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Item 1A. Risk Factors

2026-03-31 compared with 2025-04-15 · 221 added, 183 removed, 21 unchanged (95% of the section changed)

Patriot’s financial condition and results of operation are subject to various risks inherent to its business, including those noted below.

Risks Related to General Economic and Market Conditions

We have been and may continue to be adversely affected by national financial markets and economic conditions, as well as local conditions.

Our business and results of operations are affected by the financial markets and general economic conditions in the United States, including factors such as the level and volatility of interest rates, inflation, home prices, unemployment and under-employment levels, bankruptcies, household income, consumer spending, investor confidence and the strength of the U.S.

The deterioration of any of these conditions can adversely affect our securities and loan portfolios, our level of charge-offs and provision for credit losses, our capital levels, liquidity and our results of operations.

In addition, we are affected by the economic conditions within our Connecticut and New York trade areas.

Unlike larger banks that are more geographically diversified, 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.

Therefore, any decline in the economy of the Fairfield or New Haven counties of Connecticut or the New York metropolitan area could have an adverse impact on us.

Our loans, the ability of borrowers to repay these loans, and the value of collateral securing these loans are impacted by economic conditions.

Our financial results, the credit quality of our existing loan portfolio, and the ability to generate new loans with acceptable yield and credit characteristics may be adversely affected by changes in prevailing economic conditions, including declines in real estate values, changes in interest rates, adverse employment conditions and the monetary and fiscal policies of the federal government.

The Bank ’ s business is subject to various lending and other economic risks that could adversely impact its results of operations and financial condition.

The Company is exposed to changes in economic conditions and general downturns in the U.S.

economy, and particularly an economic slowdown in the Fairfield or New Haven counties of Connecticut and the New York metropolitan area could result in the following consequences, any of which may have a material detrimental effect on the Bank’s business:

• Increases in:

- Loan delinquencies;

- Problem assets and foreclosures;

• Decreases in:

- Demand for the Bank’s products and services;

- Customer borrowing power that is caused by declines in the value of assets and/or collateral supporting the Bank’s loans, especially real estate.

During the years 2007 through 2009, the general economic conditions and specific business conditions in the United States, including in Connecticut and New York deteriorated, resulting in increases in loan delinquencies, problem assets and foreclosures, and declines in the value and collateral associated with the Bank’s loans.

Two significant impacts resulting from the financial crisis included the housing market suffering falling home prices leading to increased foreclosures and our customer base experiencing rampant unemployment and sustained under-employment.

These conditions negatively impacted the credit performance of mortgage and construction loans, and resulted in significant asset-value write-downs by financial institutions, including government-sponsored enterprises, as well as major commercial and investment banks.

The loss of mortgage and construction loan asset-value caused many financial institutions to seek additional capital, to merge with larger and financially stronger financial institutions and, in some cases, to fail.

Many lenders and institutional investors reduced or ceased providing funding to borrowers, including other financial institutions.

During 2010 through 2019, however, the economic climate generally improved, contributing to decreases in the Bank’s problem assets, delinquencies and foreclosures from the levels experienced in the earlier period of economic turbulence.

During the course of the COVID-19 pandemic covering all of 2020 and a significant portion of 2021 and 2022, a temporary disruption and level of uncertainty existed.

For a period of time, delinquencies, deferrals and problem assets rose, however foreclosures were relatively unaffected due to the moratorium that was issued by many states.

Much of this has stabilized and returned to previous operating levels.

The Company is unable to predict, however, future economic conditions and their impact on the Company’s business.

Market turmoil, and the tightening of credit by the Fed, could lead to an increased level of commercial and consumer delinquencies, lack of consumer confidence, increased market volatility, and generally widespread reductions in business activity.

The resulting economic pressure on consumers and lack of confidence in the financial markets could adversely affect the Company’s business, financial condition, and results of operations.

A worsening of these conditions could likely exacerbate the adverse effects these difficult market conditions could have on the Company and other financial institutions.

In particular:

• Less than optimal economic conditions may continue to affect market confidence levels and may cause adverse changes in payment patterns, thereby causing increased delinquencies, which could affect the Bank’s provision for credit losses and charge-off of loans receivable.

• The ability to assess the creditworthiness of the Bank’s customers, or to accurately estimate loan collateral value, may be impaired if the models and approaches the Bank uses becomes less predictive of future behaviors, valuations, assumptions, or estimates due to the unpredictable economic climate.

• Increasing consolidation of financial services companies, as a result of current market conditions, could have unexpected adverse effects on the Bank’s ability to compete effectively.

The Bank ’ s business is subject to interest rate risk and variations in interest rates may negatively affect the Bank ’ s financial performance.

Patriot is unable to predict, with any degree of certainty, fluctuations of market interest rates, which are affected by many factors including inflation, recession, a rise in unemployment, a tightening money supply, domestic and international disorder, and instability in domestic and foreign financial markets.

Changes in the interest rate environment may reduce Patriot’s profits.

Patriot realizes income from the differential or “spread” between the interest earned on loans, securities, and other interest-earning assets and interest paid on deposits, borrowings, and other interest-bearing liabilities.

Net interest spreads are affected by the difference between the maturities and repricing characteristics of interest-earning assets and interest-bearing liabilities.

In addition, an increase in the general level of interest rates may adversely affect the ability of some borrowers to pay the interest on and principal of their obligations.

Although Patriot has implemented strategies which are designed to reduce the potential effects of changes in interest rates on operations, these strategies may not always be successful.

Accordingly, changes in levels of market interest rates could materially and adversely affect Patriot’s net interest spread, asset quality, levels of prepayments, liquidity and cash flow, as well as the market value of its securities portfolio and overall profitability.

Patriot ’ s investment portfolio includes securities that are sensitive to interest rates and variations in interest rates may adversely impact Patriot ’ s profitability.

Patriot’s security portfolio is classified as available-for-sale and is comprised primarily of corporate debt and mortgage-backed securities, which are insured or guaranteed by the U.S.

These securities are sensitive to interest rate fluctuations.

Unrealized gains or losses in the available-for-sale portfolio of securities are reported as a separate component of shareholders’ equity.

As a result, future interest rate fluctuations may impact shareholders’ equity, causing material fluctuations from quarter to quarter.

The inability to hold its securities until market conditions are favorable for a sale, or until payments are received on mortgage-backed securities, could adversely affect Patriot’s earnings and profitability.

Inflationary pressures and rising prices may affect our results of operations and financial condition.

Inflation risk is the risk that the value of assets or income from investments will be limited in the future as inflation decreases the value of money.

Inflation rose sharply in 2021 and 2022 to levels not seen in more than 40 years.

