UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





**FORM
      10-Q**





QUARTERLY
      REPORT UNDER SECTION 13 OR 15(d)


OF
      THE
      SECURITIES EXCHANGE ACT OF 1934





For
                the Quarter Ended September 30, 2006
            Commission
                file number 000-29599





PATRIOT
      NATIONAL BANCORP, INC.


(Exact
      name of registrant as specified in its charter)





Connecticut
            06-1559137(State
                of incorporation)
            (I.R.S.
                Employer Identification Number)





900
      Bedford Street, Stamford, Connecticut 06901


(Address
      of principal executive offices)





(203)
      324-7500


(Registrant’s
      telephone number)





Check
      whether the registrant (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





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act):





Yes ___ No X





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer:





Large
      Accelerated Filer ____ Accelerated Filer ____ Non-Accelerated Filer X





State
      the
      number of shares outstanding of each of the registrant’s classes of common
      equity, as of the latest practicable date.





Common
      stock, $2.00 par value per share, 4,739,494 shares issued and outstanding as
      of
      the close of business October 31, 2006.





Transitional
      Disclosure Format (check one): Yes ___ No X





Table
      of
      Contents





PagePart
                I
            FINANCIAL
                INFORMATIONItem
                1.
            Consolidated
                Financial Statements
            3Item
                2.
            Management’s
                Discussion and Analysis ofFinancial
                Condition and Results of Operations
            22Item
                3.
            Quantitative
                and Qualitative Disclosures about Market Risk
            33Item
                4.
            Controls
                and Procedures
            36Part
                II
            OTHER
                INFORMATIONItem
                1A.
            Risk
                Factors
            36Item
                2.
            Unregistered
                Sales of Equity Securities and Use of Proceed
            42Item
                6.
            Exhibits
            42











2


**PART
      I - FINANCIAL INFORMATION**





**Item
      1.** **Consolidated
      Financial Statements**




**PATRIOT
      NATIONAL BANCORP, INC.**


**CONSOLIDATED
      BALANCE SHEETS**


**(Unaudited)**




September
                  30,
              
              December
                  31,2006
              
              2005**ASSETS**Cash
                  and due from banks
              
              $
              6,494,390
              
              $
              7,220,577Federal
                  funds sold
              
              
              38,500,000
              
              
              6,500,000Short
                  term investments
              
              
              30,249,645
              
              
              2,247,028**Cash
                  and cash equivalents**
              
              
              **75,244,035**
              
              
              **15,967,605**Available
                  for sale securities (at fair value)
              
              
              68,740,162
              
              
              78,672,068Federal
                  Reserve Bank stock
              
              
              1,022,950
              
              
              1,022,300Federal
                  Home Loan Bank stock
              
              
              2,727,200
              
              
              1,296,700Loans
                  receivable (net of allowance for loan losses: 2006
                  $5,630,432;2005
                  $4,588,335)
              
              
              455,001,231
              
              
              364,243,777Accrued
                  interest receivable
              
              
              3,202,246
              
              
              2,445,417Premises
                  and equipment
              
              
              2,670,878
              
              
              2,474,153Deferred
                  tax asset, net
              
              
              2,522,801
              
              
              2,675,595Goodwill
              
              
              930,091
              
              
              930,091Other
                  assets
              
              
              1,763,811
              
              
              913,456**Total
                  assets**
              
              **$**
              **613,825,405**
              
              **$**
              **470,641,162****LIABILITIES
                  AND SHAREHOLDERS' EQUITY****Liabilities**Deposits:Noninterest
                  bearing deposits
              
              $
              50,928,672
              
              $
              48,797,389Interest
                  bearing deposits
              
              
              453,575,146
              
              
              370,277,899**Total
                  deposits**
              
              
              **504,503,818**
              
              
              **419,075,288**Federal
                  Home Loan Bank borrowings
              
              
              34,000,000
              
              
              9,000,000Junior
                  subordinated debt owed to unconsolidated trust
              
              
              8,248,000
              
              
              8,248,000Accrued
                  expenses and other liabilities
              
              
              3,743,998
              
              
              2,943,259**Total
                  liabilities**
              
              
              **550,495,816**
              
              
              **439,266,547****Shareholders'
                  equity**Preferred
                  stock: 1,000,000 shares authorized; no shares issuedCommon
                  stock, $2 par value: 60,000,000 shares authorized; sharesissued
                  and outstanding: 2006 - 4,739,494; 2005 - 3,230,649
              
              
              9,478,988
              
              
              6,461,298Additional
                  paid in capital
              
              
              49,307,949
              
              
              21,709,224Retained
                  earnings
              
              
              5,397,507
              
              
              4,308,242Accumulated
                  other comprehensive income - net unrealizedloss
                  on available for sale securities, net of taxes
              
              
              (854,855
              )
              
              (1,104,149
              )**Total
                  shareholders' equity**
              
              
              **63,329,589**
              
              
              **31,374,615****Total
                  liabilities and shareholders' equity**
              
              **$**
              **613,825,405**
              
              **$**
              **470,641,162**




See
      accompanying notes to consolidated financial statements.


3


**PATRIOT
      NATIONAL BANCORP, INC.**


**CONSOLIDATED
      STATEMENTS OF INCOME**


**(Unaudited)**




**Three
                  Months Ended**
              
              **Nine
                  Months Ended****September
                  30,**
              
              **September
                  30,****2006**
              
              **2005**
              
              **2006**
              
              **2005**Interest
                  and Dividend IncomeInterest
                  and fees on loans
              
              $
              8,962,195
              
              $
              5,536,477
              
              $
              24,472,546
              
              $
              15,128,669Interest
                  and dividendson
                  investment securities
              
              
              743,068
              
              
              814,647
              
              
              2,290,737
              
              
              2,483,631Interest
                  on federal funds sold
              
              
              151,591
              
              
              88,134
              
              
              286,255
              
              
              230,460**Total
                  interest and dividend income**
              
              
              **9,856,854**
              
              
              **6,439,258**
              
              
              **27,049,538**
              
              
              **17,842,760**Interest
                  ExpenseInterest
                  on deposits
              
              
              4,152,620
              
              
              2,514,851
              
              
              10,834,245
              
              
              6,543,197Interest
                  on Federal Home Loan Bank borrowings
              
              
              491,319
              
              
              80,024
              
              
              1,099,124
              
              
              303,485Interest
                  on subordinated debt
              
              
              177,013
              
              
              136,924
              
              
              497,680
              
              
              380,267Interest
                  on other borrowings
              
              
              648
              
              
              1,312
              
              
              4,798
              
              
              1,312**Total
                  interest expense**
              
              
              **4,821,600**
              
              
              **2,733,111**
              
              
              **12,435,847**
              
              
              **7,228,261****Net
                  interest income**
              
              
              **5,035,254**
              
              
              **3,706,147**
              
              
              **14,613,691**
              
              
              **10,614,499**Provision
                  for Loan Losses
              
              
              116,500
              
              
              350,000
              
              
              1,040,000
              
              
              710,000**Net
                  interest income after****provision
                  for loan losses**
              
              
              **4,918,754**
              
              
              **3,356,147**
              
              
              **13,573,691**
              
              
              **9,904,499**Noninterest
                  IncomeMortgage
                  brokerage referral fees
              
              
              373,299
              
              
              673,029
              
              
              1,052,937
              
              
              1,648,487Loan
                  processing fees
              
              
              64,862
              
              
              125,635
              
              
              218,712
              
              
              308,978Fees
                  and service charges
              
              
              166,749
              
              
              143,793
              
              
              455,159
              
              
              428,195Other
                  income
              
              
              27,653
              
              
              43,125
              
              
              117,349
              
              
              131,818**Total
                  noninterest income**
              
              
              **632,563**
              
              
              **985,582**
              
              
              **1,844,157**
              
              
              **2,517,478**Noninterest
                  ExpensesSalaries
                  and benefits
              
              
              2,795,341
              
              
              2,393,739
              
              
              7,709,120
              
              
              6,652,635Occupancy
                  and equipment expense, net
              
              
              694,925
              
              
              538,645
              
              
              2,030,499
              
              
              1,523,961Data
                  processing and other outside services
              
              
              293,358
              
              
              333,024
              
              
              1,100,622
              
              
              817,291Professional
                  services
              
              
              125,269
              
              
              120,170
              
              
              373,227
              
              
              383,461Advertising
                  and promotional expenses
              
              
              152,906
              
              
              112,459
              
              
              448,772
              
              
              336,206Loan
                  administration and processing expenses
              
              
              46,286
              
              
              47,839
              
              
              126,759
              
              
              153,511Other
                  noninterest expenses
              
              
              382,594
              
              
              324,142
              
              
              1,135,477
              
              
              1,010,924**Total
                  noninterest expenses**
              
              
              **4,490,679**
              
              
              **3,870,018**
              
              
              **12,924,476**
              
              
              **10,877,989****Income
                  before income taxes**
              
              
              **1,060,638**
              
              
              **471,711**
              
              
              **2,493,372**
              
              
              **1,543,988**Provision
                  for Income Taxes
              
              
              390,000
              
              
              191,000
              
              
              916,000
              
              
              625,000**Net
                  income**
              
              **$**
              **670,638**
              
              **$**
              **280,711**
              
              **$**
              **1,577,372**
              
              **$**
              **918,988****Basic
                  income Per Share**
              
              **$**
              **0.20**
              
              **$**
              **0.11**
              
              **$**
              **0.49**
              
              **$**
              **0.37****Diluted
                  income Per Share**
              
              **$**
              **0.20**
              
              **$**
              **0.11**
              
              **$**
              **0.48**
              
              **$**
              **0.36****Dividends
                  per share**
              
              **$**
              **0.045**
              
              **$**
              **0.040**
              
              **$**
              **0.130**
              
              **$**
              **0.115**


See
      accompanying notes to consolidated financial statements.


4


**PATRIOT
      NATIONAL BANCORP, INC**


**CONSOLIDATED
      STATEMENTS OF COMPREHENSIVE INCOME (LOSS)**


**(Unaudited)**










Three
                Months Ended
            
            Nine
                Months EndedSeptember
                30,
            
            September
                30,2006
            
            2005
            
            2006
            
            2005Net income
            
            $
            670,638
            
            $
            280,711
            
            $
            1,577,372
            
            $
            918,988Unrealized
              holding gains (losses) on securities:Unrealized
                holding gains (losses) arisingduring
                the period, net of taxes
            
            
            520,829
            
            
            (284,657
            )
            
            249,294
            
            
            (461,446
            )**Comprehensive
              income (loss)**
            ****
            **$**
            **1,191,467**
            ****
            **$**
            **(3,946**
            **)**
            **$**
            **1,826,666**
            ****
            **$**
            **457,542**
            ****











































See
      accompanying notes to consolidated financial statements.


