U. S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                  FORM 10 - KSB


[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2000

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
     SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to
                               --------------------    --------------------

Commission file number 000-29599

                         PATRIOT NATIONAL BANCORP, INC.
                 (Name of small business issuer in its charter)

            Connecticut                                  06-1559137
  (State or other jurisdiction of           (IRS Employer Identification Number)
  incorporation  or organization)
         900 Bedford Street
        Stamford, Connecticut                               06901
(Address of principal executive offices)                  (Zip Code)

Issuer's telephone number                               (203) 324-7500

         Securities registered under Section 12(b) of the Exchange Act:
                                      None
         Securities registered under Section 12(g) of the Exchange Act:
                     Common Stock, par value $2.00 per share
Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter  period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.

                               Yes  X   No
                                  -----   -----

Check if disclosure  of delinquent  filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure  will be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB. [ ]

State issuer's revenue for its most recent fiscal year: $17,379,431
                                                        -----------

Aggregate  market  value  of the  voting  stock  held  by  nonaffiliates  of the
registrant as of February 28, 2001: $11,486,698

Number of shares of the  registrant's  Common Stock,  par value $2.00 per share,
outstanding as of February 28, 2001: 2,400,375
                                     ---------


<PAGE>


Documents Incorporated by Reference
-----------------------------------

Proxy Statement for 2001 Annual               Incorporated into Part III of this
Meeting of Shareholders.  (A definitive       Form 10-KSB
proxy statement will be filed with the
Securities and Exchange Commission
within 120 days after the close of the
fiscal year covered by this Form 10-KSB.)

Transition Small Business Disclosure Format (check one):

         Yes         No  X
            -----      -----





<PAGE>




                                Table of Contents

Part I                                                                    Page

Item 1.    Description of Business                                          1

Item 2.    Description of Properties                                        6

Item 3.    Legal Proceedings                                                7

Item 4.    Submission of Matters to a Vote of Security Holders              7

Part II

Item 5.    Market for Common Equity and Related
              Shareholder Matters                                           7

Item 6.    Management's Discussion and Analysis or
              Plan of Operation                                            10

Item 7.    Financial Statements                                            22

Item 8.    Changes in and Disagreements with Accountants
              on Accounting and Financial Disclosure                       22

Part III

Item 9.    Directors, Executive Officers, Promoters and
              Control Persons: Compliance with Section 16 (a)
              of the Exchange Act                                          23

Item 10.  Executive Compensation                                           23

Item 11.  Security Ownership of Certain Beneficial Owners
             and Management                                                23

Item 12.  Certain Relationships and Related Transactions                   23

Item 13.  Exhibits and Reports on Form 8-K                                 23


<PAGE>

                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS
         -----------------------

Patriot  National  Bancorp,  Inc.,  ("Bancorp")  a Connecticut  corporation  was
organized  in 1999 for the purpose of becoming a one-bank  holding  company (the
"Reorganization")  for Patriot  National  Bank, a national  banking  association
headquartered  in  Stamford,  Connecticut  (the  "Bank").  Following  receipt of
regulatory and shareholder approvals,  the Reorganization became effective as of
the  opening  of  business  on  December  1,  1999.  Upon  consummation  of  the
Reorganization,  each  outstanding  share of Common  Stock,  par value $2.00 per
share,  of the Bank  ("Bank  Common  Stock"),  was  converted  into the right to
receive  one share of Common  Stock,  par value  $2.00  per  share,  of  Bancorp
("Bancorp  Common Stock"),  and each  outstanding  option or warrant to purchase
Bank Common  Stock  became an option or warrant to  purchase an equal  number of
shares of Bancorp Common Stock.

As of the date hereof,  the only  business of Bancorp is its ownership of all of
the issued and  outstanding  capital stock of the Bank.  Except as  specifically
noted otherwise herein,  the balance of the description of Bancorp's business is
a description of the Bank's business.

The Bank was granted  preliminary  approval by the  Comptroller  of the Currency
(the "OCC") on March 5, 1993 and received its charter and  commenced  operations
as a national  bank on August 31,  1994.  On September 5, 1997 the Bank opened a
branch office in Greenwich,  Connecticut.  On October 12, 1999 the Bank opened a
branch  office in Old  Greenwich,  Connecticut.  The Bank has recently  received
approval from the OCC to open a branch office in Norwalk, Connecticut.

On  June  30,  1999,  the  Bank  through  its  wholly-owned  subsidiary,  PinPat
Acquisition  Corporation,  acquired  all of the  outstanding  capital  stock  of
Pinnacle Financial Corp., a Connecticut corporation, Pinnacle Financial Corp., a
New Jersey  corporation,  and Pinnacle  Financial  Corp., a New York corporation
(collectively,  "Pinnacle"), a residential mortgage broker. Pinnacle surrendered
its mortgage  licenses and the  mortgage  brokerage  business of Pinnacle is now
conducted through a division of the Bank. If Bancorp determines in the future to
conduct this  business  through  Pinnacle,  Pinnacle  will file for  appropriate
mortgage licenses.  Pinnacle has not had a significant impact on the business or
results of operation of Bancorp.

Bancorp  currently  conducts  business  operations at its office  located at 900
Bedford Street, Stamford,  Connecticut. The Bank conducts business operations at
its office located at 900 Bedford Street, Stamford, Connecticut; a branch office
located at 100 Mason Street, Greenwich, Connecticut; and a branch office located
at 184 Sound Beach Avenue,  Old Greenwich,  Connecticut.  The Bank also operates
mortgage origination offices at 71 Lewis Street, Greenwich,  Connecticut and 125
Wireless Boulevard, Suite 1, Hauppauge, New York.

The Bank is an  independent  bank engaged in  substantially  all of the business
operations  customarily  conducted by  independent  commercial  banks.  The Bank
offers  a broad  range of  consumer  and  commercial  banking  services  with an
emphasis on serving the needs of individuals,  small and medium-sized businesses
and professionals. The Bank offers consumer and commercial deposit accounts that
include:  checking  accounts,  interest-bearing  "NOW"  accounts,  insured money
market  accounts,  time  certificates  of deposit,  savings  accounts  and IRA's
(Individual   Retirement   Accounts).   Other  services  include  money  orders,
traveler's checks and access to an ATM (automated  teller system).  In addition,
the Bank may in the future offer Keogh  accounts and other  financial  services.
The Bank does not currently accept brokered deposits.


                                       1
<PAGE>


The Bank offers commercial real estate and construction loans to area businesses
and  developers.  Real estate loans made to individuals  include home mortgages,
home  improvement  loans,  bridge loans and home equity  lines of credit.  Other
personal  loans  include  lines of credit,  installment  loans and credit cards.
Commercial  loans offered to small and medium-sized  businesses  include secured
and unsecured loans to service companies, real estate developers, manufacturers,
restaurants,  wholesalers,  retailers and  professionals  doing  business in the
region.

The Bank competes with all  institutions  in its market area.  Most have greater
financial resources and  capitalization,  which gives them higher lending limits
and the ability to conduct  larger  advertising  campaigns to attract  business.
Generally the larger institutions offer services such as trust and international
banking which the Bank is not equipped to offer directly.  When the need arises,
arrangements are made with correspondent  institutions to provide such services.
To attract  business in this competitive  environment,  the Bank relies on local
promotional   activities  and  personal  contact  by  officers,   directors  and
shareholders and on its ability to offer personalized services.

The Bank does not, and may not in the future, offer trust services.  If the Bank
desires in the future to offer trust services, prior approval of the OCC will be
required.

The  customer  base  of  the  Bank  is  diversified  so  that  there  is  not  a
concentration of either loans or deposits within a single  industry,  a group of
industries,  a single  person or groups of people.  The Bank is not dependent on
one or a few major customers for either its deposit or lending  activities,  the
loss of any one of which would have a material adverse effect on the business of
the Bank.

Residents  and  businesses  in Stamford and  Greenwich  Connecticut  provide the
majority of the Bank's  deposits.  The Bank has focused its attention on serving
that segment of its market area historically served by community banks operating
in Stamford and  Greenwich.  The Bank competes in its market by providing a high
level of personalized and responsive banking service for which the Bank believes
there is a need.  This  area is  bordered  by New York  State to the  west,  the
Merritt  Parkway to the north,  the Town of Darien to the east,  and Long Island
Sound to the south.

The Bank's loan  customers  extend beyond  Stamford and Greenwich to include the
adjacent towns of New Canaan and Norwalk in Connecticut, and Westchester County,
New York,  although the Bank's loan business is not necessarily limited to these
areas.  The Bank's  mortgage  brokerage  business is  concentrated  in the areas
surrounding its loan origination offices. While the Bank does not currently hold
or  intend  to  attract   significant   deposit  or  loan  business  from  major
corporations  with headquarters in the Stamford area, the Bank believes that the
service,  professional and related  businesses which have been attracted to this
area, as well as the individuals,  represent current and potential  customers of
the Bank.

In  the  normal  course  of  business  and  subject  to  applicable   government
regulations,  the Bank invests a portion of its assets in investment securities,
which may  include  certain  debt and equity  securities,  including  government
securities.  An objective of the Bank's investment policy is to seek to optimize
its return on assets while  limiting its exposure to interest rate movements and
to maintain adequate levels of liquidity.

The Bank's employees perform most routine day-to-day banking transactions at the
Bank.  However,  the Bank has entered into a number of  arrangements  with third
parties for banking


                                       2
<PAGE>


services  such  as  correspondent  banking,  check  clearing,   data  processing
services, credit card processing and armored carrier service.

The  City of  Stamford  and the  Town  of  Greenwich  are  presently  served  by
approximately 67 branches of commercial  banks and savings banks,  most of which
are  offices  of  banks  which  have  headquarters  outside  of the  area or are
subsidiaries  of bank or financial  holding  companies  whose  headquarters  are
outside of Stamford  or  Greenwich.  In  addition to the banks with  branches in
Stamford and  Greenwich,  there are numerous  banks and  financial  institutions
serving the  communities  surrounding  Stamford and  Greenwich,  which also draw
customers from Stamford and  Greenwich,  posing  significant  competition to the
Bank for deposits and loans.  Competition can also be expected from out-of-state
financial  institutions,  which may  establish or acquire  offices in the Bank's
service area and from other local financial institutions, which may be formed in
the future.  Many of such banks and financial  institutions are well established
and well capitalized.

In recent years,  intense market  demands,  economic  pressures and  significant
legislative and regulatory actions have eroded banking industry  classifications
which were once clearly defined and have increased  competition  among banks, as
well as other  financial  institutions.  This increase in competition has caused
banks and other financial  service  institutions to diversify their services and
become more cost effective as a result of competition  with one another and with
new types of financial service companies,  including non-bank competitors. While
the impact on Bancorp of federal legislation  authorizing  increased services by
financial  holding  companies  and  interstate  branching  of  banks  cannot  be
determined,  Bancorp  anticipates  that such  legislation  will likely result in
increased  competition.  These events have resulted in increasing homogeneity in
the financial services offered by banks and other financial  institutions.  Some
of the  results  to banks  and  other  financial  institutions  of these  market
dynamics and  legislative  and regulatory  changes have been increased  customer
awareness of product and service  differences  among  competitors  and increased
merger activity.

Bancorp's  operations are subject to regulation,  supervision and examination by
the Board of  Governors  of the  Federal  Reserve  Board (the  "Federal  Reserve
Board") as a bank holding  company.  The Federal  Reserve Board has  established
capital adequacy  guidelines for bank holding  companies that are similar to the
OCC's capital guidelines applicable to the Bank. The Bank Holding Company Act of
1956,  as amended  (the "BHC Act"),  limits the types of  companies  that a bank
holding  company may acquire or organize and the  activities in which it or they
may engage. In general,  bank holding companies and their  subsidiaries are only
permitted  to engage in or  acquire  direct  control of any  company  engaged in
banking  or in a  business  so  closely  related  to  banking  as to be a proper
incident  thereto.  Federal  legislation  enacted  in  1999  authorizes  certain
entities  to register  as  financial  holding  companies.  Registered  financial
holding  companies  will  be  permitted  to  engage  in  businesses,   including
securities  and  investment  banking  businesses,  which are  prohibited to bank
holding  companies.  Bancorp cannot predict what effect, if any, the creation of
financial holding companies may have on it or its competitive position.

Under the BHC Act, Bancorp is required to file annually with the Federal Reserve
Board a report of its operations.  Bancorp,  the Bank and any other subsidiaries
are subject to examination by the Federal  Reserve Board.  In addition,  Bancorp
will be required to obtain the prior  approval of the Federal  Reserve  Board to
acquire,  with certain exceptions,  more than 5% of the outstanding voting stock
of any bank or bank holding company,  to acquire all or substantially all of the
assets of a bank or to merge or consolidate  with another bank holding  company.
Moreover,  Bancorp,  the Bank and any other subsidiaries will be prohibited from
engaging in certain tying arrangements in connection


                                       3
<PAGE>


with any extension of credit or provision of any property or services.  The Bank
is also subject to certain  restrictions  imposed by the Federal  Reserve Act on
issuing any extension of credit to Bancorp or any of its  subsidiaries or making
any  investments in the stock or other  securities  thereof and on the taking of
such stock or  securities as  collateral  for loans to any borrower.  If Bancorp
wants to engage in businesses  permitted to financial  holding companies but not
to bank holding  companies,  it would need to register with the Federal  Reserve
Board as a financial holding company.

The Federal  Reserve Board has issued a policy  statement on the payment of cash
dividends by bank holding companies, which expresses the Federal Reserve Board's
view that a bank holding  company  should pay cash  dividends only to the extent
that bank holding  company's net income for the past year is sufficient to cover
both the cash dividend and a rate of earnings  retention that is consistent with
the bank holding  company's  capital needs,  asset quality and overall financial
condition.  The  Federal  Reserve  Board  has  also  indicated  that it would be
inappropriate for a company  experiencing  serious financial  problems to borrow
funds  to  pay  dividends.  Furthermore,  under  the  prompt  corrective  action
regulations adopted by the Federal Reserve Board pursuant to applicable law, the
Federal  Reserve  Board may  prohibit a bank  holding  company  from  paying any
dividends  if the bank  holding  company's  bank  subsidiary  is  classified  as
"undercapitalized."

A bank  holding  company is  required to give the  Federal  Reserve  Board prior
written  notice  of  any  purchase  or  redemption  of  its  outstanding  equity
securities,  if the gross  consideration  for the purchase or  redemption,  when
combined with the net  consideration  paid for all such purchases or redemptions
during  the  preceding  12 months,  is equal to 10% or more of its  consolidated
retained  earnings.  The Federal Reserve Board may disapprove such a purchase or
redemption  if it  determines  that the proposal  would  constitute an unsafe or
unsound  practice or would violate any law,  regulation,  Federal  Reserve Board
order,  or any  condition  imposed by, or written  agreement  with,  the Federal
Reserve Board.

The  Riegle-Neal  Interstate  Banking  and  Branching  Efficiency  Act of  1994,
("Riegle-Neal  Act") was enacted to ease  restrictions  on  interstate  banking.
Effective  September 29, 1995, the  Riegle-Neal  Act allows the Federal  Reserve
Board to approve an  application  of an adequately  capitalized  and  adequately
managed  bank  holding  company  to  acquire  control  of,  or  acquire  all  or
substantially  all or the assets of, a bank  located in a state  other than such
holding company's state, without regard to whether the transaction is prohibited
by the  laws of any  state.  The  Federal  Reserve  Board  may not  approve  the
acquisition of a bank that has not been in existence for the minimum time period
(not exceeding five years) specified by the statutory law of the host state. The
Riegle-Neal  Act also  prohibits  the Federal  Reserve  Board from  approving an
application  if  the  applicant  (and  its  depository  institution  affiliates)
controls or would  control  more than 10% of the insured  deposits in the United
States or 30% or more of the deposits in the target  bank's home state or in any
state in which the target bank maintains a branch.  The Riegle-Neal Act does not
affect the authority of states to limit the percentage of total insured deposits
in the state which may be held or controlled  by a bank or bank holding  company
to the extent that such limitation does not  discriminate  against  out-of-state
banks or bank  holding  companies.  Individual  states  may also  waive  the 30%
statewide concentration limits contained in the Riegle-Neal Act.

Bancorp is subject to capital  adequacy rules and guidelines  issued by the OCC,
the  Federal  Reserve  Board  and  the  Federal  Deposit  Insurance  Corporation
("FDIC").  These substantially identical rules and guidelines require Bancorp to
maintain  certain  minimum  ratios of capital to adjusted  total  assets  and/or
risk-weighted  assets.  Under the  provisions of the Federal  Deposit  Insurance
Corporation  Improvements  Act of 1991,  the  Federal  regulatory  agencies  are
required to implement and enforce


                                       4
<PAGE>


these  rules in a  stringent  manner.  Bancorp  is also  subject  to  applicable
provisions  of  Connecticut  law insofar as they do not conflict with or are not
otherwise preempted by Federal banking law.

Bancorp is subject to the reporting  requirements of the Securities Exchange Act
of 1934, as amended (the "Exchange  Act"),  and, in accordance with the Exchange
Act, files periodic  reports,  proxy  statements and other  information with the
SEC.

The Bank's operations are subject to regulation,  supervision and examination by
the OCC and the FDIC.

Federal and state banking regulations regulate, among other things, the scope of
the business of a bank, a bank holding company or a financial  holding  company,
the  investments a bank may make,  deposit  reserves a bank must  maintain,  the
nature  and  amount  of  collateral   for  certain  loans  a  bank  makes,   the
establishment  of branches and the  activities of a bank with respect to mergers
and  acquisitions.  The Bank is a member of the  Federal  Reserve  System and is
subject to  applicable  provisions  of the Federal  Reserve Act and  regulations
issued thereunder.  The Bank is subject to the federal  regulations  promulgated
pursuant to the  Financial  Institutions  Supervisory  Act to prevent banks from
engaging in unsafe and unsound  practices,  as well as various other federal and
state  laws  and  consumer  protection  laws.  The Bank is also  subject  to the
comprehensive provisions of the National Bank Act.

The Bank is subject to capital adequacy rules and guidelines  issued by the OCC.
Those rules and guidelines  require the Bank to maintain  certain minimum ratios
of capital to adjusted  total  assets  and/or  risk-weighted  assets.  Under the
provisions of the Federal  Deposit  Insurance  Corporation  Improvements  Act of
1991,  the OCC  and the  other  federal  regulatory  agencies  are  required  to
implement and enforce these rules in a stringent manner.

The OCC regulates  the number and locations of the branch  offices of a national
bank. The OCC may only permit a national bank to maintain  branches in locations
and under the  conditions  imposed by state law upon state banks.  At this time,
applicable  Connecticut banking laws do not impose any material  restrictions on
the establishment of branches by Connecticut banks throughout Connecticut.

