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, 2001

[ ] 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: $ 17,232,898
                                                        ------------

Aggregate  market  value  of the  voting  stock  held  by  nonaffiliates  of the
registrant as of February 28, 2002: $10,709,141.

Number of shares of the  registrant's  Common Stock,  par value $2.00 per share,
outstanding as of February 28, 2002:  2,400,525
                                      ---------

<PAGE>


Documents Incorporated by Reference

Proxy Statement for 2002 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.)

Transitional Small Business Disclosure Format (check one):

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



<PAGE>


                                Table of Contents

                                                                            Page

Part I
------

Item 1.    Description of Business                                             1

Item 2.    Description of Properties                                           7

Item 3.    Legal Proceedings                                                   8

Item 4.    Submission of Matters to a Vote of Security Holders                 8

Part II
-------

Item 5.    Market for Common Equity and Related
             Shareholder Matters                                               8

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

Item 7.    Financial Statements                                               23

Item 8.    Changes in and Disagreements with Accountants
             on Accounting and Financial Disclosure                           23

Part III
--------

Item 9.    Directors, Executive Officers, Promoters and
             Control Persons: Compliance with Section 16 (a)
             of the Exchange Act                                              24

Item 10.  Executive Compensation                                              24

Item 11.  Security Ownership of Certain Beneficial Owners
            and Management                                                    24

Item 12.  Certain Relationships and Related Transactions                      24

Item 13.  Exhibits and Reports on Form 8-K                                    25


<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, Fairfield County, 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.  The Bank  opened  branch  offices in
Greenwich and Old  Greenwich,  Connecticut  on September 5, 1997 and October 12,
1999,  respectively.  On  August  21,  2001 the Bank  opened 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.  During  2001,  Pinnacle  had  a
significant impact on the business and results of operation of Bancorp.

The Bank  conducts  business at its main office  located at 900 Bedford  Street,
Stamford,  Connecticut  and at  branch  offices  located  at 100  Mason  Street,
Greenwich,  Connecticut, 184 Sound Beach Avenue, Old Greenwich, Connecticut, and
16  River  Street,  Norwalk,   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 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,  access to an ATM  (automated  teller  machine)  network and
internet


<PAGE>


banking. In addition,  the Bank may in the future offer Keogh accounts and other
financial services. The Bank does not currently accept brokered deposits.

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 offers  residential  mortgages  through it mortgage  brokerage
division  Pinnacle  Financial.  Pinnacle  solicits  and  processes  conventional
mortgage loan applications  from consumers on behalf of permanent  investors and
originates loans for sale.

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 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, Greenwich and Norwalk, Connecticut provide
the  majority of the Bank's  deposits.  The Bank has focused  its  attention  on
serving the segment of its market area  historically  served by community banks.
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 and north,  the Town of Westport
to the east, and Long Island Sound to the south.

The Bank's loan  customers  extend  beyond  Stamford,  Greenwich  and Norwalk to
include  the  adjacent  towns in  Fairfield  County,  Connecticut,  and towns in
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 Fairfield County area,
the Bank believes that the service,  professional  and related  businesses which
have been attracted to this area, as well as the individuals that reside in this
area, represent current and potential customers of the Bank.


                                       2
<PAGE>


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

The Cities of  Stamford  and  Norwalk and the Town of  Greenwich  are  presently
served by approximately 110 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, Greenwich or Norwalk. In addition to banks with branches in
the same areas as the Bank, there are numerous banks and financial  institutions
serving the communities  surrounding these areas, which also draw customers from
Stamford,  Greenwich and Norwalk, 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.  The
impact on Bancorp of  federal  legislation  authorizing  increased  services  by
financial  holding  companies and interstate  branching of banks has resulted in
increased  competition.  These events have resulted in increasing homogeneity in
the financial  services offered by banks and other financial  institutions.  The
impact on 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.

As a bank  holding  company,  Bancorp's  operations  are subject to  regulation,
supervision  and  examination  by the Board of Governors of the Federal  Reserve
Board (the "Federal Reserve  Board").  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


                                       3
<PAGE>


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  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


                                       4
<PAGE>


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"),  and the Bank is  subject  to capital  adequacy  rules and  guidelines
issued by the OCC. 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 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
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 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.


                                       5
<PAGE>


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 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,
Greenwich  and  Norwalk,  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.  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, 2001, the Bancorp had 65
full-time  employees  and 7 part-time  employees.  None of the  employees of the
Bancorp is covered by a collective bargaining agreement.



                                       6
<PAGE>


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.  Rent  increases  for the
remainder of the term 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 90% of the space in the 900 Bedford Street
building.  The Bank has sublet the  remaining  space  under a sublease  having a
maturity  which  the Bank  believes  will  coincide  with its  future  needs for
additional  space  for its  operations.  The Bank has  entered  into a  sublease
covering approximately 1,100 square feet at rents not less than the rent payable
by the Bank with month to month terms. The business of the subtenant of the Bank
is a law  practice.  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."

The Bank leases  approximately  5,000  square feet of office  space on the first
floor located at 100 Mason Street,  Greenwich,  Connecticut.  The lease has been
extended for a five-year term  commencing July 1, 2002 at an initial annual rent
of $246,000, which rent will increase by approximately 3% each consecutive year.
The lease provides for two additional five-year renewals at the Bank's option.

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  has  increased  by
approximately  10% in the third year and will increase by  approximately  25% in
the fourth year and remain constant during the fifth year.

The Bank leases  approximately  1,700  square  feet of office  space at 16 River
Street,  Norwalk,  Connecticut.  The lease  commenced  on January 1, 2001 with a
five-year  term at an initial  annual rent of $27,648  with annual  increases of
approximately 2.4% through the fifth year of the lease.

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 increased by approximately 4% each
consecutive year. The lease expires January 31, 2004;  however,  effective April
1, 2002 the  Hauppauge  operation  will  relocate  to a new  Melville,  New York
office.  The Bank has entered into a lease  agreement  for  approximately  1,200
square feet of office  space at 20 Broad Hollow Road,  Melville,  New York.  The
lease  commences  on April 1, 2002 at an initial  annual rent of $23,400,  which
rent will increase by approximately 5% each consecutive year. The lease provides
for a three-year renewal after the initial term.


                                       7
<PAGE>


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 2001,  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." On December 31, 2001,  the last bid price for the Bancorp Common
Stock on NASDAQ Small Cap Market was $8.30.

The  following  table sets forth the high and low sales price and  dividends per
share of the Bancorp Common Stock for the last two fiscal years for each quarter
as reported on the NASDAQ Small Cap Market.

                               2001                            2000
                   -----------------------------   -----------------------------
                       Sales Price          Cash       Sales Price          Cash
                   ------------------  Dividends   ------------------  Dividends
  Quarter Ended      High       Low     Declared     High       Low    Declared
  -------------    -----------------------------   -----------------------------

  March 31         $10.000    $ 7.500    $   -     $12.500    $10.500    $  -
  June 30            9.650      7.700      .02      11.000      8.875       -
  September 30       9.250      7.670      .02       9.063      7.500       -
  December 31        8.640      7.700      .02       8.375      6.000       -

Holders
-------

There were approximately 936 shareholders of record of Bancorp Common Stock as
of December 31, 2001.

Dividends
---------

2001  marked the first year in which  Bancorp  paid a  dividend  on the  Bancorp
Common  Stock.  Bancorp's  ability to pay future  dividends  on its Common Stock
depends on the Bank's  ability to pay dividends to Bancorp.  In accordance  with
OCC rules and regulations, the Bank may continue


                                       8
<PAGE>


to 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 Bancorp's need
for capital.

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

During the fourth quarter of 2001 Bancorp did not have any sales of unregistered
securities.



                                       9
<PAGE>


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

<TABLE>
Patriot National Bancorp, Inc
Financial Highlights

<CAPTION>
                               ------------------------------------------------------------------------------------
                                     2001             2000              1999             1998             1997
                               ------------------------------------------------------------------------------------

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

Interest and dividend income     $ 13,722,943     $ 14,694,135     $  9,732,719     $  6,765,283     $  5,130,009
Interest expense ...........        6,866,960        8,017,615        4,739,921        3,074,518        2,347,644
Net interest income ........        6,855,983        6,676,520        4,992,798        3,690,765        2,782,365
Provision for loan losses ..          250,000          325,900          553,000          104,000          248,000
Noninterest income .........        3,509,955        2,685,296        1,221,329          373,808          268,822
Noninterest expense ........        8,675,551        7,693,345        5,245,986        3,420,185        2,706,871
Net income .................          876,387          767,171          348,641          626,488          310,416

Basic income per share .....             0.37             0.34             0.17             0.48             0.25
Diluted income per share ...             0.36             0.33             0.16             0.47             0.25
Dividends per share ........             0.06             --               --               --               --

Balance Sheet Data

Cash and due from banks ....        7,544,242        3,656,071        2,685,031        1,867,353        1,532,055
Federal funds sold .........       12,700,000       29,500,000       18,900,000       27,700,000       17,000,000
Short term investments .....        6,788,569             --         10,976,264             --               --
Investment securities ......       35,816,880       34,073,832       33,003,494       13,562,730        9,943,046
Loans, net .................      135,680,036      126,411,265      107,769,911       57,052,618       44,358,069
Goodwill, net ..............          930,091        1,054,027        1,177,948             --               --
Total assets ...............      202,569,457      197,628,127      177,194,697      102,327,631       75,073,200
Total deposits .............      183,263,939      179,666,098      162,746,354       89,309,139       68,592,231
Total shareholders' equity .       17,406,016       16,427,436       13,236,088       12,097,283        5,480,548
</TABLE>

         (a)      Plan of Operation

Not  applicable  since Bancorp 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


                                       10
<PAGE>


Summary
-------

Several  milestones  were  achieved  during  2001 as  Bancorp,  for  the  second
consecutive  year,  reported record  earnings,  which were $876,000 ($0.37 basic
income  per share and $.36  diluted  income  per  share)  for 2001  compared  to
$767,000  ($0.34 basic  income per share and $.33 diluted  income per share) for
2000.  Total assets also ended the year at a record high of $202.6  million,  an
increase of $5.0 million from December 31, 2000.

