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Patriot Reports full year 2018 Net Income of $3.0 million; Loans and deposits continue to expand and assets up year over year; Declares quarterly dividend

STAMFORD, Conn., Feb. 26, 2019 (GLOBE NEWSWIRE) -- Patriot National Bancorp, Inc. (“Patriot”, “Bancorp”) (PNBK), the parent company of Patriot Bank, N.A. (the “Bank”), today announced that assets for the fourth quarter of 2018 increased by 12% from the end of 2017, deposits grew by 17% and pre-tax income was $216,000, with net income at $172,000, or $0.04 per fully diluted share.  Excluding the recovery from the prior year and the special project costs in the current year, pre-tax earnings in 2018 grew materially year over year as the result of strong loan growth stemming from over $230 million of new loans funded and committed, and higher non-interest income resulting from the Bank’s SBA lending initiative. Pre-tax earnings reported for the year 2018 included significant, non-recurring transaction expenses of $2.1 million.  

Fourth quarter net income includes an addition of $1.0 million to the Bank’s provision for loan losses, and $330,000 of expenses, primarily related to costs associated with the acquisition of Prime Bank and Hana Small Business Lending (“Hana SBL”).

The increase to provision for loan losses was primarily due to a single credit experiencing cash flow difficulty.  As a result of the higher provisions and project costs, the fourth quarter net income was lower than the $769,000 and $600,000 reported in the third quarter and the same quarter last year, respectively.  For the year ended December 31, 2018, net income was $3.0 million, or $0.78 per fully diluted share, as compared with $4.1 million, or $1.06 per fully diluted share, for the year ended December 31, 2017.

The year-to-date net income is not comparable to the same period in the prior year due to a $2.8 million credit recovery that was recognized in the first quarter of 2017 and $2.1 million of non-recurring acquisition-related expenses recognized in 2018.

On May 10, 2018 Patriot completed its acquisition of Prime Bank. The closing of the transaction added a new Patriot branch located in the Town of Orange, New Haven County, Connecticut. 

CEO Michael Carrazza stated: “2018 was a productive year for Patriot. Core performance and assets grew steadily, the acquisition of Prime Bank was completed, and the Bank’s SBA loan division has made significant strides.  In February 2018, Patriot entered in to a transaction with Hana Small Busines Lending, which remains subject to regulatory approvals.  Value-creating activities have led to a significant increase in regulatory oversight from prior years. The Bank continues to maintain strong capital and sustained growth in its core operations.”

Patriot became an approved SBA lender at the end of 2017 and was designated a “preferred lender” by the SBA earlier in this year, enabling it to approve loans to small businesses and entrepreneurs more quickly and efficiently.  Patriot has now opened four new SBA Business Development offices.

Richard Muskus, Patriot’s President, added: “The year 2018 was very encouraging for Patriot, as we have seen growth and development on a number of key initiatives that we expect to yield strong performance into 2019 and beyond.  We continued to demonstrate impressive trajectory in our core competency of loan originations, with approximately $230 million in new loans funded and committed in 2018.  Further, we have significantly advanced the national footprint and platform, expanding our national SBA business into Atlanta, Indianapolis and Jacksonville.  We have also established a platform for new deposit gathering initiatives in 2019 that are expected to reduce funding costs and materially strengthen ongoing Bank operating performance.”

Regarding the previously announced November 20, 2018 Formal Agreement with the OCC, Mr. Muskus added:  “We have made  progress, addressing each of the items in accordance with our commitment under the agreement, and we continue to respond and address any enhancements requested by the OCC.”  

Patriot also announced today the declaration of its seventh consecutive quarterly dividend of $0.01 per share. The record date for this quarterly dividend will be March 11, 2019 with a dividend payment date of March 18, 2019.

