What the changes say
- The bank entered into an OCC Formal Agreement requiring extensive remediation across capital, governance, and BSA/AML functions.
- Management is aggressively executing a strategic repositioning into digital payments and institutional banking.
- Heavy reliance on third-party program managers introduces heightened compliance, liquidity, and operational risk.
What changed since the prior 10-K
New
- NewRisks 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
The OCC issued a Formal Agreement on January 17, 2025, citing unsafe practices and requiring extensive corrective actions that demand substantial management attention and expense.
- NewRisks Relating to Regulatory Oversight, Remediation and Strategic Repositioning
Our business is undergoing a substantial strategic repositioning and we may not successfully execute the transition to our revised business model
The bank is undergoing a substantial strategic repositioning around targeted client segments and digital payments, which risks operational disruption, client attrition, and financial underperformance.
- NewRisks Relating to Regulatory Oversight, Remediation and Strategic Repositioning
Our remediation efforts are extensive and ongoing and they may not be effective, timely, or sustainable
Extensive remediation efforts required by the Formal Agreement across BSA/AML and credit administration may be ineffective, untimely, or not sustained over time.
- NewRisks Relating to Regulatory Oversight, Remediation and Strategic Repositioning
Regulations addressing consumer privacy and data use and security could increase our costs and impact our reputation
Gramm-Leach-Bliley Act privacy and data security regulations could increase compliance costs and impact our reputation.
- NewRisks Relating to Regulatory Oversight, Remediation and Strategic Repositioning
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
Litigation and regulatory actions could subject us to significant fines, penalties, judgments, or business restrictions.
- NewRisks 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
Institutional banking and digital payments activities present elevated risks regarding fraud, sanctions, money laundering, and third-party oversight.
- NewRisks Relating to Institutional Banking, Digital Payments and BSA/AML
Deficiencies in our BSA/AML, sanctions, customer identification, or suspicious activity monitoring programs could result in enforcement action, penalties, losses, and reputational damage
Deficiencies in BSA/AML, sanctions, or suspicious activity monitoring programs could result in severe enforcement actions and penalties.
- NewRisks Relating to Institutional Banking, Digital Payments and BSA/AML
Our reliance on third-party program managers, fintech relationships, vendors, and other counterparties exposes us to significant third-party risk
Reliance on third-party program managers and fintech vendors exposes us to significant operational, regulatory, and reputational risks.
- NewRisks Relating to Institutional Banking, Digital Payments and BSA/AML
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 institutional banking deposits can be highly concentrated and volatile, creating significant liquidity risk.
- NewRisks Relating to Institutional Banking, Digital Payments and BSA/AML
Our reliance on Program Managers increases our exposure to risks from third party negligence or misconduct
Errors, negligence, or malfeasance by third-party program managers can subject the bank to material liabilities and regulatory violations.
- NewRisks 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
Legacy assets including unsecured consumer loans and HELOCs may continue to generate elevated credit costs and management distraction.
- NewRisks Relating to Credit, Concentrations and Legacy Assets
Our commercial real estate and other secured lending activities expose us to concentration risk, collateral risk, and credit losses
Commercial real estate concentrations and relationship-based secured lending expose us to collateral risk and credit losses.
