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Patriot Reports 3rd Quarter 2019 Income: Total Assets Grow to $972.0 million & Deposits to $762.1 Million

Declares 9th Consecutive Quarterly Dividend, with Assets, Net Loans & Deposits All Up Over Prior Year, While Adding Newest Market, Dallas, Texas, to SBA Lending Expansion

STAMFORD, Conn., Nov. 29, 2019 (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 income of $35,000 (net income of $27,000), or $0.01 per fully diluted share for the quarter ended September 30, 2019.  The Bank also announced the declaration of its 9th consecutive quarterly dividend of $0.01 per share.  The record date for this quarterly dividend will be December 9, 2019, with a dividend payment date of December 19, 2019.

As of September 30, 2019, the Bank’s total assets were $972.0 million, up 6% as comparable to the same period last year, as both net loans receivable grew to $791.9 million, up 5%, while deposits totaled $762.1 million, an increase of $42.6 million, or 6%, over the same period one year earlier. Patriot continues to maintain strong capital ratio, with earnings expected to return to normalized levels in future periods. 

As reported in its second quarter financials, the Bank had previously taken a charge-off related to a non-performing $2.3 million loan, resulting in a net loss of $1.3 million, or $0.33 per fully diluted share, for the nine months ended September 30, 2019.  This compares to a net income of $2.9 million, or $0.73 per fully diluted shares, in the prior year. The Bank has commenced actions in effort to pursue a recovery of this loan. 

The third quarter and full year results also reflect lower net interest income and a temporary increase in operating expenses associated with the organic build­up of the SBA lending business, expansion of deposit initiatives, and significant costs incurred in conjunction with strengthening institutional infrastructure, processes, controls and documentation to address regulatory requirements and to prepare crossing the $1 billion threshold.

Patriot has prioritized the expansion of its regional retail locations into urban centers across southern Connecticut, resulting in the bank having a presence in every major I­95 corridor community, from downtown Greenwich to downtown New Haven, Connecticut, plus Scarsdale, NY.  Simultaneously it built out a new SBA lending practice, opening offices in Jacksonville, Indianapolis, Stamford, and in Dallas, Texas for a current total of 16 locations.

During the third quarter, loans receivable decreased $11.4 million (1%), and total deposits decreased $5.5 million (1%). The decline in deposits was the result of an $18.1 million drop in wholesale deposit funding, offset by branch deposits growing $12.6 million.  Patriot also recognized a gain on the sale of SBA loans of $188,000, compared with $367,000 in the prior quarter and $3,000 in the third quarter of 2018.

Richard Muskus, Patriot’s President stated: “We continue to gain significant traction and expansion across our SBA lending business and expect to see operating expenses stabilize as the resolution of regulatory matters draws closer to completion. During the last year, Patriot has expanded both our community banking and SBA lending platform into new market locations, instituted enhanced governance policies and procedures and strengthened our institutional infrastructure. We believe this important reinvestment will serve to bolster performance for the long run.”

Mr. Muskus added: “Within the heavily populated 50-mile long New Haven to Greenwich corridor of Interstate 95, Patriot Bank’s continual investment into expanding, repositioning and enhancing its local market presence truly positions the institution well to provide banking customers an array of in-demand, convenient financial products and services.”

Financial Results

As of September 30, 2019, total assets were $972.0 million, as compared to $977.8 million at June 30, 2019 and $915.3 million at September 30, 2018, for a total asset growth of 6% over the past 12 months. Net loans receivable totaled $791.9 million, down 1% from $803.3 million at June 30, 2019, and up 5% over $756.6 million at September 30, 2018. Deposits totaled $762.1 million at September 30, 2019, as compared to $767.6 million at June 30, 2019 and $719.5 million at September 30, 2018, a 5.9% increase over last year.