Financial Results

As of December 31, 2018, total assets were $951.5 million, as compared to $915.3 million at September 30, 2018 and $852.1 million at December 31, 2017, for a total asset growth of 12% in the one-year period.  Net loans receivable totaled $772.8 million, up 2% over $756.6 million at September 30, 2018, and up 8% over $713.4 million at December 31, 2017. Deposits continued to grow to $743.3 million at December 31, 2018, as compared to $719.5 million at September 30, 2018 and $637.4 million at December 31, 2017.

Net interest income was $7.1 million in the quarter, increased 5% and 2% from the prior quarter and the corresponding 2017 period, respectively. The year-to-date net interest income of $28.0 million was 8% higher than the $25.9 million in the year ended December 31, 2017.

Net interest margin was 3.20% for the fourth quarter of 2018, as compared to 3.11% in the prior quarter and 3.51% for the fourth quarter of 2017.  For the full year period, net interest margin declined from 3.58% to 3.29%.  The decline in net interest margin in the year reflects the impact of subordinated debt added on June 29, 2018 and increasing deposit costs associated with higher rates paid on retail deposits and an increased reliance on more expensive wholesale funding sources.

The provision for loan losses in the quarter was $1.0 million, as compared to $87,000 in the fourth quarter of 2017. The year-to-date provision for loan losses was $1.3 million, as compared to a net credit for loan losses of $857,000, which reflected the previously noted recovery. The increase of 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 $565,000 in the fourth quarter of 2018, 60% higher than the prior quarter.  Year-to-date non-interest income in 2018 of $1.6 million was 13% higher than the prior year, primarily due to realized gains on the sale of SBA loans.

Non-interest expense increased $389,000 over the third quarter of 2018 and increased $194,000 over the fourth quarter of 2017. The comparison to the prior quarter expenses were primarily impacted by increase in salaries and benefits due in part to the timing of the recognition of incentive accruals partially offset by reduction of non-recurring project costs. The non-recurring project costs totaled $330,000 and $2.1 million for the fourth quarter of 2018 and year-to-date period, respectively.  Excluding project costs, full year 2018 operating expense increased 8% reflecting investments in the organic SBA business and deposit gathering initiatives.

The income tax provision of $44,000 in the fourth quarter of 2018 represented an effective tax rate of 20% and reflects the positive impact of the tax rate changes enacted in the fourth quarter of 2017, and adoption of ASU 2018-02, Reclassification of certain tax effects from accumulated other comprehensive income.

As of December 31, 2018, shareholders’ equity was $69.2 million, an increase of $2.4 million from a year ago.  Patriot’s book value per share increased to $17.69 at December 31, 2018, as compared to $17.12 a year ago.

The Bank’s capital ratios continue to be strong, as the Bank maintained its “well capitalized” regulatory status.  The capital ratios improved from the first quarter of 2018 as the result of the subordinated debt issuance completed at the end of the quarter.  A material amount of the proceeds from the debt issuance were down-streamed to the Bank.  As of December 31, 2018, the Bank Tier 1 leverage ratio was 9.82%, Tier 1 risk-based capital was 10.61% and total risk-based capital was 11.49%.

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 December 31,
 2018
  September 30,
 2018
  December 31,
 2017
           
Assets          
           
Noninterest bearing deposits and cash $ 7,381     $ 5,596     $ 3,582  
Interest bearing deposits   59,569       43,636       45,659  
Total cash and cash equivalents   66,950       49,232       49,241  
           
Available-for-sale securities, at fair value   39,496       40,264       25,576  
Other investments, at cost   4,450       4,450       4,450  
Total investment securities   43,946       44,714       30,026  
           
FRB & FHLB stock, at cost   7,794       7,761       8,391  
           
Gross loans receivable   780,376       763,254       719,647  
Allowance for loan losses   (7,609 )     (6,605 )     (6,297 )
Net loans receivable   772,767       756,649       713,350  
           
Accrued interest and dividends receivable   3,766       3,612       3,496  
Premises and equipment, net   35,435       35,487       35,358  
Other real estate owned   2,945       991       -  
Deferred tax asset, net   10,697       10,907       10,397  
Goodwill   1,728       1,944       -  
Core deposit intangible, net   698       717       -  
Other assets   4,816       3,272       1,821  
Total assets $    951,542     $    915,286     $    852,080  
           