Average  earning assets were $6.8 million  higher in 2001,  which resulted in an
increase in the net  interest  margin of  $179,000 to $6.9  million for the year
ended December 31, 2001 despite the unprecedented reduction in interest rates by
the Federal Reserve Bank throughout the year.

Total  assets  increased by 2.5% during the year as total loans  increased  from
$126.4  million at December  31, 2000 to $135.7  million at December  31,  2001.
Construction  and real estate loans  increased  by $8.9  million and  commercial
loans  increased  $1.8  million.  Loan growth was funded  through a reduction in
federal funds sold and the growth in total  deposits.  Deposits  increased  $3.6
million to $183.3  million at  December  31,  2001;  interest  bearing  deposits
increased $3.5 million,  or 2.2%, and non-interest  bearing  deposits  increased
$63,000 or 0.4%.

FINANCIAL CONDITION

Assets
------

Bancorp's  total assets  increased  $5.0 million from $197.6 million at December
31, 2000 to $202.6  million at December 31, 2001. The growth in total assets was
funded  primarily by deposit  growth of $3.6 million as well as net income after
dividend payments.

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

The following table is a summary of Bancorp's  investment  portfolio at December
31 for the years shown.

                                     2001            2000           1999
                                 -------------------------------------------
U. S. Government Obligations     $      --       $   998,501     $ 1,534,695
Mortgage backed securities .      10,243,418      14,191,090      17,041,507
Corporate bonds ............      11,880,156      11,798,222      11,802,835
Marketable equity securities      12,594,356       6,017,219       1,906,757
Federal Reserve Bank stock .         481,050         475,200         410,700
Federal Home Loan Bank stock         617,900         593,600         307,000
                                 -----------     -----------     -----------
Total Investments ..........     $35,816,880     $34,073,832     $33,003,494
                                 ===========     ===========     ===========

The available for sale portfolio increased $14.0 million to $34.7 million due to
an increase in unrealized holding gains of $410,000,  the transfer from the held
to  maturity  portfolio  of $11.8  million in  corporate  notes and  bonds,  the
purchase,  net of sales, of an additional $6.6 million in money market preferred
equities,  less principal payments of $4.1 million in government agency mortgage
backed securities and maturities of treasury securities of $500,000.


                                       11
<PAGE>


During 2001,  Bancorp purchased,  net of redemptions,  $6,000 in Federal Reserve
Bank  stock and  $24,000  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 is a member of the Federal  Home Loan Bank of Boston to provide  additional
sources of liquidity.

The following  table  presents the maturity  distribution  of available for sale
investment  securities  at December 31, 2001 and the weighted  average  yield of
such  securities.  The weighted  average yields were calculated 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>
Mortgage backed securities ....     $--      $      --        $      --       $ --      $ 9,981,222      $ 9,981,222      6.50%
Corporate bonds ...............      --        9,316,199        2,359,652       --             --         11,675,851      5.62%
Marketable equity securities ..      --             --               --         --       12,632,067       12,632,067      2.70%
                                ------------------------------------------------------------------------------------------------
                          Total     $--      $ 9,316,199      $ 2,359,652     $ --      $22,613,289      $34,289,140      4.80%
                                ------------------------------------------------------------------------------------------------
         Weighted average yield      --%            5.68%            5.37%      --%            4.38%            4.80%
                                ================================================================================================
</TABLE>


The  following  table  presents a summary  of  investments  for any issuer  that
exceeds 10% of shareholders' equity at December 31, 2001.

                                                        Amortized           Fair
                                                             Cost          Value
--------------------------------------------------------------------------------
Available for sale securities:
------------------------------
Franklin U. S. Government Fund ..................     $ 2,032,067    $ 1,994,356
U.S. Government agency mortgage backed securities       9,981,222     10,243,418

Short term investments:
-----------------------
Merrill Lynch Premier Institutional Fund ........       6,788,569      6,788,569


Loans
-----

The following  table is a summary of Bancorp's loan portfolio at December 31 for
the years shown.

                                   2001              2000              1999
                              -------------     -------------     -------------
Real Estate
   Commercial ...........     $  60,481,789     $  57,297,310     $  54,289,002
   Residential ..........         7,501,504         5,041,776         6,799,133
   Construction .........        26,215,265        22,969,904        13,872,519
Commercial ..............        14,649,112        12,841,040        11,086,324
Consumer installment ....         1,231,672         1,652,587         1,580,219
Consumer home equity ....        27,770,723        28,468,453        21,705,929
                              -------------     -------------     -------------
Total Loans .............       137,850,065       128,271,070       109,333,126
Net deferred fees .......          (275,575)         (214,988)         (203,032)
Allowance for loan losses        (1,894,454)       (1,644,817)       (1,360,183)
                              -------------     -------------     -------------
Loans, net ..............     $ 135,680,036     $ 126,411,265     $ 107,769,911
                              =============     =============     =============

                                       12
<PAGE>


Bancorp's  net loan  portfolio  increased  $9.3 million  from $126.4  million at
December 31, 2000 to $135.7 million at December 31, 2001. Loan growth was funded
through a reduction in federal  funds sold and an increase in deposit  accounts.
At December 31, 2001,  the net loan to deposit ratio was 74.04% and the net loan
to asset ratio was 66.98%.  At December 31, 2000,  the net loan to deposit ratio
was 70.36%, and the net loan to asset ratio was 63.96%.

Throughout  2001, the Federal  Reserve Bank decreased the federal funds rate and
discount rate.  Subsequently,  most banks  decreased their  prime-lending  rate.
Despite lower interest  rates,  loan activity was moderate and the volume of new
loans exceeded principal reductions and payoffs.

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, 2001, 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 ....     $  8,332     $ 46,995     $  5,155     $ 60,482
Residential real estate....        5,668        1,445          389        7,502
Construction loans ........       23,113        3,102         --         26,215
Commercial loans ..........        7,214        5,363        2,072       14,649
Consumer installment ......          766          465         --          1,232
Consumer home equity ......          118          300       27,354       27,770
--------------------------------------------------------------------------------
    Total .................     $ 45,211     $ 57,670     $ 34,970     $137,850
================================================================================

Fixed rate loans ..........     $  5,562     $ 37,383     $  5,238     $ 48,182
Variable rate loans .......       39,649       20,287       29,732       89,667
--------------------------------------------------------------------------------
    Total .................     $ 45,211     $ 57,670     $ 34,970     $137,850
================================================================================

The following table presents loan concentrations at December 31, 2001:

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

          Construction             20.15%              $ 27,770
          Commercial Retail         5.35%                 7,377
          Retail Store Rental       2.31%                 3,190
          Restaurant                2.29%                 3,161
          Limousine Service         2.18%                 3,009


                                       13
<PAGE>


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 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  unallocated  portion of the  allowance  reflects  management's  estimate of
probable but undetected  losses  inherent in the  portfolio;  such estimates are
influenced  by  uncertainties  in  economic  conditions,   delays  in  obtaining
information,  including  unfavorable  information  about a borrower's  financial
condition,  difficulty in identifying triggering events that correlate perfectly
to  subsequent  loss  rates,  and risk  factors  that  have  not yet  manifested
themselves in loss allocation factors.

Based upon this evaluation, management believes the allowance for loan losses of
$1.9  million,  at December  31,  2001,  which  represents  1.38% of gross loans
outstanding, is adequate, under prevailing economic conditions, to absorb losses
on existing  loans. At December 31, 2000, the allowance for loan losses was $1.6
million or 1.28% 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,  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
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.

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

<TABLE>
<CAPTION>
                                            2001          2000          1999          1998         1997
                                          ---------------------------------------------------------------
                                                               (thousands of dollars)
<S>                                       <C>           <C>           <C>           <C>           <C>
Balance at beginning of period ......     $ 1,645       $ 1,360       $   785       $   745       $   507
                                          ---------------------------------------------------------------
Charge-offs .........................          (2)          (44)          (19)          (64)          (10)
Recoveries ..........................           1             3            41          --            --
                                          ---------------------------------------------------------------
Net (charge-offs) recoveries ........          (1)          (41)           22           (64)          (10)
                                          ---------------------------------------------------------------
Additions charged to operations .....         250           326           553           104           248
                                          ---------------------------------------------------------------
Balance at end of period ............     $ 1,894       $ 1,645       $ 1,360       $   785       $   745
                                          ===============================================================
Ratio of net (charge-offs) recoveries
during the period to average loans
outstanding during the period .......      (0.00%)       (0.03%)        0.03%        (0.12%)       (0.03%)
                                          ===============================================================
</TABLE>

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

<TABLE>
<CAPTION>
                                                                                          Percent of loans in each
Balance  at end of each                          Amounts                                  category to total loans
Period applicable to            2001     2000     1999     1998     1997        2001      2000      1999      1998      1997
                              ------------------------------------------      -----------------------------------------------
<S>                           <C>      <C>      <C>      <C>      <C>          <C>       <C>       <C>       <C>       <C>
Real Estate:
  Commercial ..............   $  833   $  700   $  622   $  448   $  379       43.88%    44.67%    49.65%    57.10%    56.28%
  Construction ............      348      270      154       78       72       19.02%    17.91%    12.69%     9.88%    10.80%
  Residential .............      153       34       76       18        5        5.44%     3.93%     6.22%     2.38%     0.78%
Commercial ................      142      185       79      113      173       10.63%    10.01%    10.14%    14.33%    17.60%
Consumer installment ......       14       12       12       16       39        0.89%     1.29%     1.45%     2.03%     2.98%
Consumer home equity ......      296      312      267      112       77       20.14%    22.19%    19.85%    14.28%    11.56%
Unallocated ...............      108      132      150     --       --          N/A       N/A       N/A       N/A       N/A
                              ------------------------------------------      -----------------------------------------------
Total .....................   $1,894   $1,645   $1,360   $  785   $  745      100.00%   100.00%   100.00%   100.00%   100.00%
                              ==========================================      ===============================================
</TABLE>

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

The following table is a summary of non-accrual and past due loans at the end of
each of the last five years.