Net interest income was $6.2 million in the third quarter of 2019, a decrease of 5% from the prior quarter, and a decline of 8% from the third quarter of 2018. For the year-to-date period, the net interest income was $19.2 million, a decrease of 8% from the prior year. This decline was due to higher deposit costs, the impact of non­performing and reduced rate loans, lower loan fees, and the impact of subordinated debt issued in June of 2018.  Higher retail deposit rates are primarily the result of increased rate competition in Patriot’s local retail markets.  The Bank is exploring alternative lower-cost funding sources which, along with a recent decline in market interest rates, is expected to positively impact the aggregate cost of funding in future periods

Net interest margin was 2.70% for the third quarter of 2019, as compared to 2.93% in the prior quarter and 3.11% for the third quarter of 2018.  This decline reflects the higher cost of funding.  The provision for loan losses in the third quarter of 2019 was $100,000, as compared to $2.9 million in the prior quarter and $50,000 for the third quarter of 2018. Year-to-date provision for loan losses was $3.2 million, as compared to $285,000 for the prior year. The 2019 increase was primarily due to a large provision booked in the second quarter of 2019 associated with a single loan relationship.

Non­interest income was $571,000 in the third quarter of 2019, 31% lower than the prior quarter, and 61% higher than the third quarter of 2018. The year-to-date non­interest income was $2.1 million in 2019, 95% higher than the prior year. The increase in non­interest income was due to realized gains on the sale of SBA loans.  Non­interest expense was $6.7 million in the third quarter of 2019, consistent with the last quarter, and 10% higher than the third quarter of 2018. The year-to-date non­interest expense was $19.9 million, 12% higher than the prior year and the income tax provision was $8,000 in the third quarter of 2019, representing an effective tax rate of 23%.

An increase in non-interest expense in 2019 was primarily related to new staff salaries and benefits to support new deposit, credit, finance initiatives, including the expansion into New Haven County, SBA lending across five national markets and added compliance support professionals. 

As of September 30, 2019, shareholders’ equity was $68.2 million, a decrease of $111,000 as compared to June 30, 2019. Patriot’s book value per share decreased to $17.37 at September 30, 2019, as compared to $17.41 at June 30, 2019.  The Bank’s capital ratios continue to be strong, maintaining its “well capitalized” regulatory status. As of September 30, 2019, the Bank’s Tier 1 leverage ratio was 9.47%, Tier 1 risk-based capital ratio was 10.82% and total risk-based capital ratio was 11.81%.

Patriot Bank is headquartered in Stamford and operates 16 locations: in Scarsdale, NY; and Darien, Fairfield, Greenwich, Milford, Norwalk, Orange, Stamford, Westport, 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, Stamford and now Dallas.

About the Company

Founded in 1994, and now celebrating its 25th 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 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 components of Bancorp’s periodic earnings and assets, (5) the fact that certain of the income recognized by Bancorp in any quarter may not be repeated in future periods, (6) the effect of changes in regulations applicable to Bancorp and the Bank and the conduct of its business, (7) changes in competition among financial service companies, including possible further encroachment of non­banks on services traditionally provided by banks, (8) the ability of competitors that are larger than Bancorp to provide products and services which it is impracticable for Bancorp to provide, (9) the state of the economy and real estate values in Bancorp’s market areas, and the consequent effect on the quality of Bancorp’s loans, (10) 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 Bancorp, (11) 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 Bancorp, (12) the application of generally accepted accounting principles, consistently applied, (13) the fact that one period of reported results may not be indicative of future periods, and (14) the state of the economy in the greater New York metropolitan area and its particular effect on Bancorp customers, vendors and communities and other such factors, including risk factors, as may be described in Bancorp’s other filings with the SEC.

Contracts:                            
Patriot Bank, N.A.
900 Bedford Street
Stamford, CT 06901
www.BankPatriot.com
  Richard Muskus
President
203-252-5939
  Joseph Perillo
Chief Financial Officer
203-252-5954
  Michael Carrazza
CEO and Chairman
203-251-8230
             


PATRIOT NATIONAL BANCORP, INC. AND SUBSIDIARY        
CONSOLIDATED BALANCE SHEETS (Unaudited)          
           
           
(In thousands, except share data) September 30, 2019   June 30, 2019   September 30, 2018
           
Cash and due from banks:          
Noninterest bearing deposits and cash $ 3,157     $ 5,578     $ 5,846  
Interest bearing deposits   46,844       45,538       42,873  
Total cash and cash equivalents   50,001       51,116       48,719  
Investment securities:          
Available-for-sale securities, at fair value   50,057       43,839       40,264  
Other investments, at cost   4,963       4,963       4,963  
Total investment securities   55,020       48,802       45,227  
           
