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Patriot Reports 1st Quarter 2020 Loan Growth, and Deposit Growth offset by impact of COVID-19 Precautions and Provisions

Management’s strategic investment in digital banking plays key role in servicing throughout COVID-19 period

STAMFORD, Conn., June 22, 2020 (GLOBE NEWSWIRE) -- Patriot National Bancorp, Inc. (“Patriot,” “Bancorp” or the “Company”) (PNBK), the parent company of Patriot Bank, N.A. (the “Bank”), today announced pre­tax loss of $1.4 million (net loss of $1.1 million), or $0.27 basic and diluted loss per share for the quarter ended March 31, 2020.  Concurrently, the institution’s total assets increased 2% to $999.6 million, net loan portfolio increased 0.7%, deposits grew 4.4%, and net interest income was up 1.9% for the quarter ended March 31, 2020 as compared to the fourth quarter of 2019. 

In the first quarter of 2020, total assets increased to $999.6 million, up 2%, at March 31, 2020, as compared to $979.8 million at December 31, 2019. Net Loan portfolio increased $5.9 million or 0.7%, from $802.0 million at December 31, 2019 to $807.9 million at March 31, 2020. Deposits increased $33.7 million or 4.4%, from $769.5 million at December 31, 2019 to $803.2 million at March 31, 2020.

In its 2019 Form 10-K filed on April 29, 2020, Patriot reported a net loss of $2.8 million or $0.72 per share in the full year 2019, compared with net income of $3.2 million ($0.82 per share) in 2018.

In connection with the COVID-19 impact on its customer base, staff and the financial community, Patriot has taken the following actions:

  • All branches have remained open with customers re-directed to non-contact ATMs and Live Banker ATMs. Lobbies have been closed and customers welcomed by appointment only.  Staff is available to handle all banking matters, as necessary.
  • Daily branch staffing rotation schedules have been reduced. Staffing schedules have also been revised with expanded work at home arrangements, when practical, to better protect employees.
  • Patriot’s on-line banking services are being optimized, with expanded customer call center staff to better serve customers’ needs and meet significantly higher transaction volumes from Live Banker ATMs.  
  • We have connected with our borrower base in the context of the Coronavirus Aid, Relief and Economic Security (“CARES”) Act, resulting in requests for payment relief on loan balances totaling approximately $218.2 million, predominately commercial real estate loans and commercial industrial loans.
  • The Company continues to thoroughly evaluate incoming deferral requests and if appropriate, will grant payment deferrals considering regulatory guidance.

The earnings decline in first quarter 2020 was primarily due to a material increase in provision for loan losses of $804,000 due primarily to the impact of COVID-19.  Fourth quarter 2019 results had also been negatively impacted by an increase in loan loss provisions of $1.8 million primarily associated with a single commercial real estate loan that was restructured in December of 2019, the inability to successfully execute SBA loan sales, and higher operating costs.

Michael Carrazza, Patriot’s Chairman and interim CEO stated: “The past six months have been a challenging time.  Our Allowance for Loan Losses significantly increased as a result of a single commercial loan and the impact of the COVID-19 pandemic.  In efforts to protect capital given the uncertainties surrounding the COVID-19 situation, we promptly adjusted our strategic plan by limiting loan growth, realigning management resources and further reducing operating expenses.  Loan originations will continue, albeit on a limited basis, until future uncertainty and the impact of the COVID-19 pandemic are mitigated.

“In parallel, we have initiated changes at the senior management level, including the search for a seasoned community bank leader as our candidate to lead day-to-day operations as President and CEO.  We have identified a candidate and are currently waiting for the required regulatory non-objection before proceeding to finalize the appointment.  Lastly, each business unit has undergone heavy analysis of unit profitability and realignment in addition to material enterprise-wide cost reductions from the board level down.”