<TABLE>
<CAPTION>
                                           2001          2000          1999           1998          1997
                                       ----------------------------------------------------------------
                                                              (thousands of dollars)
<S>                                    <C>           <C>           <C>           <C>           <C>
Loans delinquent over 90
 days still accruing .............     $  1,300      $    507      $    475      $    732      $    634
Non-accruing loans ...............        1,654         1,759            91            64           463
                                       --------      --------      --------      --------      --------
                                       $  2,954      $  2,266      $    566      $    796      $  1,097
                                       ========      ========      ========      ========      ========
% of Total Loans .................        2.14%         1.77%         0.52%         1.37%         1.89%
% of Total Assets ................        1.46%         1.15%         0.32%         0.78%         1.07%
Additional income on non-accrual
 loans if recognized on an accrual
 basis ...........................     $    159      $    115      $      9      $      5      $     19
</TABLE>

There  were no  loans  in  either  2001 or 2000  considered  as  "troubled  debt
restructurings."


                                       15
<PAGE>


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

The $1.6 million of non-accruing  loans at December 31, 2001 consists of a total
of three  loans and does not  represent a negative  collectibility  trend in the
portfolio.  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, 2001,  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.

Deposits

The following  table is a summary of Bancorp's  deposits at December 31 for each
of the years shown.

<TABLE>
<CAPTION>
                                                2001             2000             1999
                                            ------------     ------------     ------------

<S>                                         <C>              <C>              <C>
Non-interest bearing ..................     $ 16,961,636     $ 16,899,057     $ 12,630,926
                                            ------------     ------------     ------------
Interest bearing
  Time certificates, less than $100,000       53,081,137       71,240,470       69,144,236
  Time certificates, $100,000 or more .       25,376,629       31,873,302       34,781,816
  Money market ........................       10,255,056          849,067          624,763
  Savings .............................       31,258,415       31,164,493       35,962,257
  NOW .................................       46,331,066       27,639,709        9,602,356
                                            ------------     ------------     ------------
  Total interest bearing ..............      166,302,303      162,767,041      150,115,428
                                            ------------     ------------     ------------
Total deposits ........................     $183,263,939     $179,666,098     $162,746,354
                                            ============     ============     ============
</TABLE>

Total  deposits  increased  $3.6 million to $183.3 million at December 31, 2001.
Non-interest bearing deposits increased $63,000 to $17.0 million at December 31,
2001.  Interest  bearing  deposits  increased  $3.5  million.  Increases  in NOW
accounts  and  money  market   accounts  of  $18.8  million  and  $9.4  million,
respectively,  were for the most part, offset by decreases in the certificate of
deposits portfolio of $24.7 million. The decrease in certificates of deposit was
due primarily to an outflow of maturities of premium priced  certificates,  some
of which were  shifted  into Super NOW accounts  which is a high  interest  rate
transaction  account.  The Bank continues to offer attractive  interest rates in
the very competitive Fairfield County marketplace in order to fund loan growth.

                                       16
<PAGE>


As of December 31, 2001, the Bank's maturities of time deposits were:

                                $100,000 or    Less than
                                  greater      $100,000       Totals
      --------------------------------------------------------------
      (thousands of dollars)
      Three months or less .     $ 7,964       $17,052       $25,016
      Three to six months ..       8,557        16,053        24,610
      Six months to one year       6,015        11,890        17,905
      Over one year ........       2,841         8,086        10,927
                                 -------       -------       -------
      Total ................     $25,377       $53,081       $78,458
                                 =======       =======       =======

Other

The decrease in accrued interest  receivable is due to the reduction in interest
rates during 2001.

The  increase in accrued  expenses  and other  liabilities  is due  primarily to
increases in accruals for incentive compensation arrangements and higher accrual
balances at year end for professional services and advertising fees.


                                       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 Variance Analysis
                                                  (thousands of dollars) (1)

<CAPTION>
                                            2001                                2000
                             --------------------------------    -------------------------------
                                                                                                        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)                     $ 132,687  $  11,136      8.39%    $  122,415   $ 11,304     9.23%      $  906   $ (1,074)    $ (168)
Short term investments            3,306         86      2.60%             -          -         -          86           -         86
Investments (4)                  36,025      2,024      5.62%        33,822      2,152     6.36%         134       (262)      (128)
Federal funds sold               10,662        477      4.47%        19,639      1,238     6.30%       (466)       (295)      (761)
                              -------------------------------    -------------------------------      -----------------------------
Total interest earning assets   182,680     13,723      7.51%       175,876     14,694     8.35%         660     (1,631)      (971)
                              -------------------------------    -------------------------------      -----------------------------

Cash and due from banks           4,772                               3,566
Premises and equipment, net         954                                 985
Allowance for loan losses       (1,745)                             (1,527)
Other                             3,178                               2,686
                              ---------                          ----------
Total Assets                  $ 189,839                          $  181,586
                              =========                          ==========

Interest bearing liabilities:
Time certificates             $  81,042  $   4,177      5.15%    $   97,851   $  5,804     5.93%      $ (923)  $    (704)   $(1,627)
Savings accounts                 33,170        929      2.80%        33,179      1,323     3.99%            -       (394)      (394)
Money market accounts             3,539        101      2.85%           872         24     2.75%           76           1         77
NOW accounts                     13,330        168      1.26%        10,057        217     2.16%           58       (107)       (49)
Super NOW accounts               23,950      1,398      5.84%         9,136        537     5.88%          865         (4)        861
Collateralized borrowings           474         36      7.59%           401         40     9.98%            7        (11)        (4)
Capital lease obligation            415         58     13.98%           516         71    13.76%         (14)           1       (13)
Other borrowings                      3          -          -            19          1     5.26%          (2)           1        (1)
                              -------------------------------    -------------------------------      ------------------------------
Total interest
      bearing liabilities       155,923      6,867      4.40%       152,031      8,017     5.27%           67     (1,217)    (1,150)
                              -------------------------------    -------------------------------      ------------------------------

Demand deposits                  15,800                              14,068
Accrued expenses and
     other liabilities              931                                 738
Shareholders' equity             17,185                              14,749
                              ---------                            --------
Total liabilities and equity  $ 189,839                          $  181,586
                              =========                          ==========

Net interest income                      $   6,856                            $  6,677                $   593  $    (414)   $   179
                                         =========                            ========                ==============================
Interest margin                                         3.75%                              3.80%
                                                     ========                              =====
Interest Spread                                         3.11%                              3.08%
                                                     ========                              =====
</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  effects of
unrealized gain or loss on available for sale securities.

RESULTS OF OPERATIONS

For the year ended  December  31, 2001,  Bancorp  earned  $876,000  ($0.37 basic
income per share and $0.36  diluted  income per share) an  increase of 14.21% as
compared to 2000 when Bancorp earned  $767,000 ($0.34 basic income per share and
$0.33 diluted income per share). Despite an


                                       18
<PAGE>


increase in average earning assets,  interest income decreased $972,000 to $13.7
million in 2001 as compared to 2000 when interest income was $14.7 million. This
decrease is due mainly to decreases in interest rates on variable rate loans and
investments due to Federal Reserve Bank rate reductions,  offset partially by an
increase in loan volume.

Non-interest  income  increased  $825,000 or 30.71% to $3.5  million for 2001. A
favorable  interest  rate  environment  and an  increase  in the  volume of loan
refinancings resulted in an increase in mortgage brokerage and referral fees and
loan processing fees of $850,000 as compared to the previous year.

Interest  expense  decreased  $1.2  million  or 14.35% to $6.9  million  in 2001
compared to $8.0 million in 2000. The decrease in interest expense is due to the
general  decrease in interest rates and lower  outstanding  average  balances in
certificates  of deposit  resulting from maturing  premium rate  certificates of
deposit, some of which shifted to products paying lower interest rates.

Non-interest expenses for 2001 totaled $8.7 million which represents an increase
of  $982,000  or 12.77% over the prior  year.  The higher  operating  costs were
primarily the result of higher  commissions  paid to loan originators as well as
compensation  adjustments and staffing  additions made during the fourth quarter
of 2000, which impact the full year of 2001, as well as staffing  additions made
during 2001. In August 2001,  Bancorp  opened a new branch  location in Norwalk,
Connecticut  which  resulted  in  additional  capital  expenditures  as  well as
increases in salaries and benefits and occupancy and equipment expenses.

The  following  are  measurements  of Bancorp's  earnings in relation to assets,
equity and earnings per share.

                                            2001          2000            1999
                                            ----------------------------------

Return on average assets                    .46%          .42%            .27%
Return on average equity                   5.10%         5.20%           2.67%
Dividend payout ratio                     16.21%             -               -
Average equity to average assets           9.05%         8.12%          10.19%
Basic income per share                     $0.37         $0.34           $0.17
Diluted income per share                   $0.36         $0.33           $0.16


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

Bancorp's net interest  margin  increased  $179,000 or 2.69%, to $6.9 million in
2001 from $6.7 million in 2000. Despite an increase in average earning assets of
$6.8  million,  or 3.86%,  lower short term  interest  rates  reduced  Bancorp's
interest  income  6.61%  from $14.7  million  in 2000 to $13.7  million in 2001.
Average loans  outstanding  increased $10.3 million led by growth in real estate
and  commercial  loans  which  reflects  the  strength  of the local real estate
market. A reduction in the investment yield of 11.63% resulted in a reduction in
interest  income  on  investments  of  $42,000  in  2001.  Dramatically  falling
short-term  interest rates resulted in a decrease of 1.83% in the rate earned on
Federal Funds Sold; this combined with a reduction of


                                       19
<PAGE>


$9.0 million in average  balances  resulted in a decrease in interest on Federal
Funds Sold of $762,000.  Total average interest bearing liabilities increased by
$3.9 million;  average  certificates of deposit decreased by $16.8 million while
average  Super NOW  accounts  increased  $14.8  million;  average  NOW  accounts
increased $3.3 million and average money market deposits increased $2.7 million.
Interest  expense  decreased  from $8.0 million in 2000 to $6.9 million in 2001.
Interest on  certificates  of deposit  decreased by $1.6 million  resulting from
lower average outstanding  balances and a decrease in the cost of funds for that
portfolio  from 5.93% in 2000 to 5.15% in 2001.  Interest on Super NOW  accounts
increased  $861,000  due to an increase in the average  outstanding  balances of
$14.8 million.