Inflation dropped in 2023 and 2024, but could begin to rise in the future.

Small to medium-sized businesses may be impacted more during periods of high inflation, as they are not able to leverage economics of scale to mitigate cost pressures compared to larger businesses.

Consequently, the ability of our business customers to repay their loans may deteriorate, and in some cases this deterioration may occur quickly, which would adversely impact our results of operations and financial condition.

Furthermore, a prolonged period of inflation could cause wages and other costs to the Company to increase, which could adversely affect our results of operations and financial condition.

The risks involved in the Bank ’ s commercial real estate loan portfolio are material.

The Bank’s commercial real estate loan portfolio constitutes a material portion of its assets and generally has different risks than residential mortgage loans.

Commercial real estate loans generally expose a lender to greater risk of non-payment and loss than one- to four-family residential mortgage loans because repayment of the loans often depends on the successful operation of the property and the income stream of the borrowers.

Commercial real estate loans also typically involve larger loan balances to single borrowers or groups of related borrowers both at origination and at maturity.

Commercial business loans expose us to additional risks since they typically are made on the basis of the borrower's ability to make repayments from the cash flow of the borrower's business and are secured by non-real estate collateral that may depreciate over time.

In addition, some of our commercial borrowers have more than one loan outstanding with us.

Consequently, an adverse development with respect to one loan or one credit relationship may expose us to a greater risk of loss.

Real estate lending involves risks related to a decline in value of commercial and residential real estate.

The market value of real estate can fluctuate significantly in a relatively short period of time, as a result of market conditions in the geographic area in which real estate is located.

A deterioration in the national and regional real estate markets could harm our financial condition and results of operations because a large percentage of our loans are secured by real property.

Declines in real estate values and sales volumes and high unemployment levels may result in higher than expected loan delinquencies, increases in our levels of nonperforming and classified assets and a decline in demand for our products and services.

If real estate values decline, the collateral for the Bank’s loans will provide less security.

As a result, the Bank’s ability to recover on defaulted loans by selling the underlying real estate will be diminished, and the Bank will be more likely to suffer losses on defaulted loans.

The Bank ’ s allowance for credit losses may not be adequate to cover actual losses.

Like all financial institutions, the Bank maintains an allowance for credit losses to provide for loan defaults and non-performance.

The allowance for credit losses is based on an evaluation of the risks associated with the Bank’s loans receivable, as well as estimates of the current credit risks and future trends.

Deterioration in general economic conditions and unforeseen risks affecting customers could have an adverse effect on borrowers’ capacity to timely repay their obligations before risk grades could reflect those changing conditions.

Maintaining the adequacy of the Bank’s allowance for credit losses may require that the Bank make significant and unanticipated increases in the provision for credit losses, which would materially affect the results of operations and capital adequacy.

The dollar amount of future losses is susceptible to changes in economic, operating, and other conditions including changes in interest rates that may be beyond the Bank’s control and which losses may exceed current allowance estimates.

Although the current economic environment has improved, conditions remain uncertain and may result in additional risk of loan losses.

Federal regulatory agencies, as an integral part of their examination process, review the Bank’s loan portfolio and assess the adequacy of the allowance for credit losses.

The regulatory agencies may require the Bank to change classifications or grades on loans, increase the allowance for credit losses by recognizing additional loan loss provisions, or to recognize further loan charge-offs based upon their judgments, which may differ from the Bank’s.

Any increase in the allowance for credit losses required by these regulatory agencies could have a negative effect on the Bank’s results of operations and financial condition.

While management believes that the allowance for credit losses is currently adequate to cover inherent losses, further loan deterioration could occur, and therefore, management cannot assure shareholders that there will not be a need to increase the allowance for credit losses, or that the regulators will not require management to increase this allowance.

Either of these occurrences could materially and adversely affect Patriot’s earnings and profitability.

Risks Related to Our Business Operations

Patriot is dependent on its locally-based management team and the loss of its senior executive officers or other key employees could impair its relationship with its customers and adversely affect its business and financial results.

The Bank’s success is dependent upon the continued services and skills of its long-term locally-based management team.

The unexpected loss of services of one or more of these key personnel, because of their skills, knowledge of the Bank’s market, years of industry experience, and the difficulty of promptly finding qualified replacement personnel could have an adverse impact on the Bank’s business.

Patriot’s success also depends, in part, on its continued ability to attract and retain experienced commercial lenders and retail bankers, as well as other management personnel.

The loss of services of several such key personnel could adversely affect Patriot’s growth and prospects, to the extent replacement personnel are not able to be identified and promptly retained.

Competition for commercial lenders and retail bankers is strong, and Patriot may not be successful in retaining or attracting such personnel.

Natural disasters, acts of war or terrorism, the impact of health epidemics and other adverse external events could detrimentally affect our financial condition and results of operations.

Natural disasters (including severe weather events of increasing strength and frequency due to climate change), acts of war or terrorism, such as the war between Russia & Ukraine, occurrence of health epidemics and other adverse external events could have a significant negative impact on our ability to conduct business or upon third parties who perform operational services for us or our customers.

Such events also could affect the stability of our deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage, result in lost revenue or cause us to incur additional expenses.

Patriot is subject to certain general affirmative debt covenants, which if it cannot comply, may result in default and actions taken against it by its debt holders.

An investment in our securities involves risks.

You should carefully consider the risks and uncertainties described below, together with the other information in this Annual Report on Form 10-K, including our consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The occurrence of any of the following risks, alone or in combination with other events or circumstances, could materially adversely affect our business, financial condition, results of operations, liquidity, capital, reputation, and the trading price of our common stock.

Risks Relating to Regulatory Oversight, Remediation and Strategic Repositioning

The Bank is subject to the Formal Agreement, and failure to satisfy its requirements could result in additional supervisory or enforcement actions, restrictions on our business, and other material adverse consequences.

On January 17, 2025, the Bank entered into the Formal Agreement.

The OCC found unsafe or unsound practices and violations of law, rule, or regulation relating to, among other things, strategic planning, capital planning, BSA/AML risk management, payment activities oversight, credit administration, and concentration risk management.

The Formal Agreement requires the Bank to implement extensive corrective actions relating to capital, liquidity, governance, strategic planning, BSA/AML, payments oversight, credit administration, concentration risk, and related reporting and controls.

Compliance with the Formal Agreement requires substantial management attention, Board oversight, personnel, systems, and expense.

There can be no assurance that our remediation efforts will be completed on the timelines we expect, that they will be viewed by the OCC as satisfactory, or that the OCC will terminate the Formal Agreement within any particular period.