Federal Reserve Bank stock, at cost   2,889       2,922       2,833  
Federal Home Loan Bank stock, at cost   4,477       4,513       4,928  
           
Gross loans receivable   800,314       811,777       763,254  
Allowance for loan losses   (8,405 )     (8,458 )     (6,605 )
Net loans receivable   791,909       803,319       756,649  
           
SBA loans held for sale   4,103       4,283       -  
Accrued interest and dividends receivable   3,538       3,678       3,612  
Premises and equipment, net   34,883       35,249       35,487  
Other real estate owned   2,400       1,954       991  
Deferred tax asset, net   11,495       11,132       10,907  
Goodwill   1,107       1,107       1,944  
Core deposit intangible, net   642       661       717  
Other assets   9,521       9,031       3,272  
Total assets $ 971,985     $ 977,767     $ 915,286  
           
Liabilities          
Deposits:          
Noninterest bearing deposits $ 80,772     $ 84,295     $ 81,687  
Interest bearing deposits   681,284       683,271       637,845  
Total deposits   762,056       767,566       719,532  
           
Federal Home Loan Bank and correspondent bank borrowings   100,000       100,000       90,000  
Senior notes, net   11,834       11,815       11,759  
Subordinated debt, net   9,745       9,738       9,720  
Junior subordinated debt owed to unconsolidated trust, net   8,100       8,098       8,092  
Note payable   1,242       1,291       1,436  
Advances from borrowers for taxes and insurance   2,182       3,239       1,659  
Accrued expenses and other liabilities   8,647       7,730       4,167  
Total liabilities   903,806       909,477       846,365  
           
Commitments and Contingencies   -       -       -  
           
Shareholders' equity          
Preferred stock   -       -       -  
Common stock   106,118       106,059       105,899  
Accumulated deficit   (37,222 )     (37,210 )     (36,078 )
Accumulated other comprehensive loss   (717 )     (559 )     (900 )
Total shareholders' equity   68,179       68,290       68,921  
           
Total liabilities and shareholders' equity $ 971,985     $ 977,767     $ 915,286  
           


PATRIOT NATIONAL BANCORP, INC. AND SUBSIDIARY            
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)            
                   
  Three Months Ended   Nine Months Ended
(In thousands, except per share amounts) September 30, 2019   June 30, 2019   September 30, 2018   September 30, 2019   September 30, 2018
                   
Interest and Dividend Income                  
Interest and fees on loans $ 10,245   $ 10,274     $ 9,413     $ 30,345     $ 27,388
Interest on investment securities   430     398       364       1,207       921
Dividends on investment securities   112     114       125       344       374
Other interest income   225     237       342       795       763
Total interest and dividend income   11,012     11,023       10,244       32,691       29,446
                   
Interest Expense                  
Interest on deposits   3,655     3,533       2,457       10,452       6,111
Interest on Federal Home Loan Bank borrowings    602     426       486       1,467       1,245
Interest on senior debt   229     228       229       686       686
Interest on subordinated debt   277     279       278       845       489
Interest on note payable and other   6     8       6       20       23
Total interest expense   4,769     4,474       3,456       13,470       8,554
                   
Net interest income   6,243     6,549       6,788       19,221       20,892
                   
Provision for Loan Losses   100     2,937       50       3,202       285
                   
Net interest income after provision for loan losses   6,143     3,612       6,738       16,019       20,607
                   
Non-interest Income                  
Loan application, inspection and processing fees    32     28       16       74       36
Deposit fees and service charges   123     116       126       366       392
Gains on sale of loans   188     367       3       864       69
Rental income   137     192       115       459       282
Other income   91     126       94       312       283
Total non-interest income   571     829       354       2,075       1,062
                   
Non-interest Expense                  
Salaries and benefits   3,480     3,608       2,794       10,272       8,417
Occupancy and equipment expenses   937     744       829       2,598       2,346
Data processing expenses   357     361       333       1,088       972
Professional and other outside services   721     803       565       2,233       1,594
Project expenses, net   212     (15 )     653       277       1,768
Advertising and promotional expenses   63     77       57       255       194
Loan administration and processing expenses   44     43       25       101       68
Regulatory assessments   152     395       275       862       825
Insurance expenses (income)   65     54       (56 )     160       52
Communications, stationary and supplies   118     131       146       383       369
Other operating expenses   530     527       426       1,626       1,194
Total non-interest expense   6,679     6,728       6,047       19,855       17,799
                   