5


**PATRIOT
      NATIONAL BANCORP, INC.**


**CONSOLIDATED
      STATEMENTS OF SHAREHOLDER’S EQUITY**


**(Unaudited)**




AccumulatedAdditional
              
              
              
              OtherNumber
                  of
              
              Common
              
              Paid-In
              
              Retained
              
              ComprehensiveShares
              
              Stock
              
              Capital
              
              Earnings
              
              Loss
              
              TotalNine
                  months ended September 30, 2005Balance
                  at December 31, 2004
              
              
              2,486,391
              
              $
              4,972,782
              
              $
              11,830,173
              
              $
              3,346,718
              
              $
              (393,239
              )
              $
              19,756,434Comprehensive
                  incomeNet
                  income
              
              
              
              
              
              
              
              
              
              
              
              918,988
              
              
              
              
              
              918,988Unrealized
                  holding loss on availablefor
                  sale securities, net of taxes
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (461,446
              )
              
              (461,446
              )Total
                  comprehensive income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              457,542Dividends
              
              
              
              
              
              
              
              
              
              
              
              (315,876
              )
              
              
              
              
              (315,876
              )Issuance
                  of capital stock
              
              
              742,883
              
              
              1,485,766
              
              
              9,859,905
              
              
              
              
              
              
              
              
              11,345,671Balance,
                  September 30, 2005
              
              
              3,229,274
              
              $
              6,458,548
              
              $
              21,690,078
              
              $
              3,949,830
              
              $
              (854,685
              )
              $
              31,243,771Nine
                  months ended September 30, 2006Balance
                  at December 31, 2005
              
              
              3,230,649
              
              $
              6,461,298
              
              $
              21,709,224
              
              $
              4,308,242
              
              $
              (1,104,149
              )
              $
              31,374,615Comprehensive
                  incomeNet
                  income
              
              
              
              
              
              
              
              
              
              
              
              1,577,372
              
              
              
              
              
              1,577,372Unrealized
                  holding gain on availablefor
                  sale securities, net of taxes
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              249,294
              
              
              249,294Total
                  comprehensive income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1,826,666Dividends
              
              
              
              
              
              
              
              
              
              
              
              (488,107
              )
              
              
              
              
              (488,107
              )Issuance
                  of capital stock
              
              
              1,508,845
              
              
              3,017,690
              
              
              27,598,725
              
              
              
              
              
              
              
              
              30,616,415Balance,
                  September 30, 2006
              
              
              4,739,494
              
              $
              9,478,988
              
              $
              49,307,949
              
              $
              5,397,507
              
              $
              (854,855
              )
              $
              63,329,589

















See
      accompanying notes to consolidated financial statements.


6
 **PATRIOT
        NATIONAL BANCORP, INC.**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**(Unaudited)**




Nine
                  Months EndedSeptember
                  30,2006
              
              2005Cash
                  Flows from Operating ActivitiesNet
                  income
              
              $
              1,577,372
              
              $
              918,988Adjustments
                  to reconcile net income to net cashprovided
                  by operating activities:Amortization
                  and accretion of investment premiums and discounts, net
              
              
              181,110
              
              
              298,196Provision
                  for loan losses
              
              
              1,040,000
              
              
              710,000Depreciation
                  and amortization
              
              
              461,119
              
              
              441,315Directors
                  fees paid by issuance of common stock
              
              
              24,928
              
              
              -Changes
                  in assets and liabilities:Increase
                  (decrease) in deferred loan fees
              
              
              348,296
              
              
              (86,946
              )Increase
                  in accrued interest receivable
              
              
              (756,829
              )
              
              (483,283
              )Increase
                  in other assets
              
              
              (16,015
              )
              
              (51,068
              )Increase
                  in accrued expenses and other liabilities
              
              
              716,689
              
              
              257,407**Net
                  cash provided by operating activities**
              
              
              **3,576,670**
              
              
              **2,004,609**Cash
                  Flows from Investing ActivitiesPurchases
                  of available for sale securities
              
              
              -
              
              
              (28,208,360
              )Principal
                  repayments on available for sale securities
              
              
              10,152,884
              
              
              16,282,227Proceeds
                  from maturities of available for sale securities
              
              
              -
              
              
              2,000,000Purchase
                  of Federal Reserve Bank Stock
              
              
              (650
              )
              
              (600
              )Purchase
                  of Federal Home Loan Bank Stock
              
              
              (1,430,500
              )
              
              -Net
                  increase in loans
              
              
              (92,980,090
              )
              
              (77,737,980
              )Purchases
                  of bank premises and equipment
              
              
              (657,844
              )
              
              (748,767
              )**Net
                  cash used in investing activities**
              
              
              **(84,916,200**
              **)**
              
              **(88,413,480**
              **)**Cash
                  Flows from Financing ActivitiesNet
                  decrease in demand, savings and money market deposits
              
              
              (5,181,818
              )
              
              (5,742,167
              )Net
                  increase in time certificates of deposits
              
              
              90,610,348
              
              
              48,505,111Proceeds
                  from FHLB borrowings
              
              
              93,718,000
              
              
              36,001,000Principal
                  repayments of FHLB borrowings
              
              
              (68,718,000
              )
              
              (40,001,000
              )Proceeds
                  from issuance of common stock
              
              
              30,591,487
              
              
              11,345,671Dividends
                  paid on common stock
              
              
              (404,057
              )
              
              (273,729
              )**Net
                  cash provided by financing activities**
              
              
              **140,615,960**
              
              
              **49,834,886****Net
                  increase (decrease) in cash and cash equivalents**
              
              
              **59,276,430**
              
              
              **(36,573,985**
              **)**Cash
                  and cash equivalentsBeginning
              
              
              15,967,605
              
              
              55,630,466Ending
              
              $
              75,244,035
              
              $
              19,056,481


7


**PATRIOT
      NATIONAL BANCORP, INC.**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS, Continued**


**(Unaudited)**


Nine
                  Months EndedSeptember
                  30,2006
              
              2005Supplemental
                  Disclosures of Cash Flow InformationCash
                  paid for:Interest
              
              $
              12,355,752
              
              $
              7,241,149Income
                  taxes
              
              $
              1,319,020
              
              $
              780,921Supplemental
                  disclosures of noncash investing and financing activites:Transfer
                  of held to maturity securities toavailable
                  for sale securities
              
              $
              -
              
              $
              -Transfer
                  of loans to other real estate owned
              
              $
              834,341
              
              $
              -Unrealized
                  holding gain (loss) on available for salesecurities
                  arising during the period
              
              $
              402,088
              
              $
              (744,270
              )Dividends
                  declared on common stock
              
              $
              213,277
              
              $
              129,171











See
      accompanying notes to consolidated financial statements.


8


**PATRIOT
      NATIONAL BANCORP, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)**





**Note
      1.**  **Basis
      of Financial Statement Presentation**





The
      Consolidated Balance Sheet at December 31, 2005 has been derived from
      the audited financial statements of Patriot National Bancorp, Inc. (“Bancorp”)
      at that date, but does not include all of the information and footnotes required
      by accounting principles generally accepted in the United States of America
      for
      complete financial statements.





The
      accompanying unaudited financial statements and related notes have been prepared
      pursuant to the rules and regulations of the Securities and Exchange Commission.
      Accordingly, certain information and footnote disclosures normally included
      in
      financial statements prepared in accordance with accounting principles generally
      accepted in the United States of America have been omitted. The accompanying
      consolidated financial statements and related notes should be read in
      conjunction with the audited financial statements of Bancorp and notes thereto
      for the year ended December 31, 2005.





The
      information furnished reflects, in the opinion of management, all normal
      recurring adjustments necessary for a fair presentation of the results for
      the
      interim periods presented. The results of operations for the three and nine
      months ended September 30, 2006 are not necessarily indicative of the
      results of operations that may be expected for the remainder of
      2006.





Certain
      2005 amounts have been reclassified to conform to the 2006 presentation. Such
      reclassifications had no effect on net income.





**Note
      2.**  **Investments**





The
      following table is a summary of Bancorp’s available for sale securities
      portfolio, at fair value, at the dates shown:




September
                30,
            
            December
                31,2006
            
            2005U.S.
              Government Agency andsponsored
                agency obligations
            
            $
            16,539,324
            
            $
            16,476,684Mortgage-backed
              securities
            
            
            46,200,838
            
            
            56,195,384Money market
              preferredequity
                securities
            
            
            6,000,000
            
            
            6,000,000Total
              Available For Sale Securities
            
            $
            68,740,162
            
            $
            78,672,068


9


The
      amortized cost, gross unrealized gains, gross unrealized losses and fair values
      of available for sale securities at September 30, 2006 are as
      follows:





Gross
              
              GrossAmortized
              
              Unrealized
              
              Unrealized
              
              FairCost
              
              Gains
              
              Losses
              
              ValueU.
                  S. Government Agency andsponsored
                  agency obligations
              
              $
              16,999,725
              
              $
              -
              
              $
              (460,401
              )
              $
              16,539,324Mortgage-backed
                  securities
              
              
              47,119,234
              
              
              7,435
              
              
              (925,831
              )
              
              46,200,838Money
                  market preferredequity
                  securities
              
              
              6,000,000
              
              
              -
              
              
              -
              
              
              6,000,000Total
                  Available For Sale Securities
              
              $
              70,118,959
              
              $
              7,435
              
              $
              (1,386,232
              )
              $
              68,740,162






At
      September 30, 2006, gross unrealized holding gains and gross unrealized
      holding losses on available for sale securities totaled $7,435 and
      $1.4 million respectively. Of the securities with unrealized losses, there
      are nine U. S. Government agency or sponsored agency obligations and 29
      mortgage-backed securities that have unrealized losses for a period in excess
      of
      twelve months with a combined current unrealized loss of $1.4 million.
      Management does not believe that any of the unrealized losses are other than
      temporary since they are the result of changes in the interest rate environment
      and they relate to debt and mortgage-backed securities issued by U. S.
      Government and U.S. Government sponsored agencies. Bancorp has the ability
      to
      hold these securities to maturity if necessary and expects to receive all
      contractual principal and interest related to these investments.


10


**Note
      3.**  **Loans**





The
      following table is a summary of Bancorp’s loan portfolio at the dates
      shown:


September
                  30,
              
              December
                  31,2006
              
              2005Real
                  EstateCommercial
              
              $
              153,846,478
              
              $
              129,178,889Residential
              
              
              91,985,593
              
              
              77,391,833Construction
              
              
              171,200,552
              
              
              107,232,587Commercial
              
              
              16,597,015
              
              
              15,591,818Consumer
                  installment
              
              
              1,237,842
              
              
              1,106,648Consumer
                  home equity
              
              
              26,936,900
              
              
              39,097,450Total
                  Loans
              
              
              461,804,380
              
              
              369,599,225Premiums
                  on purchased loans
              
              
              310,183
              
              
              367,491Net
                  deferred fees
              
              
              (1,482,900
              )
              
              (1,134,604
              )Allowance
                  for loan losses
              
              
              (5,630,432
              )
              
              (4,588,335
              )Loans
                  receivable, net
              
              $
              455,001,231
              
              $
              364,243,777





**Analysis
      of Allowance for Loan Losses**





The
      changes in the allowance for loan losses for the periods shown are as
      follows:


Three
                  months ending
              
              Nine
                  months endingSeptember
                  30,
              
              September
                  30,*(Thousands
                  of dollars)*
              
              2006
              
              2005
              
              2006
              
              2005Balance
                  at beginning of period
              
              $
              5,510
              
              $
              3,842
              
              $
              4,588
              
              $
              3,482Charge-offs
              
              
              -
              
              
              -
              
              
              (1
              )
              
              -Recoveries
              
              
              3
              
              
              -
              
              
              3
              
              
              -Net
                  recoveries
              
              
              3
              
              
              -
              
              
              2
              
              
              -Provision
                  charged to operations
              
              
              117
              
              
              350
              
              
              1,040
              
              
              710Balance
                  at end of period
              
              $
              5,630
              
              $
              4,192
              
              $
              5,630
              
              $
              4,192Ratio
                  of net recoveries duringthe
                  period to average loansoutstanding
                  during the period.
              
              
              0.00
              %
              
              0.00
              %
              
              0.00
              %
              
              0.00
              %


11


**Note
      4.**  **Deposits**





The
      following table is a summary of Bancorp’s deposits at the dates
      shown:


September
                  30,
              
              December
                  31,2006
              
              2005Noninterest
                  bearing
              
              $
              50,928,672
              
              $
              48,797,389Interest
                  bearingNOW
              
              
              33,370,486
              
              
              25,383,234Savings
              
              
              23,804,913
              
              
              20,089,889Money
                  market
              
              
              38,783,395
              
              
              57,798,772Time
                  certificates, less than $100,000
              
              
              223,831,363
              
              
              168,565,756Time
                  certificates, $100,000 or more
              
              
              133,784,989
              
              
              98,440,248Total
                  interest bearing
              
              
              453,575,146
              
              
              370,277,899Total
                  Deposits
              
              $
              504,503,818
              
              $
              419,075,288





**Note
      5.**  **Borrowings**





In
      addition to the outstanding borrowings disclosed in the consolidated balance
      sheet, the Bank has the ability to borrow approximately $78.6 million in
      additional advances from the Federal Home Loan Bank of Boston which includes
      a
      $2.0 million overnight line of credit. The Bank also has arranged a $3.0 million
      overnight line of credit from a correspondent bank and $10.0 million under
      a repurchase agreement; no amounts were outstanding under these two arrangements
      at September 30, 2006.





