Company: PNBK
Filing Date: 2025-05-14
Form Type: 10-Q
Source: 0001628280-25-025485
Chunk: 17

Company: PATRIOT NATIONAL BANCORP INC
Filing Date: 2025-05-14
Form: 10-Q
Item: Part I, Item 1
Chunk 17
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 31, 2025 and 2024, Patriot did not purchase any home equity line of credit loans (“HELOC”). 

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Table of ContentsPATRIOT NATIONAL BANCORP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited)

Construction LoansConstruction loans are of a short-term nature, generally of eighteen months or less, that are secured by land and improvements intended for commercial, residential, or mixed-use development. Loan proceeds may be used for the acquisition of or improvements to the land under development and funds are generally disbursed as phases of construction are completed. Included in this category are loans to construct single family homes where no contract of sale exists, based upon the experience and financial strength of the builder, the type and location of the property, and other factors. Construction loans tend to be personally guaranteed by the principal(s). Repayment of such loans may be negatively impacted by an inability to complete construction, a downturn in the market for new construction, by a significant increase in interest rates, or by decline in general economic conditions. The construction loans outstanding at March 31, 2025 and December 31, 2024 totaled $3.8 million and $3.8 million, respectively.Construction to Permanent - Commercial Real Estate Construction to permanent loans represent a one-time close of a construction facility with simultaneous conversion to an amortizing mortgage loan. Construction to permanent loans combine a short-term period similar to a construction loan, generally with a variable rate, and a longer term CRE loan typically 20-25 years, resetting every five years to the Federal Home Loan Bank (“FHLB”) rate.Close of the permanent facility typically occurs when events dictate, such as receipt of a certificate of occupancy and property stabilization, which is defined as cash flow sufficient to support a pre-defined minimum debt coverage ratio and other conditions and covenants particular to the loan. Construction facilities are typically variable rate instruments that, upon conversion to an amortizing mortgage loan, reset to a fixed rate instrument that is the greater of the in-force variable rate plus a predetermined spread over a reference rate (e.g., prime) or a minimum interest rate.Real estate construction loans include risks associated with the borrower’s credit-worthiness, contractor’s qualifications, borrower and contractor performance, and the overall risk and complexity of the proposed project. Construction lending is also subject to risks associated with sub-market dynamics, including population, employment trends and household income. During times of economic stress, this type of loan has typically had a greater degree