If we fail to satisfy the requirements of the Formal Agreement, or if the OCC determines that our corrective actions are not sufficiently effective or sustainable, we could be subject to additional supervisory or enforcement actions, restrictions on growth or activities, limitations on dividends or other capital actions, objections to new products, services, or personnel changes, civil money penalties, receivership, or other adverse consequences.

Any of these outcomes could materially adversely affect our business, financial condition, results of operations, reputation, and strategic flexibility.

The Bank is in “troubled condition” for regulatory purposes, which may subject us to heightened scrutiny, limit our flexibility, and adversely affect our business and growth prospects.

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The Formal Agreement provides that, as a result of the Agreement, the Bank is in “troubled condition,” a regulatory designation that applies, among other circumstances, when a national bank is subject to a formal written agreement requiring action to improve its financial condition, unless otherwise informed in writing by the OCC.

The Formal Agreement also provides that the Bank is not an “eligible bank” for certain purposes unless otherwise informed in writing by the OCC.

This status may increase supervisory scrutiny and may affect our ability to pursue acquisitions, branches, new business activities, new offices, product launches, strategic deviations, or other corporate actions on the timeline or in the manner we would otherwise prefer.

It may also adversely affect counterparties’, customers’, investors’, and employees’ perceptions of the Bank and could make it more difficult or more expensive for us to attract deposits, retain or recruit key personnel, raise capital, obtain regulatory approvals, or pursue aspects of our strategic plan.

Our business is undergoing a substantial strategic repositioning and we may not successfully execute the transition to our revised business model.

During 2025, we substantially reconstituted our management team and Board, recapitalized the Company, and began repositioning the Bank around targeted client segments, including high net worth individuals, family offices, entrepreneurs, investors, business leaders and the businesses that serve them, digital payments and related institutional banking clients, and certain underbanked but creditworthy customers.

The strategic plan contemplates narrowing certain legacy activities, reducing or eliminating certain non-core products, replacing portions of the legacy portfolio, and building enhanced risk management, reporting, and operating capabilities.

Our repositioning may not succeed, may take longer than expected, or may expose us to execution risk, operational disruption, client attrition, elevated expenses, and financial underperformance.

We may not achieve the revenue mix, deposit mix, credit performance, operating efficiency, or risk-adjusted returns contemplated by management.

If the repositioning is unsuccessful, our business, financial condition, and results of operations could be materially adversely affected.

Our remediation efforts are extensive and ongoing and they may not be effective, timely, or sustainable.

The Formal Agreement requires corrective action across a broad range of areas, including strategic planning, capital planning, BSA/AML, customer identification, program manager due diligence and monitoring, suspicious activity monitoring and look-back reviews, BSA/AML risk assessment, BSA staffing and training, payment activities oversight, credit administration, concentration risk management, and liquidity risk management.

These remediation efforts are complex and interdependent.

They require timely design, implementation, documentation, testing, governance, and sustained effectiveness.

Even if corrective actions are adopted, they may not operate as intended, may reveal additional gaps, may require costly redesign, or may be challenged by staffing turnover, data quality issues, vendor limitations, or business growth.

If our remediation efforts are delayed, ineffective, or not sustained over time, we could remain subject to heightened supervisory concerns and additional restrictions or enforcement action.

We are subject to numerous laws and governmental regulations and to regular examinations by regulators of our business and compliance with laws and regulations, and our failure to comply with such laws and regulations or to adequately address any matters identified during our examinations could materially and adversely affect us.

Federal banking agencies regularly conduct comprehensive examinations of our business, including our compliance with applicable laws, regulations and policies.

Examination reports and ratings (which often are not publicly available) and other aspects of this supervisory framework can materially impact the conduct, organic and acquisition growth and profitability of our business.

Our regulators have extensive discretion in their supervisory and enforcement activities and have imposed and may in the future impose a variety of remedial actions if, as a result of an examination, they determined that our financial condition, capital resources, asset quality, earnings prospects, management, liquidity or other aspects of any of our operations had become unsatisfactory, or that we or our management were in violation of any law, regulation or policy.

Examples of those actions could include requiring affirmative actions to correct any conditions resulting from any asserted violation of law, issuing administrative orders that can be judicially enforced, enjoining unsafe or unsound practices, directing increases in our capital, assessing civil monetary penalties against our officers or directors, removing officers and directors and, if a conclusion was reached that the offending conditions cannot be corrected, or there is an imminent risk of loss to depositors, terminating our deposit insurance.

Other actions, formal or informal, that may be imposed could restrict our growth, including regulatory denials to expand branches, relocate, add or restructure subsidiaries and affiliates, expand into new financial activities or merge with or purchase other financial institutions.

The timing of these examinations, including the timing of the resolution of any issues identified by our

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regulators in the examinations and the final determination by them with respect to the imposition of any remedial actions, conditions or limitations on our business operations, is generally not within our control.

We also could suffer reputational harm in the event of any perceived or actual noncompliance with certain laws and regulations.

If we become subject to such regulatory actions, we could be materially and adversely affected.

Regulations addressing consumer privacy and data use and security could increase our costs and impact our reputation.

We are subject to federal, state and local laws related to consumer privacy and data use and security, including information safeguard rules under the Gramm-Leach-Bliley Act.

These rules require financial institutions to develop, implement, and maintain a written, comprehensive information security program containing safeguards that are appropriate to the financial institution’s size and complexity, the nature and scope of the financial institution’s activities, and the sensitivity of any customer information at issue.

The United States has experienced a heightened legislative and regulatory focus on privacy and data security, including requirements as to consumer notification in the event of data breaches and certain types of security breaches.

Additional regulations in these areas may increase compliance costs, which could negatively impact earnings.

In addition, failure to comply with the privacy, data use and security laws and regulations to which we are subject, including by reason of inadvertent disclosure of confidential information, could result in fines, sanctions, penalties, reputational harm, loss of consumer confidence, and other adverse consequences, any of which could have a material adverse effect on our results of operations and business.

The Bank may be required to pay significantly higher FDIC premiums, special assessments, or taxes that could adversely affect its earnings.

Market developments have significantly impacted the insurance fund of the FDIC.

As a result, the Bank may be required to pay higher premiums, or special assessments, that could adversely affect earnings.

Our designation as a troubled institution operating under the Formal Agreement may also subject us to elevated FDIC and other regulatory fees.

The amount of premiums the FDIC requires for the insurance coverage it provides is outside the Bank’s control.

If there are additional banks or financial institution failures, the Bank may be required to pay higher FDIC premiums than are currently assessed.

Increases in FDIC insurance premiums, including any future increases or required prepayments, may materially adversely affect the Bank’s results of operations.

Changing regulation of corporate governance and public disclosure.