**Note
      6.**  **Income
      per share**





Bancorp
      is required to present basic income per share and diluted income per share
      in
      its income statements. Basic income per share amounts are computed by dividing
      net income by the weighted average number of common shares outstanding. Diluted
      income per share reflects additional common shares that would have been
      outstanding if potential dilutive 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 Bancorp relate to outstanding stock options
      and are determined using the treasury stock method. Bancorp is also required
      to
      provide a reconciliation of the numerator and denominator used in the
      computation of both basic and diluted income per share. The following is
      information about the computation of income per share for the three and nine
      months ended September 30, 2006 and 2005.


12


Quarter
                  ended September 30, 2006Net
                  Income
              
              Shares
              
              AmountBasic
                  Income Per ShareIncome
                  available to common shareholders
              
              $
              670,638
              
              
              3,271,472
              
              $
              0.20Effect
                  of Dilutive SecuritiesWarrants/Stock
                  Options outstanding
              
              
              -
              
              
              25,188
              
              
              -Diluted
                  Income Per ShareIncome
                  available to common shareholdersplus
                  assumed conversions
              
              $
              670,638
              
              
              3,296,660
              
              $
              0.20Quarter
                  ended September 30, 2005Net
                  Income
              
              
              Shares
              
              
              AmountBasic
                  Income Per ShareIncome
                  available to common shareholders
              
              $
              280,711
              
              
              2,573,139
              
              $
              0.11Effect
                  of Dilutive SecuritiesWarrants/Stock
                  Options outstanding
              
              
              -
              
              
              34,033
              
              
              -Diluted
                  Income Per ShareIncome
                  available to common shareholdersplus
                  assumed conversions
              
              $
              280,711
              
              
              2,607,172
              
              $
              0.11Nine
                  months ended September 30, 2006Net
                  Income
              
              
              Shares
              
              
              AmountBasic
                  Income Per ShareIncome
                  available to common shareholders
              
              $
              1,577,372
              
              
              3,244,162
              
              $
              0.49Effect
                  of Dilutive SecuritiesWarrants/Stock
                  Options outstanding
              
              
              -
              
              
              39,294
              
              
              (0.01
              )Diluted
                  Income Per ShareIncome
                  available to common shareholdersplus
                  assumed conversions
              
              $
              1,577,372
              
              
              3,283,456
              
              $
              0.48Nine
                  months ended September 30, 2005Net
                  Income
              
              
              Shares
              
              
              AmountBasic
                  Income Per ShareIncome
                  available to common shareholders
              
              $
              918,988
              
              
              2,516,856
              
              $
              0.37Effect
                  of Dilutive SecuritiesWarrants/Stock
                  Options outstanding
              
              
              -
              
              
              43,935
              
              
              (0.01
              )Diluted
                  Income Per ShareIncome
                  available to common shareholdersplus
                  assumed conversions
              
              $
              918,988
              
              
              2,560,791
              
              $
              0.36


13


**Note
      7.**  **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:




Three
                  Months Ended
              
              Nine
                  Months EndedSeptember
                  30, 2006
              
              September
                  30, 2006Before
                  Tax
              
              
              
              Net
                  of Tax
              
              Before
                  Tax
              
              
              
              Net
                  of TaxAmount
              
              Tax
                  Effect
              
              Amount
              
              Amount
              
              Tax
                  Effect
              
              AmountUnrealized
                  holding gainarising
                  during the period
              
              $
              840,046
              
              $
              (319,217
              )
              $
              520,829
              
              $
              402,088
              
              $
              (152,794
              )
              $
              249,294Reclassification
                  adjustmentfor
                  gains recognized in income
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Unrealized
                  holding gain onavailable
                  for sale securities,net
                  of taxes
              
              $
              840,046
              
              $
              (319,217
              )
              $
              520,829
              
              $
              402,088
              
              $
              (152,794
              )
              $
              249,294Three
                  Months Ended
              
              
              Nine
                  Months EndedSeptember
                  30, 2005
              
              
              September
                  30, 2005Before
                  Tax
              
              
              
              
              Net
                  of Tax
              
              
              Before
                  Tax
              
              
              
              
              
              Net
                  of TaxAmount
              
              
              Tax
                  Effect
              
              
              Amount
              
              
              Amount
              
              
              Tax
                  Effect
              
              
              AmountUnrealized
                  holding lossarising
                  during the period
              
              $
              (459,125
              )
              $
              174,468
              
              $
              (284,657
              )
              $
              (744,270
              )
              $
              282,824
              
              $
              (461,446
              )Reclassification
                  adjustmentfor
                  gains recognized in income
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Unrealized
                  holding loss onavailable
                  for sale securities,net
                  of taxes
              
              $
              (459,125
              )
              $
              174,468
              
              $
              (284,657
              )
              $
              (744,270
              )
              $
              282,824
              
              $
              (461,446
              )





**Note
      8.**  **Financial
      Instruments with Off-Balance Sheet Risk**





In
      the
      normal course of business, Bancorp 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 contractual
      amounts of these instruments reflect the extent of involvement Bancorp 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


14


upon, the
      customer defaults and the value of any existing collateral becomes worthless.
      Bancorp 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
      Bancorp 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 contractual amounts represent credit risk are as follows
      at
      September 30, 2006:


Commitments
                  to extend credit:Future
                  loan commitments
              
              $
              55,104,198Unused
                  lines of credit
              
              
              43,197,027Undisbursed
                  construction loans
              
              
              79,926,186Financial
                  standby letters of credit
              
              
              264,483$
              178,491,894
  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 Bancorp 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 Bancorp 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. Newly issued or modified guarantees that are not
      derivative contracts are recorded on Bancorp’s consolidated balance sheet at the
      fair value at inception. No liability related to guarantees was required to
      be
      recorded at September 30, 2006.





**Note
      9.**  **Stock
      Based Compensation**





In
      December 2004, the Financial Accounting Standards Board issued Statement of
      Financial Accounting Standards (SFAS) No. 123R, “Share-Based Payment” (SFAS
      123R). Under SFAS 123R, companies are no longer permitted to account for
      share-based compensation transactions using the intrinsic value method in
      accordance with APB Opinion No. 25 whereby compensation cost charged to expense,
      if any, was the excess of the quoted market price of the stock at the grant
      date
      (or other measurement date) over the amount an employee would pay to acquire
      the
      stock. Instead, under SFAS 123R


15


companies
      are required to account for such transactions using a fair-value method and
      recognize the expense in the consolidated
      statements of income. This statement applies to all awards granted, modified,
      repurchased or cancelled after the required effective date.





The
      Company adopted SFAS 123R, effective January 1, 2006, using the modified
      prospective transition method; this may impact the amount of compensation
      expense recorded in future financial statements if the Company grants
      share-based compensation to employees or directors in the future.





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 were granted, and subsequently the Company assumed all obligations
      related to such options. The Plan provided for the grant of 110,000
      non-qualified and incentive stock options in 1999 to certain directors of the
      Company, with an exercise price equal to the market value of the Company’s stock
      on the date of the grant. Such options were immediately exercisable and expire,
      if unexercised, ten years after the date of the grant. The Company has reserved
      65,000 shares of common stock remaining for issuance under the Plan. No
      additional options may be granted under the Plan.





A
      summary
      of the status of the stock options at September 30, 2006 and 2005 is as
      follows:


WeightedWeighted
              
              AverageAverage
              
              RemainingNumber
              
              Exercise
              
              Contractualof
                  Shares
              
              Price
              
              Life
                  (in years)September
                  30, 2006Outstanding,
                  January 1, 2006
              
              
              73,000
              
              $
              10.13
              
              
              3.7Exercised
              
              
              8,000
              
              
              10.11Outstanding,
                  September 30, 2006
              
              
              65,000
              
              
              10.13
              
              
              2.9Exercisable
                  at September 30, 2006
              
              
              65,000
              
              
              10.13
              
              
              2.9September
                  30, 2005Outstanding,
                  January 1, 2005
              
              
              110,000
              
              $
              10.13
              
              
              4.7Exercised
              
              
              37,000
              
              
              10.15Outstanding,
                  September 30, 2005
              
              
              73,000
              
              
              10.13
              
              
              3.9Exercisable
                  at September 30, 2005
              
              
              73,000
              
              
              10.13
              
              
              3.9


16


The
      intrinsic value of options outstanding and exercisable at September 30, 2006
      and
      2005 was $1,144,260 and $645,466, respectively. The intrinsic value of options
      exercised during the
      nine
      months ended September 30, 2006 and 2005 were $149,275 and $316,037,
      respectively. There are no pro forma disclosures required for the nine months
      ended September 30, 2006 and 2005, because there was no compensation expense
      attributed to these periods as no awards were granted or vested under this
      Plan
      during these periods.





The
      provisions of SFAS 123R have had no impact on existing plans under the
      employment agreements discussed below:





President’s
      Agreement





Under
      the
      terms of a previous employment agreement, which expired on October 23, 2003
      (the
“Agreement”) between the Company and the President, was a provision that the
      Company grants 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 was based on 30% of the President’s base salary
      for the preceding annual employment period. Compensation costs for grants
      through 2002 were recognized over the period ending with the expiration date
      of
      the Agreement and compensation cost for the 2003 grant is being recognized
      over
      the term of the current employment agreement. This stock grant has been settled
      in cash in each year from 2001 through 2005 and is anticipated to settle in
      cash
      until fully settled. The expense charged to operations related to this component
      of the Agreement was $11,798 and $6,813, respectively, for the three months
      ended September 30, 2006 and 2005, and $41,174 and $20,439, respectively,
      for the nine months ended September 30, 2006 and 2005.





The
      Agreement also provided 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 31, 2003. In the event that the
      Company did not have stock options available to grant at any of these dates,
      which was the case at December 31, 2000, 2001, 2002 and 2003, the
      President was able to elect, on a future determination date, 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. The
      expense charged to operations for the option component of the Agreement was
      $32,208 and $18,885, respectively, for the three months ended September 30,
      2006
      and 2005, and $103,833 and $56,655, respectively, for the nine months ended
      September 30, 2006 and 2005.





Stock
      Appreciation Rights Plan





During
      2001, the Company adopted the Patriot National Bancorp, Inc. 2001 Stock
      Appreciation Rights Plan (the “SAR Plan”), providing for the grant by the
      Company of stock appreciation rights to officers of the Company. Stock
      appreciation rights entitle the


17


officers
      to receive, in cash or Company common stock, the appreciation in value of the
      Company’s common stock from the date of the grant. Each award vests at the rate
      of 20% per year from the date of the grant. Any unexercised rights will expire
      ten years from the date of grant. During
      2001, the Company granted 18,000 stock appreciation rights to three officers.
      The expense charged to operations under the SAR Plan was $21,832 and $14,535,
      respectively, for the three months ended September 30, 2006 and 2005, and
      $88,816 and $43,605, respectively, for the nine months ended
      September 30, 2006 and 2005.





**Note
      10.**  **Segment
      Reporting**





Bancorp
      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. Bancorp
      also attracts deposits from both consumer and commercial customers, and invests
      such deposits in loans, investments and working capital. Revenues are generated
      primarily from net interest income from lending, investment and deposit
      activities. Additional revenues are derived from loan brokerage and application
      processing fees through the solicitation and processing of conventional mortgage
      loans, deposit account transaction based fees and service charges and other
      loan
      origination and processing fees.





Bancorp’s
      loan and deposit customers are primarily residents and businesses located in
      the
      Connecticut communities in which Bancorp has branches, as well as in bordering
      communities. Its lending customers extend beyond these areas and also include
      other nonadjacent towns in Fairfield County, Connecticut and towns in
      Westchester County, New York. Bancorp also makes loans from its Melville (Long
      Island) and New York City, New York loan production offices.