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

Non-interest income increased $825,000 from $2.7 million in 2000 to $3.5 million
in  2001.  The  increase  is  due  primarily  to  the  favorable  interest  rate
environment and increase in the volume of residential mortgage loan refinancings
which  resulted  in an increase  of  $850,000  in  mortgage  brokerage  and loan
processing  fees.  Included  in  non-interest  income is a charge to earnings of
$118,000  representing a write down made for the permanent  impairment of a debt
security  due to the  deterioration  in the  financial  condition of the issuer;
management  continues  to closely  monitor  the status  and  performance  of the
issuer.

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

Non-interest  expenses  increased  $982,000 in 2001 from $7.7 million in 2000 to
$8.7 million in 2001. Salaries and benefits increased $1.0 million due primarily
to increases in  commissions  and incentive  compensation  as a direct result of
higher  residential  loan  originations.  Higher  staffing  levels and incentive
compensation  also  impacted  salaries,  payroll  taxes and health  care  costs.
Occupancy and  equipment  expenses  increased  $192,000 from $744,000 in 2000 to
$935,000 in 2001; this increase is due primarily to increases in maintenance and
repairs as well as the costs  associated with  establishing the branch office in
Norwalk,  Connecticut.  Professional services decreased $108,000; legal expenses
decreased in 2001 due to the  nonrecurring  expenses related to the 2000 private
placement;  and in 2001 the Bank hired an Information  Technology  Manager which
was previously an outsourced  function.  Advertising  and  promotional  expenses
decreased  $73,000  from  $325,000  in 1999 to  $252,000  in 2001  due to  fewer
promotional campaigns in 2001.

The  provision  for  income  taxes of  $564,000  in 2001 and  $575,000  for 2000
represents the tax expense recognized for both federal and state income tax. The
effective  tax  rates  for 2001 and 2000 are  39.16%  and  42.86%  respectively.
Fluctuations  in  effective  tax rates are due to the  decreasing  impact of the
amortization  of intangible  assets,  as well as the increase in dividend income
from money market preferred instruments which are partially tax exempt.

Management  believes that additional branch offices,  if opened, 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.


                                       20
<PAGE>


Management  regularly  reviews  loan and  deposit  rates and  attempts  to price
Bancorp's  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 30.5% and 27.5% at December 31, 2001 and 2000,
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 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 Bank's regulatory capital ratios:

                                                 December 31,
                                       2001         2000        1999
                                    ---------------------------------
     Leverage Capital                 8.11%        7.73%       7.21%
     Tier 1 Risk-Based Capital        9.57%       10.01%       8.91%
     Total Risk-Based Capital        10.69%       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,  the Bank 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%.  Bancorp's  actual and  required  ratios are not  substantially
different from those shown above.

EMERGING ACCOUNTING STANDARDS

In June 2001, the Financial Accounting Standards Board issued Statement No. 141,
"Business  Combinations,"  and Statement No. 142, "Goodwill and Other Intangible
Assets."  Statement No 141 requires that all business  combinations  consummated
after  June  30,  2001  be  accounted  for by the  purchase  method  unless  the
combination  was initiated on or prior to that date and it meets the  conditions
to be accounted for by the  pooling-of-interests  method in accordance  with APB
Opinion No. 16,  "Business  Combinations."  Statement  No. 142 is required to be
applied in years  beginning  after December 15, 2001.  Under  Statement No. 142,
goodwill and intangible  assets that management concludes have indefinite useful
lives  will no longer be  amortized,  but will be subject  to  impairment  tests
performed at least annually. Also, upon initial application,


                                       21
<PAGE>


Bancorp is required to perform a transitional  impairment test to all previously
recognized  goodwill  and to assign all  recognized  assets and  liabilities  to
reporting  units  (which  have not yet been  identified  by  management).  Other
intangible  assets will  continue to be  amortized  over their  useful  lives as
determined at the date of initial application.

Bancorp will apply  Statement  No. 142  beginning in the first  quarter of 2002.
Application of the non-amortization  provisions of Statement No. 142 is expected
to result in an  increase  in net income of  approximately  $124,000  ($0.05 per
share) per year. During 2002,  Bancorp will perform its transitional  impairment
test of goodwill,  which has an unamortized  balance of $930,091 at December 31,
2001.  Bancorp has not yet determined what effect such  transitional  impairment
test will have on the earnings and financial position of Bancorp.

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  Bancorp'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.

Bancorp's  goal is to maximize  long term  profitability  while  minimizing  its
exposure to interest rate  fluctuations.  The first priority is to structure and
price Bancorp'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  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.  ALCO
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 its activities.

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

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.


                                       22
<PAGE>


"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, 2001 and December
31, 2000 and the related consolidated statements of income, shareholders' equity
and cash flows for the years ended  December  31, 2001 and  December  31,  2000,
together with the report  thereon of McGladrey & Pullen,  LLP dated February 20,
2002,  are  included  as part of this  Form  10-KSB  in the  "Financial  Report"
following page 27 hereof.

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

       Not applicable.



                                       23
<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 2002 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.



                                       24
<PAGE>


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)     2001 Stock Appreciation Rights Plan of Bancorp.

10(a)(2)     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)(3)     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 (incorporated by reference to Exhibit
             10(a)(4) to Bancorp's Annual Report on Form 10-KSB for the year
             ended December 31, 2000 (Commission File No. 000-29599)).

10(a)(4)     Change of Control Agreement, dated as of May 1, 2001 between Robert
             F. O'Connell and Patriot National Bank.

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

Bancorp filed no reports on Form 8-K during the fourth quarter of 2001.


                                       25
<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 De Caro
                                       ------------------------------
                                       Name: Angelo De Caro
                                       Title: Chairman & Chief Executive Officer

Date:  March 20, 2002

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 De Caro                                         March 20, 2002
---------------------------------                              --------------
Angelo De Caro, Chairman, Chief Executive                      Date
Officer and Director


  /s/   Robert F. O'Connell                                    March 20, 2002
---------------------------------                              --------------
Robert F. O'Connell                                            Date
Senior Executive Vice President,
Chief Financial Officer and Director


  /s/   Michael A. Capodanno                                   March 20, 2002
---------------------------------                              --------------
Michael A. Capodanno                                           Date
Vice President & Controller


  /s/   Herbert A. Bregman                                     March 20, 2002
---------------------------------                              --------------
Herbert A. Bregman                                             Date
Director


  /s/   Fred A. Decaro, Jr.                                    March 20, 2002
---------------------------------                              --------------
Fred A. DeCaro, Jr.                                            Date
Director




                                       26
<PAGE>


Form 10 KSB - Signatures continued


  /s/  John J. Ferguson                                        March 20, 2002
---------------------------------                              --------------
John L. Ferguson                                               Date
Director


  /s/   John A. Geoghegan                                      March 20, 2002
---------------------------------                              --------------
John A. Geoghegan                                              Date
Director


  /s/   L. Morris Glucksman                                    March 20, 2002
---------------------------------                              --------------
L. Morris Glucksman                                            Date
Director


  /s/   Charles F. Howell                                      March 20, 2002
---------------------------------                              --------------
Charles F. Howell                                              Date
Director


  /s/   Michael Intrieri                                       March 20, 2002
---------------------------------                              --------------
Michael Intrieri                                               Date
Director


  /s/   Richard Naclerio                                       March 20, 2002
---------------------------------                              --------------
Richard Naclerio                                               Date
Director


  /s/   Paul Settelmeyer                                       March 20, 2002
---------------------------------                              --------------
Paul Settelmeyer                                               Date
Director


  /s/   Salvatore Trovato                                      March 20, 2002
---------------------------------                              --------------
Salvatore Trovato                                              Date
Director


  /s/   Philip Wolford                                         March 20, 2002
---------------------------------                              --------------
Philip Wolford                                                 Date
Director
<PAGE>
                         PATRIOT NATIONAL BANCORP, INC.

                                FINANCIAL REPORT

                           DECEMBER 31, 2001 AND 2000



<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                             7-35
--------------------------------------------------------------------------------




<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, 2001 and 2000,
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 auditing standards generally accepted
in the  United  States of  America.  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, 2001 and 2000, and the results
of their operations and their cash flows for the years then ended, in conformity
with accounting principles generally accepted in the United States of America.



/s/ McGLADREY & PULLEN, LLP
New Haven, Connecticut
February 20, 2002



<PAGE>

<TABLE>
PATRIOT NATIONAL BANCORP, INC.

