The length of the blanket has to be reduced by two patches, from 12 to 10, and the width has to be increased by one patch, from 9 to 10. That suggests cutting along a zigzag line, going along one patch and then down two patches. If you do that on each side of the central missing strip, as in this picture, then you can reassemble it into a 10x10 square by shifting the top part one patch to the right and lowering it by two patches, so that it fits snugly onto the lower part.