The  earnings  and growth of  Bancorp,  the Bank and the  banking  industry  are
affected by the monetary and fiscal policies of the United States Government and
its agencies,  particularly the Federal Reserve Board. The Open Market Committee
of the  Federal  Reserve  Board  implements  national  monetary  policy  to curb
inflation  and combat  recession.  The Federal  Reserve  Board uses its power to
adjust interest rates in United States Government securities,  the Discount Rate
and deposit reserve  retention  rates.  The actions of the Federal Reserve Board
influence the growth of bank loans,  investments and deposits.  They also affect
interest  rates charged on loans and paid on deposits.  The nature and impact of
any future changes in monetary policies cannot be predicted.

In addition to other laws and  regulations,  Bancorp and the Bank are subject to
the  Community  Reinvestment  Act  ("CRA"),  which  requires  the  Federal  bank
regulatory agencies,  when considering certain applications involving Bancorp or
the Bank,  to consider  Bancorp's  and the Bank's  record of helping to meet the
credit  needs  of its  entire  community,  including  low-  and  moderate-income
neighborhoods.  The CRA was  originally  enacted  because of concern over unfair
treatment  of  prospective  borrowers by banks and over  unwarranted  geographic
differences in lending  patterns.  Existing banks have sought to comply with CRA
in various ways, including the use of more flexible lending criteria for certain
types of loans and borrowers (consistent with the requirement to conduct


                                       5
<PAGE>


safe and sound  operations),  while other banks have increased  their efforts to
make loans to help meet identified  credit needs within the consumer  community,
such as those for home mortgages,  home  improvements  and small business loans.
For  example,  this may  include  participation  in various  government  insured
lending  programs,  such as Federal Housing  Administration  insured or Veterans
Administration  guaranteed mortgage loans, Small Business  Administration loans,
and participation in other types of lending programs such as high  loan-to-value
ratio conventional mortgage loans with private mortgage insurance.  To date, the
market  area from which the Bank  draws much of its  business  is  Stamford  and
Greenwich , which are  characterized  by a very  diverse  ethnic,  economic  and
racial  cross-section of the population.  As the Bank expands further the market
areas served by the Bank will continue to evolve. The Bank has received approval
from the OCC to establish a branch office in Norwalk, Connecticut. Like Stamford
and Greenwich,  Norwalk has a diverse  ethnic,  economic and racial  population.
Bancorp  and the Bank  have not and will not adopt any  policies  or  practices,
which discourage credit applications from, or unlawfully  discriminate  against,
individuals or segments of the communities served by the Bank.

Bancorp does not anticipate that  compliance  with applicable  federal and state
banking laws will have a material adverse effect on its business or the business
of the Bank. Neither Bancorp nor the Bank has any material patents,  trademarks,
licenses,  franchises,  concessions and royalty  agreements or labor  contracts,
other than the charter  granted to the Bank by the OCC.  The Bank has,  however,
registered the trademark  "Patriot" and the corresponding logo with the State of
Connecticut  Trademark Office.  Compliance by Bancorp and the Bank with federal,
state and local  provisions  which have been  enacted or adopted  regulating  or
otherwise  relating to the  discharge of material  into the  environment  is not
expected to have a material  effect upon the capital  expenditures,  earnings or
competitive position of the Bancorp. As of December 31, 2000, the Bancorp had 62
full-time  employees  and 9 part-time  employees.  None of the  employees of the
Bancorp is covered by a collective bargaining agreement. Item 2.

Description of Properties
-------------------------

The Bank leases  approximately 12,000 square feet of office space located at 900
Bedford Street, Stamford,  Connecticut, which is used for its main office and as
the corporate  offices of Bancorp.  Such space is adequate for Bancorp's and the
Bank's current needs. The entire building is being leased by the Bank for a term
of ten years,  which commenced on September 1, 1994 at an initial annual rent of
$108,000,  which rent increased by approximately 11%, 10% and 15% in the second,
third and fourth years, respectively, and by approximately 8% in the fifth year.
Thereafter,  rent  increases  will be based on increases  in the consumer  price
index.  The Bank's lease also provides the Bank with a right of first refusal to
purchase the  building in the event the owner of the property  receives an offer
to purchase  the building  from a third party which it wishes to accept,  on the
same terms and conditions of such offer,  subject to the terms of the lease. The
Bank currently occupies approximately 75% of the space in the 900 Bedford Street
building.  The Bank has sublet  portions of the remaining  space under subleases
with each  having a maturity  which the Bank  believes  will  coincide  with its
future needs for additional space for its operations.  The Bank has entered into
subleases  covering  approximately  3,000 square feet at rents not less than the
rent  payable  by the Bank with  month to month  terms.  The  businesses  of the
subtenants of the Bank include a law practice and a mortgage  broker.  See also,
"Item 12. Certain Relationships and Related Transactions."

The Bank has entered into an agreement for  additional  parking with a remaining
term of three years at an annual rent of $18,000.  See also,  "Item 12.  Certain
Relationships and Related Transactions."


                                       6
<PAGE>


The Bank leases  approximately  5,000  square feet of office  space on the first
floor located at 100 Mason Street, Greenwich,  Connecticut.  The lease commenced
on July 1, 1997 at an initial annual rent of $190,000,  which rent will increase
by  approximately  2.5%  each year  thereafter.  The  lease  provides  for three
five-year renewals after the initial term.

The Bank leases  approximately  1,300  square feet of office  space at 184 Sound
Beach Avenue,  Old Greenwich,  Connecticut.  The lease commenced on December 31,
1998  at an  initial  annual  rent of  $34,800,  which  rent  will  increase  by
approximately  10% in the third year and 25% in the fourth  year and will remain
constant during the fifth year.

The Bank leases  approximately 2,500 square feet of office space at 125 Wireless
Boulevard, Suite 1, Hauppauge, New York. The lease commenced on March 1, 1999 at
an initial annual rent of $43,085,  which rent will increase by approximately 4%
each consecutive year. The lease expires January 31, 2004.

The Bank sub-leased  approximately 200 square feet of office space at 1120 Route
22 East, Suite 5, Bridgewater,  New Jersey.  The lease commenced on February 19,
1999 at an initial  annual rent of $7,560.  This lease  expired on February  18,
2000,  but the Bank  continued  to occupy the  office at a monthly  rent of $300
through January 31, 2001.

The Bank has agreed to lease  approximately 1,728 square feet of office space at
16 River  Street,  Norwalk for its proposed  branch.  The lease will be for five
years with a five-year  renewal option.  The initial annual rent will be $27,648
with annual increases of approximately 2.4%.

All leased properties described above are in good condition.

ITEM 3.  LEGAL PROCEEDINGS
         -----------------

Neither  Bancorp  nor the Bank has any  pending  legal  proceedings,  other than
ordinary routine litigation  incidental to its business, to which Bancorp or the
Bank is a party or any of its property is subject.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
         ---------------------------------------------------

During  the  fourth  quarter  of 2000,  no  matter  was  submitted  to a vote of
shareholders.

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
         --------------------------------------------------------

Market Information
------------------

The  Bancorp  Common  Stock is traded on the NASDAQ  Small Cap Market  under the
Symbol  "PNBK."  Prior to the  effective  date of the  Reorganization,  the Bank
Common  Stock was traded on the NASDAQ  Small Cap Market,  also under the symbol
"PNBK." On December 31, 2000, the last bid price for the Bancorp Common Stock on
NASDAQ Small Cap Market was $7.25.


                                       7
<PAGE>


The  following  table sets  forth the high and low sales  price per share of the
Bank Common  Stock up to December  1, 1999 and for Bancorp  Common  Stock on and
after  December  1, 1999 for each  quarter of 2000 and 1999 as  reported  on the
NASDAQ Small Cap Market.

         Quarter Ended                High               Low
         -------------                ----               ---

         March 31, 2000              $12.500           $10.500
         June 30, 2000                11.000             8.875
         September 30, 2000            9.063             7.500
         December 31, 2000             8.375             6.000

         March 31, 1999              $10.375            $8.438
         June 30, 1999                 9.750             7.875
         September 30, 1999           10.750             9.125
         December 31, 1999            13.000             9.875

Holders
-------

There were  approximately  991 shareholders of record of Bancorp Common Stock as
of December 31, 2000.

Dividends
---------

Bancorp has not paid any dividends on the Bancorp  Common Stock,  and, up to the
effective date of the Reorganization,  the Bank did not pay any dividends on the
Bank Common  Stock.  Bancorp's  ability to pay  dividends on the Bancorp  Common
Stock depends on the Bank's  ability to pay dividends to Bancorp.  In accordance
with OCC rules and  regulations,  the Bank may pay  dividends  only if the total
amount of all  dividends  that will be paid,  including  the proposed  dividend,
declared  by the Bank in any  calendar  year  does not  exceed  the total of the
Bank's retained net income of  that year to date, combined with the retained net
income of the preceding two years,  unless the proposed  dividend is approved by
the OCC. In addition, the OCC and/or the FDIC may impose further restrictions on
dividends.  Future  dividends  depend on many  factors,  including  management's
estimates of future earnings and the Bancorp's need for capital.

Recent Sales of Unregistered Securities
---------------------------------------

During the fourth quarter of 2000 Bancorp did not have any sales of unregistered
securities.


                                       8
<PAGE>



<TABLE>
Patriot National Bancorp, Inc.

Financial Highlights
<CAPTION>
                                 ---------------------------------------------------------------------------------
                                      2000             1999              1998             1997            1996
                                 ---------------------------------------------------------------------------------

<S>                              <C>              <C>              <C>              <C>              <C>
Operating Data
--------------

Interest and dividend income     $ 14,694,135     $  9,732,719     $  6,765,283     $  5,130,009     $  3,940,490
Interest expense ...........        8,017,615        4,739,921        3,074,518        2,347,644        1,723,052
Net interest income ........        6,676,520        4,992,798        3,690,765        2,782,365        2,217,438
Provision for loan losses ..          325,900          553,000          104,000          248,000          191,747
Non-interest income ........        2,685,296        1,221,329          373,808          268,822          281,927
Non interest expense .......        7,693,345        5,245,986        3,420,185        2,706,871        2,078,299
Net income .................          767,171          348,641          626,488          310,416          299,919
Basic income per share .....             0.34             0.17             0.48             0.25             0.25
Diluted income per share ...             0.33             0.16             0.47             0.25             0.24

Balance Sheet Data

Cash and due from banks ....        3,565,071        2,685,031        1,867,353        1,532,055        1,389,183
Federal funds sold .........       29,500,000       18,900,000       27,700,000       17,000,000       12,000,000
Short term investments .....             --         10,976,264             --               --               --
Investment securities ......       34,073,832       33,003,494       13,562,730        9,943,046        6,993,184
Loans, net .................      126,411,265      107,769,911       57,052,618       44,358,069       31,486,942
Goodwill, net ..............        1,054,027        1,177,948             --               --               --
Assets .....................      197,628,127      177,194,697      102,327,631       75,073,200       53,551,217
Total deposits .............      179,666,098      162,746,354       89,309,139       68,592,231       47,546,737
Total shareholders' equity .       16,427,436       13,236,088       12,097,283        5,480,548        5,072,975
</TABLE>




                                       9
<PAGE>


ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
        ---------------------------------------------------------

     (a)  Plan of Operation

Not applicable since the Bancorp, as successor to the Bank has had revenues from
operations in each of the last two fiscal years.

     (b)  Management's  Discussion  and  Analysis  of  Financial  Condition  and
          Results of Operations

Summary
-------

Several milestones were achieved during 2000 as Bancorp reported record earnings
of $767,000  ($.34  basic  income per share and $.33  diluted  income per share)
compared to $349,000  ($.17 basic income per share and $.16  diluted  income per
share) for the prior year.  Total assets also ended the year at a record high of
$197.6 million, an increase of $20.4 million from December 31, 1999.

Average  earning assets were $53.0 million higher in 2000,  which resulted in an
increase in the net interest margin of $1.7 million to $6.7 million for the year
ended  December  31,  2000 which was the result of the  following  factors.  The
impact of rising  interest rates on the variable rate loan portfolio and Federal
Funds Sold  served to  increase  interest  income by $5.0  million.  The overall
impact on the net interest margin was negated somewhat by the reliance on higher
average volume of certificates of deposit and an increase in volume on new, high
rate, transaction accounts to fund the growth in interest earning assets.

Total assets  increased by 11.5% during the year as total loans  increased  from
$107.8  million at December  31, 1999 to $126.4  million at December  31,  2000.
Construction  loans  increased by $9.1  million and home equity loans  increased
$6.8 million. Loan growth was funded primarily through the growth in deposits as
total deposits  increased  $16.9 million to $179.7 million at December 31, 2000.
Interest  bearing  deposits  increased $12.7 million,  or 8.4%, and non-interest
bearing deposits increased $4.3 million, or 33.8%.

Additional  asset growth was realized  through the issuance of 236,089 shares of
common  stock  in  a  private  placement  offering  that  increased  capital  by
$2,134,655. Bancorp's shareholders approved the private placement offering of up
to $5,000,000 of common stock on June 14, 2000.

FINANCIAL CONDITION
-------------------

Assets
------

Bancorp's  total assets  increased $20.4 million from $177.2 million at December
31, 1999 to $197.6  million at December 31, 2000. The growth in total assets was
funded by deposit growth of $16.9 million and $2.1 million of additional capital
through the sale of common stock in a private placement.

Investments
-----------

The  available  for sale  portfolio  increased  $723,000 to $20.7 million due to
$442,000  of  unrealized   holding  gains,  the  purchase  of  $4.0  million  of
tax-advantaged preferred stock, net of principal


                                       10
<PAGE>


payments  of $3.2  million on  mortgage-backed  securities  and the  maturity of
$550,000 in U.S. Treasury Securities

There were no purchases or maturities in the held to maturity portfolio in 2000.

During 2000, Bancorp purchased,  net of redemptions,  $65,000 in Federal Reserve
Bank stock and  $287,000  in  Federal  Home Loan Bank of Boston  stock.  Federal
Reserve stock was purchased to comply with Federal Reserve regulations.  Federal
Home Loan Bank of Boston stock was  purchased as a membership  requirement.  The
Bank  became a member  of the  Federal  Home  Loan  Bank of  Boston  to  provide
additional sources of liquidity.




                                       11
<PAGE>



The following table presents the maturity  distribution of investment securities
at December  31, 2000 and the weighted  average  yield of such  securities.  The
weighted  average  yields  were  calculated  based  on the  amortized  cost  and
effective yields to maturity of each security.

<TABLE>
<CAPTION>
                                                       Over One      Over Five                                             Weighted
                                        One year        Through       through    Over Ten                                   Average
                                        or less       Five years     Ten Years     Years      No Maturity       Total        Yield
                                     -----------------------------------------------------------------------------------------------

<S>                                  <C>            <C>            <C>          <C>            <C>            <C>             <C>
Available For Sale

Mortgage backed securities .......          --             --             --           --      $14,110,790    $14,110,790     6.56%
U.S. Government obligations ......   $   499,290           --             --           --             --          499,290     4.50%
Marketable equity securities .....          --             --             --           --        6,078,290      6,078,290     5.29%
                                     -----------------------------------------------------------------------------------------------
                        Total ....   $   499,290           --             --           --      $20,189,080    $20,688,370     6.14%
                                     ===============================================================================================
       Weighted average yield.....          4.50%          --             --           --             6.18%          6.14%     --
                                     ===============================================================================================


Held to maturity

U.S. Government obligations ......   $   499,836           --             --           --             --      $   499,836     5.52%
Corporate bonds ..................          --      $ 8,826,302    $ 2,011,397  $   960,523           --       11,798,222     6.68%
                                     -----------------------------------------------------------------------------------------------
                        Total ....   $   499,836    $ 8,826,302    $ 2,011,397  $   960,523           --      $12,298,058     6.63%
                                     ===============================================================================================
       Weighted average yield ....          5.52%          6.68%          6.41%        7.31%          --             6.63%     --
                                     ===============================================================================================
</TABLE>



                                       12
<PAGE>


The  following  table  presents a summary  of  investments  for any issuer  that
exceeds 10% of shareholders' equity at December 31, 2000.


                                                      Amortized        Fair
                                                         Cost          Value
--------------------------------------------------------------------------------

Franklin U. S. Government Fund ...................   $ 2,032,067   $ 1,970,996
U. S. Government agency mortgage backed securities    14,110,790    14,191,090

Loans
-----

Bancorp's net loan  portfolio  increased  $18.6  million from $107.8  million at
December 31, 1999 to $126.4 million at December 31, 2000. Loan growth was funded
through the growth in certificates of deposit and interest sensitive transaction
accounts  and the sale of common stock in a private  placement.  At December 31,
2000,  the net loan to deposit  ratio was 70.36% and the net loan to asset ratio
was 63.96%. At December 31, 1999, the net loan to deposit ratio was 66.22%,  and
the net loan to asset ratio was 60.82%.

During 2000,  the Federal  Reserve  Bank  increased  the federal  funds rate and
discount rate.  Subsequently,  most banks  increased their  prime-lending  rate.
Despite rising interest rates,  loan activity was strong in construction  loans,
home equity lines of credit, and commercial real estate loans.

Maturities and Sensitivities of Loans to Changes in Interest Rates
------------------------------------------------------------------

The following  table presents the maturities of loans in Bancorp's  portfolio at
December 31, 2000, by type of loan:

                                            Due after
                                 Due in      one year
                                 one year    through       Due after
  (thousands of dollars)         or less    five years    five years     Total
--------------------------------------------------------------------------------

Commercial real estate......    $ 11,509     $ 45,321     $  3,979     $ 60,809
Residential real estate ....          88        1,454        3,500        5,042
Construction loans .........      16,142        6,738            0       22,880
Commercial loans ...........       3,755        4,172        1,403        9,330
Consumer installment .......       1,338          309            5        1,652
Consumer home equity .......         167          442       27,949       28,558
                                ------------------------------------------------
Total ......................    $ 32,999     $ 58,436     $ 36,836      128,271
                                ================================================

Fixed rate loans ...........    $  5,907     $ 35,658     $  2,504     $ 44,069
Variable rate loans ........      27,092       22,778       34,332       84,202
                                ------------------------------------------------
Total ......................    $ 32,999     $ 58,436     $ 36,836     $128,271
                                ================================================



                                       13
<PAGE>


The following table presents loan concentrations at December 31, 2000:

         Category                    Percentage    Dollars Outstanding
         -------------------------------------------------------------
                                                 (Thousands of dollars)

         Construction                  17.91%           $22,970
         Retail Store                   2.99%           $ 3,839
         Restaurant                     2.75%           $ 3,528
         Limousine Service              2.49%           $ 3,193


Allowance for Loan Losses
-------------------------

The provision for loan losses is a charge  against income and an addition to the
allowance for loan losses. Management's judgement in determining the adequacy of
the  allowance  is  based  on  an  evaluation  of  individual  loans,  the  risk
characteristics  and  size of the  loan  portfolio,  an  assessment  of  current
economic and real estate  market  conditions,  estimates of the current value of
underlying collateral, past loan loss experience, review of regulatory authority
examination reports and evaluations of loans and other relevant factors.