Mr. Carrazza added: “The bank’s foundation remains strong.  We are looking forward to soon naming a new President and CEO to oversee operations and several new initiatives we have underway.  Our capital ratios continue to receive the ‘well-capitalized’ designation, while the aforementioned strategic changes are expected to result in a strengthening of those ratios over the balance of the year.  In addition, our SBA and prepaid card businesses retain untapped potential, which can provide a significant boost to future growth in profitability.”

Financial Results

As of March 31, 2020, total assets were $999.6 million, as compared to $979.8 million at December 31, 2019 and $953.1 million at March 31, 2019, for a total asset growth of 4.9% over the past 12 months. Net loans receivable totaled $807.9 million, as compared to $802.0 million at December 31, 2019 and $780.7 million at March 31, 2019, up 3.5% over the past 12 months. Deposits totaled $803.2 million at March 31, 2020, as compared to $769.5 million at December 31, 2019 and $752.8 million at March 31, 2019, a 6.7% increase over the past 12 months.

Net interest income was $6.3 million in the first quarter of 2020, an increase of 1.9% from the fourth quarter of 2019, and a decline of 0.6% from the first quarter of 2019.

Net interest margin was 2.72% in the first quarter of 2020, as compared to 2.65% in the fourth quarter of 2019 and 2.88% in the first quarter of 2019.  The decline in net interest margin as compared to the first quarter of 2019 reflects the increase in retail deposit costs associated with an increasingly competitive local rate environment and the increase in the rate paid on FHLB borrowings associated with the conversion of certain borrowings from a low variable initial rate to a higher fixed rate. This was partially offset by a higher loan volume.

The provision for loan losses in the first quarter of 2020 was $804,000, as compared to $1.8 million in the fourth quarter of 2019 and $165,000 in the first quarter of 2019. The 2020 increase as compared to the first quarter of 2019 was primarily due to an increase in the specific reserve for a cash flow-dependent loan and additional reserve attributable to COVID-19. In the fourth quarter of 2019, the provision for loan losses included an additional allowance of loan loss reserve of $1.5 million in connection with accounting for one troubled debt restructuring.

Non­interest income was $421,000 in the first quarter of 2020, 3.2% higher than the fourth quarter of 2019, and 43.6% lower than the first quarter of 2019. The decrease in non­interest income as compared to the first quarter of 2019 was due to lower realized gains on the sale of SBA loans of $368,000 in the first quarter of 2020.  Non­interest expense was $7.4 million in the first quarter of 2020, 8.4% higher than the fourth quarter of 2019, and 14.3% higher than the first quarter of 2019. The increase in non-interest expense in 2020 was primarily related to higher staff salaries and benefits for the build-up of the SBA team, new deposit initiatives, and expansion of credit, finance and compliance support functions.

The income tax benefit was $359,000 in the first quarter of 2020, representing an effective tax rate of 25%.

As of March 31, 2020, shareholders’ equity was $64.6 million, a decrease of $2.4 million, as compared to December 31, 2019. Patriot’s book value per share decreased to $16.43 at March 31, 2020, as compared to $17.04 at December 31, 2019.  The Bank’s capital ratios continue to be strong, maintaining its “well capitalized” regulatory status. As of March 31, 2020, the Bank’s Tier 1 leverage ratio was 9.16%, Tier 1 risk-based capital ratio was 10.51% and total risk-based capital ratio was 11.76%.

Patriot temporarily suspended its quarterly dividend and expects to resume when the current economic uncertainties are settled.

Patriot Bank is headquartered in Stamford and operates 9 branch locations: in Scarsdale, NY; and Darien, Fairfield, Greenwich, Milford, Norwalk, Orange, Stamford, Westport, Ct. with Express Banking locations at Bridgeport/ Housatonic Community College, downtown New Haven and Trumbull at Westfield Mall. The Bank also maintains SBA lending offices in Jacksonville, Indianapolis, and Stamford, along with a Rhode Island operations center.

