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Patriot Reports Third quarter 2018 Net Income of $0.8 Million; Loans and deposits continue to expand and assets up year over year; Declares quarterly dividend

STAMFORD, Conn., Nov. 15, 2018 (GLOBE NEWSWIRE) -- Patriot National Bancorp, Inc. (“Patriot”, “Bancorp”) (PNBK), the parent company of Patriot Bank, N.A. (the “Bank”), today announced quarterly pre-tax earnings of $1.0 million and quarterly net income of $769 thousand, or $0.20 per fully diluted share for the quarter ended September 30, 2018, as assets were up 11% over the same period in 2017, and deposits grew 19%.

Patriot’s third quarter net income includes $653 thousand of expenses primarily related to the acquisition costs associated with Prime Bank and Hana Small Business Lending (“Hana SBL”).  As a result, the third quarter net income was reduced 26% from the $1.0 million, $0.26 per fully diluted share, reported in the second quarter, and was 24% lower than the $1.0 million, $0.26 per share, reported for the same quarter a year ago.  For the nine months ended September 30, 2018, net income was $2.9 million, or $0.73 per fully diluted share, as compared with $3.5 million, or $0.91 per fully diluted share, for the nine months ended September 30, 2017.

The year-to-date net income is not comparable to the same period last year due to a $2.8 million credit recovery that was recognized in the first quarter of 2017 and material non-recurring acquisition-related expenses recognized in the current year. Pre-tax earnings reported for the three quarters of 2018 included non-recurring transaction expenses of $1.8 million.  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: “This past quarter was highlighted by our investment in building out the SBA product category for Patriot.  Quarterly results reflect the impact of material regulatory and transaction costs associated with the pending acquisition of Hana SBL and broadening overall compliance and oversight as our presence in SBA expands.  The onboarding of former SBA and FDIC regulator, Brent Ciurlino, as announced on October 31, 2018, along with the continued investment in the building of our SBA business, were significant accomplishments during the quarter, which is expected to enhance Patriot’s performance in future periods”.

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. In 2018 Patriot opened SBA Business Development offices in Stamford, CT and Atlanta, GA and plans to open in Jacksonville, FL later this month.

Mr. Carrazza added: “We have followed 2017, the best earnings year in Patriot’s history, with encouraging results for the first nine months of 2018, which include material transaction-related costs that are not expected to continue into 2019.  Excluding these costs and a credit associated with a non-recurring credit recovery in 2017, pre-tax and net income have dramatically improved year over year, demonstrating our strong earnings momentum.”

Richard Muskus, Patriot’s President, added: “The first three quarters of 2018 have seen many positive and encouraging developments at Patriot as we continue our growth as a leading community bank.  We will continue to build upon these most recent achievements with the expansion into a national SBA lending platform, and the continued expansion of our retail banking presence.”  

Patriot also announced today the declaration of its sixth consecutive quarterly dividend of $0.01 per fully diluted share. The record date for this quarterly dividend will be November 26, 2018 with a dividend payment date of December 4, 2018.

Financial Results

As of September 30, 2018, total assets were $915.3 million, as compared to $930.2 million at June 30, 2018 and $826.7 million at September 30, 2017, for a total asset growth of 11% in the one-year period.  Net loans receivable totaled $756.6 million, up 1% over $750.8 million at June 30, 2018, and up 7% over $703.9 million at September 30, 2017. Deposits continued to grow to $719.5 million at September 30, 2018, as compared to $712.3 million at June 30, 2018 and $605.4 million at September 30, 2017.

Net interest income was $6.8 million in the quarter, decreased 4% from both the prior quarter and the corresponding 2017 period.  The year-to-date net interest income of $20.9 million was 11% higher than the $18.9 million in the nine month period ended September 30, 2017. 

Net interest margin was 3.11% for the third quarter of 2018, as compared to 3.34% in the prior quarter and 3.65% for the third quarter of 2017.  The decline in net interest margin in the current quarter reflects the impact of subordinated debt added 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 $50 thousand, as compared to $545 thousand in the third quarter of 2017. The year-to-date provision for loan losses was $285 thousand, as compared to a net credit for loan losses of $944 thousand, which reflected the previously noted recovery.