Patriot is subject to laws, regulations, and standards relating to corporate governance and public disclosure, SEC rules and regulations, and NASDAQ rules.

These laws, regulations, and standards are subject to varying interpretations, and as a result, their practical application may evolve over time as new guidance is provided by regulatory and governing bodies.

Due to the evolving legal and regulatory environment, compliance may become more difficult and result in higher costs.

The Company is committed to maintaining high standards of corporate governance and public disclosure.

As a result, the Company’s efforts to comply with evolving laws, regulations and standards have resulted in, and are likely to continue to result in, increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities.

The Company’s reputation may be harmed, if it does not continue to comply with these laws, regulations and standards.

Litigation and regulatory actions, including enforcement actions, could subject us to significant fines, penalties, judgments or other requirements resulting in increased expenses or restrictions on our business activities.

Our business is subject to litigation and regulatory risks as a result of a number of factors, including the highly regulated nature of the financial services industry and the focus of state and federal prosecutors on banks and the financial services industry generally.

Legal or regulatory actions may subject us to substantial compensatory or punitive damages, significant fines, penalties, obligations to change our business practices or other requirements resulting in increased expenses, operational burdens, diminished income and damage to our reputation.

Our involvement in any such matters, even if the matters are ultimately determined in our favor, could also cause significant harm to our reputation and divert management attention from the operation of our business.

Further, any settlement, consent order or adverse judgment in connection with any formal or informal proceeding or investigation by government agencies may result in litigation, investigations or proceedings as other litigants and government agencies begin independent reviews of the same activities.

As a result, the outcome of legal and regulatory actions could be material to our business, results of operations, financial condition and cash flows, depending on, among other factors, the level of our earnings for that period and could have a material adverse effect on our business, financial condition or results of operations.

We depend on a new management team and Board, and our failure to have prudent change management including to retain, integrate, and effectively align new leadership could impair execution of our strategy and remediation efforts.

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In 2025, the Company replaced or added leadership in numerous key roles, including Chief Executive Officer, President, Chief Credit Officer, Chief Financial Officer, Chief Risk Officer, and leadership in operations, treasury management, BSA, legal, relationship management, accounting, finance, technology, and reporting.

Our strategic and remediation efforts depend heavily on these leaders’ ability to work effectively together, establish sound controls, implement new policies and reporting, attract additional talent, and maintain constructive regulatory relationships.

Competition for experienced banking, risk, BSA/AML, payments, and technology personnel is significant.

If we lose key executives or fail to recruit, integrate, incentivize, and retain qualified personnel, our remediation, growth, and risk management efforts could be delayed or impaired, and our financial condition and results of operations could be materially adversely affected.

Risks Relating to Institutional Banking, Digital Payments and BSA/AML

Our institutional banking and digital payments activities involve heightened operational, compliance, fraud, and BSA/AML risks.

A significant part of our revised strategy and non-interest income profile depends on institutional banking and digital payments activities, including sponsor-bank services, ACH and money movement, debit and credit card-related services, and products and services provided to and through program managers and other non-depository financial institutions.

Institutional Banking is currently the largest driver of non-interest income and the Bank has increased annualized digital payments revenue since recapitalization.

These activities present elevated risks relative to traditional community banking, including fraud, sanctions, money laundering, transaction monitoring, third-party oversight, operational processing failures, consumer complaints, settlement and reconciliation issues, and reputational risk.

The Formal Agreement specifically requires enhanced oversight of prepaid cards, ACH and wire activity, suspicious activity review, program manager due diligence, and BSA staffing and training.

If we fail to identify, measure, monitor, and control these risks, we could face losses, customer attrition, litigation, regulatory criticism, enforcement action, and restrictions on our ability to grow or continue these activities.

Deficiencies in our BSA/AML, sanctions, customer identification, or suspicious activity monitoring programs could result in enforcement action, penalties, losses, and reputational damage.

Banking regulations require compliance with BSA/AML laws and regulations.

The Bank was not in compliance with these regulations and therefore entered into the Formal Agreement with the OCC which requires a detailed BSA/AML action plan and corrective action relating to customer identification for reloadable prepaid cards, program manager due diligence and monitoring, suspicious activity monitoring and reporting, suspicious activity look-back, BSA/AML risk assessment, and BSA staffing and training.

These requirements reflect supervisory findings that our BSA/AML framework required significant enhancement.

If our BSA/AML, sanctions, or fraud-monitoring controls are inadequate, if third-party program managers fail to perform as expected, if transaction monitoring rules or case management processes are ineffective, or if we fail to identify and report suspicious activity on a timely basis, we may be subject to additional enforcement actions, penalties, remediation costs, activity restrictions, customer losses, and significant reputational harm.

The review or amendment of prior suspicious activity determinations could also create operational burden, increased expense, and heightened supervisory attention.

Our reliance on third-party program managers, fintech relationships, vendors, and other counterparties exposes us to significant third-party risk.

Our institutional banking, digital payments, treasury, and technology activities depend on third-party relationships, including program managers, processors, technology providers, monitoring vendors, and other counterparties.

The Formal Agreement requires risk-based due diligence, ongoing monitoring, periodic reviews, and in some cases on-site visits and review of independent audit reports for program managers.

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.

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Digital Payments and Institutional Banking Deposits can be highly concentrated and have significant volatility which could result in heightened Liquidity Risks to the Bank.

Digital Payments and Digital Payments deposits can be highly concentrated with individual decision makers in control of large deposits.

Additionally, many of these deposits are short term, unpredictable, or volatile by their nature and can be withdrawn on demand.

These factors contribute to the Bank’s liquidity risk and if not managed appropriately can result in the liquidation of assets, the inability to hold long-term assets, and other adverse impacts up to and including insolvency.

Our reliance on Program Managers increases our exposure to risks from third party negligence or misconduct.

Our digital payments business relies on third party program managers to provide certain marketing, banking and treasury management services to our clients on behalf of the Bank.

The Bank oversees the activities of its Program Managers, however errors, negligence, or malfeasance by the program managers can pose significant risks to the Bank and can subject the Bank to material liabilities, losses, and other risks such as violations of regulations and law.

Risks Relating to Credit, Concentrations and Legacy Assets

Our legacy portfolio, including criticized, classified, nonperforming, or non-core assets, may continue to adversely affect our results of operations, capital, and management attention.

The Bank historically held certain loan categories and purchased assets that were not strategic, including unsecured consumer loans, HELOCs, single-family residential loans, and securities, and the Bank is seeking to reduce, run off, sell, and replace certain legacy portfolios and concentration exposures.

Legacy assets may continue to generate elevated credit costs, valuation adjustments, workout expenses, and management distraction, and their runoff or sale may occur on less favorable terms than we expect.

