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Patriot Reports first quarter 2019 Net Income of $323 thousand; Loans and deposits expand and SBA lending business grows; Declares quarterly dividend

STAMFORD, Conn., May 24, 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 pre-tax income of $491,000, and  net income of $323,000, or $0.08 per fully diluted share for the quarter ended March 31, 2019.  The net income was essentially unchanged from the prior quarter and $742,000 below the first quarter of 2018.

The decline from the 2018 first quarter was due to a combination of: a decline in net interest income associated with higher retail deposit rates; a higher balance of more costly wholesale funding; and the impact of reserves associated with non-performing loans.  The first quarter results  include an increase in operating expenses associated with the organic build-up of the Bank’s SBA lending business, expansion of deposit initiatives, and costs incurred in conjunction with enhancing processes, controls and documentation in response to the previously announced Formal Agreement with the Office of the Comptroller of the Currency (OCC), the Bank’s primary regulator.

In the first quarter of 2019, Patriot recognized a gain on the sale of SBA loans of $456,000, compared with $93,000 in the prior quarter and none in the first quarter of 2018.  The Bank continues to maintain strong capital ratios and earnings are expected to return to normalized levels going forward.”

CEO Michael Carrazza stated: “The first quarter of 2019 resulted in lower than expected earnings.  A confluence of rising deposit rates, cost of funds, and reserves, was compounded by notable increases in regulatory compliance costs.  The Bank had positioned its balance sheet, funding costs and operating focus in anticipation of completing the acquisition of Hana SBL; it was disappointing to not have been able to obtain regulatory approval to close the transaction.” 

Patriot and Hana SBL mutually agreed to terminate the transaction in March 2019.  In response, Patriot has increased efforts to organically build its SBA business, while strengthening internal process and controls to meet current regulatory standards.

Richard Muskus, Patriot’s President, added: “We continued to produce positive results in our core competency of loan originations with approximately $70 million in new loans funded and committed in the first quarter of 2019.  Further, we have seen our first period of significant contribution from our growing SBA lending business and are looking forward to initiating new deposit gathering initiatives in the second half of the year that are expected to reduce funding costs and strengthen ongoing Bank operating performance.”

Regarding enhancements to the operating environment, Mr. Muskus added:  “We are very encouraged by the progress we have made in strengthening our internal processes and controls and are maintaining a very productive relationship with our regulators.  These enhancements combined with our other business initiatives will make us a stronger, more well-rounded and more profitable Company moving forward.”  

Patriot also announced today the declaration of its eighth consecutive quarterly dividend of $0.01 per share. The record date for this quarterly dividend will be June 4, 2019 with a dividend payment date of June 11, 2019.

Financial Results

As of March 31, 2019, total assets were $953.1 million, as compared to $951.7 million at December 31, 2018 and $870.4 million at March 31, 2018, for a total asset growth of 10% over the past 12 months.  Net loans receivable totaled $780.7 million, up 1% over $772.8 million at December 31, 2018, and up 9% over $718.1 million at March 31, 2018. Deposits continued to grow to $752.8 million at March 31, 2019, as compared to $743.3 million at December 31, 2018 and $655.3 million at March 31, 2018.

Net interest income was $6.3 million in the first quarter of 2019, a decrease of 11% and 10% from the prior quarter and the corresponding 2018 period, respectively.  The decline in both comparisons was due to higher deposit costs, the impact of non-performing and reduced rate loans and lower loan fees while the decline from the first quarter of 2019 also reflected the impact of the cost of sub debt raised in June of 2018.

Net interest margin was 2.87% for the first quarter of 2019, as compared to 3.20% in the prior quarter and 3.55% for the corresponding 2018 period. 

The provision for loan losses in the first quarter of 2019 was $165,000, as compared to $1.0 million in the prior quarter and $185,000 for the corresponding 2018 period. The provision for loan losses in the fourth quarter of 2018 was primarily due to a large provision booked in December 2018 associated with one loan stemming from operating cash flow weaknesses and a collateral shortfall.

Non-interest income was $822,000 in the first quarter of 2019, 45% higher than the prior quarter, and 155% higher than the prior year period, primarily due to realized gains on the sale of SBA loans.