Liabilities and Shareholders' Equity          
           
Deposits          
Noninterest bearing deposits $ 84,471     $ 81,687     $ 81,197  
Interest bearing deposits   658,810       637,845       556,242  
    743,281       719,532       637,439  
           
Federal Home Loan Bank and correspondent bank borrowings   100,000       90,000       120,000  
Senior  notes, net   11,778       11,759       11,703  
Subordinated debt, net   9,723       9,720       -  
Junior subordinated debt owed to unconsolidated trust, net   8,094       8,092       8,086  
Note payable   1,388       1,436       1,580  
Advances from borrowers for taxes and insurance   2,926       1,659       2,829  
Accrued expenses and other liabilities   5,166       4,167       3,694  
Total liabilities     882,356         846,365         785,331  
           
Preferred Stock   -       -       -  
Common stock   40       40       40  
Additional paid-in capital   107,095       107,038       106,875  
Accumulated deficit   (35,944 )     (36,078 )     (38,832 )
Treasury stock, at cost   (1,179 )     (1,179 )     (1,179 )
Accumulated other comprehensive loss   (826 )     (900 )     (155 )
Total Shareholders' Equity     69,186         68,921         66,749  
           
Total Liabilities and Shareholders' Equity $    951,542     $    915,286     $    852,080  
           

 

PATRIOT NATIONAL BANCORP, INC. AND SUBSIDIARY                  
CONSOLIDATED STATEMENTS OF INCOME                   
(Unaudited) Three Months Ended   Year Ended
Dollars in thousands, except per share data December 31,
2018
  September 30,
2018
  December 31,
2017
  December 31,
2018
  December 31,
2017
                   
Interest and Dividend Income                  
Interest and fees on  loans $ 10,158   $ 9,413     $ 8,550   $ 37,546   $ 31,270  
Interest on investment securities   385     364       294     1,306     982  
Dividends on investment securities   116     125       103     490     383  
Other interest income   270     342       66     1,033     214  
Total interest and dividend income   10,929     10,244       9,013     40,375     32,849  
                   
Interest Expense                  
Interest on deposits   2,913     2,457       1,491     9,024     4,948  
Interest on Federal Home Loan Bank borrowings   389     486       193     1,634     702  
Interest on senior debt   229     229       229     915     915  
Interest on subordinated debt   278     278       94     767     360  
Interest on note payable   15     6       7     38     31  
Total interest expense   3,824     3,456       2,014     12,378     6,956  
                   
Net interest income     7,105       6,788         6,999       27,997       25,893  
                   
Provision (credit) for loan losses   1,018     50       87     1,303     (857 )
                   
Net interest income after provision (credit) for loan losses   6,087     6,738       6,912     26,694     26,750  
                   
Non-interest Income                  
Loan application, inspection and processing fees   15     16       12     51     73  
Deposit fees and service charges   132     126       146     524     590  
Gains on sale of loans   93     3       4     162     4  
Rental income   131     115       97     413     399  
Other income   194     94       173     477     378  
Total non-interest income     565       354         432       1,627       1,444  
                   
Non-interest Expense                  
Salaries and benefits   3,324     2,794       3,247     11,741     10,915  
Occupancy and equipment expense   813     829       755     3,159     3,133  
Data processing expense   341     333       353     1,313     1,139  
Professional and other outside services   583     565       438     2,177     2,050  
Merger/tax initiative project expenses   330     653       601     2,098     640  
Advertising and promotional expenses   64     57       56     258     322  
Loan administration and processing expenses   25     25       18     93     63  
Regulatory assessments   317     275       272     1,142     844  
Insurance (income) expenses   38     (56 )     52     90     233  
Material and communications   134     146       94     503     381  
Other operating expenses   467     426       356     1,661     1,452  
Total non-interest expense     6,436       6,047         6,242       24,235       21,172  
                   