CONSOLIDATED BALANCE SHEETS
December 31, 2001 and 2000
-------------------------------------------------------------------------------------------------------


<CAPTION>
                                                                              2001             2000
                                                                          ------------     ------------
<S>                                                                       <C>              <C>
ASSETS
Cash and due from banks (Note 2) ....................................     $  7,544,242     $  3,565,071
Federal funds sold ..................................................       12,700,000       29,500,000
Short-term investment ...............................................        6,788,569             --
                                                                          ------------     ------------
        Cash and cash equivalents ...................................       27,032,811       33,065,071

Available for sale securities (at fair value) (Note 3) ..............       34,717,930       20,706,974
Held to maturity securities (fair value:  2000 $11,974,862) (Note 4)              --         12,298,058
Federal Reserve Bank stock ..........................................          481,050          475,200
Federal Home Loan Bank stock (Note 8) ...............................          617,900          593,600
Loans receivable (net of allowance for loan losses:  2001 $1,894,454;
  2000 $1,644,817) (Note 5) .........................................      135,680,036      126,411,265
Accrued interest receivable .........................................        1,079,450        1,228,920
Premises and equipment, net (Notes 6 and 9) .........................        1,102,428          898,754
Deferred tax asset, net (Note 10) ...................................          662,296          651,228
Goodwill (net of accumulated amortization:  2001 $306,037;
  2000 $182,101) (Note 19) ..........................................          930,091        1,054,027
Other assets ........................................................          265,465          245,030
                                                                          ------------     ------------
        Total assets ................................................     $202,569,457     $197,628,127
                                                                          ============     ============

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
  Deposits (Note 7):
    Noninterest bearing deposits ....................................     $ 16,961,636     $ 16,899,057
    Interest bearing deposits .......................................      166,302,303      162,767,041
                                                                          ------------     ------------
        Total deposits ..............................................      183,263,939      179,666,098

Capital lease obligation (Note 9) ...................................          364,836          470,826
Collateralized borrowings ...........................................          474,444          474,444
Accrued expenses and other liabilities ..............................        1,060,222          589,323
                                                                          ------------     ------------
        Total liabilities ...........................................      185,163,441      181,200,691
                                                                          ------------     ------------

Commitments and contingencies (Notes 8, 9, 11, and 13)

Shareholders' equity (Notes 11 and 14)
  Common stock, $2 par value; 5,333,333 shares authorized; shares
     issued and outstanding: 2001 2,400,525; 2000 2,400,375 .........        4,801,050        4,800,750
Additional paid-in capital ..........................................       11,484,649       11,483,770
Retained earnings ...................................................          864,202          131,840
Accumulated other comprehensive income - net unrealized
  gain on available for sale securities .............................          256,115           11,076
                                                                          ------------     ------------
        Total shareholders' equity ..................................       17,406,016       16,427,436
                                                                          ------------     ------------

        Total liabilities and shareholders' equity ..................     $202,569,457     $197,628,127
                                                                          ============     ============

See Notes to Consolidated Financial Statements.

</TABLE>

                                        2
<PAGE>

<TABLE>
PATRIOT NATIONAL BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31, 2001 and 2000
----------------------------------------------------------------------------------------------
<CAPTION>
                                                                     2001             2000
                                                                ------------      ------------
<S>                                                             <C>               <C>
Interest and Dividend Income
  Interest and fees on loans ..............................     $ 11,136,375      $ 11,303,915
  Interest and dividends on investment securities .........        2,110,012         2,151,724
  Interest on federal funds sold ..........................          476,556         1,238,496
                                                                ------------      ------------
        Total interest and dividend income ................       13,722,943        14,694,135
                                                                ------------      ------------

Interest Expense
  Interest on deposits (Note 7) ...........................        6,772,517         7,904,757
  Interest on other borrowings ............................              107             1,260
  Interest on capital lease obligation ....................           58,012            71,140
  Interest expense on collateralized borrowings ...........           36,324            40,458
                                                                ------------      ------------
        Total interest expense ............................        6,866,960         8,017,615
                                                                ------------      ------------

        Net interest income ...............................        6,855,983         6,676,520

Provision for Loan Losses (Note 5) ........................          250,000           325,900
                                                                ------------      ------------

        Net interest income after provision for loan losses        6,605,983         6,350,620
                                                                ------------      ------------

Noninterest Income
  Mortgage brokerage referral fees ........................        2,667,307         2,103,114
  Loan processing fees ....................................          540,499           255,191
  Fees and service charges ................................          273,480           235,574
  Gains and origination fees from loans sold ..............           70,790            61,014
  Loss on impaired investment security (Note 3) ...........         (117,679)             --
  Other income ............................................           75,558            30,403
                                                                ------------      ------------
        Total noninterest income ..........................        3,509,955         2,685,296
                                                                ------------      ------------

Noninterest Expenses
  Salaries and benefits (Note 12) .........................        5,282,441         4,275,275
  Occupancy and equipment expense, net ....................          935,436           743,589
  Data processing and other outside services ..............          618,408           593,536
  Professional services ...................................          322,897           430,696
  Advertising and promotional expenses ....................          251,666           325,124
  Forms, printing and supplies ............................          146,933           164,785
  Regulatory assessments ..................................           90,241            96,867
  Directors' fees and expenses ............................           65,800            65,372
  Other operating expenses ................................          961,729           998,101
                                                                ------------      ------------
        Total noninterest expenses ........................        8,675,551         7,693,345
                                                                ------------      ------------

        Income before income taxes ........................        1,440,387         1,342,571

Provision for Income Taxes (Note 10) ......................          564,000           575,400
                                                                ------------      ------------

        Net income ........................................     $    876,387      $    767,171
                                                                ============      ============

        Basic income per share (Note 11) ..................     $       0.37      $       0.34
                                                                ============      ============

        Diluted income per share (Note 11) ................     $       0.36      $       0.33
                                                                ============      ============

        Dividends per share ...............................     $       0.06      $       --
                                                                ============      ============

See Notes to Consolidated Financial Statements.
</TABLE>


                                        3
<PAGE>
<TABLE>
PATRIOT NATIONAL BANCORP, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years Ended December 31, 2001 and 2000
-----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
                                                                                                        Accumulated
                                                                           Additional                      Other
                                                Number of      Common       Paid-in       Retained     Comprehensive
                                                 Shares        Stock        Capital       Earnings         Income        Total
                                                -----------------------------------------------------------------------------------

<S>                                             <C>        <C>           <C>           <C>            <C>            <C>
Balance, January 1, 2000 ..................     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
                                                                                                                     ------------

Comprehensive income
  Net income ..............................          --            --            --         876,387           --          876,387
  Unrealized holding gain on available for
    sale securities, net of taxes (Note 16)          --            --            --            --          245,039        245,039
                                                                                                                     ------------
        Total comprehensive
        income ............................                                                                             1,121,426
                                                                                                                     ------------

Dividends .................................          --            --            --        (144,025)          --         (144,025)

Issuance of common stock ..................           150           300           879          --             --            1,179
                                                -----------------------------------------------------------------------------------

Balance, December 31, 2001 ................     2,400,525  $  4,801,050  $ 11,484,649  $    864,202   $    256,115   $ 17,406,016
                                                ===================================================================================


See Notes to Consolidated Financial Statements.
</TABLE>

                                        4
<PAGE>
<TABLE>
PATRIOT NATIONAL BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2001 and 2000
-----------------------------------------------------------------------------------------------
<CAPTION>

                                                                     2001              2000
                                                                 ------------      ------------
<S>                                                              <C>               <C>
Cash Flows from Operating Activities
  Net income ...............................................     $    876,387      $    767,171
  Adjustments to reconcile net income to net cash provided
    by operating activities:
      Amortization and accretion of investment discounts and
        premiums, net ......................................          (13,522)          (10,958)
      Originations of loans held for sale ..................       25,117,910       (15,087,035)
      Proceeds from sales of loans held for sale ...........      (25,117,910)       15,087,035
      Gains on sales of loans ..............................          (11,326)             --
      Provision for loan losses ............................          250,000           325,900
      Loss on impaired investment security .................          117,679              --
      Depreciation and amortization of fixed assets ........          357,706           294,228
      Loss on disposal of bank premises and equipment ......            1,710               165
      Deferred income taxes ................................         (176,215)         (260,708)
      Amortization of goodwill .............................          123,936           123,921
      Changes in assets and liabilities:
        Increase in deferred loan fees .....................           60,587            11,956
        Decrease (increase) in accrued interest receivable .          149,470          (248,143)
        (Increase) in other assets .........................          (20,435)          (66,337)
        Increase in accrued expenses and other liabilities .          422,888           265,755
                                                                 ------------      ------------
          Net cash provided by operating activities ........        2,138,865         1,202,950
                                                                 ------------      ------------

Cash Flows from Investing Activities
  Purchases of available for sale securities ...............      (15,600,000)       (4,046,225)
  Proceeds from sales of available for sale securities .....        9,046,223              --
  Proceeds from maturities of available for sale securities           499,290           550,000
  Principal repayments on available for sale securities ....        4,147,618         3,229,871
  Proceeds from maturities of held to maturity securities ..          500,000              --
  Purchase of Federal Reserve Bank stock, net of redemptions           (5,850)          (64,500)
  Purchase of Federal Home Loan Bank stock .................          (24,300)         (286,600)
  Proceeds from sale of loan receivable ....................          286,509              --
  Net increase in loans ....................................       (9,854,541)      (18,979,210)
  Purchases of premises and equipment ......................         (563,090)         (233,496)
                                                                 ------------      ------------
          Net cash used in investing activities ............      (11,568,141)      (19,830,160)
                                                                 ------------      ------------
</TABLE>
                                        5
<PAGE>
<TABLE>
PATRIOT NATIONAL BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued
Years Ended December 31, 2001 and 2000
----------------------------------------------------------------------------------------------------
<CAPTION>

                                                                          2001              2000
                                                                      ------------      ------------

<S>                                                                   <C>               <C>
Cash Flows from Financing Activities
  Net increase in demand, savings and money market deposits .....     $ 28,253,847      $ 17,732,024
  Net decrease in time certificates of deposit ..................      (24,656,006)         (812,280)
  Principal payments on capital lease obligation ................         (105,990)          (92,861)
  Net increase in collateralized borrowings .....................             --             149,444
  Dividends paid on common stock ................................          (96,014)             --
  Proceeds from issuance of common stock ........................            1,179         2,154,659
                                                                      ------------      ------------
        Net cash provided by financing activities ...............        3,397,016        19,130,986
                                                                      ------------      ------------

        Net (decrease) increase in cash and cash equivalents ....       (6,032,260)          503,776

Cash and cash equivalents
  Beginning .....................................................       33,065,071        32,561,295
                                                                      ------------      ------------

  Ending ........................................................     $ 27,032,811      $ 33,065,071
                                                                      ============      ============

Supplemental Disclosures of Cash Flow Information
  Cash paid during the year for:
    Interest ....................................................     $  6,853,985      $  7,977,157
                                                                      ============      ============

    Income taxes ................................................     $    714,218      $    773,440
                                                                      ============      ============

Supplemental Disclosure of Noncash Investing and Financing
  Activities
    Transfer of held to maturity securities to available for sale
      securities (Note 4) .......................................     $ 11,796,300      $       --
                                                                      ============      ============

    Unrealized holding gains on available for sale
      securities arising during the period ......................     $    410,186      $    441,926
                                                                      ============      ============

    Dividends declared on common stock ..........................     $     48,011      $       --
                                                                      ============      ============


See Notes to Consolidated Financial Statements.
</TABLE>


                                        6

<PAGE>

PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001 and 2000
--------------------------------------------------------------------------------

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,  two branch  offices in Greenwich,  Connecticut  and one
branch office in Norwalk,  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 and New York through its
mortgage brokerage division, Pinnacle Financial.