- NewRisks Relating to Credit, Concentrations and Legacy Assets
Our allowance for credit losses may prove insufficient, and changes in estimates, portfolio performance, or supervisory expectations could require additional provisions
- NewRisks 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
- NewRisks Relating to Capital, Liquidity and Balance Sheet Management
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
- NewRisks Relating to Capital, Liquidity and Balance Sheet Management
Our deposit strategy may not produce the funding mix, stability, cost, or scale we expect
- NewRisks Relating to Capital, Liquidity and Balance Sheet Management
Changes in interest rates, asset-liability mismatches, and market values may adversely affect our net interest income, liquidity, capital, and financial condition
- NewRisks 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
- NewRisks Relating to Operations, Technology and Competition
Negative public opinion regarding us could adversely affect our stock price, business, results of operations, and financial condition
- NewRisks Relating to Operations, Technology and Competition
A cyberattack, fraud event, information security breach, payments disruption, or technology failure could affect us materially and adversely
- NewRisks Relating to Operations, Technology and Competition
The development and use of artificial intelligence presents risks and challenges that may adversely impact our business
- NewRisks Relating to Operations, Technology and Competition
We face intense competition in our markets and in our target client segments, and we may not be able to compete effectively
- NewRisks 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
- NewRisks Relating to the Company and its Common Stock
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
Dropped
- DroppedRisks Related to General Economic and Market Conditions
The Bank’s business is subject to various lending and other economic risks that could adversely impact its results of operations and financial condition
- DroppedMarket Risk
The Bank’s business is subject to interest rate risk and variations in interest rates may negatively affect the Bank’s financial performance
Regional economic downturns in Connecticut and New York.
- DroppedMarket Risk
Patriot’s investment portfolio includes securities that are sensitive to interest rates and variations in interest rates may adversely impact Patriot’s profitability
Interest rate risk and variations negatively affecting financial performance.
- DroppedMarket Risk
Inflationary pressures and rising prices may affect our results of operations and financial condition
Sensitivities of available-for-sale securities portfolio to interest rates.
- DroppedMarket Risk
The risks involved in the Bank’s commercial real estate loan portfolio are material
Inflationary pressures and rising prices affecting operations.
- DroppedMarket Risk
Real estate lending involves risks related to a decline in value of commercial and residential real estate
Risks material to the commercial real estate loan portfolio.
- DroppedMarket Risk
The Bank’s allowance for credit losses may not be adequate to cover actual losses
Real estate lending risks related to property value declines.
- DroppedRisks 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
Inadequacy of the allowance for credit losses.
- DroppedRisks Related to Our Business Operations
The Company relies on the dividends and return of capital it receives from its subsidiary
Dependence on locally-based management team and senior officers.
- DroppedTechnology Risks
A breach of information security could adversely affect Patriot’s operations or reputation and create significant legal and financial exposure
- DroppedTechnology Risks
Risks associated with changes in technology
- DroppedRegulatory, Compliance and Legal Risks
Government regulation may have an adverse effect on Patriot’s profitability and growth
- DroppedRegulatory, Compliance and Legal Risks
Strong competition in Patriot’s geographical market could limit growth and profitability
Company reliance on subsidiary dividends and capital return.
- DroppedRegulatory, Compliance and Legal Risks
"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
Cybersecurity breaches, ransomware, and IT infrastructure risks.
- DroppedRisks Related to the Company’s Common Stock
The price of the Company’s common stock may fluctuate
Risks associated with keeping pace with changing technology.
Reworded
- 84% rewrittenRisks Relating to Operations, Technology and Competition
The Company is subject to risks associated with taxation
Added specific mention of potential limitations on the utilization of significant federal and state net operating loss carryforwards under Section 382.
Was: Patriot is subject to risks associated with taxation
- 83% rewrittenRisks Relating to General Economic and Market 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
Expanded external event risks to explicitly include indirect impacts from Middle East hostilities and Iran conflicts on markets, energy, and inflation.
- 46% rewrittenRisks Relating to Operations, Technology and Competition
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
Clarified that affirmative covenants contained in subordinated note agreements are of a general nature.
Was: 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
- 27% rewrittenRisks Relating to Regulatory Oversight, Remediation and Strategic Repositioning
The Bank may be required to pay significantly higher FDIC premiums, special assessments, or taxes that could adversely affect its earnings
Added a specific threat that being designated as a troubled institution operating under the Formal Agreement may subject the bank to elevated FDIC fees.
- 24% rewrittenRisks Relating to General Economic and Market Conditions
We may be adversely affected by national financial markets and economic conditions, as well as local conditions
Removed references to local economic conditions within specific Connecticut and New York trade areas.