Bancorp’s
      customer base is diversified. There is not a concentration of either loans
      or
      deposits from a single person or groups of individuals or within a single
      industry or groups of industries. Bancorp is not dependent on one or a few
      significant customers for either its loan or deposit activities, the loss of
      any
      one of which would have a material adverse impact on its business.





Prior
      to
      April 1, 2006, Bancorp had two reportable segments: commercial banking
      and mortgage brokerage activities. The operations of the mortgage broker have
      been fully integrated into the operations of the commercial bank. The activities
      of the former mortgage broker segment have expanded to include the products
      and
      services of the former commercial banking segment and developed such that they
      are indistinguishable from the lending activities of the commercial bank. Any
      such separate financial disclosures would be consistent with those presented
      in
      the financial statements.


18


**Note
      11.**  **Other
      real estate owned**





Other
      real estate owned of $834,000 is included in other assets and is comprised
      of
      one property obtained through loan foreclosure proceedings completed at the
      end
      of the third quarter of 2006.





**Note
      12.**  **Commitments**





Bancorp
      has received regulatory approval to purchase a New York City branch office
      and
      the related deposits from another financial institution. The transaction is
      expected to close during the fourth quarter; after which, it is anticipated
      that
      Bancorp will record intangible assets of approximately $560,000 related to
      this
      acquisition.





**Note
      13.**  **Recent
      Accounting Pronouncements**





In
      July
      2006, the FASB issued Interpretation No. 48 (“FIN 48”), *Accounting
      for Uncertainty in Income Taxes* .
      FIN 48
      applies to all tax positions related to income taxes subject to SFAS
      No. 109, *Accounting
      for Income Taxes* .
      This
      includes tax positions considered to be “routine” as well as those with a high
      degree of uncertainty. FIN 48 utilizes a two-step approach for evaluating tax
      positions. Recognition (step one) occurs when an enterprise concludes that
      a tax
      position, based solely on its technical merits, is more-likely-than-not to
      be
      sustained upon examination. Measurement (step two) is only addressed if step
      one
      has been satisfied (i.e., the position is more-likely-than-not to be sustained).
      FIN 48 clarifies the accounting for income taxes by prescribing the minimum
      recognition threshold a tax position must meet before being recognized in the
      financial statements. FIN 48 also provides guidance on derecognition,
      measurement, classification, interest and penalties, accounting in interim
      periods, disclosure and transition.





FIN
      48 is
      effective for fiscal years beginning after December 15, 2006. Earlier
      adoption is permitted as of the beginning of an enterprise’s fiscal year,
      provided the enterprise has not yet issued financial statements, including
      financial statements for any interim period, for that fiscal year. Management
      elected not to early adopt FIN 48 and does not believe that the adoption of
      FIN
      48 will have a material impact on the Company’s consolidated financial
      statements.


19


**"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 "Management's Discussion and Analysis of Financial Condition
      and
      Results 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 services companies, including
      possible further encroachment of non-banks on services traditionally provided
      by
      banks, (6) the ability of competitors that are larger than Bancorp to
      provide products and services that are impracticable for Bancorp to provide,
      (7) the effects of Bancorp's opening of branches, including a new branch in
      New York State, (8) the effect of any decision by Bancorp to engage in any
      new business activities and (9) the ability of Bancorp to timely and
      successfully deploy the capital raised in the 2006 offering and any future
      offerings. Other such factors may be described in Bancorp's future filings
      with
      the SEC.





**CRITICAL
      ACCOUNTING POLICIES**





The
      preparation of the consolidated financial statements in accordance with
      accounting principles generally accepted in the United States of America
      requires management to make estimates and assumptions that affect the reported
      amounts of assets, liabilities, revenues and expenses and the disclosure of
      contingent assets and liabilities. A material estimate that is particularly
      susceptible to significant near-term change relates to the determination of
      the
      allowance for loan losses. Actual results could differ significantly from those
      estimates under different assumptions and conditions. The Company believes
      the
      following discussion addresses Bancorp’s only critical accounting policy, which
      is the policy that is most important to the presentation of Bancorp’s financial
      results. This policy requires management’s most difficult, subjective and
      complex judgments, often as a result of the need to make estimates about the
      effect of matters that are inherently uncertain.





***Allowance
      for Loan Losses***





The
      allowance for loan losses is established as losses are estimated to have
      occurred through a provision for loan losses charged to earnings. Loan losses
      are charged against the allowance when management believes the uncollectibility
      of a loan balance is confirmed. Subsequent recoveries, if any, are credited
      to
      the allowance.





The
      allowance for loan losses is evaluated on a regular basis by management and
      is
      based upon management’s periodic review of the collectibility of the loans in
      light of historical experience, the nature and volume of the loan portfolio,
      adverse situations that may


20


affect the borrower’s
      ability to repay, estimated value of any underlying collateral and prevailing
      economic conditions. This evaluation is inherently subjective as it requires
      estimates that are susceptible to significant revision as more information
      becomes available.





The
      allowance consists of specific, general and unallocated components. The specific
      component relates to loans that are considered impaired. A risk rating system
      is
      utilized to measure the adequacy of the general component of the allowance
      for
      loan losses. Under this system, each loan is assigned a risk rating between
      one
      and nine, which has a corresponding loan loss factor assigned, with a rating
      of
“one” being the least risk and a rating of “nine” reflecting the most risk or a
      complete loss. Risk ratings are assigned based upon the recommendations of
      the
      credit analyst and originating loan officer and confirmed by the loan committee
      at the initiation of the transactions and are reviewed and changed, when
      necessary, during the life of the loan. Loan loss reserve factors are applied
      to
      the balances in each risk rating category to arrive at the appropriate level
      of
      the allowance for loan losses. Loans assigned a risk rating of “six” or above
      are monitored more closely by the credit administration officers. 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. Loan quality control is continually monitored by
      management subject to oversight by the board of directors through its members
      who serve on the loan committee. It is also reviewed by the full board of
      directors on a monthly basis. The methodology for determining the adequacy
      of
      the allowance for loan losses is consistently applied; however, revisions may
      be
      made to the methodology and assumptions based on historical information related
      to charge-off and recovery experience and management’s evaluation of the current
      loan portfolio.


21


**Item
      2.** **Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations**





**SUMMARY**





Bancorp
      completed a stock offering of 1.5 million shares during September 2006 resulting
      in an increase in common stock and additional paid in capital of
      $30.5 million, net of offering fees and expenses.





Bancorp’s
      net income of $671,000 ($0.20 basic and diluted income per share) for the
      quarter ended September 30, 2006 represents an increase of $390,000,
      or 139%, as compared to net income of $281,000 ($0.11 basic and diluted income
      per share) for the quarter ended September 30, 2005. For the
      nine-month period ended September 30, 2006, net income of $1,577,000
      ($0.49 basic income per share and $0.48 diluted income per share) represents
      an
      increase of $658,000, or 72%, as compared to net income of $919,000 ($0.37
      basic
      income per share and $0.36 diluted income per share) for the nine months ended
      September 30, 2005.





Total
      assets increased $143.2 million from $470.6 million at December 31, 2005 to
      $613.8 million at September 30, 2006. Cash and cash equivalents
      increased $59.2 million to $75.2 million at
      September 30, 2006 as compared to $16.0 million at
      December 31, 2005. The available for sale securities portfolio
      decreased $9.9 million to $68.7 million at September 30, 2006
      from $78.7 million at December 31, 2005. The net loan portfolio increased
      $90.8 million from $364.2 million at December 31, 2005 to $455.0 million at
      September 30, 2006. Deposits increased $85.4 million to
      $504.5  million
      at September 30, 2006 from $419.1 million at
      December 31, 2005. Borrowings increased $25.0 million from
      $17.2 million at December 31, 2005 to $42.2 million at
      September 30, 2006. Total shareholders’ equity increased
      $31.9 million from $31.4 million at December 31, 2005 to
      $63.3 million at September 30, 2006.





**FINANCIAL
      CONDITION**





***Assets***





Bancorp’s
      total assets increased $143.2 million, or 30%, from $470.6 million at
      December 31, 2005 to $613.8 million at September 30, 2006.
      The growth in the balance sheet was funded by an increase in deposits and
      borrowings and through a stock offering as discussed below. Cash and cash
      equivalents increased $59.2 million to $75.2 million at
      September 30, 2006 as compared to $16.0 million at
      December 31, 2005. Cash and due from banks decreased
      $0.7 million. Federal funds sold and short term investments increased
      $32.0 million and $28.0 million, respectively; these increases are the
      result of investing funds from the receipt of the stock offering proceeds which
      closed on the last business day of the quarter as well as to a large inflow
      of
      certificates of deposit and attorney escrow account deposits late in the
      month.


22


***Investments***





Available
      for sale securities decreased $9.9 million, or 13%, from $78.7 million
      at December 31, 2005 to $68.7 million at
      September 30, 2006. The decrease in the portfolio is due to principal
      payments on mortgage-backed securities.





***Federal
      Home Loan Bank Stock***





Bancorp’s
      investment in the capital stock of the Federal Home Loan Bank increased
      $1.4 million to $2.7 million at September 30, 2006 from
      $1.3 million at December 31, 2005. As a member of the Federal
      Home Loan Bank, the Bank’s required investment in Federal Home Loan Bank stock
      takes into consideration the level of outstanding Federal Home Loan Bank
      advances, among other factors. This increase is a direct result of an increase
      in Federal Home Loan Bank advances discussed later.





***Loans***





Bancorp’s
      net loan portfolio increased $90.8 million, or 25%, from
      $364.2 million at December 31, 2005 to $455.0 million at
      September 30, 2006. Significant increases in the portfolio included a
      $64.0 million increase in construction loans, a $24.7 million increase
      in commercial real estate loans and a $14.6 million increase in residential
      real estate loans. The growth in these segments of the loan portfolio were
      partially offset by a decrease in home equity loans of $12.2 million due in
      part to an increase in the prime rate, to which these loans are tied, prompting
      a number of borrowers to refinance and roll home equity debt into first
      mortgages. Although short term interest rates have increased, the growth in
      loans reflects the continued strong demand for real estate based financing
      in
      the Fairfield County, Connecticut and Westchester County, New York market areas
      where the Bank primarily conducts its lending business.





At
      September 30, 2006, the net loan to deposit ratio was 90% and the net
      loan to total assets ratio was 74%. At December 31, 2005, the net loan to
      deposit ratio was 87% and the net loan to total assets ratio was 77%. Based
      on
      loan applications in process and the recent and planned hiring of additional
      loan officers, management anticipates continued loan growth during the remainder
      of 2006.





***Allowance
      for Loan Losses***





Management
      believes the allowance for loan losses of $5.6 million at
      September 30, 2006, which represents 1.22% of gross loans outstanding,
      is adequate, under prevailing economic conditions, to absorb losses on existing
      loans. At December 31, 2005, the allowance for loan losses was
      $4.6 million or 1.25% of gross loans outstanding.


23


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





The
      following table presents non-accruing loans and loans past due 90 days or more
      and still accruing:




September
                30,
            
            December
                31,(Thousands
              of dollars )
            
            2006
            
            2005Loans
              delinquent over 90 days
            
            $
            50
            
            $
            275still
                accruingNon
              accruing loans
            
            
            3,612
            
            
            1,935Total
            
            $
            3,662
            
            $
            2,210%
              of Total Loans
            
            
            0.79
            %
            
            0.60
            %%
              of Total Assets
            
            
            0.60
            %
            
            0.47
            %





***Potential
      Problem Loans***





The
      $3.6
      million of non-accrual loans at September 30, 2006 was comprised of
      two loans. One loan in the amount of $1.1 million matured in
      June 2005. The borrower has continued to make principal, interest and
      property tax escrow payments on this loan. However, the borrower is currently
      in
      bankruptcy proceedings. The Bank expects that the borrower will refinance the
      two properties held as collateral upon emerging from bankruptcy, and the
      proceeds of the refinancing will be used to repay the outstanding indebtedness
      due to the Bank. While no assurances can be given, the Bank expects this will
      occur during the fourth quarter of 2006. The remaining loan in the amount of
      $2.5 million is in the process of collection and is adequately
      collateralized. In July 2006, the Bank obtained a judgment for foreclosure
      on this loan, with a sale date scheduled for December 2, 2006.
      Included in non-accrual loans at December 31, 2005, was a loan in the
      amount of $840,000 for which the Bank obtained a judgment for strict foreclosure
      at the end of the third quarter of 2006; the property was transferred to other
      real estate owned and is reflected in other assets.





