing, cash, cash equivalents and restricted cash increased $44.0 million during 2025, compared to an increase of $96.1 million during 2024.
As of December 31, 2025, the maturities of Patriot’s contractual obligations are as follows:
| (In thousands) | Contractual Obligations Due | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Contractual Obligation Category | Less than One Year | One to Three Years | Three to Five Years | Over Five Years | Total | ||||||||||||||
| Certificates of deposit | $ | 271,103 | $ | 12,134 | $ | 158 | $ | — | $ | 283,395 | |||||||||
| Brokered deposits | 49,641 | 5,042 | — | — | 54,683 | ||||||||||||||
| Subordinated debt | — | — | 8,347 | — | 8,347 | ||||||||||||||
| Junior subordinated debt | — | — | — | 8,248 | 8,248 | ||||||||||||||
| Operating lease obligations | 382 | 348 | 156 | 524 | 1,410 | ||||||||||||||
| Total contractual obligations | $ | 321,127 | $ | 17,524 | $ | 8,661 | $ | 8,772 | $ | 356,083 |
Management seeks to maintain a capital structure that supports regulatory requirements, planned balance sheet activity, and the ability to absorb potential losses, while also positioning the Company to improve profitability and shareholder value over time. The Company has not paid dividends to shareholders during the most recent three-year period.
The primary source of liquidity at the parent company is dividends or other return of capital from the Bank. Such payments are subject to regulatory restrictions, including OCC supervisory requirements and the Bank’s capital plan, and are used in part to service debt payments at the Company. Return of capital payments from the Bank to the Company totaled zero for the year ended December 31, 2025, $1.0 million for the year ended December 31, 2024, and $2.5 million for the year ended December 31, 2023.
OFF-BALANCE SHEET ARRANGEMENTS
The Bank’s off-balance sheet arrangements consist primarily of unfunded loan commitments and standby letters of credit. Because these commitments may expire unused or are contingent on the customer’s compliance with the underlying terms, the total commitment amounts do not necessarily represent future cash requirements. As of December 31, 2025 and 2024, the Bank’s off-balance sheet commitments were $69 million and $87.6 million, respectively.
As of December 31, 2025, the Bank had an irrevocable stand-by letter of credit for a maximum of $55 million, issued by the Federal Home Loan Bank of Boston on behalf of the Bank, with Mastercard as the beneficiary, which expires on April 30, 2026.
2025 FORM 10-K 35
REGULATORY CAPITAL REQUIREMENTS
The following tables illustrate the Company’s and the Bank’s regulatory capital ratios at December 31, 2025 and 2024:
| December 31, 2025 | December 31, 2024 | |||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 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) | $ | 129,587 | 20.76 | % | $ | 120,329 | 19.25 | % | $ | 44,534 | 6.07 | % | $ | 56,536 | 7.71 | % | ||||||||||||
| Formal Agreement minimum (Bank only)(a) | $ | — | — | % | $ | 71,894 | 11.50 | % | $ | — | — | % | $ | 84,306 | 11.50 | % | ||||||||||||
| Tier 1 Capital (to risk weighted assets) | 117,567 | 18.84 | % | 116,657 | 18.66 | % | 33,545 | 4.57 | % | 55,546 | 7.58 | % | ||||||||||||||||
| Formal Agreement minimum (Bank only)(a) | — | — | % | 62,516 | 10.00 | % | — | — | % | 73,309 | 10.00 | % | ||||||||||||||||
| Common Equity Tier 1 Capital (to risk weighted assets) | 109,567 | 17.55 | % | 116,657 | 18.66 | % | 25,545 | 3.48 | % | 55,546 | 7.58 | % | ||||||||||||||||
| Formal Agreement minimum (Bank only)(a) | — | — | % | 62,516 | 10.00 | % | — | — | % | 73,309 | 10.00 | % | ||||||||||||||||
| Tier 1 Leverage Capital (to average assets) | 117,567 | 11.52 | % | 116,657 | 11.42 | % | 33,545 | 3.50 | % | 55,546 | 5.79 | % | ||||||||||||||||
| Formal Agreement minimum (Bank only)(a) | — | — | % | 91,975 | 9.00 | % | — | — | % | 86,306 | 9.00 | % |
(a) On January 17, 2025, the OCC notified the Bank that the individual minimum capital ratios established in April 2024 had been terminated in connection with the Bank’s entry into the Formal Agreement dated January 14, 2025. The minimum ratios shown above for the Bank reflect the capital requirements established by the Formal Agreement. Although the Bank’s reported capital ratios at December 31, 2025 exceeded those minimum ratios, the Formal Agreement provides that meeting and maintaining such ratios does not mean the Bank may be deemed to be “well capitalized” for purposes of 12 U.S.C. § 1831o and 12 C.F.R. Part 6.
Federal banking regulations establish minimum leverage and risk-based capital requirements for insured depository institutions, including standards applicable to institutions seeking to be considered “well capitalized.”
In April 2024, the OCC established individual minimum capital ratios for the Bank. On January 17, 2025, in connection with the Bank’s entry into the Formal Agreement on January 14, 2025, the OCC notified the Bank that the April 2024 individual minimum capital ratios had been terminated. As reflected in the table above, the minimum capital ratios applicable to the Bank at December 31, 2025 were those established by the Formal Agreement.
At December 31, 2025, the Bank’s reported capital ratios exceeded both the standard “well capitalized” thresholds and the higher minimum capital ratios required by the Formal Agreement. Specifically, the Bank’s common equity tier 1 capital ratio was 18.66%, its Tier 1 capital ratio was 18.66%, its total capital ratio was 19.25%, and its Tier 1 leverage ratio was 11.42%. By comparison, at December 31, 2024, the Bank did not meet the higher minimum capital ratios then applicable. The Company’s capital actions during 2025, including the March 2025 private placement and related recapitalization transactions, materially improved the Bank’s capital position.
Notwithstanding the Bank’s reported capital ratios at December 31, 2025, the Formal Agreement provides that meeting and maintaining specified capital levels does not mean that the Bank may be deemed to be “well capitalized” for purposes of 12 U.S.C. § 1831o and 12 C.F.R. Part 6.