What changed in this filing

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Item 1. Business

2025-04-15 compared with 2024-04-01 · 35 added, 30 removed, 138 unchanged (32% of the section changed)

2 unchanged sentences

The Bank received its charter and commenced operations as a national bank on August 31, 1994.

The Bank has a total of nine branch offices comprised of eight branch offices located in Fairfield and New Haven Counties, Connecticut and one branch office located in Westchester County, New York as of December 31, 2023.

The Bank has a total of eight branch offices comprised of seven branch offices located in Fairfield and New Haven Counties, Connecticut and one branch office located in Westchester County, New York as of December 31, 2024.

On March 11, 2003, the Company formed Patriot National Statutory Trust I (the “Trust”) for the sole purpose of issuing trust preferred securities and investing the proceeds in subordinated debentures issued by the Company.

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The Bank used the proceeds to fund general operations.

On October 15, 2010, pursuant to a Securities Purchase Agreement (the “Securities Purchase Agreement”), the Company issued and sold to PNBK Holdings LLC (“Holdings”), an investment limited liability company controlled by Michael Carrazza, 3.36 million shares of its common stock at a purchase price of $15.00 per share (adjusted for a 1-for-10 reverse stock split discussed below) for an aggregate purchase price of $50.4 million.

The shares sold to Holdings represented 87.6% of the Company’s then issued and outstanding common stock.

In connection with the reverse stock split, the par value of the common stock was changed to $0.01 per share.

Also, in connection with the sale of the shares, certain directors and officers of both the Company and the Bank resigned.

Such directors and officers were replaced with nominees of Holdings and Michael Carrazza became the Chairman of the Board of Directors (the “Board”) of the Company.

Pursuant to its Operating Agreement, on March 31, 2021, Holdings completed a pro-rata in-kind distribution of shares of restricted common stock of Patriot.

Following these distributions, Holdings no longer owns any shares of Patriot.

On March 20, 2025, the Company entered into (i) securities purchase agreements (the “Co-Lead Investors Agreements”) with its President and director, Steven Sugarman (the “Lead Party”), and three co-lead investors (the “Co-Lead Investors”), and (ii) securities purchase agreements (the “Purchasers Agreements”, and together with the Co-Lead Investors Agreements, the “Securities Purchase Agreements”) with other accredited investors (collectively, and together with the Co-Lead Investors and the Lead Party, the “Purchasers”).

Also on March 20, 2025, the Company completed a $57.75 million private placement of:

(i) shares of the Company’s common stock, par value $0.01 per share (“Common Stock”), at a purchase price of $0.75 per share, and (ii) shares of a new series of the Company’s preferred stock, no par value per share, designated as Series A Non-Cumulative Perpetual Convertible Preferred Stock (the “Series A Preferred Stock”), with a liquidation preference of $60 per share (the “Private Placement”).

The Private Placement included the issuance of:

(i) 60,400,106 shares of Common Stock, and (ii) 90,832 shares of Series A Preferred Stock, convertible, in the aggregate, into 7,266,560 shares of Common Stock.

In addition, as part of the Private Placement, on March 20, 2025, the Company’s amendments to (i) 6.25% Fixed to Floating Subordinated Note due June 30, 2028 (the “Subordinated Note”), and (ii) 8.5% Fixed Rate Senior Notes Due 2026 (the “Senior Notes” and together with the Subordinated Note, the “Notes”) became effective and noteholders converted approximately $7.0 million of the aggregate principal amount of the Notes into 9,333,334 shares of Common Stock.

The amendment to the Subordinated Note provides that the interest on the Subordinated Note will be paid-in-kind (“PIK”) and the aggregate outstanding principal amount of the Subordinated Note will be automatically increased on each interest payment date by the amount of such PIK interest for all accrued and unpaid interest payments as of the closing date of the Private Placement and for future scheduled interest payments owed through and including the March 30, 2026 interest payment date.

In addition, pursuant to such amendment, the noteholder agreed to convert $2.0 million of the outstanding principal amount of the Subordinated Note into shares of Common Stock effective on the closing date of the Private Placement.