At
      September 30, 2006, Bancorp had no loans, other than those disclosed
      in the table above, for which management has significant doubts as to the
      ability of the borrower to comply with the present repayment terms .





***Deposits***





Total
      deposits increased $85.4 million or 20% from $419.1 million at December 31,
      2005 to $504.5 million at September 30, 2006. Noninterest bearing
      deposits increased $2.1 million, or 4%; increases in commercial demand and
      internal accounts of $3.2 million and $0.5 million, respectively, were
      partially offset by a decrease in personal checking accounts of
      $1.5 million. Interest bearing deposits increased $83.3 million
      or


24


23%
      from
      $370.3 million at December 31, 2005 to $453.6 million at
      September 30, 2006.  NOW accounts increased $8.0 million or
      31% as compared to December 31, 2005; increased volume in attorney escrow
      accounts of $9.0 million and municipal accounts transferred from money
      market accounts of $1.3 million were partially offset by decreases in other
      NOW account products of $2.3 million. Money market fund accounts decreased
      $19.0, million or 33%, from $57.8 million at December 31, 2005 to
      $38.8 million at September 30, 2006 primarily due to increases in
      certificate of deposit rates offered by both the Bank and its competitors which
      prompted money market fund account holders to transfer funds to higher rate
      certificates of deposit. Additionally, as indicated above, municipal money
      market accounts decreased $1.3 million as a result of a transfer to a NOW
      account. Certificates of deposit increased $90.6 million, or 34%, from
      $267.0 million at December 31, 2005 to $357.6 million at
      September 30, 2006. Included in the growth of certificates of deposits
      is $14.5 million of brokered deposits which mature in October 2006. The
      remaining growth in certificates of deposit is the result of the competitive
      rates the Bank continues to offer in order to remain a viable source of deposit
      products in an increasingly competitive market.





***Borrowings***





At
      September 30, 2006, total borrowings were $42.2 million. This
      represents an increase of $25.0 million compared to total borrowings of
      $17.2 million at December 31, 2005. The increase in borrowings
      supplemented deposit inflow in order to fund loan demand.





***Capital***





Capital
      increased $31.9 million or 102% from $31.4 million at
      December 31, 2005 to $63.3 million at
      September 30, 2006. A stock offering, completed at the end of the
      third quarter, combined with the exercise of certain stock options and shares
      issued to outside directors (disclosed in Item 2 of Part II), resulted in an
      increase in common stock of 1,508,845 shares representing net proceeds of
      $30.6 million. Year to date income of $1.6 million and an increase in
      the market value of the available for sale securities portfolio of $249,000,
      net
      of deferred taxes, was partially offset by the declaration of dividends of
      $488,000 and resulted in a net increase in retained earnings and accumulated
      other comprehensive income of $1.3 million.





***Off-Balance
      Sheet Arrangements***





There
      were no significant changes in Bancorp’s off-balance sheet arrangements which
      primarily consist of commitments to lend, during the quarter and nine months
      ended September 30, 2006.


25


**RESULTS
      OF OPERATIONS**





***Interest
      and dividend income and expense***





The
      following tables present average balance sheets (daily averages), interest
      income, interest expense and the corresponding yields earned and rates paid
      for
      major balance sheet components:


Three
                  months ended September 30,2006
              
              
              
              
              
              2005Interest
              
              
              
              
              
              InterestAverage
              
              Income/
              
              Average
              
              Average
              
              Income/
              
              AverageBalance
              
              Expense
              
              Rate
              
              Balance
              
              Expense
              
              Rate*(dollars
                  in thousands)*Interest
                  earning assets:Loans
              
              $
              454,672
              
              $
              8,962
              
              
              7.88
              %
              
              $ 
                    321,931
              
              $
              5,536
              
              
              6.88
              %Federal
                  funds sold andother
                  cash equivalents
              
              
              12,516
              
              
              166
              
              
              5.31
              %
              
              17,199
              
              
              142
              
              
              3.30
              %Investments
              
              
              74,646
              
              
              729
              
              
              3.91
              %
              
              86,832
              
              
              761
              
              
              3.51
              %Total
                  interestearning
                  assets
              
              
              541,834
              
              
              9,857
              
              
              7.28
              %
              
              425,962
              
              
              6,439
              
              
              6.05
              %Cash
                  and due from banks
              
              
              4,902
              
              
              
              
              
              
              
              
              5,280Premises
                  and equipment, net
              
              
              2,371
              
              
              
              
              
              
              
              
              2,282Allowance
                  for loan losses
              
              
              (5,513
              )
              
              
              
              
              
              
              
              (3,954
              )Other
                  assets
              
              
              7,020
              
              
              
              
              
              
              
              
              5,783Total
                  Assets
              
              $
              550,614
              
              
              
              
              
              
              
              $
              435,353Interest
                  bearing liabilities:Deposits
              
              $
              420,813
              
              $
              4,153
              
              
              3.95
              %
              
              $ 
                    350,262
              
              $
              2,515
              
              
              2.87
              %FHLB
                  advances
              
              
              36,837
              
              
              491
              
              
              5.33
              %
              
              8,783
              
              
              80
              
              
              3.64
              %Subordinated
                  debt
              
              
              8,248
              
              
              177
              
              
              8.58
              %
              
              8,248
              
              
              137
              
              
              6.64
              %Other
                  borrowings
              
              
              46
              
              
              1
              
              
              8.70
              %
              
              134
              
              
              1
              
              
              2.99
              %Total
                  interestbearing
                  liabilities
              
              
              465,944
              
              
              4,822
              
              
              4.14
              %
              
              367,427
              
              
              2,733
              
              
              2.98
              %Demand
                  deposits
              
              
              47,063
              
              
              
              
              
              
              
              
              42,515Accrued
                  expenses andother
                  liabilities
              
              
              4,207
              
              
              
              
              
              
              
              
              3,652Shareholders'
                  equity
              
              
              33,400
              
              
              
              
              
              
              
              
              21,759Total
                  liabilities and equity
              
              $
              550,614
              
              
              
              
              
              
              
              $
              435,353Net
                  interest income
              
              
              
              
              $
              5,035
              
              
              
              
              
              
              
              $
              3,706Interest
                  margin
              
              
              
              
              
              
              
              
              3.72
              %
              
              
              
              
              
              
              
              3.48
              %Interest
                  spread
              
              
              
              
              
              
              
              
              3.14
              %
              
              
              
              
              
              
              
              3.07
              %
 26
 Nine
                  months ended September 30,2006
              
              
              
              
              
              2005Interest
              
              
              
              
              
              InterestAverage
              
              Income/
              
              Average
              
              Average
              
              Income/
              
              AverageBalance
              
              Expense
              
              Rate
              
              Balance
              
              Expense
              
              Rate*(dollars
                  in thousands)*Interest
                  earning assets:Loans
              
              $
              428,211
              
              $
              24,473
              
              
              7.62
              %
              
              $ 
                    302,134
              
              $
              15,129
              
              
              6.68
              %Federal
                  funds sold andother
                  cash equivalents
              
              
              8,348
              
              
              309
              
              
              4.94
              %
              
              18,717
              
              
              383
              
              
              2.73
              %Investments
              
              
              77,382
              
              
              2,268
              
              
              3.91
              %
              
              89,051
              
              
              2,331
              
              
              3.49
              %Total
                  interestearning
                  assets
              
              
              513,941
              
              
              27,050
              
              
              7.02
              %
              
              409,902
              
              
              17,843
              
              
              5.80
              %Cash
                  and due from banks
              
              
              5,729
              
              
              
              
              
              
              
              
              4,933Premises
                  and equipment, net
              
              
              2,348
              
              
              
              
              
              
              
              
              2,133Allowance
                  for loan losses
              
              
              (5,220
              )
              
              
              
              
              
              
              
              (3,767
              )Other
                  assets
              
              
              6,695
              
              
              
              
              
              
              
              
              5,594Total
                  Assets
              
              $
              523,493
              
              
              
              
              
              
              
              $
              418,795Interest
                  bearing liabilities:Deposits
              
              $
              401,707
              
              $
              10,834
              
              
              3.60
              %
              
              $ 
                    332,728
              
              $
              6,543
              
              
              2.62
              %FHLB
                  advances
              
              
              29,045
              
              
              1,100
              
              
              5.05
              %
              
              11,634
              
              
              304
              
              
              3.48
              %Subordinated
                  debt
              
              
              8,248
              
              
              497
              
              
              8.03
              %
              
              8,248
              
              
              380
              
              
              6.14
              %Other
                  borrowings
              
              
              129
              
              
              5
              
              
              5.17
              %
              
              45
              
              
              1
              
              
              2.96
              %Total
                  interestbearing
                  liabilities
              
              
              439,129
              
              
              12,436
              
              
              3.78
              %
              
              352,655
              
              
              7,228
              
              
              2.73
              %Demand
                  deposits
              
              
              47,727
              
              
              
              
              
              
              
              
              42,286Accrued
                  expenses andother
                  liabilities
              
              
              4,176
              
              
              
              
              
              
              
              
              3,207Shareholders'
                  equity
              
              
              32,461
              
              
              
              
              
              
              
              
              20,647Total
                  liabilities and equity
              
              $
              523,493
              
              
              
              
              
              
              
              $
              418,795Net
                  interest income
              
              
              
              
              $
              14,614
              
              
              
              
              
              
              
              $
              10,615Interest
                  margin
              
              
              
              
              
              
              
              
              3.79
              %
              
              
              
              
              
              
              
              3.45
              %Interest
                  spread
              
              
              
              
              
              
              
              
              3.24
              %
              
              
              
              
              
              
              
              3.07
              %




27


The
      following 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.


Three
                  months ended September 30,
              
              Nine
                  months ended September 30,2006
                  vs 2005
              
              2006
                  vs 2005Fluctuations
                  in Interest
              
              Fluctuations
                  in InterestIncome/Expense
              
              Income/ExpenseDue
                  to change in:
              
              Due
                  to change in:Volume
              
              Rate
              
              Total
              
              Volume
              
              Rate
              
              Total*(dollars
                  in thousands)*Interest
                  earning assets:Loans
              
              $
              2,529
              
              $
              897
              
              $
              3,426
              
              $
              6,987
              
              $
              2,357
              
              $
              9,344Federal
                  funds sold andother
                  cash equivalents
              
              
              (104
              )
              
              128
              
              
              24
              
              
              (200
              )
              
              126
              
              
              (74
              )Investments
              
              
              (401
              )
              
              369
              
              
              (32
              )
              
              (392
              )
              
              329
              
              
              (63
              )Total
                  interestearning
                  assets
              
              
              2,024
              
              
              1,394
              
              
              3,418
              
              
              6,395
              
              
              2,812
              
              
              9,207Interest
                  bearing liabilities:Deposits
              
              $
              573
              
              $
              1,065
              
              $
              1,638
              
              $
              1,537
              
              $
              2,754
              
              $
              4,291FHLB
                  advances
              
              
              359
              
              
              52
              
              
              411
              
              
              602
              
              
              194
              
              
              796Subordinated
                  debt
              
              
              -
              
              
              40
              
              
              40
              
              
              -
              
              
              117
              
              
              117Other
                  borrowings
              
              
              (2
              )
              
              2
              
              
              -
              
              
              1
              
              
              3
              
              
              4Total
                  interestbearing
                  liabilities
              
              
              930
              
              
              1,159
              
              
              2,089
              
              
              2,140
              
              
              3,068
              
              
              5,208Net
                  interest income
              
              $
              1,094
              
              $
              235
              
              $
              1,329
              
              $
              4,255
              
              $
              (256
              )
              $
              3,999





An
      increase in average interest earning assets of $116.6 million, or 27%,
      combined with an increase in interest rates increased Bancorp’s interest income
      $3.4 million or 53% for the quarter ended September 30, 2006 as
      compared to the same period in 2005. Interest and fees on loans increased
      $3.4 million, or 62%, from $5.5 million for the quarter ended
      September 30, 2005 to $8.9 million for the quarter ended
      September 30, 2006. This increase was primarily the result of the
      increase in the average outstanding balances of the loan portfolio followed
      by
      the impact of a rising rate environment. Interest income on investments
      decreased slightly; the decrease in interest income from the reduction in the
      portfolio due to principal payments on mortgage backed securities was offset
      by
      an increase in the interest rates on the remaining portfolio. Interest income
      on
      federal funds and other cash equivalents increased as a result of an increase
      in
      short term interest rates. For the nine months ended September 30, 2006,
      interest and dividend income was $27.0 million which represents an increase
      of $9.2 million, or 52%, as compared to


28


interest
      and dividend income of $17.8 million for the same period last year. This
      increase was due to the reasons cited earlier.