Based upon this evaluation, management believes the allowance for loan losses of
$1.6  million , at  December  31, 2000 , which  represents  1.28% of gross loans
outstanding, is adequate, under prevailing economic conditions, to absorb losses
on existing  loans which may become  uncollectible.  At December 31,  1999,  the
allowance for loan losses was $1.4 million or 1.24% of gross loans outstanding.

The  accrual of interest  income on loans is  discontinued  whenever  reasonable
doubt exists as to its  collectibility  and generally is discontinued when loans
are past due 90 days as to either  principal  or  interest.  When the accrual of
interest income is discontinued, all previously accrued and uncollected interest
is reversed against  interest income.  The accrual of interest on loans past due
90 days or more may be continued if the loan is well secured, and it is believed
all principal and accrued interest income due on the loan will be realized,  and
the loan is in the process of collection.  A non-accrual  loan is restored to an
accrual status when it is no longer  delinquent and  collectibility  of interest
and principal is no longer in doubt.  Interest  income on impaired loans is only
recorded subsequent to the recovery of the principal balance.

Management  considers  all  non-accrual  loans  and  restructured  loans  to  be
impaired.  In most cases,  loan payments that are past due less than 90 days are
considered minor collection  delays, and the related loans are not considered to
be impaired. Bancorp considers consumer installment loans to be pools of smaller
balance homogeneous loans, which are collectively evaluated for impairment.


                                       14
<PAGE>


Analysis of Allowance for Loan Losses
-------------------------------------

                                                  2000              1999
         -----------------------------------------------------------------
         (Thousands of dollars)

         Balance at beginning of period          $  1,360              $785
                                                 ---------------------------
         Charge-offs                                  (44)              (19)
         Recoveries                                     3                41
                                                 ---------------------------
         Net  (charge-offs) recoveries                (41)               22
                                                 ---------------------------
         Additions charged to operations              326               553
                                                 ---------------------------
         Balance at end of period                  $1,645            $1,360
                                                 ===========================

         Ratio of net (charge-offs) recoveries
         during the period to average loans
         outstanding during the period             (0.03%)            0.03%
                                                   =======            =====


Allocation of the Allowance for Loan Losses
-------------------------------------------

                                                        Percent of loans in each
Balance at end of each                 Amounts           category to total loans
period applicable to               2000       1999           2000        1999
--------------------------------------------------------------------------------
(Thousands of dollars)
Real Estate:
  Commercial ................      $700       $622          44.67%       49.65%
  Construction ..............       270        154          17.91%       12.69%
  Residential ...............        34         76           3.93%        6.22%
 Commercial .................       185         79          10.01%       10.14%
 Consumer Installment .......        12         12           1.29%        1.45%
 Consumer Home Equity .......       312        267          22.19%       19.85%
 Unallocated ................       132        150           N/A          N/A
                                 -----------------------------------------------
                                 $1,645     $1,360         100.00%      100.00%
                                 ===============================================


                                       15
<PAGE>


Non-Accrual, Past Due and Restructured Loans
--------------------------------------------

The following table presents non-accrual and past due loans at December 31, 2000
and 1999.

                                  2000            1999
------------------------------------------------------
(Thousands of dollars)

Loans delinquent over 90
    days still accruing            $    504          $  475
Non-accruing loans                    1,762              91
                                     ----------------------
                                     $2,266          $  566
                                     ======================

% of  Total  Loans                    1.77%            .52%
% of  Total Assets                    1.15%            .32%

Additional income on non-accrual
  loans if recognized on an
  accrual basis                    $115,010          $8,911


There  were no  loans  in  either  2000 or 1999  considered  as  "troubled  debt
restructurings."

Potential Problem Loans
-----------------------

The $1.8 million of non accruing  loans at December 31, 2000 consists of a total
of 4 loans  and  does  not  represent  a  negative  collectibility  trend in the
portfolio. One of the loans, in the amount of $44,000, has been paid off in full
subsequent to year end. The largest  loan,  in the amount of $1.3 million,  is a
residential real estate loan that Bancorp believes is well secured.  Foreclosure
proceedings have commenced and Bancorp does not anticipate  incurring any losses
on this loan.

At December 31, 2000,  Bancorp had no loans other than those described above, as
to which management has significant  doubts as to the ability of the borrower to
comply with the present repayment terms.



                                       16
<PAGE>


Deposits
--------

Total deposits  increased  $16.9 million to $179.7 million at December 31, 2000.
Interest  bearing  deposits,  primarily  new, high interest  rate, NOW accounts,
increased $12.7 million to $162.8 million,  and  non-interest  bearing  deposits
increased $4.3 million to $16.9 million at December 31, 2000. The Bank continues
to offer  attractive  interest rates in the very  competitive  Fairfield  County
marketplace in order to fund loan growth.

As of December 31, 2000, the Bank's maturities of time deposits were:

                                     $100,000 or     Less than
----------------------------------------------------------------------------
                                      greater        $100,000        Totals
(Thousands of dollars)

Three months or less ...........      $ 19,461       $ 42,331       $ 61,791
Three to six months ............         5,474         13,425         18,899
Six months to one year .........         4,879          9,056         13,935
Over one year ..................         2,059          6,429          8,489
                                      --------       --------       --------

                                      $ 31,873       $ 71,241       $103,114
                                      ========       ========       ========

Other
-----

The increase in accrued interest receivable is due to higher outstanding average
earning assets.

The increase in accrued expenses and other liabilities represents an increase in
income taxes payable resulting from higher earnings and the complete utilization
of net operating loss carry forwards in 1999.



                                       17
<PAGE>



The following table presents average balance sheets (daily  averages),  interest
income, interest expense, and the corresponding yields earned and rates paid.

<TABLE>
                                                     Distribution of Assets, Liabilities and Shareholders' Equity
                                                  Interest Rates and Interest Differential and Rate Volume analysis
                                                                      (thousands of dollars) (1)

<CAPTION>
                                                2000                                                  1999
                                 ---------------------------------      ------------------------------------------------------------
                                                                                                    Fluctuations in interest
                                               Interest                              Interest           Income/Expense(3)
                                    Average     Income/     Average       Average    Income/   Average  Due to Change in:
                                    Balance     Expense      Rate         Balance    Expense    Rate    Volume      Rate     Total
                                 ----------------------------------      -----------------------------------------------------------

<S>                               <C>          <C>           <C>        <C>          <C>       <C>      <C>        <C>       <C>
Interest Earning Assets:
Loans (2)                         $ 122,415$   $11,304       9.23%      $  79,523    $7,277     9.15%   $3,962     $  65     $4,027
Short term investments                 --         --          --             2,108      139     6.59%    (139)         0       (139)
Investments (4)                      33,822      2,152       6.36%         25,231     1,513     6.00%     543         96        639
Federal funds sold                   19,639      1,238       6.30%         15,955       804     5.04%     209        225        434
                                   --------------------------------      -----------------------------------------------------------
Total interest earning assets       175,876     14,694       8.35%        122,817     9,733     7.92%    4,575       386      4,961
                                   --------------------------------      -----------------------------------------------------------

Cash and due from banks               3,566                                 3,349
Premises and equipment, net             985                                   897
Allowance for loan losses           (1,527)                                 (991)
Other                                 2,686                                 2,197
                                  ---------                             ---------
Total Assets                      $ 181,586                             $ 128,269
                                  =========                             =========


Interest Bearing Liabilities:
Time certificates                 $  97,851$    $5,804       5.93%      $  58,445    $3,037     5.20%   $2,291     $ 476     $2,767
Savings deposits                     33,179      1,323       3.99%         34,132     1,346     3.94%      (57)       34        (23)
Money Market Deposits                   872         24       2.71%          1,398        55     3.93%      (24)       (7)       (31)
NOW accounts                         10,057        217       2.16%          9,957       217     2.18%        3        (3)         0
Super NOW Accounts                    9,136        537       5.88%           _          _        _         537         0        537
Federal Funds Purchased                  19          1       5.26%           _          _        _           1         0          1
Collateralized borrowings               401         40       9.98%             14         2    14.29%       39        (1)        38
Capital lease obligation                516         71      13.76%            604        83    13.74%      (11)       (1)       (12)
                                  --------------------------------      ------------------------------------------------------------
Total Interest Bearing
  Liabilities                       152,031      8,017       5.27%        104,550     4,740     4.53%    2,779       498      3,277
                                  --------------------------------      ------------------------------------------------------------

Demand deposits                      14,068                                10,240
Accrued expenses and
 other liabilities                      738                                   414
Shareholders' equity                 14,749                                13,065
                                  ---------                             ---------
Total liabilities and equity      $ 181,586                             $ 128,269
                                  =========                             =========

Net interest income                             $6,677                               $4,993             $1,796     $(112)    $1,684
                                                =======                              ======            =============================
Interest margin                                              3.80%                              4.07%
                                                            ======                             ======
Interest spread                                              3.08%                              3.39%
                                                            ======                             ======
</TABLE>


(1)  The rate  volume  analysis  reflects  the  changes in net  interest  income
     arising from changes in interest rates and from asset and liability volume,
     including  mix.  The change in  interest  attributable  to volume  includes
     changes in interest attributable to mix.
(2)  Includes non-accruing loans.
(3)  favorable/(unfavorable) fluctuations.
(4)  Yields  are  calculated  at  historical  cost and  excludes  the  effect of
     unrealized gain or (loss) on available for sale securities.













                                       18
<PAGE>


RESULTS OF OPERATIONS

For the year ended  December  31, 2000,  Bancorp  earned  $767,000  ($0.34 basic
income per share and $0.33  diluted  income per share) as  compared to 1999 when
Bancorp earned  $349,000  ($0.17 basic income per share and $0.16 diluted income
per share).  Interest income  increased $5.0 million to $14.7 million in 2000 as
compared to 1999 when  interest  income was $9.7  million.  Non-interest  income
increased $1.5 million to $2.7 million for 2000, primarily due to the first full
year of mortgage  brokerage  related fees generated by Pinnacle,  which the Bank
acquired in June 1999.  Interest expense  increased $3.3 million to $8.0 million
in 2000  compared  to  $4.7  million  in  1999,  due to the  growth  in  average
outstanding  deposits,  primarily  new, high  interest now accounts,  and higher
average  volume of  certificates  of  deposit.  Non-interest  expenses  for 2000
totaled $7.7 million which represents an increase of $2.5 million over the prior
year . The higher  operating  costs were  primarily  the result of the impact of
Pinnacle and the Old  Greenwich  Branch that were included in operations in 2000
for the full year, but were only in 1999 for a portion of the year.

The  following  are  measurements  of Bancorp's  earnings in relation to assets,
equity and earnings per share. These ratios present Bancorp's historical results
for 2000 and 1999:

                                              2000         1999
-----------------------------------------------------------------

Return on average assets                      .42%           .27%
Return on average equity                     5.20%          2.67%
Average equity to average assets             8.12%         10.19%
Basic income per share                      $0.34         $ 0.17
Diluted income per share                    $0.33         $ 0.16



Interest income and expense
---------------------------

Bancorp's net interest margin increased $1.7 million,  or 34.0%, to $6.7 million
in 2000 from $5.0  million in 1999.  Based upon an increase  in average  earning
assets of $51.5  million,  or 43.2%,  and  higher  short  term  interest  rates,
Bancorp's  interest  income  increased  51.0% from $9.7 million in 1999 to $14.7
million in 2000. Average loans outstanding increased $42.9 million led by growth
in  construction  and commercial real estate lending which reflects the strength
of the local  real  estate  market.  A 23.7%  increase  in  average  investments
outstanding,  coupled with a 6.0% increase in investment  yields,  accounted for
the $500,000  increase in interest and dividends on investments in 2000.  Rising
short-term  interest rates helped to increase the yield on Federal Funds Sold by
126 basis points, as the interest on Federal Funds Sold increased by $4,434,000,
or 54.0%. Total average interest bearing liabilities increased by $47.5 million,
as average  certificates of deposit increased by $39.4 million and average Super
Now Accounts generated $9.1 million of the increase.  Interest expense increased
from $4.7 million in 1999 to $8.0 million in 2000.  Interest on  certificates of
deposit increased by $2.8 million resulting from the higher average  outstanding
balances  and an increase in the cost of funds for that  portfolio  from 5.2% in
1999 to 5.9% in 2000.  The  Super NOW  Account,  which is a high  interest  rate
transaction  account,  was  responsible for $537,000 of the increase in interest
expense based upon an average outstanding balance of $9.1 million.


                                       19
<PAGE>


Non-interest income
-------------------

Non-interest  income  increased  $1.5  million from $1.2 million in 1999 to $2.7
million in 2000.  The  increase is due to mortgage  brokerage  related fees from
Pinnacle,  which was  acquired  in June 1999 and is  included  in a full year of
operations for 2000.

Non-interest expenses
---------------------

Non-interest  expenses  increased $2.5 million in 2000 from $5.2 million in 1999
to $7.7 million in 2000.  Bancorp acquired  Pinnacle in June 1999 and opened the
Old Greenwich  branch in September  1999.  Much of the increase in  non-interest
expenses for 2000 is attributable to these two operating units that are included
for a full year in 2000 but only had an impact on  operations  for a portion  of
1999.  Salaries and benefits increased  $1,576,000 due to higher staffing levels
which impacted salaries,  payroll taxes and health care costs.  Commissions paid
to mortgage  originators,  which is related to the  increased  mortgage  revenue
included in non-interest  income,  increased  $522,000 to $692,000 in 2000. Data
processing and other outside  services  consisting of service bureau fees,  item
processing costs and data processing  consultants  increased $342,000 due to the
overall  growth in account  activity  and the  physical  expansion  of  Bancorp.
Professional services increased 39% due to higher legal expenses relating to the
private  placement  and  various  regulatory  matters.   Regulatory  assessments
increased $45,000 and insurance  increased $46,000 due to the growth in Bancorp.
Occupancy  and  equipment   increased  $260,000  and  other  operating  expenses
increased  $146,000  primarily  due to Pinnacle  and the Old  Greenwich  branch,
including an additional $66,000 of goodwill amortization to cover the full year.
Advertising  decreased 9.0% due to fewer promotional campaigns in 2000. Printing
and supplies decreased 13.0% due to improved ordering techniques  resulting from
a centralized purchasing function.  Director fees and expenses decreased $32,000
due to fewer committee meetings and a reduction in outside programs.

The  provision  for  income  taxes  of  $575,000  in 2000 and  $67,000  for 1999
represents the tax expense recognized for both federal and state income tax, net
of  the  tax  benefit   recognized   from  the  remaining  net  operating   loss
carryforwards utilized in 1999.

Management believes that additional branch offices will contribute to the future
growth and  earnings of Bancorp.  While the opening of these new  branches  will
result in  increased  operating  expenses,  the openings  will be  strategically
planned to maintain profitable operations.

Management  regularly  reviews loan and deposit  rates and attempts to price its
products competitively.  With the assistance of its investment advisors, Bancorp
tracks  its  mix  of  asset/liability  maturities  and  strives  to  maintain  a
reasonable match.  Performance ratios are reviewed monthly by management and the
Board and are used to set strategies.

LIQUIDITY
---------

Bancorp's  liquidity position was 27.5% and 29.7% at December 31, 2000 and 1999,
respectively.  The liquidity ratio is defined as the percentage of liquid assets
to total  assets.  The  following  categories  of  assets  as  described  in the
accompanying  balance  sheets are considered  liquid  assets:  Cash and due from
banks, federal funds sold, short-term investments, available-for-sale securities
and  held-to-maturity  securities  maturing in one year or less.  Liquidity is a
measure  of  Bancorp's  ability  to  generate  adequate  cash to meet  financial
obligations. The principal cash requirements of a


                                       20
<PAGE>


financial institution are to cover downward fluctuations in deposit accounts and
increases in its loan portfolio. Management believes Bancorp's short-term assets
have sufficient  liquidity to cover potential  fluctuations in deposit  accounts
and loan demand and to meet other anticipated cash requirements.

CAPITAL
-------

The following table illustrates Bancorp's regulatory capital ratios:

                                Dec. 31, 2000            Dec. 31,1999
                                -------------            ------------

Leverage Capital                    7.73%                    7.21%
Tier 1 Risk-Based Capital          10.01%                    8.91%
Total Risk-Based Capital           11.10%                    9.90%

Capital  adequacy is one of the most  important  factors used to  determine  the
safety and soundness of individual  banks and the banking  system.  Based on the
above ratios,  Bancorp  believes that it is considered to be "well  capitalized"
under  applicable   regulations.   To  be  considered   "well-capitalized,"   an
institution  must generally have a leverage capital ratio of at least 5%, a Tier
1 risk-based  capital ratio of at least 6% and a total risk-based  capital ratio
of at least 10%.

MARKET RISK
-----------

Market risk is defined as the  sensitivity of income to fluctuations in interest
rates,  foreign  exchange  rates,  equity  prices,  commodity  prices  and other
market-driven rates or prices.  Based upon the nature of the Company's business,
market risk is primarily limited to interest rate risk, which is the impact that
changing interest rates have on current and future earnings.

The Company's goal is to maximize long term  profitability  while minimizing its
exposure to interest rate  fluctuations.  The first priority is to structure and
price the Company's  assets and  liabilities to maintain an acceptable  interest
rate spread while reducing the net effect of changes in interest rates. In order
to accomplish  this, the focus is on  maintaining a proper  balance  between the
timing and volume of assets and liabilities re-pricing within the balance sheet.
One method of achieving this balance is to originate variable rate loans for the
portfolio  and purchase  short term  investments  to offset the  ever-increasing
short term  re-pricing of the liability  side of the balance  sheet.  In fact, a
number of the interest  bearing deposit  products have no contractual  maturity.
Customers  may  withdraw  funds  from  their  accounts  at any time and  deposit
balances may therefore run off unexpectedly due to changing market conditions.

The  exposure  to interest  rate risk is  monitored  by the Asset and  Liability
Management  Committee ("ALCO")  consisting of senior management  personnel.  The
committee  reviews the  interrelationships  within the balance sheet to maximize
net interest income within  acceptable levels of risk. ALCO reports to the Board
of Directors on a monthly basis regarding the status of ALCO  activities  within
the Company.