Non-interest expense was $6.5 million in the first quarter of 2019, 1% higher than the first quarter of the prior year, and 12% higher than the prior year period. The increase compared to the first quarter of the prior year was primarily due to an increase in salaries and benefits associated with the build-up of the SBA lending team, the completion of the acquisition of Prime Bank, and increased headcount supporting new deposit initiatives and the expansion of credit, finance and compliance support functions.

The income tax provision was $168,000 in the first quarter of 2019.

As of March 31, 2019, shareholders’ equity was $69.6 million, an increase of $309,000 as compared to December 31, 2018. Patriot’s book value per share increased to $17.77 at March 31, 2019, as compared to $17.73 at December 31, 2018.

The Bank’s capital ratios continue to be strong, as the Bank maintains its “well capitalized” regulatory status. As of March 31, 2019, the Bank’s Tier 1 leverage ratio was 9.79%, Tier 1 risk-based capital ratio was 10.99% and total risk-based capital ratio was 11.91%.

About the Company  

Founded in 1994, 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 non-banks 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,  (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.

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


                 
                 
PATRIOT NATIONAL BANCORP, INC. AND SUBSIDIARY                
CONSOLIDATED BALANCE SHEETS                
(Unaudited)                        
Dollars in thousands   March 31,
 2019
  December 31,
 2018
  March 31,
 2018
                             
Assets                          
                             
Noninterest bearing deposits and cash   $   6,661     $   7,381     $   3,865  
Interest bearing deposits       49,971         59,056         57,615  
  Total cash and cash equivalents       56,632         66,437         61,480  
                             
Available-for-sale securities, at fair value       40,275         39,496         24,793  
Other investments, at cost       4,963         4,963         4,962  
  Total investment securities       45,238         44,459         29,755  
                             
FRB & FHLB stock, at cost       7,405         7,794         8,415  
                             
Gross loans receivable       788,536         780,376         724,555  
Allowance for loan losses       (7,823 )       (7,609 )       (6,485 )
  Net loans receivable       780,713         772,767         718,070  
                             
Accrued interest and dividends receivable       3,621         3,766         3,505  
Premises and equipment, net       35,335         35,435         35,638  
Other real estate owned       2,945         2,945         -   
Deferred tax asset, net        10,357         10,851         11,335  
Goodwill       1,107         1,728         -   
Core deposit intangible, net       680         698         -   
Other assets       9,075         4,816         2,219  
  Total assets   $    953,108     $    951,696     $    870,417  
                             
Liabilities and Shareholders' Equity                        
                             
Deposits                        
  Noninterest bearing deposits   $   82,248     $   84,471     $   71,736  
  Interest bearing deposits       670,573         658,810         583,562  
            752,821         743,281         655,298  
                             
Federal Home Loan Bank and correspondent bank borrowings       90,000         100,000         120,000  
Senior  notes, net       11,796         11,778         11,722  
Subordinated debt, net       9,731         9,723         -   
Junior subordinated debt owed to unconsolidated trust, net       8,096         8,094         8,088  
Note payable       1,339         1,388         1,532  
Advances from borrowers for taxes and insurance       1,922         2,926         1,904  
Accrued expenses and other liabilities       7,754         5,166         4,268  
    Total liabilities       883,459         882,356         802,812  
                             
Preferred Stock       -          -          -   
Common stock       40         40         40  
Additional paid-in capital       107,143         107,095         106,928  
Accumulated deficit       (35,517 )       (35,790 )       (37,805 )
Treasury stock, at cost       (1,179 )       (1,179 )       (1,179 )
Accumulated other comprehensive loss       (838 )       (826 )       (379 )
    Total Shareholders' Equity       69,649         69,340         67,605  
                             
  Total Liabilities and Shareholders' Equity   $    953,108     $    951,696     $    870,417  
                             
                             

 

PATRIOT NATIONAL BANCORP, INC. AND SUBSIDIARY                        
CONSOLIDATED STATEMENTS OF INCOME                         
(Unaudited)   Three Months Ended
Dollars in thousands, except per share data   March 31,
2019
  December 31,
2018
  March 31,
2018
                             
Interest and Dividend Income                        
  Interest and fees on  loans   $ 9,741     $ 10,158     $ 8,774  
  Interest on investment securities     385       385       266  
  Dividends on investment securities     118       116       121  
  Other interest income     327       270       151  
    Total interest and dividend income     10,571       10,929       9,312  
                             