Was: We have been and may continue to be adversely affected by national financial markets and economic conditions, as well as local conditions
- 21% rewrittenRisks Relating to Regulatory Oversight, Remediation and Strategic Repositioning
Changing regulation of corporate governance and public disclosure
Updated corporate governance risk language to refer specifically to 'The Company' instead of 'Patriot'.
All 31 risk factors
Headings as the filing states them, in filing order.
Risks Relating to Regulatory Oversight, Remediation and Strategic Repositioning
- 01The 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 consequencesNew
- 02Our business is undergoing a substantial strategic repositioning and we may not successfully execute the transition to our revised business modelNew
- 03Our remediation efforts are extensive and ongoing and they may not be effective, timely, or sustainableNew
- 04Regulations addressing consumer privacy and data use and security could increase our costs and impact our reputationNew
- 05The Bank may be required to pay significantly higher FDIC premiums, special assessments, or taxes that could adversely affect its earnings27% rewritten
- 06Changing regulation of corporate governance and public disclosure21% rewritten
- 07Litigation 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 activitiesNew
Risks Relating to Institutional Banking, Digital Payments and BSA/AML
- 08Our institutional banking and digital payments activities involve heightened operational, compliance, fraud, and BSA/AML risksNew
- 09Deficiencies in our BSA/AML, sanctions, customer identification, or suspicious activity monitoring programs could result in enforcement action, penalties, losses, and reputational damageNew
- 10Our reliance on third-party program managers, fintech relationships, vendors, and other counterparties exposes us to significant third-party riskNew
- 11Digital Payments and Institutional Banking Deposits can be highly concentrated and have significant volatility which could result in heightened Liquidity Risks to the BankNew
- 12Our reliance on Program Managers increases our exposure to risks from third party negligence or misconductNew
Risks Relating to Credit, Concentrations and Legacy Assets
- 13Our legacy portfolio, including criticized, classified, nonperforming, or non-core assets, may continue to adversely affect our results of operations, capital, and management attentionNew
- 14Our commercial real estate and other secured lending activities expose us to concentration risk, collateral risk, and credit lossesNew
- 15Our allowance for credit losses may prove insufficient, and changes in estimates, portfolio performance, or supervisory expectations could require additional provisionsNew
Risks Relating to Capital, Liquidity and Balance Sheet Management
- 16If 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 allNew
- 17Our 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 baseNew
- 18Our deposit strategy may not produce the funding mix, stability, cost, or scale we expectNew
- 19Changes in interest rates, asset-liability mismatches, and market values may adversely affect our net interest income, liquidity, capital, and financial conditionNew
Risks Relating to Operations, Technology and Competition
- 20Our operating model depends on enhancements to infrastructure, data, reporting, and controls, and failures in those areas could impair decision-making, financial reporting, and risk managementNew
- 21The 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 holders46% rewritten
- 22The Bank is subject to environmental liability risk associated with its lending activities
- 23Negative public opinion regarding us could adversely affect our stock price, business, results of operations, and financial conditionNew
- 24A cyberattack, fraud event, information security breach, payments disruption, or technology failure could affect us materially and adverselyNew
- 25The development and use of artificial intelligence presents risks and challenges that may adversely impact our businessNew
- 26We face intense competition in our markets and in our target client segments, and we may not be able to compete effectivelyNew
- 27The Company is subject to risks associated with taxation84% rewritten
Risks Relating to the Company and its Common Stock
- 28The Holding Company depends on dividends and other distributions from the Bank, which are restricted and may be further limited by regulation and supervisory actionsNew
- 29Our 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 statusNew
Risks Relating to General Economic and Market Conditions
- 30We may be adversely affected by national financial markets and economic conditions, as well as local conditions24% rewritten
- 31Natural 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 operations83% rewritten
Other Patriot National Bancorp 10-Ks
- FY2024 10-K risk factors22 risks
Patriot National Bancorp relies heavily on regional economic conditions in Connecticut and New York, significant commercial real estate lending, and exposure to interest rate fluctuations.
Filed Apr 15, 2025
About this page
The headings are the filing's own. The one-line readings and the overview are automated and can be wrong: read Item 1A of the 10-K for the exact wording.