Overview of Financial Performance

Patriot National Bancorp, Inc. (the “Company”) reported a net loss of $39.9 million for the year ended December 31, 2024, compared to a net loss of $4.2 million in the prior year. This significant decline was primarily driven by a $25.1 million charge to establish a full valuation allowance against the Company’s deferred tax assets. The Company also recorded $13.6 million in charge-offs on two large commercial real estate loans, contributing to the overall net loss.

Revenue and Profit Trends

Net interest income, the difference between interest earned on loans and investments and interest paid on deposits and borrowings, decreased by $8.4 million to $20.1 million in 2024. This was due to a $101.3 million decline in average loan balances as the Company restricted loan growth to strengthen its capital position. The net interest margin contracted from 2.8% in 2023 to 2.1% in 2024 as deposit costs increased amid rising interest rates, only partially offset by higher yields on variable-rate loans.

The provision for credit losses increased by $5.0 million to $12.5 million in 2024, reflecting the charge-offs on the commercial real estate loans. Non-interest income rose by $2.4 million, primarily from higher revenue in the Company’s digital payments program. Non-interest expense decreased slightly by $628,000, though this was offset by the $1.1 million goodwill impairment recorded in 2023.

Overall, the Company reported a pre-tax loss of $16.1 million in 2024, compared to a pre-tax loss of $5.6 million in the prior year. The net loss of $39.9 million, or $10.03 per share, was significantly higher than the $4.2 million, or $1.05 per share, net loss in 2023.

Strengths and Weaknesses

One of the Company’s key strengths is its digital payments program, which has been a source of growing non-interest income. However, the Company’s core lending business has struggled, with a significant decline in average loan balances and elevated credit costs. The charge-offs on the two large commercial real estate loans highlight the risks in the Company’s commercial real estate portfolio.

The Company’s capital ratios have deteriorated, with the Bank failing to meet any of its regulatory capital requirements as of December 31, 2024. The common equity tier 1 capital ratio of 7.58% was well below the required 10.00%, and the total risk-based capital ratio of 7.71% fell short of the 11.50% minimum. This has limited the Bank’s ability to grow and has increased regulatory scrutiny.

Outlook and Conclusion

The outlook for Patriot National Bancorp remains challenging. The Company will need to focus on rebuilding its capital position, likely through a combination of reducing assets, improving profitability, and potentially raising additional capital. Addressing the credit quality issues in the commercial real estate portfolio will also be a priority.

While the digital payments program provides a source of non-interest income, the Company’s core banking operations have struggled, and the net interest margin compression is likely to persist in the current rising interest rate environment. Patriot National Bancorp will need to execute a comprehensive turnaround strategy to return to profitability and regain a strong capital position.

Table 1: Key Financial Ratios

Metric	2024	2023	2022
Return on Average Assets	-4.03%	-0.39%	0.60%
Return on Average Equity	-110.37%	-8.99%	9.87%
Average Equity to Average Assets	3.66%	4.34%	6.09%

Table 2: Allowance for Credit Losses

(In thousands)	2024	2023	2022
Balance at beginning of the period	$15,925	$10,310	$9,905
Impact of ASC 326 adoption	-	$13,001	-
Charge-offs	$(22,593)	$(18,417)	$(1,828)
Recoveries	$1,429	$1,128	$348
Net charge-offs	$(21,164)	$(17,289)	$(1,480)
Provision for credit losses	$12,544	$9,903	$1,885
Balance at end of the period	$7,305	$15,925	$10,310
Net charge-offs to average loans	-2.66%	-1.93%	-0.18%
Allowance for credit losses to total loans	1.03%	1.88%	1.22%
Allowance for credit losses to nonaccrual loans	28.24%	87.85%	55.45%

Table 3: Loan Portfolio Composition

(In thousands)	2024	2023	2022
Commercial Real Estate	$419,489	$472,093	$437,443
Residential Real Estate	$92,215	$106,783	$124,140
Commercial and Industrial	$129,608	$163,565	$138,787
Consumer and Other	$59,973	$99,688	$141,091
Construction	$3,830	$4,266	$4,922
Construction to permanent - CRE	$2,357	$2,464	$1,933
Total Loans Receivable, Gross	$707,472	$848,859	$848,316

Table 4: Regulatory Capital Ratios

Metric	2024 Patriot National Bancorp, Inc.	2024 Patriot Bank, N.A.	2023 Patriot National Bancorp, Inc.	2023 Patriot Bank, N.A.
Total Capital (to risk-weighted assets)	6.07%	7.71%	10.00%	11.22%
Tier 1 Capital (to risk-weighted assets)	4.57%	7.58%	8.17%	10.50%
Common Equity Tier 1 Capital (to risk-weighted assets)	3.48%	7.58%	7.27%	10.50%
Tier 1 Leverage Capital (to average assets)	3.50%	5.79%	6.76%	8.70%