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
accounting  principles  generally  accepted in the United  States of America 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.  The short-term
investment  represents  an  investment in a money market mutual fund of a single
issuer.


                                       7
<PAGE>

PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2001 and 2000
--------------------------------------------------------------------------------


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.

Debt  securities  that management has the positive intent and ability to hold to
maturity are  classified as "held to maturity"  and recorded at amortized  cost.
Securities  not  classified  as held to maturity or  trading,  including  equity
securities with readily  determinable fair values,  are classified as "available
for sale" and recorded at fair value,  with unrealized gains and losses excluded
from earnings and reported in other comprehensive income.

Purchase  premiums and  discounts are  recognized  in interest  income using the
interest method over the terms of the securities.  Declines in the fair value of
held to maturity and  available  for sale  securities  below their cost that are
deemed to be other than temporary are reflected in earnings as realized  losses.
Gains and losses on the sale of  securities  are  recorded on the trade date and
are determined using the specific identification method.

The sale of a held to maturity 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 purposes of  classification
and disclosure.

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


                                       8
<PAGE>
PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2001 and 2000
--------------------------------------------------------------------------------


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 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 Company's allowance for loan losses. Such agencies have
the authority to require the Company 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


                                       9
<PAGE>
PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2001 and 2000
--------------------------------------------------------------------------------


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.

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 closing of loans for 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 to pledge or exchange the transferred assets and no
condition both constrains the transferee from taking advantage of that right and
provides more than a trivial benefit for the transferor,  and (3) the transferor
does not maintain  effective control over the transferred  assets through either
(a) an agreement  that both entitles and obligates the  transferor to repurchase
or redeem the assets before  maturity or (b) the ability to  unilaterally  cause
the holder to return specific assets, other than through a cleanup call.

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


                                       10
<PAGE>
PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2001 and 2000
--------------------------------------------------------------------------------


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 three to ten 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.

Goodwill
--------

Goodwill  represents the cost in excess of net assets of businesses acquired 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

                                       11
<PAGE>
PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2001 and 2000
--------------------------------------------------------------------------------


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  management,   the
transactions  with  related  parties did not involve  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

                                       12
<PAGE>
PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2001 and 2000
--------------------------------------------------------------------------------


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.

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 loans' 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.


                                       13
<PAGE>
PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2001 and 2000
--------------------------------------------------------------------------------


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

      For variable rate borrowings which reprice frequently, fair value is based
      on carrying value. The fair value of fixed rate borrowings is estimated by
      discounting the future cash flows using current interest rates for similar
      available borrowings with the same remaining maturities.

      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 2000 financial  statement amounts have been reclassified to conform with
the 2001 presentations. Such reclassifications had no effect on 2000 net income.

NOTE 2.  RESTRICTIONS ON CASH AND DUE FROM BANKS

The Company is required to maintain reserves against its respective  transaction
accounts  and non personal  time  deposits.  At December 31, 2001,  the Bank was
required  to have cash and liquid  assets of  approximately  $2,070,000  to meet
these requirements.  In addition, the Company is required to maintain $25,000 in
the Federal Reserve Bank for clearing purposes.

                                       14
<PAGE>
PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2001 and 2000
--------------------------------------------------------------------------------


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, 2001
and 2000 are as follows:
<TABLE>
<CAPTION>

                                                                       Gross             Gross
                                   Amortized       Unrealized        Unrealized          Fair
2001                                 Cost             Gains            Losses            Value
----                             ------------     ------------      ------------      ------------

<S>                              <C>              <C>               <C>               <C>
Mortgage-backed securities .     $  9,981,222     $    262,196      $       --        $ 10,243,418
Corporate bonds ............       11,675,851          213,049            (8,744)       11,880,156
Marketable equity securities       12,632,067             --             (37,711)       12,594,356
                                 ------------     ------------      ------------      ------------
                                 $ 34,289,140     $    475,245      $    (46,455)     $ 34,717,930
                                 ============     ============      ============      ============
</TABLE>

<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
                                 ============     ============      ============      ============
</TABLE>

The  amortized  cost and fair value of  available  for sale debt  securities  at
December 31, 2001 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:
      1-5 years ................     $ 9,316,199     $ 9,476,061
      5-10 years ...............       2,359,652       2,404,095
      Mortgage-backed securities       9,981,222      10,243,418
                                     -----------     -----------
  Total ........................     $21,657,073     $22,123,574
                                     ===========     ===========

During  2001,  proceeds  from  sales  of  available  for  sale  securities  were
$9,046,223  and there were no gains or losses  realized on those  sales.  During
2000, there were no sales of available for sale securities.  Also,  during 2001,
due to the significant deterioration in the creditworthiness of the

                                       15
<PAGE>
PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2001 and 2000
--------------------------------------------------------------------------------


issuer,  the Company  recognized an impairment  loss of $117,679 on an available
for sale corporate bond, which loss was considered other than temporary.

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 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
                                ============      ============      ============     ============
</TABLE>

During 2001,  the Company  transferred  all of its held to maturity  securities,
which had a carrying value of  $11,796,300,  to the available for sale category.
At the time of the  transfer,  the  Company  recognized  an  unrealized  loss of
$154,147 as an adjustment to other  comprehensive  income. The transfer of these
securities  was made  based  on a change  in the  Company's  overall  investment
strategies and for liquidity purposes.

There were no sales of held to maturity securities during 2001 or 2000.

NOTE 5.  LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES

A summary of the  Company's  loan  portfolio at December 31, 2001 and 2001 is as
follows:

<TABLE>
<CAPTION>
                                                          2001                2000
                                                     -------------      -------------
<S>                                                  <C>                <C>
Real estate:
    Commercial .................................     $  60,481,789      $  57,297,310
    Residential ................................         7,501,504          5,041,776
    Construction, net of undisbursed portion of
      $5,096,767 in 2001 and $10,842,047 in 2000        26,215,265         22,969,904
Commercial .....................................        14,649,112         12,841,040
Consumer installment ...........................         1,231,672          1,652,587
Consumer home equity ...........................        27,770,723         28,468,453
                                                     -------------      -------------
           Total loans .........................       137,850,065        128,271,070
Net deferred loan fees .........................          (275,575)          (214,988)
Allowance for loan losses ......................        (1,894,454)        (1,644,817)
                                                     -------------      -------------
           Loans receivable, net ...............     $ 135,680,036      $ 126,411,265
                                                     =============      =============
</TABLE>


                                       16
<PAGE>
PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2001 and 2000
--------------------------------------------------------------------------------


The changes in the  allowance  for loan losses for the years ended  December 31,
2001 and 2000 are as follows:

                                                      2001              2000
                                                   -----------      -----------

Balance, beginning of year ...................     $ 1,644,817      $ 1,360,183
    Provision for loan losses ................         250,000          325,900
    Recoveries of loans previously charged-off           1,412            3,314
    Loans charged-off ........................          (1,775)         (44,580)
                                                   -----------      -----------
Balance, end of year .........................     $ 1,894,454      $ 1,644,817
                                                   ===========      ===========

At December 31, 2001 and 2000, the unpaid principal balances of loans delinquent
90 days or more were  $2,953,870 and  $2,266,421,  respectively,  and the unpaid
principal  balances of loans placed on  nonaccrual  status were  $1,653,946  and
$1,759,270, respectively.

The  following  information  relates to  impaired  loans as of and for the years
ended December 31, 2001 and 2000:

<TABLE>
<CAPTION>
                                                                 2001           2000
                                                             -----------     ----------

<S>                                                          <C>             <C>
Loans receivable for which there is a related allowance
    for credit losses ..................................     $ 1,653,946     $   95,307
                                                             ===========     ==========

Loans receivable for which there is no related allowance
    for credit losses ..................................     $      --       $1,663,963
                                                             ===========     ==========

Allowance for credit losses related to impaired loans ..     $   118,092     $   95,307
                                                             ===========     ==========

Average recorded investment in impaired loans ..........     $ 1,567,075     $1,169,872
                                                             ===========     ==========
</TABLE>

There was no interest  income on impaired loans  collected or recognized in 2001
and 2000. 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 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

                                       17
<PAGE>
PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2001 and 2000
--------------------------------------------------------------------------------


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  creditworthiness  of each customer
and,  in most  cases,  extends  credit of up to 75% 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,  2001  and  2000,  premises  and  equipment  consisted  of the
following:

                                                       2001             2000
                                                   -----------      -----------

Premises under capital lease .................     $   783,000      $   783,000
Leasehold improvements .......................         831,814          538,723
Furniture, equipment and software ............         992,388          735,314
                                                   -----------      -----------
                                                     2,607,202        2,057,037
Less accumulated depreciation and amortization      (1,504,774)      (1,158,383)
                                                   -----------      -----------
                                                   $ 1,102,428      $   898,754
                                                   ===========      ===========

For the years ended December 31, 2001 and 2000,  depreciation  and  amortization
expense  related to  premises  and  equipment  totaled  $357,706  and  $294,228,
respectively.