Impact of Inflation and Changing Prices
---------------------------------------


                                       21
<PAGE>


Bancorp's  financial  statements  have  been  prepared  in terms  of  historical
dollars,  without considering changes in relative purchasing power of money over
time due to inflation.  Unlike most industrial  companies,  virtually all of the
assets and liabilities of a financial  institution are monetary in nature.  As a
result,   interest  rates  have  a  more  significant   impact  on  a  financial
institution's  performance  than the  effect of  general  levels  of  inflation.
Interest  rates do not  necessarily  move in the same  direction  or in the same
magnitude as the prices of goods and services.  Notwithstanding  this, inflation
can directly affect the value of loan  collateral,  in particular,  real estate.
Inflation,  or disinflation,  could  significantly  affect Bancorp's earnings in
future periods.

"Safe Harbor" Statement Under Private Securities Litigation Reform Act of 1995
------------------------------------------------------------------------------

Certain statements contained in Bancorp's public reports, including this report,
and in  particular  in this  "Management's  Discussion  and  Analysis or Plan of
Operation",  may be  forward  looking  and  subject  to a  variety  of risks and
uncertainties.  These  factors  include,  but are not limited to, (1) changes in
prevailing  interest  rates which would affect the interest  earned on Bancorp's
interest   earning  assets  and  the  interest  paid  on  its  interest  bearing
liabilities,  (2) the timing of repricing of Bancorp's  interest  earning assets
and  interest  bearing  liabilities,  (3) the effect of changes in  governmental
monetary policy, (4) the effect of changes in regulations  applicable to Bancorp
and the conduct of its  business,  (5) changes in  competition  among  financial
service  companies,  including  possible  further  encroachment  of non-banks on
services  traditionally  provided  by banks and the impact of  recently  enacted
federal  legislation,  (6) the  ability of  competitors  which are  larger  than
Bancorp to provide products and services which it is  impracticable  for Bancorp
to provide, (7) the effect of Bancorp's opening of branches,  and (8) the effect
of any decision by Bancorp to engage in any business not historically  permitted
to it. Other such factors may be  described  in the  Bancorp's  filings with the
SEC.

Although  Bancorp  believes that it offers the loan and deposit products and has
the resources needed for continued success, future revenues and interest spreads
and yields  cannot be  reliably  predicted.  These  trends may cause  Bancorp to
adjust its operations in the future. Because of the foregoing and other factors,
recent trends should not be considered  reliable  indicators of future financial
results or stock prices.

ITEM 7.  FINANCIAL STATEMENTS

The consolidated  balance sheets of Bancorp as of December 31, 2000 and December
31, 1999 and the related consolidated statements of income, shareholders' equity
and cash flows for the years ended  December  31, 2000 and  December  31,  1999,
together with the report  thereon of McGladrey & Pullen,  LLP dated February 16,
2001,  are  included  as part of this  Form  10-KSB  in the  "Financial  Report"
following page 26 hereof.

ITEM 8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURE
          ---------------------------------------------------------------

         Not applicable.



                                       22
<PAGE>


                                    PART III

ITEM 9.   DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
          COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
          -------------------------------------------------------------

The information  required by Items 401 and 405 of Regulation S-B is incorporated
into this Form 10-KSB by reference to Bancorp's  definitive proxy statement (the
"Definitive Proxy Statement") for its 2001 Annual Meeting of Shareholders.

ITEM 10.  EXECUTIVE COMPENSATION
          ----------------------

The information required by Item 402 of Regulation S-B is incorporated into this
Form 10-KSB by reference to the Definitive Proxy Statement.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
          --------------------------------------------------------------

The information required by Item 403 of Regulation S-B is incorporated into this
Form 10-KSB by reference to the Definitive Proxy Statement.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
          ----------------------------------------------

The information required by Item 404 of Regulation S-B is incorporated into this
Form 10-KSB by reference to the Definitive Proxy Statement.

13.  EXHIBITS AND REPORTS ON FORM 8-K
     --------------------------------

(a)      Exhibits

Exhibit No.                                 Description
-----------                                 -----------

2              Agreement  and Plan of  Reorganization  dated as of June 28, 1999
               between  Bancorp  and the  Bank  (incorporated  by  reference  to
               Exhibit 2 to Bancorp's  Current Report on Form 8-K dated December
               1, 1999 (Commission File No. 000-29599))

3(i)           Certificate  of  Incorporation   of  Bancorp,   (incorporated  by
               reference to Exhibit 3(i) to Bancorp's Current Report on Form 8-K
               dated December 1, 1999 (Commission File No. 000-29599))

3(ii)          By-laws of Bancorp (incorporated by reference to Exhibit 3(ii) to
               Bancorp's  Current  Report  on Form 8-K  dated  December  1, 1999
               (Commission File No. 000-29599))

10(a)(1)       Form of 1994 Warrant to Purchase  Common Stock  (incorporated  by
               reference to Exhibit 10(a)(1) to Bancorp's Current Report on Form
               8-K dated December 1, 1999 (Commission File No. 000-29599))



                                       23
<PAGE>


10(a)(2)       Form of 1998 Warrant to Purchase  Common Stock  (incorporated  by
               reference to Exhibit 10(a)(2) to Bancorp's Current Report on Form
               8-K dated December 1, 1999 (Commission File No. 000-29599))

10(a)(3)       Lease  dated   February  1,  1995  between  999  Bedford   Street
               Corporation  and the Bank  (incorporated  by reference to Exhibit
               10(a)(3) to Bancorp's  Current  Report on Form 8-K dated December
               1, 1999 (Commission File No. 000-29599)).

10(a)(4)       Employment Agreement, dated as of October 23, 2000, as amended by
               a First  Amendment,  dated as of March 21, 2001,  among the Bank,
               Bancorp and Charles F.Howell.

10(c)          1999 Stock Option Plan of the Bank  (incorporated by reference to
               Exhibit  10(c) to  Bancorp's  Current  Report  on Form 8-K  dated
               December 1, 1999 (Commission File No. 000-29599))

21             Subsidiaries of Bancorp  (incorporated by reference to Exhibit 21
               to  Bancorp's  Annual  Report on Form  10-KSB  for the year ended
               December 31, 1999 (Commission File No. 000-29599))

(b)      Reports on Form 8-K

The issuer filed no reports on Form 8-K during the fourth quarter of 2000.



                                       24
<PAGE>


                                   SIGNATURES

In accordance  with Section 13 or 15(d) of the Exchange Act, the  registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                   Patriot National Bancorp, Inc.
                                   (Registrant)


                                   By: /s/ ANGELO DeCARO
                                      --------------------------
                                      Name: Angelo DeCaro
                                      Title: President & Chief Executive Officer

Date:  March  29, 2001

In  accordance  with the Exchange  Act, this report has been signed below by the
following persons on behalf of the registrant and in capacities and on the dates
indicated.

/s/ ANGELO DeCARO                                                 March 29, 2001
----------------------------------                                --------------
Angelo DeCaro, President, Chief Executive                         Date
Officer and Director

/s/ R.F. O'CONNELL                                                March 29, 2001
----------------------------------                                --------------
Robert F. O'Connell                                               Date
Executive Vice President and
Chief Financial Officer

/s/ HERBERT A. BREGMAN                                            March 29, 2001
----------------------------------                                --------------
Herbert A. Bregman                                                Date
Director

/s/ FRED A. DeCARO, JR.                                           March 29, 2001
----------------------------------                                --------------
Fred A. DeCaro, Jr.                                               Date
Director


/s/                                                               March 29, 2001
----------------------------------                                --------------
John A. Geoghegan                                                 Date
Director


                                       25
<PAGE>


Form 10 KSB - Signatures continued


/s/ L. MORRIS GLUCKSMAN                                           March 29, 2001
----------------------------------                                --------------
L. Morris Glucksman                                               Date
Director


/s/ CHARLES F. HOWELL                                             March 29, 2001
----------------------------------                                --------------
Charles F. Howell                                                 Date
Director


/s/ MICHAEL INTRIERI                                              March 29, 2001
----------------------------------                                --------------
Michael Intrieri                                                  Date
Director


/s/                                                               March 29, 2001
----------------------------------                                --------------
Richard Naclerio                                                  Date
Director


/s/                                                               March 29, 2001
----------------------------------                                --------------
Salvatore Trovato                                                 Date
Director


/s/ P.W. WOLFORD                                                  March 29, 2001
----------------------------------                                --------------
Phil Wolford                                                      Date
Director


                                       26
<PAGE>



                         PATRIOT NATIONAL BANCORP, INC.

                                Financial Report

                           December 31, 2000 and 1999


<PAGE>


                                    CONTENTS

--------------------------------------------------------------------------------

INDEPENDENT AUDITOR'S REPORT                                                1
--------------------------------------------------------------------------------

CONSOLIDATED FINANCIAL STATEMENTS
    Consolidated balance sheets                                             2
    Consolidated statements of income                                       3
    Consolidated statements of shareholders' equity                         4
    Consolidated statements of cash flows                                 5-6
    Notes to consolidated financial statements                           7-38
--------------------------------------------------------------------------------




<PAGE>








                          INDEPENDENT AUDITOR'S REPORT

To the Shareholders and Board of Directors
Patriot National Bancorp, Inc.
Stamford, Connecticut

We have audited the accompanying consolidated balance sheets of Patriot National
Bancorp,  Inc. and Subsidiary  (the "Company") as of December 31, 2000 and 1999,
and the related consolidated statements of income, shareholders' equity and cash
flows for the years then ended. These consolidated  financial statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the financial  position of Patriot National
Bancorp,  Inc. and  Subsidiary as of December 31, 2000 and 1999, and the results
of their operations and their cash flows for the years then ended, in conformity
with generally accepted accounting principles.


/s/ McGLADREY & PULLEN LLP

New Haven, Connecticut
February 16, 2001


<PAGE>


<TABLE>
<CAPTION>

PATRIOT NATIONAL BANCORP, INC.

CONSOLIDATED BALANCE SHEETS
December 31, 2000 and 1999
-------------------------------------------------------------------------------------------------------

                                                                               2000            1999
                                                                        -------------------------------
<S>                                                                      <C>              <C>
ASSETS
Cash and due from banks (Note 2) ....................................    $   3,565,071    $   2,685,031
Federal funds sold ..................................................       29,500,000       18,900,000
Short-term investments - commercial paper
                                                                                  --         10,976,264
                                                                         -------------    -------------
           Cash and cash equivalents ................................       33,065,071       32,561,295

Available for sale securities (at fair value) (Note 3) ..............       20,706,974       19,984,309
Held to maturity securities (fair value:  2000 $11,974,862;
   1999 $11,906,293) (Note 4) .......................................       12,298,058       12,301,485
Federal Reserve Bank stock ..........................................          475,200          410,700
Federal Home Loan Bank stock (Note 8) ...............................          593,600          307,000
Loans receivable (net of allowance for loan losses:  2000 $1,644,817;
   1999 $1,360,183) (Note 5) ........................................      126,411,265      107,769,911
Accrued interest receivable .........................................        1,228,920          980,777
Premises and equipment, net (Notes 6 and 9) .........................          898,754          959,651
Deferred tax asset, net (Note 10) ...................................          651,228          562,928
Goodwill (net of accumulated amortization:  2000 $182,101;
   1999 $58,180) ....................................................        1,054,027        1,177,948
Other assets ........................................................          245,030          178,693
                                                                         -------------    -------------
           Total assets .............................................    $ 197,628,127    $ 177,194,697
                                                                         =============    =============

LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities
   Deposits (Note 7):

     Noninterest bearing deposits ...................................    $  16,899,057    $  12,630,926
     Interest bearing deposits ......................................      162,767,041      150,115,428
                                                                         -------------    -------------
           Total deposits ...........................................      179,666,098      162,746,354

   Capital lease obligation (Note 9) ................................          470,826          563,687
   Collateralized borrowings ........................................          474,444          325,000
   Accrued expenses and other liabilities ...........................          589,323          323,568
                                                                         -------------    -------------
           Total liabilities ........................................      181,200,691      163,958,609
                                                                         -------------    -------------

Commitments and contingencies (Notes 9, 11, and 13)

Shareholders' equity (Notes 11 and 14)
   Common stock, $2 par value; 5,333,333 shares authorized; shares
      issued and outstanding: 2000 2,400,375; 1999 2,160,952 ........        4,800,750        4,321,904
Additional paid-in capital ..........................................       11,483,770        9,807,957
   Retained earnings ................................................          131,840         (635,331)
   Accumulated other comprehensive income - net unrealized
     gain (loss) on available for sale securities ...................           11,076         (258,442)
                                                                         -------------    -------------
           Total shareholders' equity ...............................       16,427,436       13,236,088
                                                                         -------------    -------------
           Total liabilities and shareholders' equity ...............    $ 197,628,127    $ 177,194,697
                                                                         =============    =============
</TABLE>

See Notes to Consolidated Financial Statements.




                                       2
<PAGE>



<TABLE>
<CAPTION>

PATRIOT NATIONAL BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31, 2000 and 1999
--------------------------------------------------------------------------------------------
                                                                      2000           1999
                                                                 ---------------------------
<S>                                                               <C>            <C>
Interest and Dividend Income
   Interest and fees on loans ................................    $11,303,915    $ 7,276,659
   Interest and dividends on investment securities ...........      2,151,724      1,651,565
   Interest on federal funds sold ............................      1,238,496        804,495
                                                                  -----------    -----------
           Total interest and dividend income ................     14,694,135      9,732,719
                                                                  -----------    -----------
Interest Expense
   Interest on deposits (Note 7) .............................      7,906,017      4,654,515
   Interest on capital lease obligation                                71,140         83,082
   Interest expense on collateralized borrowings                       40,458          2,324
                                                                  -----------    -----------
           Total interest expense ............................      8,017,615      4,739,921
                                                                  -----------    -----------
           Net interest income ...............................      6,676,520      4,992,798

Provision for Loan Losses (Note 5) ...........................        325,900        553,000
                                                                  -----------    -----------
           Net interest income after provision for loan losses      6,350,620      4,439,798
                                                                  -----------    -----------
Noninterest Income
   Mortgage brokerage referral fees ..........................      2,103,114        933,074
   Fees and service charges ..................................        239,164        162,534
   Gains and origination fees from loans sold                          61,014         48,841
   Other income ..............................................        282,004         76,880
                                                                  -----------    -----------
           Total noninterest income ..........................      2,685,296      1,221,329
                                                                  -----------    -----------
Noninterest Expenses
   Salaries and benefits .....................................      4,275,275      2,699,266
   Occupancy and equipment expense, net ......................        861,341        601,309
   Data processing and other outside services ................        588,089        245,645
   Professional services .....................................        430,696        309,605
   Advertising and promotional expenses ......................        325,124        357,323
   Forms, printing and supplies ..............................        164,785        189,512
   Regulatory assessments                                              96,867         51,800
   Insurance                                                           79,314         33,603
   Directors fees and expenses                                         65,372         97,734
   Other operating expenses ..................................        806,482        660,189
                                                                  -----------    -----------
           Total noninterest expenses ........................      7,693,345      5,245,986
                                                                  -----------    -----------

           Income before income taxes ........................      1,342,571        415,141

Provision for Income Taxes (Note 10) .........................        575,400         66,500
                                                                  -----------    -----------
           Net income ........................................    $   767,171    $   348,641
                                                                  ===========    ===========
           Basic income per share (Note 11) ..................    $      0.34           0.17
                                                                  ===========    ===========
           Diluted income per share (Note 11) ................    $      0.33           0.16
                                                                  ===========    ===========
</TABLE>
See Notes to Consolidated Financial Statements.





                                       3
<PAGE>



<TABLE>
<CAPTION>

PATRIOT NATIONAL BANCORP, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years Ended December 31, 2000 and 1999
---------------------------------------------------------------------------------------------------------------------

                                                                                         Accumulated
                                                          Additional                        Other
                                Number of     Common       Paid-in        Retained      Comprehensive
                                 Shares        Stock       Capital        Earnings         Income           Total
                               --------------------------------------------------------------------------------------

<S>                             <C>          <C>           <C>           <C>            <C>              <C>
Balance, December 31, 1998      1,996,931    $3,993,862    $9,047,262    $ (983,972)    $   40,131       $ 12,097,283
                                                                                                         ------------
Comprehensive income

   Net income                       -             -             -           348,641            -              348,641
   Unrealized holding loss
     on available for sale
     securities, net of
     taxes (Note 16)                -             -             -              -          (298,573)          (298,573)
                                                                                                         ------------
         Total comprehensive
         income                                                                                                50,068
                                                                                                         ------------

Issuance of common stock
(Note 11)                         164,021       328,042       760,695          -               -            1,088,737
                               --------------------------------------------------------------------------------------

Balance, December 31, 1999      2,160,952     4,321,904     9,807,957      (635,331)      (258,442)        13,236,088

Comprehensive income
   Net income                       -             -             -           767,171            -              767,171
   Unrealized holding gain on
     available for sale
     securities, net of taxes
     (Note 16)                      -             -             -              -           269,518            269,518
                                                                                                         ------------
         Total comprehensive
         income                                                                                             1,036,689
                                                                                                         ------------
Issuance of common stock
(Note 11)                         239,423       478,846     1,675,813          -               -            2,154,659
                               --------------------------------------------------------------------------------------

Balance, December 31, 2000      2,400,375  $  4,800,750   $11,483,770    $  131,840     $   11,076       $ 16,427,436
                               ======================================================================================
</TABLE>

See Notes to Consolidated Financial Statements.