Total
      interest expense for the quarter ended September 30, 2006 of
      $4.8 million represents an increase of $2.1 million or 76% as compared to
      the same period last year. The increase in interest expense is primarily the
      result of higher interest rates paid on deposit accounts and a higher volume
      of
      FHLB advances; an increase in total average interest bearing liabilities of
      $98.5 million or 27% also contributed to the increase in interest expense.
      The increase in interest rates combined with the increase in the average
      balances of deposit accounts of $70.5 million, or 20%, resulted in an
      increase in interest expense of $1.6 million, or 65%. Average FHLB advances
      increased $28.1 million or 319%; this increase in average balances combined
      with the increase in interest paid on FHLB advances resulted in an increase
      in
      interest expense of $411,000, or 514%. The increase in the index to which the
      junior subordinated debt is tied resulted in an increase in interest expense
      of
      $40,000, or 29%. For the nine months ended September 30, 2006 total
      interest expense increased $5.2 million, or 72%, to $12.4 million as
      compared to $7.2 million for the nine months ended September 30, 2005. This
      increase in interest expense was due to the reasons cited earlier.





As
      a
      result of the above, Bancorp’s net interest income increased $1.3 million,
      or 36%, to $5.0 million for the three months ended
      September 30 2006 as compared to $3.7 million for the same period
      last year. Net interest income increased $4.0 million, or 38%, to
      $14.6 million for the nine months ended September 30, 2006 as compared
      to $10.6 million for the nine months ended September 30,
      2005.





***Provision
      for loan losses***





The
      provision for loan losses charged to operations for the quarter ended
      September 30, 2006 was $117,000 as compared to $350,000 for the same
      period last year. For the nine months ended September 30, 2006, the
      provision for loan losses was $1,040,000 as compared to $710,000 for the nine
      months ended September 30, 2005. These variances were due to the credit
      risk factors assigned to the loan portfolio, as well as, to the growth in the
      loan portfolio and not to any adverse or more favorable changes in the credit
      quality of the loan portfolio or changes in non-performing loans.





An
      analysis of the changes in the allowance for loan losses is presented under
      “Allowance for Loan Losses.”




***Noninterest
      income***





Noninterest
      income decreased $353,000, or 36%, from $986,000 for the quarter ended
      September 30, 2005 to $633,000 for the three months ended
      September 30, 2006. A decrease in the volume of loans placed with
      outside investors resulted in a decrease in mortgage brokerage and referral
      fee
      income of $300,000 and a decrease in loan origination


29


and
      processing fee income of $61,000. Fees and service charges for the three months
      ended September 30, 2006 increased $23,000, or 16%, as compared to the
      same period last year. This increase was primarily due to an increase in the
      service charges on deposit accounts. Other income decreased $15,000 as compared
      to the same period last year which reflected the settlement of an insurance
      claim.





For
      the
      nine months ended September 30, 2006, noninterest income decreased
      $673,000, or 27% to $1.8 million as compared to $2.5 million for the
      nine months ended September 30, 2005. This decrease was due to a
      decrease in mortgage brokerage and referral fee income and loan origination
      and
      processing fee income partially offset by an increase in service charges for
      similar reasons cited above.





***Noninterest
      expenses***





Noninterest
      expenses increased $621,000, or 16%, to $4.5 million for the quarter ended
      September 30, 2006 from $3.9 million for the quarter ended
      September 30, 2005. Salaries and benefits expense increased $402,000,
      or 17%, to $2.8 million for the quarter ended September 30, 2006 from
      $2.4 million for the quarter ended September 30, 2005. This increase
      was primarily due to staff additions, increases in bonuses and incentive
      compensation and salary increases made during the last quarter of 2005.
      Occupancy and equipment expense, net, increased $156,000, or 29% to $695,000
      for
      the quarter ended September 30, 2006 from $539,000 for the quarter
      ended September 30, 2005 due to the leasing of additional space for
      the Bank’s lending and credit administration functions during the last quarter
      of 2005, lease expense during 2006 for branches under renovation and a new
      metropolitan New York loan production office. Increased marketing campaigns
      and
      related activities resulted in an increase in advertising and promotional
      expenses of $40,000, or 36%, to $153,000 for the three months ended
      September 30, 2006 from $112,000 for the three months ended
      September 30, 2005. Data processing and other outside services
      decreased $40,000, or 12%, from $333,000 for the three months ended
      September 30, 2005 to $294,000 for the three months ended
      September 30, 2006 primarily due to decreases in personnel placement
      fees, information technology consulting and temporary office staffing which
      were
      partially offset by increases in data processing and correspondent banking
      expenses. The increases in data processing and correspondent banking expenses
      were a result of the growth in the branch network as well as increased ongoing
      maintenance charges for the implementation of new products and
      services.





For
      the
      nine months ended September 30, 2006, noninterest expenses increased
      $2.0 million, or 19%, to $12.9 million as compared to
      $10.9 million for the nine months ended Septemeber 30, 2005. Salaries
      and benefits expense increased $1.1 million, or 16% to $7.7 million;
      occupancy and equipment expense, net increased $507,000 or 33%. These increases
      are due to similar reasons cited above and to the full year impact in 2006
      of
      the staffing additions and occupancy and equipment expenses incurred with an
      additional branch location established during the second quarter of 2005. Data
      processing and other outside services and advertising and promotional expenses
      increased $283,000


30


and
      $113,000, respectively, for the nine months ended September 30, 2006
      as compared to the same period last year. These increases were due to similar
      reasons cited earlier.





***Income
      Taxes***





Bancorp
      recorded income tax expense of $390,000 for the quarter ended
      September 30, 2006 as compared to $191,000 for the quarter ended
      September 30, 2005. For the nine months ended September 30, 2006,
      income tax expense was $916,000 as compared to $625,000 for the same period
      last
      year. These changes were related primarily to the change in pre-tax income
      and
      the exclusion for state tax purposes of certain holding company expenses. The
      effective tax rates for the quarters ended September 30, 2006 and
      September 30, 2005 were 37% and 40%, respectively; the effective tax
      rates for the nine months ended September 30, 2006 and September 30,
      2005 were 37% and 40%, respectively.





**LIQUIDITY**





Bancorp's
      liquidity ratio was 23% at both September 30, 2006 and 2005. The
      liquidity ratio is defined as the percentage of liquid assets to total assets.
      The following categories of assets as described in the accompanying consolidated
      balance sheets are considered liquid assets: cash and due from banks, federal
      funds sold, short term investments and available for sale securities. 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 provide sufficient
      liquidity to cover loan demand, potential fluctuations in deposit accounts
      and
      to meet other anticipated cash operating requirements.





**CAPITAL**





The
      following table illustrates Bancorp’s regulatory capital ratios at September
      30, 2006 and December 31, 2005 respectively:


September
                  30, 2006
              
              December
                  31, 2005Total
                  Risk-based Capital
              16.70%
              
              12.70%Tier
                  1 Risk-based Capital
              15.47%
              
              11.45%Leverage
                  Capital
              12.94%
              
              8.56%


31


The
      following table illustrates the Bank’s regulatory capital ratios at September
      30, 2006 and December 31, 2005 respectively:


September
                  30, 2006
              
              December
                  31, 2005Total
                  Risk-based Capital
              16.35%
              
              12.52%Tier
                  1 Risk-based Capital
              15.13%
              
              11.27%Leverage
                  Capital
              12.65%
              
              8.42%





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 is considered to be “well capitalized” at September 30, 2006 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%.





The
      increase in capital ratios is due to the stock offering and the increase in
      retained earnings partially offset by the growth of the Bank. Management
      continuously assesses the adequacy of the Bank’s capital to ensure that the Bank
      remains a “well capitalized” institution. Management’s strategic and capital
      plans contemplate various options to maintain the “well capitalized”
classification.





**IMPACT
      OF INFLATION AND CHANGING PRICES**





Bancorp’s
      consolidated financial statements have been prepared in terms of historical
      dollars, without considering changes in the 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 general levels of inflation. Interest rates
      do not necessarily move in the same direction or with 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.


32


**Item
      3.** **Quantitative
      and Qualitative Disclosures about 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.





**Qualitative
      Aspects of Market Risk**





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. Therefore,
      deposit balances may run off unexpectedly due to changing market conditions.
      Additionally, loans and investments with longer term rate adjustment frequencies
      are matched against longer term deposits and borrowings to lock in a desirable
      spread.





The
      exposure to interest rate risk is monitored by the Management Asset and
      Liability Committee consisting of senior management personnel. The Committee
      meets on a monthly basis, but may convene more frequently as conditions dictate.
      The Committee reviews the interrelationships within the balance sheet to
      maximize net interest income within acceptable levels of risk. This Committee
      reports to the Board of Directors on a monthly basis regarding its activities.
      In addition to the Management Asset and Liability Committee, there is a Board
      Asset and Liability Committee (“ALCO”) which meets quarterly. ALCO monitors the
      interest rate risk analyses, reviews investment transaction during the period
      and determines compliance with Bank policies.





**Quantitative
      Aspects of Market Risk**





Management
      analyzes Bancorp’s interest rate sensitivity position to manage the risk
      associated with interest rate movements through the use of interest income
      simulation and GAP analysis. The matching of assets and liabilities may be
      analyzed by examining the extent to which such assets and liabilities are
“interest sensitive.” An asset or liability is said to be interest sensitive
      within a specific time period if it will mature or reprice within that time
      period.





Management’s
      goal is to manage asset and liability positions to moderate the effects of
      interest rate fluctuations on net interest income. Interest income simulations
      are completed


33


quarterly
      and presented to ALCO. The simulations provide an estimate of the impact of
      changes in interest rates on net interest income under a range of assumptions.
      Changes to these assumptions can significantly affect the results of the
      simulations. The simulation incorporates assumptions regarding the potential
      timing in the repricing of certain assets and liabilities when market rates
      change and the changes in spreads between different market rates.





Simulation
      analysis is only an estimate of Bancorp’s interest rate risk exposure at a
      particular point in time. Management regularly reviews the potential effect
      changes in interest rates could have on the repayment of rate sensitive assets
      and funding requirements of rate sensitive liabilities.





Management
      has established interest rate risk guidelines measured by behavioral GAP
      analysis calculated at the one year cumulative GAP level and a net interest
      income and economic value of portfolio equity simulation model measured by
      a 200
      basis point interest rate shock.





The
      table
      below sets forth an approximation of Bancorp’s exposure to changing interest
      rates using management’s behavioral GAP analysis and as a percentage of
      estimated net interest income and estimated net portfolio value using interest
      income simulation. The calculations use projected repricings of assets and
      liabilities at September 30, 2006 and December 31, 2005 on the basis
      of contractual maturities, anticipated repayments and scheduled rate
      adjustments.