We may also incur losses, lower yields, or liquidity constraints in connection with repositioning the portfolio.

Our commercial real estate and other secured lending activities expose us to concentration risk, collateral risk, and credit losses.

Commercial real estate has historically represented a significant portion of the Bank’s loan portfolio, and both management and the OCC have identified concentration risk management as an area requiring enhancement.

Commercial real estate and relationship-based secured lending can involve larger balances, more complex underwriting, and repayment that depends on business cash flow, tenant performance, market values, and refinancing conditions.

Deterioration in real estate values, occupancy, rents, debt-service coverage, sponsor liquidity, or capital market conditions could materially increase defaults and losses.

Our allowance for credit losses may prove insufficient, and changes in estimates, portfolio performance, or supervisory expectations could require additional provisions.

The determination of the allowance for credit losses requires management to make significant judgment regarding current conditions, reasonable and supportable forecasts, borrower performance, collateral values, and portfolio risk characteristics.

Actual losses may differ materially from our estimates.

During 2025, the Bank increased its reserve for loan losses relative to loan balances and continued resolving special assets.

If economic conditions worsen, if credit migration exceeds our expectations, if collateral values decline, or if regulators require different classifications, methodologies, or assumptions, we may need to increase our provision for credit losses, which could materially adversely affect our earnings and capital.

Risks Relating to Capital, Liquidity and Balance Sheet Management

If we fail to maintain sufficient capital, we may be subject to restrictions, may be unable to execute our strategy, and may need to raise additional capital on unfavorable terms or at all.

The Formal Agreement requires the Bank to maintain minimum capital ratios of 10.0% common equity Tier 1, 10.0% Tier 1 capital, 11.5% total capital, and 9.0% leverage, and requires an internal capital planning process and OCC non-objection to the Bank’s capital plan.

The Bank’s ability to maintain these levels depends on earnings, credit performance, balance sheet mix, asset growth, market values, and access to capital.

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Although the Company raised substantial capital in 2025, there can be no assurance that our capital levels will remain sufficient under stress, that our business plan will generate the expected earnings, or that we would be able to raise additional capital on acceptable terms if needed.

Capital raises could be dilutive to existing shareholders, could involve burdensome terms, or could be unavailable during periods of market stress or heightened regulatory scrutiny.

Our liquidity could be adversely affected by deposit volatility, funding concentration, market disruption, deterioration in our regulatory or financial condition, or the characteristics of our deposit base.

Liquidity risk is a central risk for us, particularly as we reposition our business and manage deposit mix.

We believe that prior liquidity planning did not adequately reflect the impact of rising rates on the liquidity of loans and securities, deposit concentrations including digital payments deposits, reduced Federal Home Loan Bank (“FHLB”) and Federal Reserve financing capacity from capital impairment, and risks to uninsured and other deposits.

The Formal Agreement requires a revised liquidity risk management program emphasizing cash flow projections, diversified funding sources, a cushion of highly liquid assets, liquidity stress testing, and a contingency funding plan.

Our deposits may be more rate-sensitive, concentrated, or operationally volatile than traditional retail core deposits, particularly in institutional, digital payments, or large-balance relationship accounts.

If depositors withdraw funds unexpectedly, if counterparties reduce funding availability, if collateral values decline, or if our access to brokered, reciprocal, FHLB, Federal Reserve, or other funding is constrained, our liquidity could be materially adversely affected.

Our deposit strategy may not produce the funding mix, stability, cost, or scale we expect.

Our revised strategy depends in part on growing relationship-based deposits from high-net-worth and business clients while also utilizing institutional and digital payments deposits.

The Bank reduced deposit costs in 2025 and restructured its digital payments activities to improve pricing and depository services.

There can be no assurance that these trends will continue.

Competition for deposits remains intense, and our target clients may be highly rate-sensitive, operationally mobile, or able to move funds quickly.

If we cannot attract or retain deposits at acceptable cost and stability, our net interest margin, liquidity, profitability, and growth could be adversely affected.

Changes in interest rates, asset-liability mismatches, and market values may adversely affect our net interest income, liquidity, capital, and financial condition.

Our earnings depend significantly on net interest income, which is affected by the level, slope, and volatility of interest rates, the timing of repricing, deposit betas, customer behavior, prepayments, and funding mix.

The Bank previously failed to adequately evaluate and manage interest rate risk and certain fixed-rate securities and loans resulted in unrealized losses, extended durations, and liability sensitivity in a rising-rate environment.

Changes in rates may compress margins, reduce loan demand, increase deposit costs, impair borrowers’ repayment capacity, increase the market value sensitivity of securities and loans, reduce collateral values, and limit liquidity if assets must be sold at a loss.

We may not be able to manage these risks successfully through balance sheet positioning, pricing, hedging, or other strategies.

Risks Relating to Operations, Technology and Competition

Our operating model depends on enhancements to infrastructure, data, reporting, and controls, and failures in those areas could impair decision-making, financial reporting, and risk management.

Our strategic plan emphasizes operational excellence and superior analytics and acknowledges prior deficiencies in change management, internal reporting, key performance indicators and key risk indicators (“KPIs/KRIs”), and risk measurement.

The Bank is building or enhancing data, reporting, and governance capabilities, including those needed to support enterprise risk management, regulatory reporting, BSA/AML, payments monitoring, concentration management, and business line profitability.

These initiatives may be costly, delayed, or ineffective.

Data quality problems, reporting gaps, model weaknesses, system integration failures, or control deficiencies could impair management’s ability to identify and manage risk, support accurate financial and regulatory reporting, or satisfy supervisory expectations.

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Management concluded that our disclosure controls and procedures and internal control over financial reporting were not effective as of December 31, 2025, and if we fail to remediate the underlying control deficiencies in a timely manner, our business, financial condition, results of operations, and access to capital could be adversely affected.

As described in Item 9A of this Annual Report on Form 10-K, management concluded that the Company’s disclosure controls and procedures and internal control over financial reporting were not effective as of December 31, 2025.

In connection with its evaluation, management identified deficiencies concentrated 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.

Although the Company’s independent registered public accounting firm expressed an opinion that the Company’s consolidated financial statements as of and for the year ended December 31, 2025 are fairly presented in all material respects and in conformity with U.S.

GAAP, management concluded that the control deficiencies it identified, when considered together, constituted a material weakness in the Company’s internal control over financial reporting as of December 31, 2025.

The existence of these control deficiencies and the related material weakness could adversely affect the Company’s ability to record, process, summarize, and report financial information accurately and on a timely basis, and could impair its ability to comply with applicable financial reporting and disclosure obligations.