                                       4
<PAGE>



<TABLE>
<CAPTION>

PATRIOT NATIONAL BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2000 and 1999
----------------------------------------------------------------------------------------------

                                                                       2000             1999
                                                                 -----------------------------

<S>                                                              <C>              <C>
Cash Flows from Operating Activities
   Net income ...............................................    $    767,171     $    348,641
   Adjustments to reconcile net income to net cash provided
     by operating activities:
       Amortization and accretion of investment discounts and
         premiums, net ......................................         (10,958)          17,244
       Gains on sales of investments ........................            --             (4,378)
       Originations of loans held for sale ..................     (15,087,035)      (2,014,950)
       Proceeds from sales of loans held for sale ...........      15,087,035        2,033,235
       Gains on sales of loans ..............................            --            (18,285)
       Provision for loan losses ............................         325,900          553,000
       Gain on sale of other real estate owned ..............            --            (32,238)
       Depreciation and amortization ........................         418,149          282,954
       Loss on disposal of bank premises and equipment ......             165            1,439
       Deferred income taxes ................................        (260,708)         (18,000)
       Consulting fees paid by issuance of common stock .....            --             27,035
       Directors fees paid by issuance of common stock ......            --             48,232
       Changes in assets and liabilities:
         Decrease (increase) in deferred loan fees ..........          11,956          (59,034)
         Increase in accrued interest receivable ............        (248,143)        (393,044)
         (Increase) decrease in other assets ................         (66,337)          76,527
         Increase in accrued expenses and other liabilities .         265,755           66,936
                                                                  ------------     -----------
           Net cash provided by operating activities ........       1,202,950          915,314
                                                                  ------------     -----------

Cash Flows from Investing Activities
   Purchases of available for sale securities ...............      (4,046,225)     (18,870,640)
   Proceeds from sales of available for sale securities .....            --          5,771,438
   Proceeds from maturities of available for sale securities          550,000        1,050,000
   Principal repayments on available for sale securities ....       3,229,871        1,049,086
   Purchases of held to maturity securities .................            --         (8,966,022)
   Proceeds from maturities of held to maturity securities ..            --            500,000
   Purchase of Federal Reserve Bank stock, net of redemptions         (64,500)        (170,700)
   Purchase of Federal Home Loan Bank stock .................        (286,600)        (307,000)
</TABLE>




                                       5
<PAGE>



<TABLE>
<CAPTION>

PATRIOT NATIONAL BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued
Years Ended December 31, 2000 and 1999
------------------------------------------------------------------------------------------------------------------


                                                                                        2000             1999
                                                                                   -------------------------------

<S>                                                                                 <C>              <C>
Cash Flows from Financing Activities
   Net increase in demand, savings and money market deposits ...................    $ 17,732,024     $  7,108,932
   Net (decrease) increase in time certificates of deposit .....................        (812,280)      66,328,283
   Principal payments on capital lease obligation ..............................         (92,861)         (80,918)
   Net increase in collateralized borrowings ...................................         149,444          325,000
   Proceeds from issuance of common stock ......................................       2,154,659           13,096
                                                                                    -----------------------------
           Net cash provided by financing activities ...........................      19,130,986       73,694,393
                                                                                    -----------------------------
           Net increase in cash and cash equivalents ...........................         503,776        2,993,942

Cash and cash equivalents
   Beginning ...................................................................      32,561,295       29,567,353
                                                                                    -----------------------------
   Ending ......................................................................    $ 33,065,071     $ 32,561,295
                                                                                    =============================
Supplemental Disclosures of Cash Flow Information
     Cash paid during the year for:
     Interest ..................................................................    $  7,977,157     $  4,739,921
                                                                                    =============================
     Income taxes ..............................................................    $    773,440     $     98,000
                                                                                    =============================

Supplemental Disclosure of Noncash Investing and Financing
   Activities
     Unrealized holding gains (losses) on available for sale
       securities arising during the period ....................................    $    441,926     $   (490,208)
                                                                                    =============================

     Accrued prior year director fees settled in common stock ..................    $       --       $     19,965
                                                                                    =============================

     Purchase of Mortgage Company (Note 18)
       Purchase price ..........................................................    $       --       $  1,130,409
       Direct acquisition costs ................................................            --            105,719
                                                                                    -----------------------------
                                                                                    $       --       $  1,236,128
                                                                                    =============================

       Fair Value of Assets Acquired:
         Goodwill ..............................................................    $       --       $  1,236,128
                                                                                    =============================

       Source of Funds:
         Cash ..................................................................            --       $    255,719
         Issuance of common stock ..............................................    $       --            980,409
                                                                                    -----------------------------
                                                                                    $       --       $  1,236,128
                                                                                    =============================
</TABLE>

See Notes to Consolidated Financial Statements.




                                       6
<PAGE>


PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000 and 1999
--------------------------------------------------------------------------------
Note 1.  Nature of Operations and Summary of Significant Accounting Policies

Patriot National Bancorp, Inc. (the "Company"), a Connecticut corporation,  is a
bank holding  company that was organized in 1999.  On December 1, 1999,  all the
issued and  outstanding  shares of Patriot  National  Bank,  (the  "Bank")  were
converted  into  Company  common  stock  and the  Bank  became  a  wholly  owned
subsidiary of the Company.  The Bank is a nationally  chartered  commercial bank
whose deposits are insured under the Bank Insurance Fund,  which is administered
by the Federal Deposit Insurance Corporation.  The Bank provides a full range of
banking services to commercial and consumer customers through its main office in
Stamford,  Connecticut  and two branch  offices in Greenwich,  Connecticut.  The
Bank's  customers  are  concentrated  in  Fairfield   County,   Connecticut  and
Westchester  County,  New  York.  The  Bank  also  conducts  mortgage  brokerage
operations  in  Connecticut,  New  York  and New  Jersey  through  its  mortgage
brokerage division, Pinnacle Financial (see Note 18).

Principles of consolidation and basis of financial statement presentation
--------------------------------------------------------------------------

The consolidated  financial  statements  include the accounts of the Company and
its wholly owned  subsidiary,  the Bank, and the Bank's wholly owned subsidiary,
Pinpat  Acquisition  Corporation,  and have been  prepared  in  accordance  with
generally  accepted  accounting  principles  and  general  practices  within the
banking industry.  All significant  intercompany  balances and transactions have
been eliminated. In preparing the consolidated financial statements,  management
is required to make estimates and assumptions  that affect the reported  amounts
of assets and liabilities, and disclosures of contingent assets and liabilities,
as of the balance  sheet date and revenues  and expenses for the period.  Actual
results  could  differ  from  those  estimates.   Material  estimates  that  are
particularly  susceptible to  significant  change in the near term relate to the
determination  of the allowance  for loan losses,  and the valuation of deferred
tax assets.

The following is a summary of the Company's significant accounting policies.

Cash and cash equivalents
-------------------------

Cash and due from  banks,  federal  funds sold and  short-term  investments  are
recognized as cash equivalents in the consolidated financial statements. Federal
funds sold  generally  mature in one day. For purposes of reporting  cash flows,
the Company  considers  all highly  liquid  debt  instruments  purchased  with a
maturity of three months or less to be cash  equivalents.  Cash flows from loans
and deposits are reported net. The Company  maintains amounts due from banks and
Federal funds sold which, at times,  may exceed  federally  insured limits.  The
Company has not experienced any losses from such concentrations.



                                       7
<PAGE>



PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2000 and 1999

--------------------------------------------------------------------------------



Investments in debt and marketable equity securities
----------------------------------------------------

Management  determines the appropriate  classification of securities at the date
individual investment  securities are acquired,  and the appropriateness of such
classification   is  reassessed  at  each  balance  sheet  date.  This  security
classification  may be modified after  acquisition only under certain  specified
conditions.  The  classification of those securities and the related  accounting
policies are as follows:

      Held to maturity securities

      Securities  classified as held to maturity are those debt  securities  the
      Company has both the intent and ability to hold to maturity  regardless of
      changes  in market  conditions,  liquidity  needs or  changes  in  general
      economic  conditions.  These securities are carried at cost,  adjusted for
      amortization  of premium and  accretion  of discount,  computed  using the
      interest  method,  over the  period to  maturity.  The sale of a  security
      within three months of its maturity  date or after  collection of at least
      85% of the principal  outstanding at the time the security was acquired is
      considered a maturity for the purposes of classification and disclosure.

      Available for sale securities

      Securities classified as available for sale are those debt securities that
      the  Company  intends  to hold for an  indefinite  period  of time but not
      necessarily  to maturity and equity  securities not classified as held for
      trading.  Any decision to sell a security classified as available for sale
      would be based on various  factors,  including  significant  movements  in
      interest  rates,  changes in the maturity mix of the Company's  assets and
      liabilities, liquidity needs, regulatory capital considerations, and other
      similar factors.  Available for sale securities are carried at fair value.
      Unrealized  gains or losses are  reported as  increases  or  decreases  in
      shareholders' equity, net of the related deferred tax effect. Amortization
      of premiums and  accretion of discounts,  computed by the interest  method
      over the period to maturity,  are recognized in interest income.  Realized
      gains  or  losses,  determined  on the  basis  of  the  cost  of  specific
      securities sold, are included in earnings.

      Trading Securities

      Trading securities, if any, which are generally held for the short term in
      anticipation  of market  gains,  are carried at fair value.  Realized  and
      unrealized  gains and losses on trading  account  assets are recognized in
      the statement of income.



                                       8
<PAGE>



PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2000 and 1999

--------------------------------------------------------------------------------



Declines in the fair value of individual  held to maturity or available for sale
securities  below their  amortized cost, that are determined by management to be
other than  temporary,  result in write-downs  of the  individual  securities to
their fair  value.  The  related  losses from the  write-downs  are  included in
earnings as realized losses.

Loans held for sale
-------------------

Loans held for sale are those  loans the  Company  has the intent to sell in the
foreseeable  future,  and are carried at the lower of  aggregate  cost or market
value,  taking into consideration all open positions.  Gains and losses on sales
of loans are recognized at the trade dates, and are determined by the difference
between the sales proceeds and the carrying  value of the loans.  Loans are sold
with servicing released.

Loans receivable
----------------

Loans receivable are stated at their current unpaid  principal  balances and are
net of the allowance for loan losses and net deferred loan origination fees. The
Company has the ability and intent to hold its loans for the foreseeable  future
or until maturity or payoff.

A loan is classified as a restructured  loan when certain  concessions have been
made to the original  contractual terms, such as reductions in interest rates or
deferral of interest or  principal  payments,  due to the  borrower's  financial
condition.

Impaired loans are measured  based on the present value of expected  future cash
flows  discounted  at the  loan's  effective  interest  rate or, as a  practical
expedient,  at the  loan's  observable  market  price or the  fair  value of the
collateral if the loan is collateral  dependent.  The amount of  impairment,  if
any, and any subsequent changes are recorded as adjustments to the allowance for
loan losses.  A loan is impaired  when it is probable the Company will be unable
to collect all  contractual  principal  and interest  payments due in accordance
with the terms of the loan agreement.

Management considers all nonaccrual loans and restructured loans to be impaired.
In most cases,  loan payments that are past due less than 90 days are considered
minor  collection  delays,  and  the  related  loans  are not  considered  to be
impaired.  The  Company  considers  consumer  installment  loans  to be pools of
smaller  balance  homogeneous  loans,  which  are  collectively   evaluated  for
impairment.

Allowance for loan losses
-------------------------

The allowance for loan losses,  a material  estimate  susceptible to significant
change in the near-term, is established as losses are estimated to have occurred
through a provision for losses charged against operations and is maintained at a
level that management considers adequate to absorb losses in the loan portfolio.
Management's judgment in determining the adequacy of the



                                       9
<PAGE>



PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2000 and 1999
--------------------------------------------------------------------------------



allowance is inherently  subjective and is based on the evaluation of individual
loans,  the  known  and  inherent  risk  characteristics  and  size of the  loan
portfolios,   the  assessment  of  current   economic  and  real  estate  market
conditions,  estimates of the current value of underlying collateral,  past loan
loss  experience,   review  of  regulatory  authority  examination  reports  and
evaluations  of specific  loans and other  relevant  factors.  Loans,  including
impaired  loans,  are  charged  against  the  allowance  for  loan  losses  when
management  believes that the  uncollectibility  of principal is confirmed.  Any
subsequent  recoveries  are  credited  to the  allowance  for loan  losses  when
received. In connection with the determination of the allowance for loan losses,
management  obtains  appraisals  for  significant  properties,  when  considered
necessary.

The  Company's  real estate  loans are  collateralized  by real  estate  located
principally  in  Connecticut  and  New  York,  and  accordingly,   the  ultimate
collectibility  of a  substantial  portion of the  Company's  loan  portfolio is
susceptible to changes in real estate market conditions.

Management believes the allowance for loan losses is adequate.  While management
uses available information to recognize losses on loans, future additions to the
allowance may be necessary based on changes in economic conditions. In addition,
various regulatory  agencies,  as an integral part of their examination process,
periodically review the Bank's allowance for loan losses. Such agencies have the
authority  to  require  the Bank to  recognize  additions  to the  allowance  or
charge-offs based on the agencies' judgments about information available to them
at the time of their examination.

Interest and fees on loans
--------------------------

Interest  on  loans  is  accrued  and  included  in  operating  income  based on
contractual  rates  applied to  principal  amounts  outstanding.  The accrual of
interest  income is  discontinued  whenever  reasonable  doubt  exists as to its
collectibility  and generally is discontinued when loans are past due 90 days as
to  either  principal  or  interest.  When the  accrual  of  interest  income is
discontinued,  all  previously  accrued  and  uncollected  interest  is reversed
against  interest  income.  The accrual of interest on loans past due 90 days or
more,  including  impaired loans,  may be continued if the loan is well secured,
and it is believed all  principal  and accrued  interest  income due on the loan
will be  realized,  and the loan is in the process of  collection.  A nonaccrual
loan is  restored  to an  accrual  status  when it is no longer  delinquent  and
collectibility of interest and principal is no longer in doubt.

Loan origination  fees, net of direct loan  origination  costs, are deferred and
amortized as an adjustment to the loan's yield  generally  over the  contractual
life of the loan, utilizing the interest method.



                                       10
<PAGE>



PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2000 and 1999
--------------------------------------------------------------------------------



Loan brokerage activities
-------------------------

The  Company   receives  loan  brokerage  fees  for  soliciting  and  processing
conventional loan applications on behalf of permanent  investors.  Brokerage fee
income is recognized upon funding of loans by permanent investors.

Transfers of financial assets
-----------------------------

Transfers of financial assets are accounted for as sales,  when control over the
assets has been  surrendered.  Control over  transferred  assets is deemed to be
surrendered  when (1) the assets have been  isolated  from the Company,  (2) the
transferee  obtains the right (free of conditions  that constrain it from taking
advantage of that right) to pledge or exchange the transferred  assets,  and (3)
the Company does not maintain  effective  control  over the  transferred  assets
through an agreement to repurchase them before their maturity.

Other real estate owned
-----------------------

Other real estate owned consists of properties  acquired through, or in lieu of,
loan foreclosure or other proceedings and is initially recorded at fair value at
the date of foreclosure,  which establishes a new cost basis. After foreclosure,
the  properties  are held for sale and are  carried at the lower of cost or fair
value less estimated costs of disposal. Any write-down to fair value at the time
of  acquisition  is charged to the  allowance  for loan losses.  Properties  are
evaluated regularly to ensure the recorded amounts are supported by current fair
values,  and  valuation  allowances  are  recorded  as  necessary  to reduce the
carrying  amount to fair value less  estimated  cost of  disposal.  Revenue  and
expense from the operation of other real estate owned and  valuation  allowances
are included in operations. Costs relating to the development and improvement of
the  property  are  capitalized,  subject  to the  limit  of fair  value  of the
collateral. Gains or losses are included in operations upon disposal.

Premises and equipment
----------------------

Premises and equipment are stated at cost for purchased assets, and at the lower
of fair value or the net present  value of the minimum lease  payments  required
over the term of the lease for assets under capital  leases,  net of accumulated
depreciation  and  amortization.  Leasehold  improvements  are  capitalized  and
amortized  over the shorter of the terms of the related  leases or the estimated
economic lives of the improvements.  Depreciation is charged to operations using
the  straight-line  method over the estimated useful lives of the related assets
which range from 3 to 10 years. Amortization of premises under capital leases is
charged to operations using the straight-line method over the life of the lease.
Gains and losses on dispositions  are recognized upon  realization.  Maintenance
and repairs are expensed as incurred and improvements are capitalized.



                                       11
<PAGE>



PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2000 and 1999

--------------------------------------------------------------------------------



Goodwill
--------

Goodwill  represents the cost of acquired assets in excess of values ascribed to
net tangible assets related to the acquisition of Pinnacle  Financial Group (see
Note 18) and is being amortized on a straight line basis over ten years.

Impairment of long-lived assets
-------------------------------

Long-lived assets, including premises and equipment and goodwill, which are held
and used by the Company,  are reviewed for impairment whenever events or changes
in  circumstances  indicate  that the  carrying  amount  of an asset  may not be
recoverable.  If  impairment  is indicated by that review,  the asset is written
down to its estimated fair value through a charge to noninterest expense.

Collateralized borrowings
-------------------------

Collateralized  borrowings  represent the portion of loans  transferred to other
institutions  under  loan  participation  agreements.  Such  transfers  were not
recognized  as sales  due to  recourse  provisions  and/or  restrictions  on the
participant's right to transfer their portion of the loan.

Income taxes
------------

The Company recognizes income taxes under the asset and liability method.  Under
this method,  deferred tax assets and  liabilities are recognized for the future
tax  consequences  attributable to differences  between the financial  statement
carrying  amounts of existing assets and  liabilities  and their  respective tax
bases, and loss carryforwards.  Deferred tax assets and liabilities are measured
using  enacted  tax rates  expected  to apply to taxable  income in the years in
which those temporary  differences are expected to be recovered or settled.  The
effect  on  deferred  tax  assets  and  liabilities  of a change in tax rates is
recognized in income in the period that includes the  enactment  date.  Deferred
tax  assets  are  reduced  by a  valuation  allowance  when,  in the  opinion of
management,  it is more likely than not that some portion or all of the deferred
tax assets will not be realized.

Related party transactions
--------------------------

Directors  and  officers of the Company and the Bank and their  affiliates  have
been  customers of and have had  transactions  with the Bank, and it is expected
that such  persons  will  continue  to have  such  transactions  in the  future.
Management believes that all deposit accounts,  loans,  services and commitments
comprising such transactions  were made in the ordinary course of business,  and
on substantially  the same terms,  including  interest rates and collateral,  as
those  prevailing at the time for comparable  transactions  with other customers
who are not  directors  or  officers.  In the  opinion  of the  management,  the
transactions with related parties did not involve



                                       12
<PAGE>



PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2000 and 1999
--------------------------------------------------------------------------------



more than normal  risks of  collectibility  or favored  treatment  or terms,  or
present other unfavorable  features.  Note 15 contains details regarding related
party transactions.

Earnings per share
------------------

Basic earnings per share represents income available to common  stockholders and
is  computed  by dividing  net income by the  weighted-average  number of common
shares outstanding. Diluted earnings per share reflects additional common shares
that would have been  outstanding if dilutive  potential  common shares had been
issued,  as well as any  adjustment to income that would result from the assumed
issuance.  Potential  common shares that may be issued by the Company  relate to
outstanding  stock options and warrants,  and are determined  using the treasury
stock method.