The amendment to the Senior Notes provides that (i) the maturity date of the Senior Notes will be extended to April 15, 2028, (ii) the interest rate will be increased to 10% effective as of January 1, 2026, and (iii) at any time prior to the maturity date, the Company may repay any amount of the outstanding principal amount of the Senior Notes, in whole or in part, without penalty.

In addition, pursuant to such amendment, the noteholders agreed to convert into shares of Common Stock an amount of the outstanding Senior Notes, on a pro rata basis, equal to $5.0 million based on the terms of the amendment and the closing of the private placement, and all accrued and unpaid interest payments as of the closing date of the Private Placement and for future scheduled interest payments owed through the January 15, 2026 payment may be PIK.

As of the date hereof, the only business of the Company is its ownership of all of the issued and outstanding capital stock of the Bank and the Trust.

1 unchanged sentence

Business Operations

The Bank offers commercial real estate loans, commercial business loans, SBA loans originated under the U.S.

Small Business Administration ("SBA") 7(a) program, and a variety of consumer loans with an emphasis on serving the needs of individuals, small and medium‑sized businesses and professionals.

The Bank offers, on a limited basis to satisfy Community Reivestment Act requirements, commercial real estate loans, commercial business loans, SBA loans originated under the U.S.

Small Business Administration ("SBA") 7(a) program, and limited consumer loans with an emphasis on serving the needs of individuals, small and medium‑sized businesses and professionals.

The Bank’s lending activities are conducted principally in Fairfield and New Haven Counties in Connecticut and Westchester County in New York, although the Bank’s loan business is not necessarily limited to these areas.

1 unchanged sentence

Since 2016, Patriot has purchased residential real estate loans.

During 2023, the Bank began the process of establishing its own national mortgage origination business, with new originations expected to begin in early 2024.

Further information of the purchased residential real estate loans is set forth in Note 4 to the consolidated financial statements.

In 2024, the Bank reentered the residential mortgage business and began originating mortgage loans through its mortgage origination unit, Residential Mortgage Division, based in Jacksonville, Florida.

These mortgage loans are typically sold to third parties.

Further information of the residential mortgage loans held-for-sale is set forth in Note 5 to the consolidated financial statements.

Consumer and commercial deposit accounts offered include:

9 unchanged sentences

5 Norwalk Fairfield Connecticut

6 Orange New Haven Connecticut

6 Stamford Fairfield Connecticut

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federal government issues comprise the majority of the Bank’s investment portfolio.

As of December 31, 2023, Patriot had 117 full-time equivalent employees.

As of December 31, 2024, Patriot had 129 full-time employees.

None of Patriot’s employees are covered by a collective bargaining agreement.

6 unchanged sentences

The customer base of the Bank generally is meant to be diversified, so that there is not a concentration of either loans or deposits within a single industry, a group of industries, or a single person or groups of people.

The Bank is not dependent on one or a few major customers for its lending or deposit activities, the loss of any one of which would have a material adverse effect on the business of the Bank.

The Bank establishes concentration limits to monitor the risk and implements mitigating controls and procedures related to the limits.

The Bank’s loan customers extend beyond the towns and cities in which the Bank has branch offices, including nearby towns in Fairfield and New Haven Counties in Connecticut, and Westchester County and the five boroughs of New York City in New York, although the Bank’s loan business is not necessarily limited to these areas.

22 unchanged sentences

The Fed may disapprove of such a purchase or redemption, if it determines that the proposal would constitute an unsafe or unsound practice or would violate any law, regulation, Fed order, or any condition imposed by, or written agreement with, the Fed.

The Company is subject to capital adequacy rules and guidelines issued by the Fed and the FDIC and the Bank is subject to capital adequacy rules and guidelines issued by the OCC.

The Company is subject to capital adequacy rules and guidelines issued by the Fed and the Bank is subject to capital adequacy rules and guidelines issued by the OCC and FDIC.

These substantially identical rules and guidelines require Patriot to maintain certain minimum ratios of capital to adjusted total assets and/or risk-weighted assets.

25 unchanged sentences

As the Bank expands further, the market areas served by the Bank will continue to evolve.

The Company and the Bank have not and will not adopt any policies or practices, which discourage credit applications from, or unlawfully discriminate against, individuals or segments of the communities served by the Bank.