Remediation requires substantial management attention, cost, and resources, including enhancement of documentation, evidencing, monitoring, information-technology general controls, financial-close and reconciliation controls, and controls over certain third-party and digital-payments activities.

There can be no assurance that these remediation efforts will be completed in a timely manner or that they will be effective.

If the material weakness is not remediated, or if additional material weaknesses or significant deficiencies are identified, the Company could experience delays in financial reporting, increased costs, loss of investor confidence, regulatory scrutiny, and other adverse effects on its business, financial condition, results of operations, and access to capital.

The Company is subject to certain general affirmative debt covenants, which if it cannot comply, may result in default and actions taken against it by its debt holders.

On June 29, 2018, the Company entered into certain subordinated note purchase agreements with two institutional accredited investors and completed a private placement of $10 million of fixed-to-floating rate subordinated notes with the maturity date of September 30, 2028.

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The subordinated debt qualifies for Tier 2 Capital of the Company and the funds contributed to the Bank qualify as Tier 1 capital at the Bank.

In December 2022, the Company issued $12 million of senior notes that contain certain affirmative covenants, which require the Company to:

maintain its and its subsidiaries’ legal entity and tax status, pay its income tax obligations on a timely basis, and comply with SEC and FDIC reporting requirements.

The senior notes are unsecured, rank equally with all other senior obligations of the Company, are not redeemable nor may they be put to the Company by the holders of the notes, and require no payment of principal until maturity.

The affirmative covenants contained in the senior notes and subordinated notes agreements are of a general nature and not uncommon in such debt agreements.

Management does not anticipate an inability to maintain its compliance with the affirmative covenants contained in the senior notes and subordinated notes agreements as such compliance is inherent in the Bank’s continued operation and Patriot’s public company status, as well as management’s overall strategic plan.

The affirmative covenants contained in the subordinated notes agreements are of a general nature and not uncommon in such debt agreements.

Management does not anticipate an inability to maintain its compliance with the affirmative covenants contained in the subordinated notes agreements as such compliance is inherent in the Bank’s continued operation and Patriot’s public company status, as well as management’s overall strategic plan.

The Bank is subject to environmental liability risk associated with its lending activities.

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The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on Patriot’s financial condition and results of operations.

The Company relies on the dividends and return of capital it receives from its subsidiary.

The Company is a separate and distinct legal entity from the Bank.

The Company’s primary source of revenue is the dividends or other returns of capital it receives from the Bank, which the Company uses to fund its activities, meet its obligations, and remit dividends to its shareholders.

Various federal and state laws and regulations limit the amount of dividends or other returns of capital that a bank may pay to its parent company.

In addition, the Company’s right to participate in a distribution of assets, upon liquidation or reorganization of the Bank or another regulated subsidiary, may be subordinate to claims by the Bank’s or subsidiary's creditors.

If the Bank were to be restricted from making payments to the Company, the Company’s ability to fund its activities, meet its obligations, or pay dividends to its shareholders might be curtailed.

The inability to receive payments from the Bank could therefore have a material adverse effect on the Company.

Per agreement with Bank regulators, dividends and return of capital from the Bank to the Company are subject to prior approval from the OCC, and dividends from the Company to third parties are also subject to prior approval from FRB.

There is no assurance that Company will pay dividends in the future.

Technology Risks

A breach of information security could adversely affect Patriot ’ s operations or reputation and create significant legal and financial exposure.

The Company faces cybersecurity risks, including denial of service, hacking, and malware or ransomware attacks, which could result in the disclosure of confidential information, adversely affect the Company’s operations or reputation, and create significant legal and financial exposure.

Patriot increasingly depends upon data processing, communications, and information exchange on a variety of computing platforms and networks, and the internet to conduct its business.

Patriot cannot be certain that all of its systems are entirely free from vulnerability to attack, despite safeguards it has instituted.

In addition, Patriot relies on the services of a variety of vendors to meet its data processing and communication needs.

If information security is breached, information can be lost or misappropriated and could result in financial loss or costs to Patriot, or damages to others.

These financial losses or costs could materially exceed the amount of Patriot’s insurance coverage, if applicable, which would have an adverse effect on its results of operations and financial condition.

In addition, the Bank’s reputation could suffer if its database were breached, which could materially affect Patriot’s financial condition and results of operations.

Risks associated with changes in technology.

Financial products and services have become increasingly technology-driven.

The Bank’s ability to compete for new customers and meet the needs of existing customers, in a cost-efficient manner, is dependent on its ability to keep pace with technological advances and to invest in new technology as it becomes available.

Many of the Bank’s competitors have greater resources to invest in technology and may be better equipped to market new technology-driven products and services.

Failing to keep pace with technological change could have a material adverse impact on the Bank’s business and therefore on Patriot’s financial condition and results of operations.

Regulatory, Compliance and Legal Risks

Government regulation may have an adverse effect on Patriot ’ s profitability and growth.

Patriot is subject to extensive regulation, supervision, and examination by the OCC as the Bank’s chartering authority, the FDIC as the insurer of its deposits, and the Fed as its primary regulator.

Changes in federal and state banking laws and regulations, or in federal monetary policies, could adversely affect the Bank’s profitability and continued growth.

Legislative and regulatory changes are expected, but cannot be predicted.

For example, new legislation or regulation could limit the way Patriot may conduct its business, including the Bank’s ability to obtain financing, attract deposits, make loans, and achieve satisfactory interest spreads.

The laws, regulations, interpretations, and enforcement policies that apply to Patriot have been subject to significant, and sometimes retroactively applied, changes in recent years, and are likely to change significantly in the future.

Legislation enacted by the U.S.

Congress, proposing significant structural reforms to the financial services industry, has, among other things, created the CFPB, which is given broad authority to regulate financial service providers and financial products.

In addition, the Fed has passed guidance on incentive compensation at financial institutions it regulates and the United States Department of the Treasury and federal banking regulators have issued statements calling for higher capital and liquidity requirements.

Complying with any new legislative or regulatory requirements and any programs established thereunder by federal and state governments, could have an adverse impact on Patriot’s operations and the results thereof.

The Bank may be required to pay significantly higher FDIC premiums, special assessments, or taxes that could adversely affect its earnings.

Market developments have significantly impacted the insurance fund of the FDIC.

As a result, the Bank may be required to pay higher premiums, or special assessments, that could adversely affect earnings.

The amount of premiums the FDIC requires for the insurance coverage it provides is outside the Bank’s control.

If there are additional banks or financial institution failures, the Bank may be required to pay higher FDIC premiums than are currently assessed.

Increases in FDIC insurance premiums, including any future increases or required prepayments, may materially adversely affect the Bank’s results of operations.