Stock compensation plans
------------------------

Statement of  Financial  Accounting  Standards  (SFAS) No. 123,  Accounting  for
Stock-Based  Compensation,  encourages  all entities to adopt a fair value based
method of accounting for employee stock compensation plans, whereby compensation
cost is  measured  at the  grant  date  based on the  value of the  award and is
recognized  over the  service  period,  which is  usually  the  vesting  period.
However,  it also allows an entity to continue to measure  compensation cost for
those plans using the intrinsic  value based method of accounting  prescribed by
Accounting  Principles  Board  Opinion No. 25,  Accounting  for Stock  Issued to
Employees, whereby compensation cost is the excess, if any, of the quoted market
price of the stock at the grant date (or other measurement date) over the amount
an  employee  must pay to acquire  the stock.  Stock  options  issued  under the
Company's stock option plan, and stock warrants issued,  have no intrinsic value
at the grant date, and under Opinion No. 25 no  compensation  cost is recognized
for them. The Company has elected to continue with the accounting methodology in
Opinion No. 25 and,  as a result,  has  provided  pro forma  disclosures  of net
income and earnings per share and other disclosures,  as if the fair value based
method of accounting  had been applied.  The pro forma  disclosures  include the
effects of all awards granted on or after January 1, 1995 (see Note 11).

Comprehensive income
--------------------

Accounting principles generally require that recognized revenue, expenses, gains
and losses be  included in net income.  Although  certain  changes in assets and
liabilities,  such  as  unrealized  gains  and  losses  on  available  for  sale
securities,  are reported as a separate  component of the  shareholders'  equity
section of the consolidated  balance sheets,  such items, along with net income,
are components of comprehensive income.



                                       13
<PAGE>



PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2000 and 1999
--------------------------------------------------------------------------------



Fair values of financial instruments
------------------------------------

The following methods and assumptions were used by the Company in estimating the
fair value of its financial instruments:

      Cash and due from banks,  federal funds sold,  short-term  investments and
      accrued interest receivable

      The carrying amount is a reasonable estimate of fair value.

      Securities

      Fair values,  excluding  restricted Federal Reserve Bank stock and Federal
      Home Loan Bank stock,  are based on quoted market prices or dealer quotes,
      if  available.  If a quoted market price is not  available,  fair value is
      estimated using quoted market prices for similar securities.  The carrying
      value of the Federal  Reserve  Bank stock and Federal Home Loan Bank stock
      approximate  fair value based on the redemption  provisions of the related
      stock.

      Loans receivable

      For variable rate loans which reprice frequently,  and have no significant
      changes in credit risk,  fair value is based on the loan's carrying value.
      The fair value of fixed rate loans is estimated by discounting  the future
      cash flows using the year end rates at which  similar  loans would be made
      to  borrowers  with  similar  credit  ratings  and for the same  remaining
      maturities.

      Loans held for sale

      Fair value is based on quoted secondary market rates.

      Deposits

      The fair value of demand  deposits,  regular  savings  and  certain  money
      market deposits is the amount payable on demand at the reporting date. The
      fair value of certificates of deposit and other time deposits is estimated
      using a  discounted  cash flow  calculation  that applies  interest  rates
      currently being offered for deposits of similar remaining  maturities to a
      schedule of aggregated expected maturities on such deposits.

      Collateralized borrowings

      The fair  value of the  collateralized  borrowings  is  estimated  using a
      discounted cash flow  calculation  that applies current interest rates for
      borrowings  of  similar  maturity  to a  schedule  of  maturities  of such
      borrowings.



                                       14
<PAGE>



PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2000 and 1999
--------------------------------------------------------------------------------




      Off-balance-sheet instruments

      Fair  values  for the  Company's  off-balance-sheet  instruments  (lending
      commitments  and standby  letters of credit)  are based on fees  currently
      charged  to  enter  into  similar  agreements,  taking  into  account  the
      remaining terms of the agreements and the counterparties' credit standing.

Reclassifications
-----------------

Certain 1999 financial  statement amounts have been reclassified to conform with
the 2000 presentations. Such reclassifications had no effect on 1999 net income.

Note 2.  Restrictions on Cash and Due From Banks

The Bank is required to maintain  reserves  against its  respective  transaction
accounts  and non personal  time  deposits.  At December 31, 2000,  the Bank was
required to have cash and liquid assets of approximately  $677,000 to meet these
requirements.  In  addition,  the Bank is required  to  maintain  $25,000 in the
Federal Reserve Bank for clearing purposes.

Note 3.  Available for Sale Securities

The  amortized  cost,  gross  unrealized  gains,  gross  unrealized  losses  and
approximate  fair values of available  for sale  securities at December 31, 2000
and 1999 are as follows:

<TABLE>
<CAPTION>

                                                                  Gross             Gross
                                             Amortized          Unrealized       Unrealized            Fair
    2000                                        Cost              Gains            Losses              Value
    ----                                 ----------------------------------------------------------------------------

    <S>                                  <C>                  <C>              <C>                 <C>
    Mortgage backed securities           $   14,110,790       $   80,300       $      -            $ 14,191,090
    U.S. Government obligations                 499,290           -                  (625)              498,665
    Marketable equity securities              6,078,290           -               (61,071)            6,017,219
                                         ----------------------------------------------------------------------------
                                         $   20,688,370       $   80,300       $  (61,696)         $ 20,706,974
                                         ============================================================================

                                                                  Gross             Gross
                                             Amortized          Unrealized       Unrealized            Fair
    1999                                        Cost              Gains            Losses              Value
    ----                                 ----------------------------------------------------------------------------

    Mortgage backed securities           $   17,325,754       $   -            $ (284,247)         $ 17,041,507
    U.S. Government obligations               1,049,810           -               (13,765)            1,036,045
    Marketable equity securities              2,032,067           -              (125,310)            1,906,757
                                         ----------------------------------------------------------------------------
                                         $   20,407,631       $   -            $ (423,322)         $ 19,984,309
                                         ============================================================================
</TABLE>




                                       15
<PAGE>


PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2000 and 1999
--------------------------------------------------------------------------------



The  amortized  cost and fair value of  available  for sale debt  securities  at
December 31, 2000 by contractual maturity are presented below. Actual maturities
of mortgage backed securities may differ from contractual maturities because the
mortgages  underlying  the  securities  may be  called  or  repaid  without  any
penalties.  Because mortgage backed  securities are not due at a single maturity
date, they are not included in the maturity categories in the following maturity
summary.

                                                 Amortized             Fair
                                                    Cost               Value
                                              ----------------------------------
          Maturity:
             Within 1 year                    $     499,290      $     498,665
             Mortgage-backed securities          14,110,790         14,191,090
                                              ----------------------------------
          Total                               $  14,610,080      $  14,689,755
                                              ==================================

During 2000, there were no sales of available for sale securities.  During 1999,
proceeds from sales of available for sale securities were $5,771,438,  and gross
gains of $4,378 were realized on those sales.

Note 4.  Held to Maturity Securities

The  amortized  cost,  gross  unrealized  gains,  gross  unrealized  losses  and
approximate fair values of held to maturity  securities at December 31, 2000 and
1999 are as follows:

<TABLE>
<CAPTION>

                                                                  Gross             Gross
                                              Amortized         Unrealized       Unrealized           Fair
    2000                                        Cost              Gains            Losses             Value
    ----                                  ---------------------------------------------------------------------------

    <S>                                   <C>                  <C>               <C>             <C>
    U.S. Government obligations           $       499,836      $       -         $    (149)      $    499,687
    Corporate bonds                            11,798,222             41          (323,088)        11,475,175
                                          ---------------------------------------------------------------------------

                                          $    12,298,058      $      41         $(323,237)      $ 11,974,862
                                          ===========================================================================

                                                                  Gross            Gross
                                              Amortized         Unrealized       Unrealized           Fair
    1999                                        Cost              Gains            Losses             Value
    ----                                  ---------------------------------------------------------------------------

    U.S. Government obligations           $       498,650      $     -           $  (3,500)      $    495,150
    Corporate bonds                            11,802,835          9,147          (400,839)        11,411,143
                                          ---------------------------------------------------------------------------

                                          $    12,301,485      $   9,147         $(404,339)      $ 11,906,293
                                          ===========================================================================
</TABLE>




                                       16
<PAGE>


PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2000 and 1999
--------------------------------------------------------------------------------



The  amortized  cost  and fair  value of held to  maturity  debt  securities  at
December 31, 2000 by contractual maturity are shown below:

<TABLE>
<CAPTION>

                                                                           Amortized               Fair
                                                                              Cost                 Value
                                                                         -------------------------------------
       <S>                                                               <C>                      <C>
       Maturity:
           Within 1 year                                                 $     499,836              499,687
           After 1 but within 5 years                                        8,826,302            8,593,520
           After 5 years                                                     2,971,920            2,881,655
                                                                         -------------------------------------
       Total                                                             $  12,298,058           11,974,862
                                                                         =====================================
</TABLE>

There were no sales of held to  maturity  securities  during  2000 or 1999,  and
there were no securities  transferred among the held to maturity,  available for
sale or trading categories.

Note 5.  Loans Receivable and Allowance for Loan Losses

A summary of the  Company's  loan  portfolio at December 31, 2000 and 1999 is as
follows:

<TABLE>
<CAPTION>

                                                                                  2000               1999
                                                                         --------------------------------------
        <S>                                                              <C>                <C>
        Real estate:
            Commercial                                                   $   57,297,310     $   54,289,002
            Residential                                                       5,041,776          6,799,133
            Construction, net of undisbursed portion of
              $10,842,047 in 2000 and $8,099,481 in 1999                     22,969,904         13,872,519
        Commercial                                                           12,841,040         11,086,324
        Consumer installment                                                  1,652,587          1,580,219
        Consumer home equity                                                 28,468,453         21,705,929
                                                                         --------------------------------------
                   Total loans                                              128,271,070        109,333,126
        Net deferred loan fees                                                 (214,988)          (203,032)
        Allowance for loan losses                                            (1,644,817)        (1,360,183)
                                                                         --------------------------------------
                   Loans receivable, net                                 $   126,411,265    $  107,769,911
                                                                         ======================================
</TABLE>




                                       17
<PAGE>


PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2000 and 1999
--------------------------------------------------------------------------------



The changes in the  allowance  for loan losses for the years ended  December 31,
2000 and 1999 are as follows:

<TABLE>
<CAPTION>

                                                                                2000              1999
                                                                         -----------------------------------

        <S>                                                               <C>                <C>
        Balance, beginning of year                                        $   1,360,183      $     785,536
            Provision for loan losses                                           325,900            553,000
            Recoveries of loans previously charged off                            3,314             40,770
            Loans charged off                                                   (44,580)           (19,123)
                                                                         -----------------------------------
        Balance, end of year                                              $   1,644,817      $   1,360,183
                                                                         ===================================
</TABLE>

At December 31, 2000 and 1999, the unpaid principal balances of loans delinquent
90 days or more were  $2,266,421  and  $565,788,  respectively,  and the  unpaid
principal  balances of loans placed on  nonaccrual  status were  $1,759,270  and
$91,076, respectively.

The  following  information  relates to  impaired  loans as of and for the years
ended December 31, 2000 and 1999:
<TABLE>
<CAPTION>

                                                                                2000              1999
                                                                          ----------------------------------

      <S>                                                                  <C>               <C>
      Loans receivable for which there is a related allowance
          for credit losses based on discounted cash flows                 $     95,307      $        -
                                                                          ==================================

      Loans receivable for which there is no related
          allowance for credit losses determined based on
          the fair value of collateral                                     $  1,663,963      $      91,076
                                                                          ==================================

      Allowance for credit losses related to impaired loans                $     95,307      $        -
                                                                          ==================================

      Average recorded investment in impaired loans                        $  1,169,872      $      81,923
                                                                          ==================================
</TABLE>

There was no interest  income on impaired loans collected or recognized in 2000,
and $3,000 of interest income  recognized on the cash basis in 1999. The Company
has no  commitments  to lend  additional  funds to  borrowers  whose  loans  are
impaired.

The Company's  lending  activities  are conducted  principally  in the Fairfield
County section of Connecticut  and  Westchester  County section of New York. The
Company grants  commercial  real estate loans,  commercial  business loans and a
variety of  consumer  loans.  In  addition,  the  Company  grants  loans for the
construction  of  residential  homes,  residential  developments  and  for  land
development  projects.   All  residential  and  commercial  mortgage  loans  are
collateralized  by first or second  mortgages  on real  estate.  The ability and
willingness of borrowers to satisfy their



                                       18
<PAGE>


PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2000 and 1999
--------------------------------------------------------------------------------



loan  obligations  is  dependent  in large part upon the status of the  regional
economy  and   regional   real  estate   market.   Accordingly,   the   ultimate
collectibility  of a substantial  portion of the loan portfolio and the recovery
of a substantial portion of any resulting real estate acquired is susceptible to
changes in market conditions.

The Company has established  credit policies  applicable to each type of lending
activity in which it engages,  evaluates the credit  worthiness of each customer
and, in most cases,  extends  credit of up to 75 percent of the market  value of
the  collateral at the date of the credit  extension  depending on the Company's
evaluation of the borrowers' creditworthiness and type of collateral. The market
value of collateral is monitored on an ongoing basis and  additional  collateral
is obtained when warranted. Real estate is the primary form of collateral. Other
important forms of collateral are accounts receivable, inventory, other business
assets,  marketable  securities and time  deposits.  While  collateral  provides
assurance as a secondary source of repayment,  the Company  ordinarily  requires
the  primary  source  of  repayment  to be based on the  borrower's  ability  to
generate continuing cash flows.

Note 6.  Premises and Equipment

At  December  31,  2000  and  1999,  premises  and  equipment  consisted  of the
following:

                                                      2000            1999
                                                  -----------------------------

Premises under capital lease .................... $   783,000     $   783,000
Leasehold improvements ..........................     538,723         516,811
Furniture, equipment and software ...............     735,314         532,055
                                                  -----------------------------
                                                    2,057,037       1,831,866
Less accumulated depreciation and amortization ..  (1,158,283)       (872,215)
                                                  -----------------------------
                                                  $   898,754     $   959,651
                                                  =============================


For the years ended December 31, 2000 and 1999,  depreciation  and  amortization
expense  related to  premises  and  equipment  totaled  $294,228  and  $208,821,
respectively.



                                       19
<PAGE>

PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2000 and 1999
--------------------------------------------------------------------------------


Note 7.  Deposits

At December 31, 2000 and 1999, deposits consisted of the following:

                                                  2000            1999
                                             -----------------------------

Noninterest bearing ........................ $ 16,899,057    $ 12,630,926
Interest bearing:
    Time certificates, less than $100,000 ..   71,240,470      69,144,236
    Time certificates, $100,000 or more ....   31,873,302      34,781,816
    Money market ...........................      849,067         624,763
    Savings ................................   31,164,493      35,962,257
    NOW ....................................   27,639,709       9,602,356
                                             ----------------------------
      Total interest bearing ...............  162,767,041     150,115,428
                                             ----------------------------
         Total deposits .................... $179,666,098    $162,746,354
                                             ============================

Interest expense on certificates of deposit in denominations of $100,000 or more
was  $1,737,979  and  $842,230  for the years ended  December 31, 2000 and 1999,
respectively.

Contractual  maturities of time  certificates of deposit as of December 31, 2000
are summarized below:

               Due within:
                   1 year                         $     94,624,873
                   1-2 years                             5,076,542
                   2-3 years                               385,010
                   3-4 years                               212,228
                   4-5 years                               325,921
                   5-6 years                             2,489,198
                                                  -------------------
                                                  $    103,113,772
                                                  ===================

Note 8.  Line of Credit and Federal Home Loan Bank Stock

The Bank is a member  of the  Federal  Home Loan  Bank of  Boston  ("FHLB").  At
December 31,  2000,  the Bank has the ability to borrow from the FHLB based on a
certain percentage of the value of the Bank's qualified  collateral,  as defined
in the FHLB  Statement  of Products  Policy,  at the time of the  borrowing.  In
accordance  with an agreement  with the FHLB, the qualified  collateral  must be
free and clear of liens,  pledges and  encumbrances.  At  December  31, 2000 and
1999, there were no advances outstanding under this line of credit.



                                       20
<PAGE>


PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2000 and 1999
--------------------------------------------------------------------------------


The Bank is required to maintain an  investment  in capital stock of the FHLB in
an amount equal to a percentage of its outstanding  mortgage loans and contracts
secured by residential  properties,  including  mortgage-backed  securities.  No
ready  market  exists  for FHLB  stock and it has no quoted  market  value.  For
disclosure purposes, such stock is assumed to have a market value which is equal
to cost since the Bank can redeem the stock with FHLB at cost.

Note 9.  Commitments and Contingencies

Capital lease
-------------

The Company leases the Bank's main office under a capital lease which expires in
2004.   Premises  under  capital  lease  of  $783,000  and  related  accumulated
amortization  of  $495,900  and  $417,600  as of  December  31,  2000 and  1999,
respectively, are included in premises and equipment.

The  Company  is  obligated  under the lease to pay  executory  costs  including
insurance, property taxes, maintenance and other related expenses.

At  December  31,  2000,  future  minimum  lease  payments,  by years and in the
aggregate, under this capital lease are as follows:

         Years Ending
         December 31,                                             Amount
         --------------------------------------------------------------------

         2001                                                $       164,000
         2002                                                        164,000
         2003                                                        164,000
         2004                                                        109,333
                                                             ----------------
                                                                     601,333
         Less amount representing interest                           130,507
                                                             ----------------

         Present value of future minimum lease payments-
             capital lease obligation                        $       470,826
                                                             ================




                                       21
<PAGE>


PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2000 and 1999
--------------------------------------------------------------------------------

Operating leases
----------------

The Company  subleases  excess  office space in its premises to various  tenants
under cancelable and noncancelable operating leases with remaining terms ranging
from  monthly to three years.  Future  minimum  lease  payments  receivable  for
noncancelable leases by year, and in the aggregate,  at December 31, 2000 are as
follows:

         Years Ending
         December 31,                                             Amount
         --------------------------------------------------------------------

         2001                                                $       24,869
         2002                                                        22,269
         2003                                                        22,269
                                                             ----------------
                                                             $       69,407
                                                             ================

For the years  ended  December  31,  2000 and 1999,  rental  income  under  both
cancelable and noncancelable leases totaled $74,168 and $99,218, respectively.

The  Company  also has  noncancelable  operating  leases for its two bank branch
offices in Greenwich,  Connecticut and for its mortgage  brokerage office in New
York.  Under  these  lease  agreements,  the  Company is required to pay certain
executory  costs such as insurance and property  taxes.  The Company also leases
parking space under a noncancelable operating lease agreement.