About the Company

Founded in 1994, and now celebrating its 26th year, Patriot National Bancorp, Inc. (“Patriot” or “Bancorp”) is the parent holding company of Patriot Bank N.A. (“Bank”), a nationally chartered bank headquartered in Stamford, CT. Patriot operates with full service branches in Connecticut and New York and provides lending products and services nationally. Patriot’s mission is to serve its local community and nationwide customer base by providing a growing array of banking solutions to meet the needs of individuals and small businesses owners. Patriot places great value in the integrity of its people and how it conducts business. An emphasis on building strong client relationships and community involvement are cornerstones of our philosophy as we seek to maximize shareholder value.

“Safe Harbor” Statement Under Private Securities Litigation Reform Act of 1995

Certain statements contained in Bancorp’s public statements, including this one, 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 the Company’s interest earning assets and the interest paid on its interest bearing liabilities; (2) the timing of re-pricing of the Company’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 the Company and the Bank and the conduct of its business; (5) changes in competition among financial service companies, including possible further encroachment of non-banks on services traditionally provided by banks; (6) the ability of competitors that are larger than the Company to provide products and services which it is impracticable for the Company to provide; (7) the state of the economy and real estate values in the Company’s market areas, and the consequent effect on the quality of the Company’s loans; (8) demand for loans and deposits in our market area; (9) recent governmental initiatives that are expected to have a profound effect on the financial services industry and could dramatically change the competitive environment of the Company; (10) other legislative or regulatory changes, including those related to residential mortgages, changes in accounting standards, and Federal Deposit Insurance Corporation (“FDIC”) premiums that may adversely affect the Company; (11) the application of generally accepted accounting principles, consistently applied; (12) the fact that one period of reported results may not be indicative of future periods; (13) the state of the economy in the greater New York metropolitan area and its particular effect on the Company's customers, vendors and communities and other such factors, including risk factors, as may be described in the Company’s other filings with the Securities and Exchange Commission (the “SEC”); (14) political, social, legal and economic instability, civil unrest, war, catastrophic events, acts of terrorism; (15) widespread outbreaks of infectious diseases, including the ongoing novel coronavirus (COVID-19) outbreak; (16) changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses; (17) our ability to access cost-effective funding; (18) our ability to implement and change our business strategies; (19) changes in the quality or composition of our loan or investment portfolios; (20) technological changes that may be more difficult or expensive than expected; (21) our ability to manage market risk, credit risk and operational risk in the current economic environment; (22) our ability to enter new markets successfully and capitalize on growth opportunities; (23) changes in consumer spending, borrowing and savings habits; (24) our ability to retain key employees; and (25) our compensation expense associated with equity allocated or awarded to our employees.

Contacts:                                    
Patriot Bank, N.A.
900 Bedford Street
Stamford, CT 06901
www.BankPatriot.com
  Joseph Perillo
Chief Financial Officer
203-252-5954
  Michael Carrazza
Chairman & interim CEO
203-251-8230
         


PATRIOT NATIONAL BANCORP, INC. AND SUBSIDIARIES            
CONSOLIDATED BALANCE SHEETS (Unaudited)              
               
               
(In thousands, except share data) March 31, 2020   December 31, 2019   March 31, 2019   December 31, 2018
               
Assets              
Cash and due from banks:              
Noninterest bearing deposits and cash $ 1,806     $ 2,693     $ 6,661     $ 7,381  
Interest bearing deposits   50,350       36,711       49,971       59,056  
Total cash and cash equivalents   52,156       39,404       56,632       66,437  
Investment securities:              
Available-for-sale securities, at fair value   44,830       48,317       40,275       39,496  
Other investments, at cost   4,450       4,450       4,963       4,963  
Total investment securities   49,280       52,767       45,238       44,459  
               
Federal Reserve Bank stock, at cost   2,897       2,897       2,892       2,866  
Federal Home Loan Bank stock, at cost   4,477       4,477       4,513       4,928  
               