Income (loss) before income taxes   35     (2,287 )     1,045       (1,761 )     3,870
                   
Provision (benefit) for Income Taxes   8     (632 )     276       (456 )     1,000
Net income (loss) $ 27   $ (1,655 )   $ 769     $ (1,305 )   $ 2,870
                   
Basic earnings (loss) per share $ 0.01   $ (0.42 )   $ 0.20     $ (0.33 )   $ 0.74
Diluted earnings (loss) per share $ 0.01   $ (0.42 )   $ 0.20     $ (0.33 )   $ 0.73
                   


FINANCIAL RATIOS AND OTHER DATA                  
                   
      Three Months Ended   Nine Months Ended
(Dollars in thousands)  September 30, 2019   June 30, 2019   September 30, 2018   September 30, 2019   September 30, 2018
                   
Quarterly Performance Data:                  
Net income (loss) $ 27     $ (1,655 )   $ 769     $ (1,305 )   $ 2,870  
Return on Average Assets   0.01 %     -0.69 %     0.33 %     -0.18 %     0.43 %
Return on Average Equity   0.16 %     -9.44 %     4.40 %     -2.50 %     5.60 %
Net Interest Margin   2.70 %     2.93 %     3.11 %     2.85 %     3.33 %
Efficiency Ratio   98.00 %     91.19 %     84.67 %     93.24 %     81.07 %
Efficiency Ratio excluding project costs   94.86 %     91.39 %     75.53 %     91.94 %     73.02 %
% increase (decrease) loans   -1.41 %     2.95 %     0.78 %     2.55 %     6.06 %
% increase (decrease) deposits   -0.72 %     1.96 %     1.00 %     2.53 %     12.88 %
                   
Asset Quality:                  
Nonaccrual loans $ 19,183     $ 19,405     $ 6,479     $ 19,183     $ 6,479  
Other real estate owned $ 2,400     $ 1,954     $ 991     $ 2,400     $ 991  
Total nonperforming assets $ 21,583     $ 21,359     $ 7,470     $ 21,583     $ 7,470  
                   
Nonaccrual loans / loans   2.40 %     2.39 %     0.85 %     2.40 %     0.85 %
Nonperforming assets / assets   2.22 %     2.18 %     0.82 %     2.22 %     0.82 %
Allowance for loan losses $ 8,405     $ 8,458     $ 6,605     $ 8,405     $ 6,605  
Valuation reserve $ 1,252     $ 1,416     $ 1,684     $ 1,252     $ 1,684  
Allowance for loan losses with valuation reserve $ 9,657     $ 9,874     $ 8,289     $ 9,657     $ 8,289  
                   
Allowance for loan losses / loans   1.05 %     1.04 %     0.87 %     1.05 %     0.87 %
Allowance / nonaccrual loans   43.81 %     43.59 %     101.94 %     43.81 %     101.94 %
Allowance for loan losses and valuation reserve / loans   1.20 %     1.21 %     1.09 %     1.20 %     1.09 %
Allowance for loan losses and valuation reserve / nonaccrual loans   50.34 %     50.88 %     127.94 %     50.34 %     127.94 %
                   
Gross loan charge-offs $ 282     $ 2,307     $ 5     $ 2,589     $ 19  
Gross loan (recoveries) $ (129 )   $ (5 )   $ (35 )   $ (183 )   $ (42 )
Net loan charge-offs (recoveries) $ 153     $ 2,302     $ (30 )   $ 2,406     $ (23 )
                   
Capital Data and Capital Ratios                  
Book value per share (1) $ 17.37     $ 17.41     $ 17.64     $ 17.37     $ 17.64  
Shares outstanding   3,925,002       3,922,610       3,906,966       3,925,002       3,906,966  
Bank Capital Ratios:                  
Leverage Ratio   9.47 %     9.61 %     9.92 %     9.47 %     9.92 %
Tier 1 Capital   10.82 %     10.66 %     10.61 %     10.82 %     10.61 %
Total Risk Based Capital   11.81 %     11.65 %     11.38 %     11.81 %     11.38 %
                   

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