Future minimum rental  commitments  under the terms of these leases, by year and
in the aggregate, are as follows:

         Years Ending
         December 31,                                             Amount
         --------------------------------------------------------------------

         2001                                                $      365,706
         2002                                                       272,138
         2003                                                       139,894
         2004                                                        16,910
                                                             ----------------
                                                             $      794,648
                                                             ================

Total rental expense  charged to operations  for  cancelable  and  noncancelable
operating leases was $376,261 and $264,770 for the years ended December 31, 2000
and 1999, respectively.



                                       22
<PAGE>


PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2000 and 1999
--------------------------------------------------------------------------------


Employment Agreements
---------------------

President's Agreement
---------------------
In October 2000,  the Company and the Bank entered into a three-year  employment
agreement  (the  "Agreement")  with the  Bank's  President  and Chief  Executive
Officer.  The Agreement  provides for,  among other  things,  a stipulated  base
salary  for  the  first  year  of  the  Agreement,   annual  increases  at  each
anniversary,  and a discretionary  annual bonus to be determined by the Board of
Directors.  In  addition,  the  Agreement  provides  that the Company will grant
shares of the Company's  common stock to the President on December 31, 2000, and
annually  thereafter  through  December  31,  2003.  The  number of shares to be
granted is based on 30 percent of the President's stipulated base salary for the
preceding annual employment period, as defined, and 25 percent of such shares so
granted will vest and be  distributed  to the President at each of the next four
annual  anniversaries  of the  date of the  grant.  Compensation  cost is  being
recognized over the vesting period. Under certain  circumstances  defined in the
Agreement,  this stock grant may be settled in cash. The Agreement also provides
for the grant of options to purchase a minimum of 10,000 shares of the Company's
common stock on December 31, 2000,  and  annually  thereafter  through  December
2002, and on December 31, 2003, if the President  remains  employed by the Bank.
In the event that the Company does not have stock options  available to grant at
any of the  stipulated  dates,  which was the case at  December  31,  2000,  the
President may then elect,  on a future  determination  date,  as defined,  to be
chosen by the President, to receive cash compensation in the future equal to the
difference  between  the value of the  Company's  stock at the time the  options
would  have  been  granted,  and  the  value  of  the  Company's  stock  on  the
determination date.

In the event of the early termination of the Agreement for any reason other than
cause,  the Company would be obligated to  compensate  the President in one lump
sum payment, an amount equal to the higher of the aggregate salary payments that
would be made to the President  under the remaining  term of the  Agreement,  or
eighteen  months  of the  President's  stipulated  base  salary  at the  time of
termination.

The  Agreement  also  includes  change of control  provisions  that entitles the
President  to a lump sum  payment of two times the  greater  of the  President's
stipulated  base  salary  at the  time of the  change  in  control,  total  cash
compensation,  as defined,  for the year preceding the change in control, or the
average total cash  compensation,  as defined,  for the two years  preceding the
change in control.

Other Agreements
----------------
In conjunction with the acquisition of Pinnacle  Financial Group ("Pinnacle") on
June 30, 1999 (see Note 18), the Company entered into employment agreements with
two officers who were the principal  shareholders  of Pinnacle.  The  agreements
provide for,  among other things,  stipulated  base  salaries that  increased in
2000, and may increase or decrease in years  thereafter based on the achievement
of certain financial results by the mortgage  brokerage  division.  In addition,
the agreements provide for annual bonuses based on the achievement of certain



                                       23
<PAGE>


PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2000 and 1999
--------------------------------------------------------------------------------


financial results by the mortgage brokerage  division,  and for reimbursement of
expenses  incurred  incidental  to their  duties  as  officers.  The  agreements
terminate on December 31, 2002, however  automatically  renew, unless either the
Company or the officers  elect not to renew in writing,  for additional one year
periods upon the same terms and  conditions,  except that the base salaries will
increase by 10% for each one year extended term.

Legal Matters
-------------

The Company is involved in various  legal  proceedings  which have arisen in the
normal course of business.  Management believes that resolution of these matters
will not have a material effect on the Company's  financial condition or results
of operations.

Note 10. Income Taxes

The components of the income tax provision for the years ended December 31, 2000
and 1999 are as follows:

                                                        2000             1999
                                                     ---------------------------

Current
    Federal ..................................       $ 664,637        $  73,500
    State ....................................         171,471           11,000
                                                     ---------------------------
           Total .............................         836,108           84,500
                                                     ---------------------------
Deferred
    Federal ..................................         (56,068)         (14,100)
    State ....................................        (204,640)          (3,900)
                                                     ---------------------------
           Total .............................        (260,708)         (18,000)
                                                     ---------------------------
           Provision for income taxes ........       $ 575,400        $  66,500
                                                     ===========================



                                       24
<PAGE>


PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2000 and 1999
--------------------------------------------------------------------------------


A reconciliation of the anticipated  income tax provision  (computed by applying
the statutory  Federal  income tax rate (34%) to the income before income taxes)
to the income tax  provision  as  reported in the  statements  of income for the
years ended December 31, 2000 and 1999 are as follows:

                                                             2000        1999
                                                        ------------------------

Provision for income taxes at statutory Federal rate .    $ 456,500   $ 141,100
State taxes, net of Federal benefit ..................       63,400      21,500
Decrease in deferred tax valuation allowance .........         --      (134,400)
Change in state tax rates ............................         --         3,400
Nondeductible expenses ...............................       58,400      29,000
Other ................................................       (2,900)      5,900
                                                        ------------------------
           Total provision for income taxes ..........    $ 575,400   $  66,500
                                                        ========================

At December 31, 2000 and 1999,  the  components of gross deferred tax assets and
gross deferred tax liabilities are as follows:

                                                             2000        1999
                                                        ------------------------

Deferred tax assets:
    Allowance for loan losses ..................           $651,514    $529,793
    Investment securities ......................               --       164,880
    Asset under capital lease ..................             72,774      77,232
    Premises and equipment .....................             47,651      17,231
    Accrued expenses ...........................             51,493        --
    Other ......................................             38,022      33,627
                                                        ------------------------
      Gross deferred tax assets ................            861,454     822,763
                                                        ------------------------

Deferred tax liabilities:
    Tax bad debt reserve .......................            201,805     259,312
    Investment securities ......................              7,528          --
    Other ......................................                893         523
                                                        ------------------------
    Gross deferred tax liabilities .............            210,226     259,835
                                                        ------------------------
           Net deferred tax asset ..............           $651,228    $562,928
                                                        ========================

The net decrease in the valuation allowance of $134,400 in 1999 was to recognize
deferred tax assets at amounts  considered by management more likely than not to
be realized.



                                       25
<PAGE>


PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2000 and 1999
--------------------------------------------------------------------------------


Note 11.  Shareholders' Equity

Common Stock
------------

2000
----
On June 14, 2000,  the  Company's  shareholders  approved the private  placement
offering of up to $5,000,000 of the Company's  common stock.  Under the terms of
the private  placement  offering,  the sales price of the shares was  determined
based on the market value of the Company's stock at the time of the sale. During
2000, the Company sold 236,089 shares of its common stock at an aggregate  price
of $2,134,655 in conjunction with the private placement  offering.  In addition,
3,334 shares of common stock were issued  through the exercise of stock warrants
at an aggregate price of $20,004.

1999
----
As  described in Note 18, on June 30, 1999,  the Bank issued  151,685  shares of
common  stock  at an  aggregate  price  of  $980,409,  in  conjunction  with the
acquisition of the net assets of Pinnacle.

The Company  issued 1,285  shares of its common  stock at an aggregate  price of
$10,096 relating to its 1998 stock rights offering. In addition, 7,601 shares of
common stock,  at an aggregate  price of $68,197,  were issued to Bank directors
for meeting  fees,  and 2,950 shares of common stock,  at an aggregate  price of
$27,035,  were issued to former Bank  directors for consulting  fees.  Also, 500
shares of common stock were issued  through the exercise of stock warrants at an
aggregate price of $3,000

Income Per Share
----------------

The following is information  about the  computation of income per share for the
years ended December 31, 2000 and 1999.

<TABLE>
<CAPTION>

                                                                                      2000
                                                                ---------------------------------------------------
                                                                      Net                            Per Share
                                                                     Income           Shares           Amount
                                                                ---------------------------------------------------

      <S>                                                        <C>                <C>           <C>
      Basic Income Per Share
         Income available to common shareholders                 $    767,171       2,281,993     $       0.34
      Effect of Dilutive Securities
         Warrants and stock options outstanding                           -            35,085            (0.01)
                                                                ---------------------------------------------------

      Diluted Income Per Share
         Income available to common shareholders
            plus assumed conversions                             $    767,171       2,317,078     $       0.33
                                                                ===================================================
</TABLE>




                                       26
<PAGE>


PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2000 and 1999
--------------------------------------------------------------------------------



                                                             1999
                                              ----------------------------------
                                                  Net                  Per Share
                                                Income      Shares       Amount
                                              ----------------------------------
Basic Income Per Share
   Income available to common shareholders    $ 348,641   2,080,590    $   0.17

Effect of Dilutive Securities
   Warrants and stock options outstanding          --        41,614       (0.01)
                                              ----------------------------------

Diluted Income Per Share
   Income available to common shareholders
      plus assumed conversions ...........    $ 348,641   2,122,204    $   0.16
                                              ==================================




Stock warrants
--------------

The Bank issued warrants to certain of the Bank's original  organizing group and
certain other  individuals  to purchase up to 95,000 shares of the Bank's common
stock at the original public offering price of $6 per share.  These warrants are
currently  exercisable  and expire on August 31,  2004.  During  1998,  the Bank
issued warrants to certain other individuals involved in the organization of the
Bank to  purchase  up to 28,680  shares of the  Bank's  common  stock at $14 per
share. These warrants are currently  exercisable and expire on July 6, 2001. The
obligations  related to such warrants  were assumed by the Company.  The Company
has reserved  119,846  shares of its common stock for issuance  upon exercise of
these warrants.

A summary of the status of the  warrants  at  December  31,  2000 and 1999,  and
changes during the years ended on those dates, is as follows:


<TABLE>
<CAPTION>
                                                      2000                          1999
                                              ----------------------      -----------------------
                                                          Weighted-                     Weighted-
                                               Number      Average        Number        Average
                                                 of       Exercise          of          Exercise
                                               Shares       Price         Shares         Price
                                              ----------------------      -----------------------

<S>                                           <C>           <C>           <C>           <C>
Outstanding at beginning of year....          123,180       $ 7.86        123,680       $ 7.86
Granted ............................            --                          --
Exercised ..........................           (3,334)        6.00           (500)        6.00
                                              -------                     -------

Outstanding at end of year .........          119,846         7.91        123,180         7.86
                                              =======                     =======

Exercisable at end of year .........          119,846         7.91        123,180         7.86
                                              =======                     =======
</TABLE>

The weighted average remaining  contractual life for the warrants outstanding at
December 31, 2000 is 2.9 years.



                                       27
<PAGE>


PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2000 and 1999
--------------------------------------------------------------------------------


Stock options
-------------

On August 17,  1999,  the Bank  adopted a stock  option  plan (the  "Plan")  for
employees and  directors,  under which both  incentive and  non-qualified  stock
options may be granted,  and  subsequently  the Company  assumed all obligations
related to such options.  For incentive stock options granted to employees,  the
exercise  price  shall  be  greater  than or equal  to the  market  value of the
Company's stock on the date of grant. One-third of such options vest at the date
of grant,  and one-third vest on each of the first and second  anniversaries  of
the grant  date,  and  expire if  unexercised  ten years  after the grant  date.
However, for incentive stock options granted to shareholders who own 10% or more
of the Company's stock, the exercise price must be greater than or equal to 110%
of the  market  value of the  Company's  stock on the  date of  grant,  and such
options expire if they remain  unexercised for five years, or less if stipulated
by the Board of Directors, after the grant date. Generally, any options that are
not exercisable upon the termination of employment expire upon such termination.
The Plan also  provided  for the grant of 110,000  non-qualified  and  incentive
stock  options in 1999 to certain  directors  of the  Company,  with an exercise
price  equal to the market  value of the  Company's  stock on the date of grant.
Such options were  immediately  exercisable  and expire if unexercised ten years
after the date of grant. The Company has reserved 110,000 shares of common stock
for issuance  under this plan.  No options shall be granted under the Plan after
August 17, 2000.

A summary of the status of the stock options at December 31, 2000 and 1999 is as
follows:


<TABLE>
<CAPTION>
                                                      2000                          1999
                                              ----------------------      -----------------------
                                                          Weighted-                     Weighted-
                                               Number      Average        Number        Average
                                                 of       Exercise          of          Exercise
                                               Shares       Price         Shares         Price
                                              ----------------------      -----------------------

<S>                                           <C>         <C>             <C>           <C>
Outstanding at beginning of year ........     110,000     $  10.13           --         $   --
Granted .................................        --                       110,000        10.13
                                              -------                     -------
Outstanding at end of year ..............     110,000        10.13        110,000        10.13
                                              =======                     =======

Exercisable at end of year ..............     110,000        10.13        110,000        10.13
                                              =======                     =======

Weighted-average fair value per option
   of options granted during the year ...                                 $  5.55
                                                                          =======
</TABLE>

The weighted-average  remaining  contractual life for the options outstanding at
December 31, 2000 is 8.4 years.



                                       28
<PAGE>


PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2000 and 1999
--------------------------------------------------------------------------------


The  Company  has elected to continue to apply APB Opinion No. 25 to account for
the  warrants  and  options  granted  to  employees,  including  directors,  and
accordingly,  no  compensation  cost has  been  recognized  in the  consolidated
statements  of  income  for the  grants  of  these  warrants  and  options.  Had
compensation cost for issuance of such options been recognized based on the fair
values of awards on the grant dates, in accordance with the method  described in
SFAS No. 123, reported net income and per share amounts for 1999 would have been
reduced to the pro forma amounts shown below:


               Net income (loss):
                   As reported ................     $   348,641
                                                    ===========

                   Pro forma ..................     $   (23,651)

                                                    ===========
               Basic income (loss) per share:
                   As reported ................     $      0.17
                                                    ===========

                   Pro forma ..................     $     (0.01)
                                                    ===========

               Diluted income (loss) per share:
                   As reported ................     $      0.16
                                                    ===========

                   Pro forma ..................     $     (0.01)
                                                    ===========



The fair value of options  issued in 1999 was  estimated at the grant date using
the  Black-Scholes  option-pricing  model  with the  following  weighted-average
assumptions:

              Dividend rate                                  --
              Risk free interest rate                      5.80%
              Weighted-average expected lives, in years      10
              Price Volatility                            29.71%


                                       29
<PAGE>


PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2000 and 1999
--------------------------------------------------------------------------------


Note 12. 401(k) Savings Plan

The Company  adopted the Patriot  National Bank 401(k) Savings Plan (the "Plan")
under Section 401(k) of the Internal Revenue Code. The Plan covers substantially
all employees who have completed six months of service,  are 21 years of age and
who  elect to  participate.  Under  the  terms  of the  Plan,  participants  can
contribute up to the maximum amount allowed, subject to Federal limitations. The
Company may make discretionary matching contributions to the Plan.  Participants
are immediately  vested in their  contribution  and Company  contributions.  The
Company  contributed  approximately  $10,000 and $13,800 to the Plan in 2000 and
1999, respectively.

Note 13. Financial Instruments With Off-Balance-Sheet Risk

In  the  normal  course  of  business,  the  Company  is a  party  to  financial
instruments  with  off-balance-sheet  risk to meet  the  financing  needs of its
customers.  These financial instruments include commitments to extend credit and
standby letters of credit and involve,  to varying  degrees,  elements of credit
and  interest  rate risk in  excess of the  amounts  recognized  in the  balance
sheets.  The  contract  amounts  of these  instruments  reflect  the  extent  of
involvement the Company has in particular classes of financial instruments.

The  contractual  amounts of commitments to extend credit and standby letters of
credit represent the amounts of potential accounting loss should the contract be
fully drawn upon, the customer default, and the value of any existing collateral
become  worthless.   The  Company  uses  the  same  credit  policies  in  making
commitments  and  conditional   obligations  as  it  does  for  on-balance-sheet
instruments  and evaluates each  customer's  creditworthiness  on a case-by-case
basis.  Management  believes that the Company  controls the credit risk of these
financial  instruments  through  credit  approvals,  credit  limits,  monitoring
procedures and the receipt of collateral as deemed necessary.

Financial  instruments  whose  contract  amounts  represent  credit  risk are as
follows at December 31, 2000 and 1999:



                                                         2000            1999
                                                     --------------------------
       Commitments to extend credit:
           Future loan commitments .............     $11,917,000     $17,279,500
           Unused lines of credit ..............      13,445,938      14,057,211
           Undisbursed construction loans ......      10,842,047       8,099,481
       Financial standby letters of credit......         134,000            --
                                                     --------------------------
                                                     $36,338,985     $39,436,192
                                                     ==========================





                                       30
<PAGE>


PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2000 and 1999
--------------------------------------------------------------------------------


Commitments  to extend  credit are  agreements  to lend to a customer as long as
there is no violation of any condition established in the contract.  Commitments
to extend credit  generally  have fixed  expiration  dates or other  termination
clauses  and  may  require  payment  of a  fee  by  the  borrower.  Since  these
commitments could expire without being drawn upon, the total commitment  amounts
do not necessarily represent future cash requirements.  The amount of collateral
obtained,  if deemed necessary by the Company upon extension of credit, is based
on management's  credit evaluation of the counterparty.  Collateral held varies,
but may include residential and commercial property, deposits and securities.

Standby  letters  of credit are  written  commitments  issued by the  Company to
guarantee  the  performance  of a customer  to a third  party.  The credit  risk
involved in issuing  letters of credit is essentially  the same as that involved
in extending  loan  facilities to customers.  These  financial  instruments  are
recorded in the financial statements when they become payable.

Note 14. Regulatory Matters

The Company and the Bank are subject to various regulatory capital  requirements
administered  by the federal banking  agencies.  Failure to meet minimum capital
requirements   can  initiate  certain   mandatory  -  and  possibly   additional
discretionary - actions by regulators  that, if undertaken,  could have a direct
material effect on the Company's  financial  statements.  Under capital adequacy
guidelines  and the  regulatory  framework  for prompt  corrective  action,  the
Company  and the  Bank  must  meet  specific  capital  guidelines  that  involve
quantitative measures of the Company's and the Bank's assets,  liabilities,  and
certain  off-balance-sheet  items  as  calculated  under  regulatory  accounting
practices.  The Company's and the Bank's capital amounts and  classification are
also subject to qualitative  judgments by the regulators about components,  risk
weightings, and other factors.