The Company and the Bank have not and will not adopt any policies or

practices, which discourage credit applications from, or unlawfully discriminate against, individuals or segments of the communities served by the Bank.

On October 26, 2001, the United and Strengthening America by Providing Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “Patriot Act”) was enacted to further strengthen domestic security following the September 11, 2001 attacks.

13 unchanged sentences

Financial reform legislation and the implementation of any rules ultimately issued could have adverse implications on the financial industry, the competitive environment, and the Bank’s ability to conduct business.

On October 24, 2023, the OCC, the Fed, and the FDIC released the final rule to strengthen and modernize their regulations implementing the CRA.

The final rule revises the CRA regulations to better achieve the CRA’s core purpose of encouraging banks to help meet the credit needs of their local communities.

It also adapts to changes in the banking industry, including the expanded role of mobile and online banking;

provides greater clarity and consistency in the application of CRA regulations;

tailors performance standards, data collection, and reporting requirements to account for differences in bank size, business model, and local conditions;

promotes transparency and public engagement;

confirms that CRA and fair lending responsibilities are mutually reinforcing;

and promotes a consistent regulatory approach that applies to banks regulated by all three agencies.

The final rule took effect on April 1, 2024, with staggered compliance dates of January 1, 2026, and January 1, 2027.

Capital Requirements

10 unchanged sentences

Under this framework, the Bank reports leverage and risk-based capital ratios and compares those ratios to its own internally designed risk-based capital policy.

Federal regulations require FDIC-insured depository institutions, including national banks, to meet several minimum capital standards:

a common equity Tier 1 capital to risk-based assets ratio of 5%, a Tier 1 capital to risk-based assets ratio of 6.0%, a total capital to risk-based assets ratio of 8% and a Tier 1 capital to total assets leverage ratio of 4%.

Federal regulations require FDIC-insured depository institutions, including national banks, to meet several minimum capital standards to be considered Adequately Capitalized under the Prompt Corrective Action (“PCA”) section of the Federal Deposit Insurance Act:

a common equity Tier 1 capital to risk-based assets ratio of 4.5%, a Tier 1 capital to risk-based assets ratio of 6.0%, a total capital to risk-based assets ratio of 8% and a Tier 1 capital to total average assets leverage ratio of 4%.

PCA restricts or prohibits certain activities for an insured depository institution that are not Adequately Capitalized.

For purposes of the regulatory capital requirements, common equity Tier 1 capital is generally defined as common stockholders’ equity and retained earnings.

9 unchanged sentences

The capital conservation buffer requirement was fully implemented at 2.5% on January 1, 2019.

At December 31, 2023, the Bank’s capital exceeded all applicable regulatory requirements, the Bank was considered well-capitalized under the prompt corrective action framework, as subsequently discussed, and it had a capital conservation buffer above the applicable requirement.

Recent Developments with Regulators

In November 2018 the Bank entered into a formal written agreement (the “Agreement”) with the Office of the OCC.

The Agreement stated that the Board and the Bank would develop, implement and revise written documents and policies related to executive compensation, conflict of interest, internal audit, liquidity and asset/liability management, commercial loan administration, leveraged lending, practices relating to the allowance for loan and lease losses, and assumptions used in the Bank’s interest rate risk model.

Under the Agreement the Bank agreed to provide a revised written 3-year strategic and capital plan for the Bank.

The existence of this Agreement also resulted in increased supervision from the SBA with respect to the Bank’s SBA division and the loss of its preferred lender status.

On September 1, 2021, the OCC terminated the Agreement concluding that the safety and soundness of the Bank and its now established compliance with laws and regulations did not require continued existence of the Agreement.

Shortly after the termination of the Agreement, the SBA removed the increased supervision.

In October 2022, the SBA renewed the Bank’s Preferred Lender Program (“PLP”) status, with an expiration date of November 15, 2023.

As a normal course of business, the PLP is renewed on an annual basis by the SBA.

The Bank received a satisfactory audit by the SBA in 2022 and expects its PLP status to be renewed for another term prior to the current expiration period.

For further discussion of the regulatory capital requirements, refer to Management's Discussion and Analysis - Regulatory Capital Requirements and Note 19.

Regulatory and Operational Matters to the Consolidated Financial Statements.

Available Information

3 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business