Interest Expense                        
  Interest on deposits     3,264       2,913       1,657  
  Interest on Federal Home Loan Bank borrowings     439       389       257  
  Interest on senior debt     229       229       229  
  Interest on subordinated debt     289       278       99  
  Interest on note payable and other     6       15       7  
    Total interest expense     4,227       3,824       2,249  
                             
    Net interest income       6,344         7,105         7,063  
                             
Provision for loan losses     165       1,018       185  
                             
    Net interest income after provision for loan losses     6,179       6,087       6,878  
                             
Non-interest Income                        
  Loan application, inspection and processing fees     14       15       8  
  Deposit fees and service charges     127       132       134  
  Gains on sale of loans     456       93       -  
  Rental income     130       131       84  
  Other income     95       194       96  
    Total non-interest income       822         565         322  
                             
Non-interest Expense                        
  Salaries and benefits     3,184       3,324       2,769  
  Occupancy and equipment expense     917       813       741  
  Data processing expense     370       341       317  
  Professional and other outside services     771       583       572  
  Merger/tax initiative project expenses     80       330       523  
  Advertising and promotional expenses     115       64       78  
  Loan administration and processing expenses     14       25       13  
  Regulatory assessments     315       317       252  
  Insurance expenses     41       38       55  
  Material and communications     134       134       113  
  Other operating expenses     569       467       358  
    Total non-interest expense       6,510         6,436         5,791  
                             
    Income before income taxes     491       216       1,409  
                             
Provision (benefit) for Income Taxes     168       (110 )     344  
    Net income   $    323     $    326     $    1,065  
                             
    Basic earnings per share   $ 0.08     $ 0.08     $ 0.27  
    Diluted earnings per share   $ 0.08     $ 0.08     $ 0.27  
                             
                             

 

FINANCIAL RATIOS AND OTHER DATA                
                     
        Quarter Ended
          March 31,
 2019
    December 31,
 2018
  March 31,
 2018
                             
Quarterly Performance Data:
                       
    Net Income   $ 323     $ 326     $ 1,065  
    Return on Average Assets     0.14 %     0.14 %     0.51 %
    Return on Average Equity     1.87 %     1.85 %     6.37 %
    Net Interest Margin     2.87 %     3.20 %     3.55 %
    Efficiency Ratio     90.83 %     83.91 %     78.41 %
    Efficiency Ratio excluding project costs     89.72 %     79.61 %     71.32 %
    % increase loans     1.05 %     2.24 %     0.68 %
    % increase deposits     1.28 %     3.30 %     2.80 %
                             
Asset Quality:                        
    Nonaccrual loans   $ 28,029     $ 19,186     $ 5,036  
    Other real estate owned   $ 2,945     $ 2,945     $ -  
    Total nonperforming assets   $ 30,974     $ 22,131     $ 5,036  
                             
    Nonaccrual loans / loans     3.55 %     2.46 %     0.70 %
    Nonperforming assets / assets     3.25 %     2.33 %     0.58 %
    Allowance for loan losses   $ 7,823     $ 7,609     $ 6,485  
    Valuation reserve   $ 1,384     $ 1,712     $ -  
    Allowance for loan losses with valuation reserve   $ 9,207     $ 9,321     $ 6,485  
                             
    Allowance for loan losses / loans     0.99 %     0.98 %     0.90 %
    Allowance / nonaccrual loans     27.91 %     39.66 %     128.77 %
    Allowance for loan losses and valuation reserve / loans     1.17 %     1.19 %     0.90 %
    Allowance for loan losses and valuation reserve / nonaccrual loans     32.85 %     48.58 %     128.77 %
                             
    Gross loan charge-offs   $ -     $ 16     $ -  
    Gross loan (recoveries)   $ (49 )   $ (2 )   $ (3 )
    Net loan charge-offs (recoveries)   $ (49 )   $ 14     $ (3 )
                             
Capital Data and Capital Ratios                        
    Book value per share (1)   $ 17.77     $ 17.73     $ 17.32  
    Shares outstanding     3,919,610       3,910,674       3,902,610  
Bank Capital Ratios:                        
    Leverage Ratio     9.79 %     9.84 %     9.72 %
    Tier 1 Capital     10.99 %     10.62 %     10.90 %
    Total Risk Based Capital     11.91 %     11.50 %     11.76 %
                             
(1)  Book value per share represents shareholders' equity divided by outstanding shares.