Quantitative  measures  established  by  regulation to ensure  capital  adequacy
require the Company  and the Bank to  maintain  minimum  amounts and ratios (set
forth in the  table  below)  of total  and Tier I  capital  (as  defined  in the
regulations)  to  risk-weighted  assets (as defined),  and of Tier I capital (as
defined) to average assets (as defined). Management believes, as of December 31,
2000,  that the Company and the Bank meet all capital  adequacy  requirements to
which it is subject.

The most recent  notification from the Office of the Comptroller of the Currency
categorized the Bank as adequately  capitalized  under the regulatory  framework
for prompt corrective action.  Subsequent to the most recent  notification,  the
Bank's capital increased,  and management believes that as of December 31, 2000,
the Bank would be  classified as well  capitalized.  To be  categorized  as well
capitalized, the Bank must maintain minimum total risk-based, Tier I risk-based,
and Tier I leverage ratios as set forth in the table.



                                       31
<PAGE>


PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2000 and 1999
--------------------------------------------------------------------------------


The Bank's actual capital  amounts and ratios at December 31, 2000 and 1999 were
(dollars in thousands):


<TABLE>
<CAPTION>

                                                                                                To Be Well
                                                                                             Capitalized Under
                                                                         For Capital         Prompt Corrective
                                                     Actual           Adequacy Purposes      Action Provisions
                                            ---------------------------------------------------------------------
                                               Amount       Ratio     Amount       Ratio     Amount      Ratio
                                           ---------------------------------------------------------------------
<S>                                            <C>          <C>       <C>          <C>      <C>          <C>
December 31, 2000:
------------------
  Total Capital (to Risk Weighted Assets)      $16,794      11.10%    $12,104      8.00%    $15,130      10.00%
  Tier I Capital (to Risk Weighted Assets)      15,149      10.01%      6,054      4.00%      9,080       6.00%
  Tier I Capital (to Average Assets) .....      15,149       7.73%      7,839      4.00%      9,799       5.00%

</TABLE>

<TABLE>
<CAPTION>
                                                                                                To Be Well
                                                                                             Capitalized Under
                                                                         For Capital         Prompt Corrective
                                                     Actual           Adequacy Purposes      Action Provisions
                                            ---------------------------------------------------------------------
                                               Amount       Ratio     Amount       Ratio     Amount      Ratio
                                           ---------------------------------------------------------------------

<S>                                            <C>           <C>      <C>          <C>      <C>          <C>
December 31, 1999:
------------------
  Total Capital (to Risk Weighted Assets)      $13,551       9.90%    $10,950      8.00%    $13,688      10.00%
  Tier I Capital (to Risk Weighted Assets)      12,191       8.91%      5,473      4.00%      8,209       6.00%
  Tier I Capital (to Average Assets) .....      12,191       7.21%      6,763      4.00%      8,454       5.00%
</TABLE>


The  Company is also  considered  to be well  capitalized  under the  regulatory
framework  specified by the Federal Reserve Bank ("FRB").  The Company's  actual
and required ratios are not substantially different from those shown above.

Restrictions on dividends, loans and advances
---------------------------------------------

The Company's ability to pay dividends is dependent on the Bank's ability to pay
dividends to the Company.  However,  certain  restrictions  exist  regarding the
ability  of the  Bank to  transfer  funds  to the  Company  in the  form of cash
dividends, loans or advances. The approval of the Comptroller of the Currency is
required  to pay  dividends  in excess of the Bank's  earnings  retained  in the
current  year plus  retained net earnings  for the  preceding  two years.  As of
December 31, 2000, the Bank had retained earnings of approximately $230,000, all
of which is available for distribution to the Company as dividends without prior
regulatory  approval.  The Bank is also  prohibited  from paying  dividends that
would reduce its capital ratios below minimum regulatory  requirements,  and the
FRB may impose further dividend restrictions on the Company.

Loans or  advances  to the  Company by the Bank are limited to 10% of the Bank's
capital stock and surplus on a secured basis.



                                       32
<PAGE>


PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2000 and 1999
--------------------------------------------------------------------------------


Note 15. Related Party Transactions

In the  normal  course  of  business,  the  Company  grants  loans to  executive
officers,  directors and members of their immediate families, as defined, and to
entities in which these individuals have more than a 10% equity ownership.  Such
loans are  transacted  at terms,  including  interest  rates,  similar  to those
available to unrelated customers.

Changes in loans outstanding to such related parties during 2000 and 1999 are as
follows:


                                                     2000             1999
                                                 -----------------------------
         Balance, beginning of year              $ 3,124,050      $ 1,922,555
         Additional loans .........                2,097,898        4,497,841
         Repayments ...............                 (665,587)      (3,296,346)
                                                 -----------------------------
         Balance, end of year .....              $ 4,556,361      $ 3,124,050
                                                 =============================


Related party deposits aggregated  approximately $4,896,000 and $8,814,000 as of
December 31, 2000 and 1999, respectively.

The Company  leases  office  space in its  premises to a director of the Company
under a  five-year  lease.  Rental  income  under this  lease was  approximately
$20,000  and  $35,000  for  the  years  ended   December   31,  2000  and  1999,
respectively.  Also during 2000 and 1999,  the Company  leased office space to a
related  individual under a  month-to-month  lease, and rental income under this
lease was approximately $10,000 and $6,000 for the years ended December 31, 2000
and 1999,  respectively.  In  addition,  the  Company  paid  consulting  fees of
approximately  $100,000  and $26,000 to this  individual  during the years ended
December 31, 2000 and 1999, respectively.

During 2000 and 1999, respectively, the Company paid legal fees of approximately
$5,400 and $4,600 to an attorney who is a director of the Company.

During  2000 and 1999,  the Company  leased  parking  space from a  corporation,
certain  principals  of which are officers and  directors of the Company.  Total
rent paid to the  corporation  was $18,000 for the years ended December 31, 2000
and 1999.

During  1999,  the Company sold a parcel of other real estate owned to a related
individual for $72,705, and a gain of $32,238 was recognized on such sale.



                                       33
<PAGE>


PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2000 and 1999
--------------------------------------------------------------------------------


Note 16. Other Comprehensive Income

Other  comprehensive  income,  which  is  comprised  solely  of  the  change  in
unrealized gains and losses on available for sale securities, is as follows:


<TABLE>
<CAPTION>
                                                                         2000
                                                     ---------------------------------------------
                                                       Before-Tax    Tax Benefit     Net-of-Tax
                                                         Amount       (Expense)        Amount
                                                     ---------------------------------------------

<S>                                                     <C>           <C>            <C>
   Unrealized holding gains arising during period       $ 441,926     $(172,408)     $ 269,518

   Less reclassification adjustment for gains
      recognized in net income ..................            --            --             --
                                                     ---------------------------------------------

   Unrealized holding gain on available for sale
         securities, net of taxes ...............       $ 441,926     $(172,408)     $ 269,518
                                                     =============================================


                                                                          1999
                                                     ---------------------------------------------
                                                       Before-Tax    Tax Benefit     Net-of-Tax
                                                         Amount       (Expense)        Amount
                                                     ---------------------------------------------

   Unrealized holding losses arising during period      $(485,830)    $ 189,924      $(295,906)


   Less reclassification adjustment for gains
      recognized in net income ...................         (4,378)        1,711         (2,667)
                                                     ---------------------------------------------

   Unrealized holding loss on available for sale
         securities, net of taxes ................      $(490,208)    $ 191,635      $(298,573)
                                                     =============================================
</TABLE>


Note 17. Fair Value of Financial Instruments and Interest Rate Risk

SFAS  No.  107,   "Disclosures  About  Fair  Value  of  Financial   Instruments"
("Statement  No.  107"),  requires  disclosure of fair value  information  about
financial instruments, whether or not recognized in the statements of condition,
for which it is practicable to estimate that value. In cases where quoted market
prices are not available, fair values are based on estimates using present value
or other valuation  techniques.  Those techniques are significantly  affected by
the assumptions used,  including the discount rates and estimates of future cash
flows. In that regard,  the derived fair value estimates cannot be substantiated
by comparisons to independent  markets and, in many cases, could not be realized
in immediate settlement of the instrument. Statement



                                       34
<PAGE>


PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2000 and 1999
--------------------------------------------------------------------------------


No. 107 excludes certain financial instruments from its disclosure requirements.
Accordingly,  the aggregate  fair value  amounts  presented do not represent the
underlying value of the Company.

Management  uses its best judgment in estimating the fair value of the Company's
financial instruments;  however, there are inherent weaknesses in any estimation
technique.  Therefore,  for  substantially all financial  instruments,  the fair
value estimates  presented herein are not necessarily  indicative of the amounts
the Company could have realized in a sales  transaction at December 31, 2000 and
1999.  The estimated  fair value amounts for 2000 and 1999 have been measured as
of their  respective  year-ends,  and have not been  reevaluated  or updated for
purposes  of  these  consolidated   financial  statements  subsequent  to  those
respective  dates.  As such,  the fair  values  of these  financial  instruments
subsequent to the respective  reporting  dates may be different from the amounts
reported at each year-end.

The information  presented  should not be interpreted as an estimate of the fair
value of the entire Company since a fair value  calculation is only required for
a limited portion of the Company's assets and liabilities. Due to the wide range
of  valuation  techniques  and the  degree of  subjectivity  used in making  the
estimate,  comparisons between the Company's disclosures and those of other bank
holding companies may not be meaningful.

As of December 31, 2000 and 1999,  the recorded book balances and estimated fair
values of the Company's financial instruments were (in thousands):

<TABLE>
<CAPTION>

                                               2000                     1999
                                       -----------------------------------------------
                                       Recorded                  Recorded
                                         Book        Fair          Book         Fair
                                       Balance       Value        Balance       Value
                                       -----------------------------------------------

<S>                                    <C>          <C>          <C>          <C>
Financial Assets:
   Cash and due from banks .......     $  3,565     $  3,565     $  2,685     $  2,685
   Federal funds sold ............       29,500       29,500       18,900       18,900
   Commercial paper ..............         --           --         10,976       10,976
   Available for sale securities .       20,707       20,707       19,984       19,984
   Held to maturity securities ...       12,298       11,975       12,301       11,906
   Federal Reserve Bank stock ....          475          475          411          411
   Federal Home Loan Bank stock ..          594          594          307          307
   Loans receivable, net .........      126,411      127,191      107,770      107,182
   Accrued interest receivable ...        1,229        1,229          981          981

Financial Liabilities:
   Demand deposits ...............       16,899       16,899       12,631       12,631
   Savings deposits ..............       31,164       31,164       35,962       35,962
   Money market deposits .........          849          849          625          625
   Negotiable orders of withdrawal       27,640       27,640        9,602        9,602
   Time deposits .................      103,114      103,765      103,926      103,909
   Collateralized borrowings .....          474          474          325          325
</TABLE>





                                       35
<PAGE>


PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2000 and 1999
--------------------------------------------------------------------------------


Unrecognized financial instruments
----------------------------------

Loan  commitments on which the committed  interest rate is less than the current
market rate are  insignificant at December 31, 2000 and 1999. The estimated fair
value of fee  income  on  letters  of credit at  December  31,  2000 and 1999 is
insignificant.

The Company  assumes  interest  rate risk (the risk that general  interest  rate
levels will change) as a result of its normal operations.  As a result, the fair
values of the  Company's  financial  instruments  will change when interest rate
levels  change and that change may be either  favorable  or  unfavorable  to the
Company.  Management  attempts to match  maturities of assets and liabilities to
the extent believed necessary to minimize interest rate risk. However, borrowers
with  fixed  rate  obligations  are less  likely  to  prepay  in a  rising  rate
environment and more likely to prepay in a falling rate environment. Conversely,
depositors  who are  receiving  fixed rates are more  likely to  withdraw  funds
before  maturity  in a rising  rate  environment  and less  likely to do so in a
falling rate environment. Management monitors rates and maturities of assets and
liabilities  and attempts to minimize  interest rate risk by adjusting  terms of
new loans and deposits and by investing in  securities  with terms that mitigate
the Company's overall interest rate risk.

Note 18. Business Combination

On June 30,  1999,  the Bank  acquired,  through  a plan of  reorganization  and
merger, all of the outstanding  capital stock of Pinnacle,  a mortgage brokerage
operation consisting of three separate corporations. Details of the transaction,
which was accounted for as a purchase, are as follows.

A summary of the purchase  payments in  connection  with the  acquisition  is as
follows:


      Cash paid to sellers at closing .....................     $  150,000
      Issuance of 151,685 shares of common stock to sellers        980,409
      Acquisition costs ...................................        105,719
                                                                ----------
                                                                $1,236,128
                                                                ==========


The entire  purchase price was allocated to goodwill as no significant  tangible
net assets were acquired.



                                       36
<PAGE>


PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2000 and 1999
--------------------------------------------------------------------------------


Unaudited  pro forma  consolidated  results  of  operations  for the year  ended
December 31, 1999, as though the acquisition occurred on January 1, 1999, are as
follows:


     Net interest income after provision for loan loss        $   4,439,798
     Net income ......................................              256,755
     Basic income per share ..........................                 0.12
     Diluted income per share ........................                 0.12


With respect to the shares of common  stock issued to the sellers,  one-third of
such shares are  currently  held in escrow and are subject to  forfeiture if the
sellers do not remain  employees of the Company at June 30, 2001.  If any shares
are  forfeited,  goodwill  and  additional  paid-in  capital  would be  adjusted
accordingly.

Note 19. Segment Reporting

The Company has two reportable  segments,  the commercial  bank and the mortgage
broker.  The  commercial  bank segment  provides its  commercial  customers with
products such as commercial  mortgage loans,  working  capital loans,  equipment
loans and other  business  financing  arrangements,  and  provides  its consumer
customers with residential  mortgage loans, home equity loans and other consumer
installment  loans. The commercial bank segment also attracts deposits from both
consumer  and   commercial   customers  and  invests  such  deposits  in  loans,
investments  and working  capital The commercial  bank's  revenues are generated
primarily  from net  interest  income from its lending,  investment  and deposit
activities.

The  mortgage   broker  solicits  and  processes   conventional   mortgage  loan
applications  from  consumers on behalf of permanent  investors,  and originates
loans for sale.  Revenues are  generated  from loan  brokerage  and  application
processing fees received from the permanent investors, and gains and origination
fees from loans sold.

Information about reportable segments,  and a reconciliation of such information
to the consolidated  financial statements as of and for the years ended December
31, 2000 and 1999 is as follows (in thousands):


                                                                  Elimination of
                            Commercial   Mortgage   Intersegment   Consolidated
2000                           Bank       Broker      Revenue         Totals
----                        ----------------------------------------------------

Net interest income .....   $  6,677     $   --      $   --         $  6,677
Noninterest income ......        373        2,538        (226)         2,685
Noninterest expenses ....      5,376        2,543        (226)         7,693
Provision for loan losses        326         --          --              326
Income before taxes .....      1,348           (5)       --            1,343
Assets ..................    197,628         --          --          197,628




                                       37
<PAGE>


PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2000 and 1999
--------------------------------------------------------------------------------


                                                                  Elimination of
                            Commercial   Mortgage   Intersegment   Consolidated
1999                           Bank       Broker      Revenue         Totals
----                        ----------------------------------------------------

Net interest income .....   $  4,993    $   --         $ --         $  4,993
Noninterest income ......        357         864         --            1,221
Noninterest expenses ....      4,458         788         --            5,246
Provision for loan losses        553        --           --              553
Income before taxes .....        339          76         --              415
Assets ..................    177,195        --           --          177,195

The accounting  policies of the segments are the same as those  described in the
summary of significant  accounting  policies,  except that beginning  January 1,
2000,  management began allocating  certain overhead  expenses of the commercial
bank  to  the  mortgage  broker  segment,  which  allocations  are  based  on  a
pre-determined  monthly  charge  agreed to between the Company and the  mortgage
broker  segment.  During 1999,  management did not allocate  corporate  overhead
expenses to the mortgage broker  segment,  and all such expenses are included in
noninterest   expenses  of  the  commercial  bank.   Management   evaluates  the
performance  of each  segment  based on profit or loss  from  operations  before
income taxes. Intersegment revenues are accounted for at amounts that assume the
revenues were between  unrelated  third parties at the current  market prices at
the time of the transactions.

The  Company's  reportable  segments  are  strategic  business  units that offer
different  products  and  services.  They are managed  separately  because  each
segment  appeals to  different  markets  and,  accordingly,  requires  different
technology and marketing strategies.

The Company does not have  operating  segments other than those reported and the
Company does not have a single  external  customer  from which it derives 10% or
more of its revenues and the Company operates in one geographical area.




                                       38



<PAGE>

                                 EXHIBIT INDEX



Exhibit No.                                 Description
-----------                                 -----------

2              Agreement  and Plan of  Reorganization  dated as of June 28, 1999
               between  Bancorp  and the  Bank  (incorporated  by  reference  to
               Exhibit 2 to Bancorp's  Current Report on Form 8-K dated December
               1, 1999 (Commission File No. 000-29599))

3(i)           Certificate  of  Incorporation   of  Bancorp,   (incorporated  by
               reference to Exhibit 3(i) to Bancorp's Current Report on Form 8-K
               dated December 1, 1999 (Commission File No. 000-29599))

3(ii)          By-laws of Bancorp (incorporated by reference to Exhibit 3(ii) to
               Bancorp's  Current  Report  on Form 8-K  dated  December  1, 1999
               (Commission File No. 000-29599))

10(a)(1)       Form of 1994 Warrant to Purchase  Common Stock  (incorporated  by
               reference to Exhibit 10(a)(1) to Bancorp's Current Report on Form
               8-K dated December 1, 1999 (Commission File No. 000-29599))

10(a)(2)       Form of 1998 Warrant to Purchase  Common Stock  (incorporated  by
               reference to Exhibit 10(a)(2) to Bancorp's Current Report on Form
               8-K dated December 1, 1999 (Commission File No. 000-29599))

10(a)(3)       Lease  dated   February  1,  1995  between  999  Bedford   Street
               Corporation  and the Bank  (incorporated  by reference to Exhibit
               10(a)(3) to Bancorp's  Current  Report on Form 8-K dated December
               1, 1999 (Commission File No. 000-29599)).

10(a)(4)       Employment Agreement, dated as of October 23, 2000, as amended by
               a First  Amendment,  dated as of March 21, 2001,  among the Bank,
               Bancorp and Charles F.Howell.

10(c)          1999 Stock Option Plan of the Bank  (incorporated by reference to
               Exhibit  10(c) to  Bancorp's  Current  Report  on Form 8-K  dated
               December 1, 1999 (Commission File No. 000-29599))

21             Subsidiaries of Bancorp  (incorporated by reference to Exhibit 21
               to  Bancorp's  Annual  Report on Form  10-KSB  for the year ended
               December 31, 1999 (Commission File No. 000-29599))