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Regulatory and Operational Matters
 12 Months Ended
Dec. 31, 2024
Regulatory Capital Requirements under Banking Regulations [Abstract]  
Regulatory and Operational Matters Regulatory and Operational Matters
Federal and state regulatory authorities have adopted standards requiring financial institutions to maintain increased levels of capital. Effective January 1, 2015, federal banking agencies imposed four minimum capital requirements on a community bank’s risk-based capital ratios consisting of Total Capital, Tier 1 Capital, Common Equity Tier 1 (“CET1”) Capital, and a Tier 1 Leverage Capital ratio. The risk-based capital ratios measure the adequacy of a bank's capital against the riskiness of its on- and off-balance sheet assets and activities. Failure to maintain adequate capital is a basis for "prompt corrective action" or other regulatory enforcement action. In assessing a bank's capital adequacy, regulators also consider other factors such as interest rate risk exposure, liquidity, funding and market risks, quality and level of earnings, concentrations of credit, quality of loans and investments, nontraditional activity risk, policy effectiveness, and management's overall ability to monitor and control risk.
In September 2019, the community bank leverage ratio (“CBLR”) framework was jointly issued by the FDIC, OCC and FRB. The final rule gives qualifying community banks the option to use a simplified measure of capital adequacy instead of risk based capital, beginning with their March 31, 2020 Call Report. Under the final rule a community bank may qualify for the CBLR framework if it has a Tier 1 leverage ratio of greater than 9%, less than $10 billion in total consolidated assets, and limited amounts of off-balance sheet exposures and trading assets and liabilities. The CARES Act directed the federal banking agencies to issue an interim rule temporarily lowering the CBLR ratio to 8% which the agencies did with a transition back to 9% beginning January 1, 2022. Capital adequacy is one of the most important factors used to determine the safety and soundness of individual banks and the banking system. A community bank which meets the leverage ratio requirement, and other CBLR framework requirements will not be subject to other capital and leverage requirements and will be considered “well capitalized.”
Capital adequacy is one of the most important factors used to determine the safety and soundness of individual banks and the banking system. From September 2021 to September 30, 2023, the Company elected to adopt the CBLR framework. In the fourth quarter of 2023, the Company elected to use the instituted regulatory risk-based capital approach.
Under the instituted regulatory framework, to be considered “well capitalized”, a financial institution must generally have a Total Capital ratio of at least 10%, a Tier 1 Capital ratio of at least 8.0%, a CET1 Capital ratio at least 6.5%, and a Tier 1 Leverage Capital ratio of at least 5%. However, regardless of a financial institution’s ratios, the OCC may require increased capital ratios or impose dividend restrictions based on the other factors it considers in assessing a bank’s capital adequacy. Under the final capital rules that became effective on January 1, 2015, there was a requirement for a CET1 capital conservation buffer of 2.5% of risk-weighted assets, which is in addition to the other minimum risk-based capital standards in the rule. Institutions that do not maintain this required capital buffer become subject to progressively more stringent limitations on the percentage of earnings that may be distributed to shareholders or used for stock repurchases and on the payment of discretionary bonuses to senior executive management. The capital conservation buffer of 2.5% has been included in the minimum capital adequacy ratios as of December 31, 2024 and 2023.
On April 17, 2024, based on its supervisory profile, the Bank was notified by the OCC that it established individual minimum capital ratios (“IMCR”) for the Bank. Specifically, the Bank is required to maintain the following ratios: a common equity tier 1 capital ratio of 10.00%, a Tier 1 capital ratio of 10.00%, a Tier 1 leverage ratio of 9.00% and a total capital ratio of 11.50%. As of December 31, 2024, the Bank did not meet all of its regulatory capital requirements. During 2024, the Bank significantly reduced its total and risk-based assets to work towards achieving the OCC requirements
On January 14, 2025, the Bank entered into an agreement with the OCC, pursuant to which the Bank agreed, through its board of directors to take certain actions in the areas of strategic planning, capital planning, Bank Secrecy Act / Anti-Money Laundering risk management, payment activities oversight, credit administration and concentrations risk management. The Bank’s Board appointed a Compliance Committee in January 2025, as required, to oversee the progress and compliance with the OCC Agreement.
The Bank has been working to address each of the items identified in the OCC Agreement. The Company has completed the Private Placement , which was critical to address the Capital Plan and Higher Minimums Article and pivotal to the Strategic Plan.
The Capital Plan and Higher Minimums Article in the OCC Agreement established capital minimums that need to be met and maintained. The Bank is required to maintain the following ratios: a common equity tier 1 capital ratio of 10.00%, a Tier 1 capital ratio of 10.00%, a Tier 1 leverage ratio of 9.00% and a total capital ratio of 11.50%. As of December 31, 2024, the Bank did not meet all of its regulatory capital requirements. The Private Placement results in capital ratios that are in excess of the minimums required by the OCC Agreement.
The Company and Bank’s regulatory capital amounts and ratios at December 31, 2024 and 2023 are summarized as follows:
December 31, 2024December 31, 2023
Patriot National Bancorp, Inc.Patriot Bank, N.A.Patriot National Bancorp, Inc.Patriot Bank, N.A.
(Dollar amounts in thousands)AmountRatioAmountRatioAmountRatioAmountRatio
Total Capital (to risk weighted assets):
Actual$44,534 6.07 %$56,536 7.71 %$89,727 10.00 %$100,683 11.22 %
To be Well Capitalized(1)— — 73,309 10.00 %— — 89,732 10.00 %
For capital adequacy58,667 8.00 %58,648 8.00 %71,788 8.00 %71,785 8.00 %
Individual minimum capital ratio(2)— — 84,306 11.50 %— — N/AN/A
Tier 1 Capital (to risk weighted assets):
Actual33,545 4.57 %55,546 7.58 %73,282 8.17 %94,238 10.50 %
To be Well Capitalized(1)— — 58,648 8.00 %— — 71,785 8.00 %
For capital adequacy44,001 6.00 %43,986 6.00 %53,841 6.00 %53,839 6.00 %
Individual minimum capital ratio(2)— — 73,309 10.00 %— — N/AN/A
Common Equity Tier 1 Capital
(to risk weighted assets):
Actual25,545 3.48 %55,546 7.58 %65,282 7.27 %94,238 10.50 %
To be Well Capitalized(1)— — 47,651 6.50 %— — 58,325 6.50 %
For capital adequacy33,000 4.50 %32,989 4.50 %40,381 4.50 %40,379 4.50 %
Individual minimum capital ratio(2)— — 73,309 10.00 %— — N/AN/A
Tier 1 Leverage Capital (to average assets):
Actual33,545 3.50 %55,546 5.79 %73,282 6.76 %94,238 8.70 %
To be Well Capitalized(1)— — 47,948 5.00 %— — 54,170 5.00 %
For capital adequacy38,368 4.00 %38,358 4.00 %43,339 4.00 %43,336 4.00 %
Individual minimum capital ratio(2)— — 86,306 9.00 %— — N/AN/A
(1) Designation as "Well Capitalized" does not apply to bank holding companies - the Company. Such categorization of capital adequacy only applies to insured depository institutions - the Bank.
(2) The Capital ratios established by the OCC began to be phased in beginning April 17,2024. It was not applicable to periods prior to that date and does not apply to bank holding companies - the Company.