                                       18
<PAGE>
PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2001 and 2000
--------------------------------------------------------------------------------


NOTE 7.  DEPOSITS

At December 31, 2001 and 2000, deposits consisted of the following:

                                                    2001             2000
                                                ------------     ------------
Noninterest bearing .......................     $ 16,961,636     $ 16,899,057
Interest bearing:
    Time certificates, less than $100,000..       53,081,137       71,240,470
    Time certificates, $100,000 or more ...       25,376,629       31,873,302
    Money market ..........................       10,255,056          849,067
    Savings ...............................       31,258,415       31,164,493
    NOW ...................................       46,331,066       27,639,709
                                                ------------     ------------
      Total interest bearing ..............      166,302,303      162,767,041
                                                ------------     ------------
         Total deposits ...................     $183,263,939     $179,666,098
                                                ============     ============

Interest expense on certificates of deposit in denominations of $100,000 or more
was  $1,378,773  and  $1,737,979 for the years ended December 31, 2001 and 2000,
respectively.

Contractual  maturities of time  certificates of deposit as of December 31, 2001
are summarized below:

         Due within:
             1 year                                 $     67,530,758
             1-2 years                                     1,007,660
             2-3 years                                     1,996,039
             3-4 years                                       346,932
             4-5 years                                     7,576,377
                                                    ----------------
                                                    $     78,457,766
                                                    ================

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,  2001,  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, 2001 and
2000, there were no advances outstanding under this line of credit.

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

                                       19
<PAGE>
PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2001 and 2000
--------------------------------------------------------------------------------


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  $574,200  and  $495,900  as of  December  31,  2001 and  2000,
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,  2001,  future  minimum  lease  payments,  by years and in the
aggregate, under this capital lease are as follows:

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

     2002                                              $      164,000
     2003                                                     164,000
     2004                                                     109,333
                                                      ----------------
                                                              437,333
     Less amount representing interest                         72,497
                                                      ----------------

     Present value of future minimum lease
       payments-capital lease obligation               $      364,836
                                                      ================

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

The Company  subleases  excess  office space in its premises to a tenant under a
noncancelable operating lease. Future minimum lease payments receivable for this
lease by year, and in the aggregate, at December 31, 2001 are as follows:

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

                    2002                   $     22,260
                    2003                         22,260
                    2004                         16,695
                                           --------------
                                           $     61,215
                                           ==============

For the years  ended  December  31,  2001 and 2000,  rental  income  under  both
cancelable and noncancelable leases totaled $29,060 and $74,168, respectively.

                                       20
<PAGE>
PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2001 and 2000
--------------------------------------------------------------------------------



The  Company  also has  noncancelable  operating  leases for its two bank branch
offices in 0Greenwich,  Connecticut,  one branch office in Norwalk,  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  and  certain   equipment   under   cancelable  and
noncancelable arrangements.

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

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

               2002                           $     427,314
               2003                                 446,298
               2004                                 334,566
               2005                                 305,616
               2006                                 273,000
               Thereafter                           138,600
                                              --------------
                                              $   1,925,394
                                              ==============

Total rental expense  charged to operations  for  cancelable  and  noncancelable
operating leases was $407,865 and $376,261 for the years ended December 31, 2001
and 2000, respectively.

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% of the  President's  stipulated  base  salary  for the
preceding annual  employment  period,  as defined,  and such shares granted will
vest and be  distributed  ratably to the President at each of the  anniversaries
subsequent  to the date of grant  through the end of the term of the  agreement.
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

                                       21
<PAGE>
PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2001 and 2000
--------------------------------------------------------------------------------


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 and  2001,  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. For the year ended December 31, 2001,  approximately $48,400
was charged to expense related to the stock and option  compensation  components
of the Agreement.

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 Employment Agreements

The Company entered into employment agreements with two officers of the Pinnacle
Financial division.  The agreements provide for, among other things,  stipulated
base  salaries  in 1999 and  2000,  which  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  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,  they
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.

In 2001,  the Company  entered into a three-year  employment  agreement with its
Chief  Financial  Officer.  The agreement  provides for,  among other things,  a
stipulated base salary and discretionary bonuses as determined from time to time
by the Board of Directors.  The  agreement  terminates on September 19, 2004. In
addition, certain officers of the Company have change of control agreements that
entitle  such  officers  to receive one year's  compensation  (as defined in the
agreements) if a change of control (as defined in the  agreements)  occurs while
such officers are full time officers of the Bank or within six months  following
termination of employment other than for cause (as defined in the agreements) or
by reason of death or disability.


                                       22
<PAGE>
PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2001 and 2000
--------------------------------------------------------------------------------


Stock Appreciation Rights Plan
------------------------------

During 2001, the Company adopted the Patriot National  Bancorp,  Inc. 2001 Stock
Appreciation Rights Plan (the "Plan").  Under the terms of the Plan, the Company
may grant stock appreciation  rights to officers of the Company that entitle the
officers to receive,  in cash or Company common stock,  the  appreciation in the
value of the Company's common stock from the date of grant.  Each award vests at
the rate of 20% per year from the date of grant; however, portions of the grants
may be forfeited if certain Company financial performance goals are not met. Any
unexercised  rights will expire ten years from the date of grant.  During  2001,
the Company granted a total of 18,000 stock appreciation rights to three Company
officers,  and $3,600 was  charged  to  operations  under this Plan for the year
ended December 31, 2001.

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, 2001
and 2000 are as follows:

                                                        2001             2000
                                                     ---------        ---------
Current
    Federal ..................................       $ 582,401        $ 664,637
    State ....................................         157,814          171,471
                                                     ---------        ---------
           Total .............................         740,215          836,108
                                                     ---------        ---------

Deferred
    Federal ..................................        (138,401)        (204,640)
    State ....................................         (37,814)         (56,068)
                                                     ---------        ---------
           Total .............................        (176,215)        (260,708)
                                                     ---------        ---------

           Provision for income taxes ........       $ 564,000        $ 575,400
                                                     =========        =========


                                       23
<PAGE>
PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2001 and 2000
--------------------------------------------------------------------------------


A reconciliation of the anticipated  income tax provision  (computed by applying
the statutory  Federal income tax rate to the income before income taxes) to the
income tax provision as reported in the statements of income for the years ended
December 31, 2001 and 2000 is as follows:

                                                           2001          2000
                                                         ---------    ---------

Provision for income taxes at statutory Federal rate     $ 489,700    $ 456,500
State taxes, net of Federal benefit ................        75,300       71,600
Dividends received deduction .......................       (71,500)     (16,400)
Nondeductible expenses .............................        81,200       58,400
Other ..............................................       (10,700)       5,300
                                                         ---------    ---------
           Total provision for income taxes ........     $ 564,000    $ 575,400
                                                         =========    =========

At December 31, 2001 and 2000,  the  components of gross deferred tax assets and
gross deferred tax liabilities are as follows:

                                                         2001             2000
                                                       --------         --------

Deferred tax assets:
    Allowance for loan losses ................         $750,394         $651,514
    Investment securities ....................           46,613             --
    Asset under capital lease ................           61,807           72,774
    Premises and equipment ...................           75,931           47,651
    Accrued expenses .........................           15,844           51,493
    Other ....................................           23,103           38,022
                                                       --------         --------
      Gross deferred tax assets ..............          973,692          861,454
                                                       --------         --------

Deferred tax liabilities:
    Tax bad debt reserve .....................          138,721          201,805
    Investment securities ....................          172,675            7,528
    Other ....................................             --                893
                                                       --------         --------
      Gross deferred tax liabilities .........          311,396          210,226
                                                       --------         --------

           Deferred tax asset, net ...........         $662,296         $651,228
                                                       ========         ========


                                       24
<PAGE>
PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2001 and 2000
--------------------------------------------------------------------------------


NOTE 11.  SHAREHOLDERS' EQUITY

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

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.

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

The following is information  about the  computation of income per share for the
years ended December 31, 2001 and 2000.

                                                            2001
                                              ---------------------------------
                                                  Net                Per Share
                                                Income      Shares     Amount
                                              ---------------------------------
Basic Income Per Share
   Income available to common shareholders     $ 876,387   2,400,488   $ 0.37

Effect of Dilutive Securities
   Warrants and stock options outstanding           --        26,013    (0.01)
                                               ---------   ---------   ------
Diluted Income Per Share
   Income available to common shareholders
      plus assumed conversions ...........     $ 876,387   2,426,501   $ 0.36
                                               =========   =========   ======


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


                                       25
<PAGE>
PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2001 and 2000
--------------------------------------------------------------------------------


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  expired on July 6, 2001, and none were  exercised.  The
obligations  related to such warrants  were assumed by the Company.  The Company
has reserved  91,166  shares of its common stock for issuance  upon  exercise of
these warrants.

A summary of the status of the  warrants  at  December  31,  2001 and 2000,  and
changes during the years ended on those dates, is as follows:

                                              2001                 2000
                                      --------------------   ------------------
                                                 Weighted-             Weighted-
                                       Number     Average    Number     Average
                                         of      Exercise      of      Exercise
                                       Shares      Price     Shares     Price
                                      --------------------   ------------------

Outstanding at beginning of year      119,846     $ 7.91    123,180     $7.86
Expired ........................      (28,680)     14.00       --
Exercised ......................         --                  (3,334)     6.00
                                      -------               -------
Outstanding at end of year .....       91,166       6.00    119,846      7.91
                                      =======               =======

Exercisable at end of year .....       91,166       6.00    119,846      7.91
                                      =======               =======

The weighted average remaining  contractual life for the warrants outstanding at
December 31, 2001 is 2.7 years.

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

                                       26
<PAGE>
PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2001 and 2000
--------------------------------------------------------------------------------


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 the 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, 2001 and 2000 is as
follows:

                                            2001                 2000
                                   ---------------------  ----------------------
                                              Weighted-              Weighted-
                                    Number     Average    Number      Average
                                      of      Exercise      of       Exercise
                                    Shares      Price     Shares       Price
                                   ---------------------  ----------------------

Outstanding at beginning of year   110,000   $   10.13    110,000   $   10.13
Granted ........................      --                     --
                                   -------                -------
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
                                   =======                =======

The weighted-average  remaining  contractual life for the options outstanding at
December 31, 2001 is 7.6 years.