Gross loans receivable   818,841       812,164       788,536       780,376  
Allowance for loan losses   (10,916 )     (10,115 )     (7,823 )     (7,609 )
Net loans receivable   807,925       802,049       780,713       772,767  
               
SBA loans held for sale   17,996       15,282       -       -  
Accrued interest and dividends receivable   3,801       3,603       3,621       3,766  
Premises and equipment, net   34,312       34,568       35,335       35,435  
Other real estate owned   2,400       2,400       2,945       2,945  
Deferred tax asset, net   11,989       11,133       10,357       10,851  
Goodwill   1,107       1,107       1,107       1,728  
Core deposit intangible, net   605       623       680       698  
Other assets   10,634       9,526       9,075       4,816  
Total assets
$ 999,579     $ 979,836     $ 953,108     $ 951,696  
               
Liabilities              
Deposits:              
Noninterest bearing deposits $ 83,583     $ 88,135     $ 82,248     $ 84,471  
Interest bearing deposits   719,631       681,400       670,573       658,810  
Total deposits   803,214       769,535       752,821       743,281  
               
Federal Home Loan Bank and correspondent bank borrowings   90,000       100,000       90,000       100,000  
Senior notes, net   11,871       11,853       11,796       11,778  
Subordinated debt, net   9,760       9,752       9,731       9,723  
Junior subordinated debt owed to unconsolidated trust, net   8,104       8,102       8,096       8,094  
Note payable   1,143       1,193       1,339       1,388  
Advances from borrowers for taxes and insurance   2,637       3,681       1,922       2,926  
Accrued expenses and other liabilities   8,227       8,726       7,754       5,166  
Total liabilities   934,956       912,842       883,459       882,356  
               
Commitments and Contingencies   -       -       -       -  
               
Shareholders' equity              
Preferred stock   -       -       -       -  
Common stock   106,213       106,170       106,004       105,956  
Accumulated deficit   (39,845 )     (38,773 )     (35,517 )     (35,790 )
Accumulated other comprehensive loss   (1,745 )     (403 )     (838 )     (826 )
Total shareholders' equity   64,623       66,994       69,649       69,340  
               
Total liabilities and shareholders' equity
$ 999,579     $ 979,836     $ 953,108     $ 951,696  
               



PATRIOT NATIONAL BANCORP, INC. AND SUBSIDIARIES            
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)          
               
  Three Months Ended
(In thousands, except per share amounts) March 31, 2020   December 31, 2019   March 31, 2019   December 31, 2018
               
Interest and Dividend Income              
Interest and fees on loans $ 10,033     $ 10,223     $ 9,755   $ 10,158  
Interest on investment securities   416       460       379     385  
Dividends on investment securities   138       109       118     116  
Other interest income   135       161       333     270  
Total interest and dividend income   10,722       10,953       10,585     10,929  
               
Interest Expense              
Interest on deposits   3,200       3,533       3,264     2,913  
Interest on Federal Home Loan Bank borrowings   697       708       439     389  
Interest on senior debt   229       229       229     229  
Interest on subordinated debt   268       273       289     278  
Interest on note payable and other   5       5       6     15  
Total interest expense   4,399       4,748       4,227     3,824  
               
Net interest income   6,323       6,205       6,358     7,105  
               
Provision for Loan Losses   804       1,769       165     1,018  
               
Net interest income after provision for loan losses   5,519       4,436       6,193     6,087  
               
Non-interest Income              
Loan application, inspection and processing fees   53       39       14     15  
Deposit fees and service charges   114       126       127     132  
Gains on sale of loans   12       27       380     93  
Rental income   131       130       130     131  
Other income   111       86       95     194  
Total non-interest income   421       408       746     565  
               