Patriot is subject to risks associated with taxation.

The amount of income taxes Patriot is required to pay on its earnings is based on federal and state legislation and regulations.

Patriot provides for current and deferred taxes in its financial statements, based on the results of operations, business activity, legal structure, interpretation of tax statutes, assessment of risk of adjustment upon audit, and application of financial accounting standards.

Patriot may take tax return filing positions for which the final determination of tax is uncertain.

Patriot’s net income or loss and the related amount per share may be reduced, if a federal, state, or local tax authority assesses additional taxes, penalties, or interest that has not been provided for in the consolidated financial statements.

Since Patriot has a full valuation allowance recorded against its deferred tax assets, there is no risk of further reduction to Patriot’s equity position and net income or loss from changes in expectations about the future realizability of deferred tax assets.There can be no assurance that Patriot will achieve its anticipated effective tax rate, due to a change in a tax law, or the result of a tax audit that disallows previously recognized tax benefits.

Changing regulation of corporate governance and public disclosure.

Patriot is subject to laws, regulations, and standards relating to corporate governance and public disclosure, SEC rules and regulations, and NASDAQ rules.

Due to the evolving legal and regulatory environment, compliance may become more difficult and result in higher costs.

Patriot is committed to maintaining high standards of corporate governance and public disclosure.

As a result, Patriot’s efforts to comply with evolving laws, regulations and standards have resulted in, and are likely to continue to result in, increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities.

Patriot’s reputation may be harmed, if it does not continue to comply with these laws, regulations and standards.

Competition Risks

Strong competition in Patriot ’ s geographical market could limit growth and profitability.

Competition in the banking and financial services industry is intense.

Fairfield County, Connecticut and the New York City metropolitan areas have a high concentration of financial institutions including large money center and regional banks, community banks, and credit unions.

Some of Patriot’s competitors offer products and services that the Bank currently does not offer, such as private banking and trust services.

Many of these competitors have substantially greater resources and lending limits than the Bank, and may offer certain services that Patriot does not or cannot provide.

Price competition might result in the Bank earning less on its loans and paying more for deposits, which would reduce net interest income.

Patriot expects competition to increase in the future, as a result of legislative, regulatory and technological changes.

Patriot’s profitability depends upon its continued ability to successfully compete in its geographical market.

Liquidity Risk

Patriot is subject to certain risks with respect to liquidity.

"Liquidity" refers to Patriot’s ability to generate sufficient cash flows to support its operations and fulfill its obligations, including commitments by the Bank to originate loans, to repay its wholesale borrowings and other liabilities, and to satisfy the withdrawal of deposits by its customers.

Patriot’s primary sources of liquidity are the deposits the Bank acquires organically through its branch network, through the activities of its Digital Payments Division, and through its online deposit channels.

Funds are also acquired through borrowed funds primarily in the form of collateralized borrowings from the Federal Reserve Bank and the Federal Home Loan Bank, deposits raised through listing services, and the cash flows generated through the collection of loan payments and on mortgage-related securities.

In addition, depending on current market conditions, Patriot may have the ability to access the capital markets.

Deposit flows, calls of investment securities and wholesale borrowings, and prepayments of loans and mortgage-related securities are strongly influenced by such external factors as the direction of interest rates, whether actual or perceived;

local and national economic conditions;

and competition for deposits and loans in the markets served.

Deposits coming through the Payments Division will fluctuate on a daily basis based on standard business activity in the underlying customer accounts.

Furthermore, changes to the underwriting guidelines for wholesale borrowings, or lending policies may limit or restrict Patriot’s ability to borrow, and could therefore have a significant adverse impact on its liquidity.

A decline in available funding could adversely impact Patriot’s ability to originate loans, invest in securities, and meet its expenses, or to fulfill such obligations as repaying its borrowings or meeting deposit withdrawal demands.

Risks Related to the Company’s Common Stock

The price of the Company ’ s common stock may fluctuate.

The market price of the Company’s common stock could be subject to significant fluctuations due to changes in sentiment in the market regarding the Company’s operations or business prospects.

Among other factors, the Company’s stock price may be affected by:

• Operating results that vary from the expectations of securities analysts and investors;

• Developments in its business or in the financial services sector in-general;

• Regulatory or legislative changes affecting its business or the financial services sector in-general;

• Operating results or securities price performance of companies that investors consider being comparable to the Company;

• Changes in estimates or recommendations by securities analysts or rating agencies;

• Announcements of strategic developments, acquisitions, dispositions, financings, and other material events by the Company or the Company’s competitors;

• Changes or volatility in global financial markets and economies, general market conditions, interest or foreign exchange rates, stock, commodity, credit, or asset valuations.

Negative public opinion regarding us could adversely affect our stock price, business, results of operations, and financial condition.

Reputational harm, including as a result of our actual or alleged conduct or public opinion of the financial services industry generally, could adversely affect our stock price, business, results of operations, and financial condition.

Reputation risk, or the risk to our business, earnings, liquidity, capital, stability or viability from negative public opinion, is inherent in our business and

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is expected to increase as our size, profile and product offerings in the financial services industry grows.

Negative publicity or reputational harm can result from actual or alleged conduct in a number of areas, including legal and regulatory compliance, lending practices, corporate governance, litigation, inadequate protection of customer data, illegal or unauthorized acts taken by third parties that supply products or services to us, the behavior of our team members, the customers with whom we have chosen to do business, the industries in which we operate, corporate initiatives and negative publicity for other financial institutions.

Damage to our reputation could adversely impact our ability to attract new, or maintain existing, loan and deposit customers, team members and business relationships, and could result in the imposition of new regulatory requirements, operational restrictions, enhanced supervision and/or civil money penalties.

Further, negative public opinion can expose us to litigation and regulatory action and delay and impede our efforts to raise capital or implement our growth strategy.

The proliferation and increasing influence of social media websites and the use thereof by investors who may sell our public stock short, also may increase the risk that negative, inappropriate or unauthorized information may be posted or released publicly that could harm our reputation, adversely affect our stock price or the public’s perception of our stability or viability, or have other negative consequences.

Any damage to our reputation could have a material adverse effect on our stock price, business, results of operations, and financial condition.

A cyberattack, fraud event, information security breach, payments disruption, or technology failure could affect us materially and adversely.

We rely extensively on information systems, online and mobile channels, payments systems, vendors, data processors, and communications networks.

Our institutional banking and digital payments activities increase our exposure to cyber, fraud, payments, and operational threats.

Like other financial institutions, we face risks from phishing, ransomware, credential compromise, vendor compromise, insider threats, account takeover, business email compromise, data theft, fraud rings, and service outages.