NOTE 12. 401(K) SAVINGS PLAN

The Company offers  employees  participation in the Patriot National Bank 401(k)
Savings Plan (the "401(k)  Plan") under Section  401(k) of the Internal  Revenue
Code. The 401(k) 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 401(k) Plan,  participants  can contribute up to the maximum amount
allowed,  subject to Federal  limitations.  The Company  may make  discretionary
matching  contributions to the 401(k) Plan.  Participants are immediately vested
in  their  contribution  and  Company  contributions.  The  Company  contributed
approximately  $25,000  and  $10,000  to the  401(k)  Plan  in  2001  and  2000,
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

                                       27
<PAGE>
PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2001 and 2000
--------------------------------------------------------------------------------


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, 2001 and 2000:

                                               2001              2000
                                           ------------------------------

Commitments to extend credit:
    Future loan commitments .......        $ 5,142,789        $11,917,000
    Unused lines of credit ........         18,307,594         13,445,938
    Undisbursed construction loans           5,096,767         10,842,047
Financial standby letters of credit            144,000            134,000
                                           ------------------------------
                                           $28,691,150        $36,338,985
                                           ==============================

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

                                       28
<PAGE>
PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2001 and 2000
--------------------------------------------------------------------------------


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,
2001,  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 well  capitalized  under the  regulatory  framework for
prompt corrective  action. 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.  There are no  conditions  or events  since then that
management believes have changed the Bank's category.

The Bank's actual capital  amounts and ratios at December 31, 2001 and 2000 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, 2001:

   Total Capital (to Risk Weighted Assets)      $ 18,003     10.69%   $ 13,473    8.00%    $ 16,841    10.00%
   Tier I Capital (to Risk Weighted Assets)       16,109      9.57%      6,733    4.00%      10,100     6.00%
   Tier I Capital (to Average Assets) .....       16,109      8.11%      7,945    4.00%       9,932     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, 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>

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.

                                       29
<PAGE>
PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2001 and 2000
--------------------------------------------------------------------------------


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, 2001, the Bank had retained  earnings of approximately  $1,041,000,
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.

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 2001 and 2000 are as
follows:

                                         2001            2000
                                     -----------------------------

      Balance, beginning of year     $ 4,556,361      $ 3,124,050
      Additional loans .........         832,941        2,097,898
      Repayments ...............      (1,541,680)        (665,587)
                                     -----------------------------
      Balance, end of year .....     $ 3,847,622      $ 4,556,361
                                     =============================

Related party deposits aggregated  approximately $7,161,000 and $4,896,000 as of
December 31, 2001 and 2000, 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
$22,300  and  $20,000  for  the  years  ended   December   31,  2001  and  2000,
respectively.  Also during 2001 and 2000,  the Company  leased office space to a
related  individual under a  month-to-month  lease, and rental income under this
lease was  approximately  $500 and $10,000 for the years ended December 31, 2001
and 2000,  respectively.  In  addition,  the  Company  paid  consulting  fees of
approximately  $20,400 and  $100,000 to this  individual  during the years ended
December 31, 2001 and 2000, respectively.

                                       30
<PAGE>
PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2001 and 2000
--------------------------------------------------------------------------------


During 2001 and 2000, respectively, the Company paid legal fees of approximately
$9,900 and $5,400 to an attorney who is a director of the Company.

During  2001 and 2000,  the Company  leased  parking  space from a  corporation,
certain  principals  of  which  are  related  parties.  Total  rent  paid to the
corporation  was $13,500 and $18,000 for the years ended  December  31, 2001 and
2000,  respectively.  During 2001, ownership of this corporation was transferred
to individuals who are not related parties of the Company.

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>
                                                                    2001
                                                  ---------------------------------------

                                                   Before-Tax                  Net-of-Tax
                                                     Amount      Tax Expense     Amount
                                                  ---------------------------------------

<S>                                                <C>           <C>            <C>
Unrealized holding gains arising during period     $ 138,360     $ (55,707)     $  82,653

Add:
   Adjustment for unrealized losses of held to
      maturity securities transferred to
      available for sale securities ..........       154,147       (62,061)        92,086

   Reclassification adjustment for losses
      recognized in net income ...............       117,679       (47,379)        70,300
                                                   ---------     ---------      ---------

Unrealized holding gain on available for sale
      securities, net of taxes ...............     $ 410,186     $(165,147)     $ 245,039
                                                   =========     =========      =========
</TABLE>


<TABLE>
<CAPTION>
                                                                    2000
                                                  ---------------------------------------

                                                   Before-Tax                  Net-of-Tax
                                                     Amount      Tax 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
                                                   =========     =========      =========
</TABLE>

                                       31
<PAGE>
PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2001 and 2000
--------------------------------------------------------------------------------


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 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, 2001 and
2000.  The estimated  fair value amounts for 2001 and 2000 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.


                                       32
<PAGE>
PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2001 and 2000
--------------------------------------------------------------------------------


As of December 31, 2001 and 2000,  the recorded book balances and estimated fair
values of the Company's financial instruments were (in thousands):

<TABLE>
<CAPTION>
                                               2001                  2000
                                     ------------------------------------------------

                                      Recorded                              Recorded
                                        Book        Fair        Book          Fair
                                      Balance       Value      Balance       Value
                                     ------------------------------------------------

<S>                                  <C>          <C>          <C>          <C>
Financial Assets:
   Cash and due from banks .....     $  7,544     $  7,544     $  3,565     $  3,565
   Federal funds sold ..........       12,700       12,700       29,500       29,500
   Short-term investments ......        6,789        6,789         --           --
   Available for sale securities       34,718       34,718       20,707       20,707
   Held to maturity securities .         --           --         12,298       11,975
   Federal Reserve Bank stock ..          481          481          475          475
   Federal Home Loan Bank stock           618          618          594          594
   Loans receivable, net .......      135,680      138,541      126,411      127,191
   Accrued interest receivable .        1,079        1,079        1,229        1,229

Financial Liabilities:
   Demand deposits .............       16,962       16,962       16,899       16,899
   Savings deposits ............       31,258       31,258       31,164       31,164
   Money market deposits .......       10,255       10,255          849          849
   NOW accounts ................       46,331       46,331       27,640       27,640
   Time deposits ...............       78,458       79,183      103,114      103,765
   Collateralized borrowings ...          474          474          474          474
</TABLE>

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

Loan  commitments on which the committed  interest rate is less than the current
market rate are  insignificant at December 31, 2001 and 2000. The estimated fair
value of fee  income  on  letters  of credit at  December  31,  2001 and 2000 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.


                                       33
<PAGE>


NOTE 18. 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 and  construction  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, 2001 and 2000 is as follows (in thousands):


                                  Commercial    Mortgage   Consolidated
   2001                              Bank        Broker       Totals
   -----                          ------------------------------------

   Net interest income ......     $  6,856     $   --        $  6,856
   Noninterest income .......          190        3,320         3,510
   Noninterest expenses .....        6,056        2,620         8,676
   Provision for loan losses           250         --             250
   Income before taxes ......          740          700         1,440
   Assets ...................      201,589          980       202,569

                                  Commercial    Mortgage   Consolidated
   2000                              Bank        Broker       Totals
   -----                          ------------------------------------

   Net interest income ......     $  6,677     $   --        $  6,677
   Noninterest income .......          147        2,538         2,685
   Noninterest expenses .....        5,026        2,667         7,693
   Provision for loan losses           326         --             326
   Income (loss) before taxes        1,472         (129)        1,343
   Assets ...................      196,522        1,106       197,628


                                       34
<PAGE>
PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
December 31, 2001 and 2000
--------------------------------------------------------------------------------


The accounting  policies of the segments are the same as those  described in the
summary  of  significant  accounting  policies.   Management  allocates  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  2001,  the  Company  began
allocating the goodwill and related amortization to the mortgage broker segment.
The  2000  segment  information  has  been  restated  to  conform  with the 2001
presentation.  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.

NOTE 19. EMERGING ACCOUNTING STANDARDS

In June 2001, the Financial Accounting Standards Board issued Statement No. 141,
"Business  Combinations,"  and Statement No. 142, "Goodwill and Other Intangible
Assets." Statement No. 141 requires that all business  combinations  consummated
after  June  30,  2001  be  accounted  for by the  purchase  method  unless  the
combination  was initiated on or prior to that date and it meets the  conditions
to be accounted for by the  pooling-of-interests  method in accordance  with APB
Opinion No. 16,  "Business  Combinations."  Statement  No. 142 is required to be
applied in years  beginning  after December 15, 2001.  Under  Statement No. 142,
goodwill and intangible  assets that management  concludes has indefinite useful
lives  will no longer be  amortized,  but will be subject  to  impairment  tests
performed at least  annually.  Also,  upon initial  application,  the Company is
required to perform a transitional  impairment test to all previously recognized
goodwill and to assign all recognized  assets and liabilities to reporting units
(which have not yet been identified by management). Other intangible assets will
continue to be amortized  over their useful lives as  determined  at the date of
initial application.

The Company will apply Statement No. 142 beginning in the first quarter of 2002.
Application of the non-amortization  provisions of Statement No. 142 is expected
to result in an  increase  in net income of  approximately  $124,000  ($0.05 per
share)  per year.  During  2002,  the  Company  will  perform  its  transitional
impairment  test of goodwill,  which has an  unamortized  balance of $930,091 at
December  31,  2001.  The  Company  has  not yet  determined  what  effect  such
transitional impairment test will have on the earnings and financial position of
the Company.



                                       35

<PAGE>


                                 EXHIBIT INDEX

(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)     2001 Stock Appreciation Rights Plan of Bancorp.

10(a)(2)     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)(3)     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 (incorporated by reference to Exhibit
             10(a)(4) to Bancorp's Annual Report on Form 10-KSB for the year
             ended December 31, 2000 (Commission File No. 000-29599)).

10(a)(4)     Change of Control Agreement, dated as of May 1, 2001 between Robert
             F. O'Connell and Patriot National Bank.

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))