Basis
              Interest
                  Rate
              September
                  30,
              December
                  31,Points
              Risk
                  Guidelines
              2006
              2005Gap
                  percentage total
              
              +/-
                  15%
              8.33%
              4.98%Net
                  interest income
              200
              +/-
                  15%
              15.75%
              14.49%-200
              +/-
                  15%
              -17.87%
              -14.24%Net
                  portfolio value
              200
              +/-
                  25%
              -1.90%
              0.45%-200
              +/-
                  25%
              -2.87%
              -7.89%





Bancorp
      benefited during 2006 from a rising interest rate environment as assets
      re-priced faster than liabilities and, combined with a 25% increase in the
      loan
      portfolio, resulted in an expanding net interest margin. These factors
      contributed to higher levels of net interest income and net portfolio value
      in
      the base case scenario at September 30, 2006 as compared to December 31,
      2005 using Bancorp’s interest income simulation model. Bancorp’s interest rate
      risk position was within its gap percentage total and net portfolio
      value guidelines at September 30, 2006. Bancorp exceeded its net
      interest income guidelines at September 30, 2006; this is primarily due to
      the
      receipt of the stock offering proceeds on the last business day of the quarter
      which were placed in short term investments.  This is a temporary situation
      and will be remedied once the excess funds are


34


redeployed
      into longer term assets.  The interest rate risk position is monitored on
      an ongoing basis and management reviews strategies to maintain all categories
      within guidelines.




The
      table
      below sets forth examples of changes in estimated net interest income and the
      estimated net portfolio value based on projected scenarios of interest rate
      increases and decreases. The analyses indicate the rate risk embedded in
      Bancorp’s portfolio at the dates indicated should all interest rates
      instantaneously rise or fall. The results are derived by adding to or
      subtracting from all current rates; however, there are certain limitations
      to
      these types of analyses. Rate changes are rarely instantaneous and these
      analyses may also overstate the impact of short term repricings.


Net
                  Interest Income and Economic ValueSummary
                  PerformanceSeptember
                  30, 2006Net
                  Interest Income
              Net
                  Portfolio ValueProjected
                  Interest
              Estimated
              $
                  Change
              %
                  Change
              Estimated
              $
                  Change
              %
                  ChangeRate
                  Scenario
              Value
              from
                  Base
              from
                  Base
              Value
              from
                  Base
              from
                  Base+
                  200
              23,663
              3,220
              15.75%
              80,842
              (1,569)
              -1.90%+
                  100
              22,066
              1,623
              7.94%
              82,034
              (377)
              -0.46%BASE
              20,443
              
              
              82,411-
                  100
              18,707
              (1,736)
              -8.49%
              82,264
              (147)
              -0.18%-
                  200
              16,790
              (3,653)
              -17.87%
              80,044
              (2,367)
              -2.87%December
                  31, 2005Net
                  Interest Income
              Net
                  Portfolio ValueProjected
                  Interest
              Estimated
              $
                  Change
              %
                  Change
              Estimated
              $
                  Change
              %
                  ChangeRate
                  Scenario
              Value
              from
                  Base
              from
                  Base
              Value
              from
                  Base
              from
                  Base+
                  200
              18,650
              2,360
              14.49%
              47,153
              211
              0.45%+
                  100
              17,478
              1,188
              7.29%
              47,606
              664
              1.41%BASE
              16,290
              
              
              46,942-
                  100
              15,115
              (1,175)
              -7.21%
              45,432
              (1,510)
              -3.22%-
                  200
              13,970
              (2,320)
              -14.24%
              43,239
              (3,703)
              -7.89%


35


**Item
      4.** **Controls
      and Procedures**





Based
      on
      an evaluation of the effectiveness of Bancorp’s disclosure controls and
      procedures performed by Bancorp’s management, with the participation of
      Bancorp’s Chief Executive Officer and its Chief Financial Officer as of the end
      of the period covered by this report, Bancorp’s Chief Executive Officer and
      Chief Financial Officer concluded that Bancorp’s disclosure controls and
      procedures have been effective.





As
      used
      herein, “disclosure controls and procedures” means controls and other procedures
      of Bancorp that are designed to ensure that information required to be disclosed
      by Bancorp in the reports that it files or submits under the Securities Exchange
      Act is recorded, processed, summarized and reported, within the time periods
      specified in the Commission’s rules and forms. Disclosure controls and
      procedures include, without limitation, controls and procedures designed to
      ensure that information required to be disclosed by Bancorp in the reports
      that
      it files or submits under the Securities Exchange Act is accumulated and
      communicated to Bancorp’s management, including its principal executive and
      principal financial officers, or persons performing similar functions, as
      appropriate to allow timely decisions regarding required
      disclosure.





There
      were no changes in Bancorp’s internal control over financial reporting
      identified in connection with the evaluation described in the preceding
      paragraph that occurred during Bancorp’s fiscal quarter ended September 30, 2006
      that has materially affected, or is reasonably likely to materially affect,
      Bancorp’s internal control over financial reporting.








**PART
      II - OTHER INFORMATION** .





**Item
      1A.** **Risk
      Factors**





**Management
      intends to continue Bancorp’s emphasis on growth over earnings for the
      foreseeable future.**





Management
      has actively sought growth of the institution in recent years by opening
      additional branches, initiating internal growth programs, and completing one
      acquisition of a mortgage company. Bancorp may not be able to sustain its
      historical rate of growth or may not even be able to continue to grow at all.
      Various factors, such as economic conditions and competition, may impede or
      prohibit the Bank from opening new branches. In addition, Bancorp may not be
      able to obtain the financing necessary to fund additional growth and may not
      be
      able to find suitable candidates for acquisition. Sustaining Bancorp’s growth
      has placed significant demands on management as well as on administrative,
      operational and financial resources. For Bancorp to continue to grow, it must:
      attract and retain qualified management and experienced bankers, find suitable
      markets for expansion, find suitable, affordable branch office locations;
      attract funding to


36


support
      additional growth; maintain high asset quality levels; maintain adequate
      regulatory capital; and maintain adequate controls.  Although management
      believes that earnings will increase as the franchise is expanded, earnings
      are
      expected to continue to be adversely affected by the costs associated with
      opening new branches and the time necessary to build a customer base in each
      new
      branch’s market area.





If
      Bancorp is unable to continue its historical levels of growth, or if growth
      comes at greater financial expense than has been incurred in the past, Bancorp
      may not be able to achieve its financial goals and profitability may be
      adversely affected.





**Because
      Bancorp intends to increase its commercial real estate, construction and
      commercial business loan originations, its lending risk will increase, and
      downturns in the real estate market could adversely affect its
      earnings.**





Commercial
      real estate, construction and commercial business loans generally have more
      risk
      than residential mortgage loans. Both commercial real estate and construction
      loans, for example, often involve larger loan balances concentrated with single
      borrowers or groups of related borrowers as compared to single-family
      residential loans. Construction loans are secured by the property under
      construction, the value of which is uncertain prior to completion. Thus, it
      is
      more difficult to evaluate accurately the total loan funds required to complete
      a project and the related loan-to-value ratios. Speculative construction loans
      involve additional risk because the builder does not have a contract for the
      sale of the property at the time of construction.





Because
      the repayment of commercial real estate, construction and commercial business
      loans depends on the successful management and operation of the borrower’s
      properties or related businesses, repayment of such loans can be affected by
      adverse conditions in the real estate market or the local economy. A significant
      portion of Bancorp’s total loan portfolio is secured by real estate located in
      Fairfield County, Connecticut and Westchester County, New York. As a result,
      a
      downturn in the real estate market, especially within Bancorp’s market area,
      could adversely impact the value of properties securing these loans. Bancorp’s
      ability to recover on defaulted loans by selling the underlying real estate
      would be diminished, and Bancorp would be more likely to suffer losses on
      defaulted loans. As its commercial real estate, construction and commercial
      business loan portfolios increase, the corresponding risks and potential for
      losses from these loans may also increase.





**Bancorp’s
      business is subject to various lending and other economic risks that could
      adversely impact Bancorp’s results of operations and financial
      condition.**





Changes
      in economic conditions, particularly an economic slowdown in Fairfield County,
      Connecticut and the New York metropolitan area, could hurt Bancorp’s financial


37


performance.
      Bancorp’s business is directly affected by political and market conditions,
      broad trends in industry and finance, legislative and regulatory changes and
      changes in governmental monetary and fiscal policies and inflation, all of
      which
      are beyond Bancorp’s control. A deterioration in economic conditions, in
      particular an economic slowdown within Fairfield County, Connecticut and/or
      the
      New York metropolitan area, could result in the following consequences, any
      of
      which may hurt the business of Bancorp materially: loan delinquencies may
      increase; problem assets and foreclosures may increase; demand for the Bank’s
      products and services may decline; and assets and collateral associated with
      the
      Bank’s loans, especially real estate, may decline in value, thereby reducing a
      customer’s borrowing power.





The
      Bank
      may suffer losses in its loan portfolio despite its underwriting practices.
      The
      Bank seeks to mitigate the risks inherent in its loan portfolio by adhering
      to
      specific underwriting practices. These practices include analysis of a
      borrower’s prior credit history, financial statements, tax returns and cash flow
      projections, valuation of collateral based on reports of independent appraisers
      and verification of liquid assets. Although the Bank believes that its
      underwriting criteria is appropriate for the various types of loans the Bank
      makes, the Bank may still incur losses on loans, and these losses may exceed
      the
      amounts set aside as reserves in the allowance for loan losses.





**Bancorp’s
      allowance for loan losses may not be adequate to cover actual
      losses.**





Like
      all
      financial institutions, the Bank maintains an allowance for loan losses to
      provide for loan defaults and non-performance. The allowance for loan losses
      may
      not be adequate to cover actual loan losses and future provisions for loan
      losses could materially and adversely affect Bancorp’s operating results. The
      allowance for loan losses is based on an evaluation of the risks associated
      with
      the Bank’s loans receivable as well as the Bank’s prior loss experience. A
      substantial portion of the Bank’s loans are unseasoned and lack an established
      record of performance. To date, losses have been negligible. The amount of
      future losses is susceptible to changes in economic, operating and other
      conditions, including changes in interest rates that may be beyond the Bank’s
      control and these losses may exceed current estimates. Federal regulatory
      agencies, as an integral part of their examination process, review the Bank’s
      loans and assess the adequacy of the allowance for loan losses. While management
      believes that the allowance for loan losses is adequate to cover current losses,
      management cannot assure shareholders that there will not be a need to increase
      the allowance for loan losses or that the regulators will not require management
      to increase this allowance. Either of these occurrences could materially and
      adversely affect Bancorp’s earnings and profitability.





**Bancorp’s
      business is subject to interest rate risk and variations in interest rates
      may
      negatively affect Bancorp’s financial performance.**





Bancorp
      is unable to predict fluctuations of market interest rates, which are affected
      by many factors including: inflation, recession, a rise in unemployment, a
      tightening money


38
 supply
        and domestic and international disorder and instability in domestic and foreign
        financial markets. Changes in the interest rate environment may reduce Bancorp’s
        profits. Bancorp realizes income from the differential or “spread” between the
        interest earned on loans, securities and other interest-earning assets, and
        interest paid on deposits, borrowings and other interest-bearing liabilities.
        Net interest spreads are affected by the difference between the maturities
        and
        repricing characteristics of interest-earning assets and interest-bearing
        liabilities. Bancorp is vulnerable to a decrease in interest rates because
        its
        interest-earning assets generally have shorter durations than its
        interest-bearing liabilities. As a result, material and prolonged decreases
        in
        interest rates would decrease Bancorp’s net interest income. In contrast, an
        increase in the general level of interest rates may adversely affect the
        ability
        of some borrowers to pay the interest on and principal of their obligations.
        Accordingly, changes in levels of market interest rates could materially
        and
        adversely affect Bancorp’s net interest spread, asset quality, levels of
        prepayments and cash flow as well as the market value of its securities
        portfolio and overall profitability.





Mortgage
      brokerage activity is also affected by interest rate fluctuations. Generally
      increases in interest rates often lead to decreases in home refinancing
      activity, thus reducing the number of mortgage loans that Bancorp
      originates.