Public company and bank peer filings continue to identify cybersecurity, employee misconduct, and operational breakdown as material risks.

A successful attack or system failure could disrupt operations, compromise customer data, result in financial losses, trigger remediation costs, regulatory scrutiny, litigation, and reputational damage, and materially adversely affect our business and financial condition.

The development and use of artificial intelligence presents risks and challenges that may adversely impact our business.

We or our third-party vendors, customers or counterparties may develop or incorporate artificial intelligence (“AI”) technology in certain business processes, services or products.

The development and use of AI presents a number of risks and challenges, including concerns around safety and soundness, privacy and data-handling, fair access to financial services, fair treatment to customers, inaccuracy of results broadly known as “hallucinations” and compliance with applicable laws and regulations.

The legal and regulatory environment relating to AI is uncertain and rapidly evolving, both in the U.S.

and internationally, and includes regulatory schemes targeted specifically at AI as well as provisions in intellectual property, privacy, consumer protection, employment, and other laws applicable to the use of AI.

These evolving laws and regulations could require changes in our implementation of AI technology and increase our compliance costs and the risks to us of non-compliance.

AI models, particularly generative or agentic AI models, may produce outputs or take action that is incorrect, that reflects biases included in the data on which they are trained, that results in the release of private, confidential, or proprietary information, that infringes on the intellectual property rights of others, or that is otherwise harmful.

Further, we may rely on AI models developed by third parties, and, to that extent, would be dependent in part on the manner in which those third parties develop and train their models, including risks arising from the inclusion of any unauthorized material in the training data for their models and the effectiveness of the steps these third parties have taken to limit the risks associated with output of their models, matters over which we may have limited visibility.

Any of these risks could expose us to liability or adverse legal or regulatory consequences and harm our reputation and the public perception of our business or the effectiveness of our security measures.

We face intense competition in our markets and in our target client segments, and we may not be able to compete effectively.

We compete with money-center banks, regional and community banks, private banks, specialty finance companies, fintechs, and other non-bank providers.

Our strategy specifically targets client segments that may also be targeted by larger institutions with broader capabilities, stronger brands, lower cost of funds, greater lending capacity, more advanced technology, or wider product offerings.

We recognize that the Bank is attempting to differentiate itself in client segments that larger institutions and specialty providers also serve.

If we cannot compete effectively on service, convenience, pricing, expertise, technology, or risk-adjusted product offerings, our growth and profitability could suffer.

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The Company is subject to risks associated with taxation.

The amount of income taxes the Company is required to pay on its earnings is based on federal and state legislation and regulations.

the Company provides for current and deferred taxes in its financial statements, based on the results of operations, business activity, legal structure, interpretation of tax statutes, assessment of risk of adjustment upon audit, and application of financial accounting standards.

The Company may take tax return filing positions for which the final determination of tax is uncertain, and tax authorities could assess additional taxes, penalties, or interest that may adversely affect the Company’s results of operations, financial condition, or cash flows.

The Company also has significant federal and state net operating loss carryforwards, the utilization of which may be limited by Section 382 of the Internal Revenue Code and similar state law provisions.

The Company’s existing Section 382 analysis does not yet 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 a result, the amount and future availability of the Company’s net operating loss carryforwards could be reduced once updated analyses are completed.

In addition, although the Company maintained a full valuation allowance against its deferred tax assets at December 31, 2025, there can be no assurance regarding the timing or amount of any future reduction in that valuation allowance, or whether future changes in tax law, taxable income projections, ownership changes, or tax audit outcomes may adversely affect the Company’s effective tax rate, tax expense, net income, or capital.

Risks Relating to the Company and its Common Stock

The Holding Company depends on dividends and other distributions from the Bank, which are restricted and may be further limited by regulation and supervisory actions.

The Holding Company is a separate legal entity from the Bank and relies primarily on dividends and other distributions from the Bank to fund holding company expenses, debt service, and any shareholder distributions.

The Formal Agreement requires prior written non-objection before the Bank may declare or pay dividends or make capital distributions, and the Bank may do so only if it remains in compliance with its capital plan and applicable law.

Regulatory restrictions, earnings limitations, capital requirements, or supervisory objections could limit the Bank’s ability to distribute funds to the Holding Company, which could adversely affect the Holding Company’s liquidity and ability to meet its obligations.

Our common stock price may be volatile, and shareholders may experience dilution or other adverse effects from future capital actions or market perceptions of our business and regulatory status.

The market price of our common stock may fluctuate significantly due to our operating results, regulatory developments, remediation progress, capital actions, perceptions of our strategic execution, broader bank-sector conditions, or general market volatility.

Banks subject to heightened regulatory scrutiny or undergoing strategic restructuring may experience greater share price volatility.

If we issue additional equity, convertible securities, preferred stock, or other capital instruments in the future, existing shareholders may experience dilution or the market may react adversely to such issuances.

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Risks Relating to General Economic and Market Conditions

We may be adversely affected by national financial markets and economic conditions, as well as local conditions.

Geopolitical conflicts and military tensions, including the ongoing conflict between Russia and Ukraine and hostilities involving Iran and the Middle East, may contribute to volatility in energy prices, inflation, financial markets, cybersecurity threats, and broader macroeconomic conditions, any of which could adversely affect our borrowers, deposit base, liquidity, capital, and results of operations.

In addition, we are affected by the economic conditions within our Connecticut and New York trade areas.

Unlike larger banks that are more geographically diversified, 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.

Therefore, any decline in the economy of the Fairfield or New Haven counties of Connecticut or the New York metropolitan area could have an adverse impact on us.

Our loans, the ability of borrowers to repay these loans, and the value of collateral securing these loans are impacted by economic conditions.

Natural disasters, acts of war or terrorism, the impact of health epidemics and other adverse external events could detrimentally affect our financial condition and results of operations.

Natural disasters (including severe weather events of increasing strength and frequency due to climate change), acts of war or terrorism, health epidemics, geopolitical conflicts, and other adverse external events could have a significant negative impact on our ability to conduct business or upon third parties that provide services for us or our customers.

Although we do not believe we have material direct exposure to the ongoing conflict between Russia and Ukraine or hostilities involving Iran and the Middle East, such events may adversely affect us indirectly through volatility in financial markets, energy and commodity prices, inflation, cyber threats, vendor or payment-system disruption, changes in customer behavior, deterioration in borrower credit quality, instability in our deposit base, or declines in collateral values.

Any such effects could result in lost revenue, higher expenses, reduced liquidity, or other adverse effects on our financial condition and results of operations.

Risks related to environmental and other global matters

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What changed 10-K

Item 1A. Risk Factors