Income before income taxes   216     1,045       1,102     4,086     7,022  
                   
Provision for Income Taxes   44     276       502     1,044     2,875  
Net income $    172   $    769     $    600   $    3,042   $    4,147  
                   
Basic earnings per share $ 0.04   $ 0.20     $ 0.15   $ 0.78   $ 1.06  
Diluted earnings per share $ 0.04   $ 0.20     $ 0.15   $ 0.78   $ 1.06  
                   

 

PATRIOT NATIONAL BANCORP, INC. AND SUBSIDIARY                
FINANCIAL RATIOS AND OTHER DATA                  
(Unaudited)                  
Dollars in thousands, except shares outstanding and per share data                
                         
        Quarter Ended   Year Ended
        December 31,
 2018
  September 30,
2018
  December 31,
 2017
  December 31,
2018
  December 31,
2017
                         
Quarterly Performance Data:                  
    Net Income $   172     $   769     $   600     $   3,042     $   4,147  
    Return on Average Assets   0.07 %     0.33 %     0.29 %     0.34 %     0.54 %
    Return on Average Equity   0.98 %     4.40 %     3.65 %     4.42 %     6.32 %
    Net Interest Margin   3.20 %     3.11 %     3.51 %     3.29 %     3.58 %
    Efficiency Ratio   84 %     85 %     84 %     82 %     77 %
    Efficiency Ratio excluding project costs   80 %     76 %     76 %     75 %     75 %
    % increase loans   2 %     1 %     1 %     8 %     24 %
    % increase deposits   3 %     1 %     5 %     17 %     20 %
                         
Asset Quality:                  
    Nonaccrual loans $   8,263     $   6,479     $   3,778     $   8,263     $   3,778  
    Other real estate owned     2,945         991         -          2,945         -   
      Total nonperforming assets $   11,208     $   7,470     $   3,778     $   11,208     $   3,778  
                         
    Nonaccrual loans / loans   1.06 %     0.85 %     0.52 %     1.06 %     0.52 %
    Nonperforming assets / assets   1.18 %     0.82 %     0.44 %     1.18 %     0.44 %
    Allowance for loan losses $   7,609     $   6,605     $   6,297     $   7,609     $   6,297  
    Valuation reserve $   1,712     $   1,684     $   -      $   1,712     $   -   
    Allowance for loan losses with valuation reserve $   9,321     $   8,289     $   6,297     $   9,321     $   6,297  
                         
    Allowance for loan losses / loans   0.98 %     0.87 %     0.88 %     0.98 %     0.88 %
    Allowance / nonaccrual loans   92.09 %     101.94 %     166.68 %     92.09 %     166.68 %
    Allowance for loan losses and valuation reserve / loans   1.19 %     1.09 %     0.88 %     1.19 %     0.88 %
    Allowance for loan losses and valuation reserve / nonaccrual loans   112.80 %     127.94 %     166.68 %     112.80 %     166.68 %
                         
    Gross loan charge-offs  $   16     $   5     $   17     $   35     $   305  
    Gross loan (recoveries)  $   (2 )   $   (35 )   $   (4 )   $   (45 )   $   (2,783 )
    Net loan charge-offs (recoveries)  $   14     $   (30 )   $   13     $   (10 )   $   (2,478 )
                         
Capital Data and Capital Ratios                  
    Book value per share (1) $   17.69     $   17.64     $   17.12     $   17.69     $   17.12  
    Shares outstanding     3,910,674         3,906,966         3,899,675         3,910,674         3,899,675  
Bank Capital Ratios:                  
    Leverage Ratio   9.82 %     9.92 %     9.36 %     9.82 %     9.36 %
    Tier 1 Capital   10.61 %     10.61 %     10.55 %     10.61 %     10.55 %
    Total Risk Based Capital   11.49 %     11.38 %     11.41 %     11.49 %     11.41 %
                         
(1)  Book value per share represents shareholders' equity divided by outstanding shares.