**Bancorp’s
      investment portfolio includes securities which are sensitive to interest rates
      and variations in interest rates may adversely impact Bancorp’s profitability.**





Bancorp’s
      securities portfolio is classified as available-for-sale, and is comprised
      of
      mortgage-backed securities which are insured or guaranteed by U.S. government
      agencies or government-sponsored enterprises, U.S. government agency securities
      and money market preferred equity securities. These securities are sensitive
      to
      interest rate fluctuations. Unrealized gains or losses in the available-for-sale
      portfolio are reported as a separate component of shareholders’ equity. As a
      result, future interest rate fluctuations may impact shareholders’ equity,
      causing material fluctuations from quarter to quarter. Failure to hold its
      securities until payments are received on mortgage-backed securities or until
      maturity on other investments or until market conditions are favorable for
      a
      sale could adversely affect Bancorp’s earnings and profitability.





**Bancorp
      is dependent on its management team, and the loss of its senior executive
      officers or other key employees could impair its relationship with its customers
      and adversely affect its business and financial results.**





Bancorp’s
      success is dependent upon the continued services and skills of Angelo De Caro,
      Charles F. Howell, Robert F. O’Connell, Philip W. Wolford and other senior
      officers including Martin G. Noble, its chief lender, Marcus Zavattaro, its
      residential lending sales manager, and John Kantzas, a founder and an executive
      vice president. While Bancorp has employment agreements containing
      non-competition provisions with Messrs. Howell, O’Connell and Zavattaro, these
      agreements do not prevent any of them from terminating their employment with
      Bancorp. The unexpected loss of services of one or more of these


39


key
      personnel could have an adverse impact on Bancorp’s business because of their
      skills, knowledge of Bancorp’s market, years of industry experience and the
      difficulty of promptly finding qualified replacement personnel. 
 Bancorp’s
        success also depends, in part, on its continued ability to attract and retain
        experienced commercial lenders and residential mortgage originators, as well
        as
        other management personnel. The loss of the services of several of such key
        personnel could adversely affect Bancorp’s growth strategy and prospects to the
        extent it is unable to replace such personnel. In the past year, Bancorp
        has
        hired several experienced commercial loan officers who have strong business
        relationships in order to expand and enhance its current deposit and commercial
        banking operations. Competition for commercial lenders and residential mortgage
        originators is strong within the commercial banking and mortgage banking
        industries, and Bancorp may not be successful in retaining or attracting
        additional personnel necessary to maintain its growth plans.





**A
      breach of information security could negatively affect Bancorp’s
      earnings** .





Bancorp
      increasingly depends upon data processing, communications and information
      exchange on a variety of computing platforms and networks, and over the internet
      to conduct its business. Bancorp cannot be certain that all of its systems
      are
      entirely free from vulnerability to attack, despite safeguards it has
      instituted. In addition, Bancorp relies on the services of a variety of vendors
      to meet its data processing and communication needs. If information security
      is
      breached, information can be lost or misappropriated; this could result in
      financial loss or costs to Bancorp or damages to others. These costs or losses
      could materially exceed the amount of insurance coverage, if any, which would
      have an adverse effect on Bancorp’s results of operations and financial
      condition. In addition, the Bank’s reputation could be harmed, which also could
      materially adversely affect Bancorp’s financial condition and results of
      operation.





**Risks
      Related to Bancorp’s industry**





**Strong
      competition within Bancorp’s market area may limit the growth and profitability
      of the Company.**





Competition
      in the banking and financial services industry is intense. The Fairfield County,
      Connecticut and the New York City metropolitan areas have a high concentration
      of financial institutions including large money center and regional banks,
      community banks and credit unions. Some of Bancorp’s competitors offer products
      and services that the Bank currently does not offer, such as private banking
      and
      trust services. The Bank’s planned purchase of a small branch in New York City,
      New York and anticipated future expansion into Westchester County, New York,
      will expose the Bank to more competition and in markets where it is not well
      known. Many of these competitors have substantially greater resources and
      lending limits than Bancorp and may offer certain services that it does not
      or
      cannot provide. Price competition for loans and deposits might result in the


40


Bank
      earning less on its loans and paying more for deposits, which reduces net
      interest income. Bancorp expects competition to increase in the future as a
      result of legislative, regulatory and technological changes. Bancorp’s
      profitability depends upon its continued ability to successfully compete in
      its
      market area. 
 **Government
        regulation may have an adverse effect on Bancorp’s profitability and
        growth**.
 
 Bancorp
        is subject to extensive regulation, supervision and examination by the Office
        of
        the Comptroller of the Currency, or the OCC, as the Bank’s chartering authority,
        by the FDIC, as insurer of the deposits, and by the Federal Reserve Board
        as
        regulator of Bancorp. Changes in state and federal banking laws and regulations
        or in federal monetary policies could adversely affect the Bank’s ability to
        maintain profitability and continue to grow. For example, new legislation
        or
        regulation could limit the manner in which Bancorp may conduct its business,
        including the Bank’s ability to obtain financing, attract deposits, make loans
        and achieve satisfactory interest spreads. Many of these regulations are
        intended to protect depositors, the public and the FDIC, not shareholders.
        In
        addition, the burden imposed by federal and state regulations may place the
        Company at a competitive disadvantage compared to competitors who are less
        regulated. The laws, regulations, interpretations and enforcement policies
        that
        apply to Bancorp have been subject to significant, and sometimes retroactively
        applied, changes in recent years, and may change significantly in the future.
        Future legislation or government policy may also adversely affect the banking
        industry or Bancorp’s operations.





**Changing
      regulation of corporate governance and public disclosure.**





Recently
      enacted laws, regulations and standards relating to corporate governance and
      public disclosure, including the Sarbanes-Oxley Act of 2002, new SEC regulations
      and NASDAQ rules, are adding to the responsibilities that companies, such as
      Bancorp, have. These laws, regulations and standards are subject to varying
      interpretations, and as a result, their application in practice may evolve
      over
      time as new guidance is provided by regulatory and governing bodies, which
      could
      make compliance more difficult and result in higher costs due to ongoing
      revisions to disclosure and governance practices. Bancorp is committed to
      maintaining high standards of corporate governance and public disclosure. As
      a
      result, Bancorp’s efforts to comply with evolving laws, regulations and
      standards have resulted in, and are likely to continue to result in, increased
      general and administrative expenses and a diversion of management time and
      attention from revenue-generating activities to compliance activities. In
      addition, during the fiscal year ending December 31, 2007, Bancorp will be
      required to comply with Section 404 of the Sarbanes-Oxley Act of 2002 and the
      related regulations regarding its required assessment of its internal controls
      over financial reporting and its external auditors’ audit of that assessment. In
      order to prepare for this, Bancorp will need to commit significant financial
      and
      managerial resources beginning in 2006. If Bancorp does not effectively comply
      with these laws, regulations and standards, its reputation may be
      harmed.


41
 **Item
        2.** **Unregistered
        Sales of Equity Securities and Use of Proceeds**





(a)
            On
                July 14, 2006, the Company issued 845 shares of its common stock
                to its
                five outside directors. Pursuant to a policy adopted by the Board
                of
                Directors, outside directors serving on the board receive an annual
                award
                of the Company’s common stock valued at $5,000; the award is prorated for
                directors who have served less than a full year. The shares have
                not been
                registered under the Securities Act of 1933 and therefore were issued
                in a
                private placement transaction exempt from registration under Section
                4(2)
                of the Securities Act. For purposes of this transaction, the Company
                shares were valued at approximately $29.50 per share, or a total
                value of
                approximately $25,000.


(b)
            Not
                applicable(c)
            Not
                applicable(d)
            Not
                applicable





**Item
      6.**  **Exhibits**





No.
            Description2
            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(i)(A)
            Certificate
                of Amendment of Certificate of Incorporation of Patriot National
                Bancorp,
                Inc. dated July 16, 2004 (incorporated by reference to Exhibit 3(i)(A)
                to
                Bancorp's Annual Report on Form 10-KSB for the year ended December
                31,
                2004 (Commission File No. 000-29599)).3(i)(B)
            Certificate
                of Amendment of Certificate of Incorporation of Patriot National
                Bancorp,
                Inc. dated June 15, 2006.


42


No.
            Description3(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)).4
            Reference
                is made to the Rights Agreement dated April 19, 2004 by and between
                Patriot National Bancorp, Inc. and Registrar and Transfer Company
                filed as
                Exhibit 99.2 to Bancorp’s Report on Form 8-K filed on April 19, 2004,
                which is incorporated herein by reference.10(a)(1)
            2001
                Stock Appreciation Rights Plan of Bancorp (incorporated by reference
                to
                Exhibit 10(a)(1) to Bancorp’s Annual Report on Form 10-KSB for the year
                ended December 31, 2001 (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 Martin G. Noble
                and
                Patriot National Bank (incorporated by reference to Exhibit 10(a)(4)
                to
                Bancorp’s Annual Report on Form 10-KSB for the year ended December 31,
                2004 (Commission File No. 000-29599)).10(a)(5)
            Employment
                Agreement dated as of November 3, 2003 among Patriot National Bank,
                Bancorp and Robert F. O’Connell (incorporated by reference to Exhibit
                10(a)(5) to Bancorp’s Annual Report on Form 10-KSB for the year ended
                December 31, 2003 (Commission File No. 000-29599)).10(a)(6)
            Change
                of Control Agreement, dated as of November 3, 2003 between
                Robert F. O’Connell and Patriot National Bank (incorporated by
                reference to Exhibit 10(a)(6) to Bancorp’s Annual Report on Form 10-KSB
                for the year ended December 31, 2003 (Commission File No.
                000-29599)).


43


No.
            Description10(a)(8)
            Employment
                Agreement dated as of January 1, 2006 between Patriot National Bank
                and
                Marcus Zavattaro (incorporated by reference to Exhibit 10(a)(8) to
                Bancorp’s Annual Report on Form 10-KSB for the year ended December 31,
                2005 (Commission File No. 000-29599)).10(a)(9)
            License
                agreement dated July 1, 2003 between Patriot National Bank and L.
                Morris
                Glucksman (incorporated by reference to Exhibit 10(a)(9) to Bancorp’s
                Annual Report on Form 10-KSB for the year ended December 31, 2003
                (Commission File No. 000-29599)).10(a)(10)
            Employment
                Agreement dated as of October 23, 2003 among the Bank, Bancorp and
                Charles
                F. Howell (incorporated by reference to Exhibit 10(a)(10) to Bancorp’s
                Annual Report on form 10-KSB for the year ended December 31, 2003
                (Commission file No. 000-29599)).10(a)(11)
            Amendment
                No. 1 to the Amended and Restated Change of control Agreement, dated
                March
                30, 2006, between Robert F. O’Connell and Patriot National Bank
                (incorporated by reference to Exhibit 10(a)(11) to Bancorp’s Annual Report
                on Form 10-KSB for the year ended December 31, 2005 (Commission File
                No. 000-29599)).10(a)(12)
            2005
                Director Stock Award Plan (incorporated by reference to Exhibit 10(a)(12)
                to Bancorp’s Quarterly Report on Form 10-Q for the quarter ended June 30,
                2006 (Commission File No. 000-295999)).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)).14
            Code
                of Conduct for Senior Financial Officers (incorporated by reference
                to
                Exhibit 14 to Bancorp’s Annual Report on Form 10-KSB for the year ended
                December 31, 2004 (Commission File No.
                000-29599).


44


No.
            Description21
            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)).31(1)
            Rule
                13a-14(a)/15d-14(a) Certification of Chief Executive
                Officer31(2)
            Rule
                13a-14(a)/15d-14(a) Certification of Chief Financial
                Officer32
            Section
                1350 Certifications









45


**SIGNATURES**





In
      accordance with the requirements of the Securities Exchange Act of 1934, 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/
                Robert F. O’ConnellRobert
                F. O’Connell,Senior
                Executive Vice PresidentChief
                Financial Officer(On
                behalf of the registrant and aschief
                financial officer)November
                14, 2006










46