Non-interest Expense              
Salaries and benefits   3,861       3,409       3,184     3,324  
Occupancy and equipment expenses   949       923       917     813  
Data processing expenses   390       375       370     341  
Professional and other outside services   784       777       709     583  
Project expenses, net   94       188       80     330  
Advertising and promotional expenses   147       125       115     64  
Loan administration and processing expenses   24       54       14     25  
Regulatory assessments   440       371       315     317  
Insurance expenses (income)   70       (24 )     41     38  
Communications, stationary and supplies   120       135       134     134  
Other operating expenses   492       466       569     467  
Total non-interest expense   7,371       6,799       6,448     6,436  
               
(Loss) income before income taxes   (1,431 )     (1,955 )     491     216  
               
(Benefit) provision for Income Taxes   (359 )     (443 )     168     (110 )
Net (loss) income $ (1,072 )   $ (1,512 )   $ 323   $ 326  
               
Basic (loss) earnings per share $ (0.27 )   $ (0.39 )   $ 0.08   $ 0.08  
Diluted (loss) earnings per share $ (0.27 )   $ (0.39 )   $ 0.08   $ 0.08  
               


FINANCIAL RATIOS AND OTHER DATA              
               
               
  Three Months Ended
(Dollars in thousands) March 31, 2020   December 31, 2019   March 31, 2019   December 31, 2018
               
Quarterly Performance Data:              
Net (loss) income $ (1,072 )   $ (1,512 )   $ 323     $ 326  
Return on Average Assets   -0.44 %     -0.61 %     0.14 %     0.14 %
Return on Average Equity   -6.37 %     -8.74 %     1.87 %     1.85 %
Net Interest Margin   2.72 %     2.65 %     2.88 %     3.20 %
Efficiency Ratio   109.28 %     102.80 %     90.78 %     83.91 %
Efficiency Ratio excluding project costs   107.90 %     101.47 %     89.65 %     79.61 %
% increase loans   0.82 %     1.48 %     1.05 %     2.24 %
% increase deposits   4.38 %     0.98 %     1.28 %     3.30 %
               
Asset Quality:              
Nonaccrual loans $ 16,450     $ 18,049     $ 28,029     $ 19,186  
Other real estate owned $ 2,400     $ 2,400     $ 2,945     $ 2,945  
Total nonperforming assets $ 18,850     $ 20,449     $ 30,974     $ 22,131  
               
Nonaccrual loans / loans   2.01 %     2.22 %     3.55 %     2.46 %
Nonperforming assets / assets   1.89 %     2.09 %     3.25 %     2.33 %
Allowance for loan losses $ 10,916     $ 10,115     $ 7,823     $ 7,609  
Valuation reserve $ 1,100     $ 1,258     $ 1,384     $ 1,712  
Allowance for loan losses with valuation reserve $ 12,016     $ 11,373     $ 9,207     $ 9,321  
               
Allowance for loan losses / loans   1.33 %     1.25 %     0.99 %     0.98 %
Allowance / nonaccrual loans   66.36 %     56.04 %     27.91 %     39.66 %
Allowance for loan losses and valuation reserve / loans   1.47 %     1.40 %     1.17 %     1.19 %
Allowance for loan losses and valuation reserve / nonaccrual loans   73.05 %     63.01 %     32.85 %     48.58 %
               
Gross loan charge-offs $ 44     $ 71     $ -     $ 16  
Gross loan (recoveries) $ (41 )   $ (11 )   $ (49 )   $ (2 )
Net loan charge-offs (recoveries) $ 3     $ 60     $ (49 )   $ 14  
               
Capital Data and Capital Ratios              
Book value per share (1) $ 16.43     $ 17.04     $ 17.77     $ 17.73  
Shares outstanding   3,932,841       3,930,669       3,919,610       3,910,674  
Bank Capital Ratios:              
Leverage Ratio   9.16 %     9.28 %     9.79 %     9.84 %
Tier 1 Capital   10.51 %     10.64 %     10.99 %     10.62 %
Total Risk Based Capital   11.76 %     11.83 %     11.91 %     11.50 %
               

(1) Book value per share represents shareholders' equity divided by outstanding shares.