Non-interest income was $354 thousand in the quarter, 8% lower than the prior quarter.  Year-to-date non-interest income of $1.1 million was 5% higher than the prior year, primarily due to a loss on security sales recognized in the same period of 2017 and gains on the sale of SBA loans recognized in 2018.

Non-interest expense increased $86 thousand over the prior quarter, and increased $825 thousand over the third quarter of 2017. The expenses were impacted by non-recurring project costs.  These costs totaled $653 thousand and $1.8 million for the third quarter and year-to-date period, respectively.

The income tax provision in the third quarter of $276 thousand represented an effective tax rate of 26% and reflects the positive impact of the tax rate changes enacted in the fourth quarter of 2017.

As of September 30, 2018 shareholders’ equity was $68.9 million, an increase of $2.6 million from a year ago.  Patriot’s book value per share increased to $17.64 at September 30, 2018, as compared to $17.02 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 2018 level 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 September 30, 2018, Tier 1 leverage ratio was 9.92%, Tier 1 risk based capital was 10.61% and total risk based capital was 11.38%.

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.
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)          
Dollars in thousands September 30,
 2018
  June 30,
 2018
  September 30,
 2017
               
Assets            
               
Noninterest bearing deposits and cash $   5,596     $   4,589     $   3,312  
Interest bearing deposits     43,636         81,052         25,100  
  Total cash and cash equivalents     49,232         85,641         28,412  
               
Available-for-sale securities, at fair value     40,264         23,982         29,586  
Other investments, at cost     4,450         4,450         4,450  
  Total investment securities     44,714         28,432         34,036  
               
FRB & FHLB stock, at cost     7,761         8,371         8,813  
               
Gross loans receivable     763,254         757,329         710,118  
Allowance for loan losses     (6,605 )       (6,525 )       (6,222 )
  Net loans receivable     756,649         750,804         703,896  
               
Accrued interest and dividends receivable     3,612         3,306         3,501  
Premises and equipment, net     35,487         35,715         34,713  
Other real estate owned     991         991         851  
Deferred tax asset, net      10,907         11,085         10,686  
Goodwill     1,944         2,100         -   
Core deposit intangible,net     717         534         -   
Other assets     3,272         3,256         1,823  
  Total assets $    915,286     $    930,235     $    826,731  
               
Liabilities and Shareholders' Equity          
               
Deposits          
  Noninterest bearing deposits $   81,687     $   83,808     $   76,875  
  Interest bearing deposits     637,845         628,504         528,539  
  Total deposits     719,532         712,312         605,414  
               
Federal Home Loan Bank and correspondent bank borrowings     90,000         110,000         130,000  
Senior  notes, net     11,759         11,740         11,684  
Subordinated debt, net     9,720         9,576         -   
Junior subordinated debt owed to unconsolidated trust     8,092         8,090         8,085  
Note payable     1,436         1,484         1,627  
Advances from borrowers for taxes and insurance     1,659         2,876         1,799  
Accrued expenses and other liabilities     4,167         5,796         1,812  
    Total liabilities     846,365         861,874         760,421  
               
Preferred stock     -          -          -   
Common stock     40         40         40  
Additional paid-in capital     107,038         106,982         106,834  
Accumulated deficit     (36,078 )       (36,808 )       (39,394 )
Treasury stock, at cost     (1,179 )       (1,179 )       (1,179 )
Accumulated other comprehensive (loss) gain     (900 )       (674 )       9  
    Total Shareholders' Equity     68,921         68,361         66,310  
               
  Total Liabilities and Shareholders' Equity $    915,286     $    930,235     $    826,731  
               

 

                   
PATRIOT NATIONAL BANCORP, INC. AND SUBSIDIARY 
CONSOLIDATED STATEMENTS OF INCOME  
(Unaudited) Three Months Ended   Nine Months Ended
Dollars in thousands, except per share data September 30,
2018
  June 30,
2018
  September 30,
2017
  September 30,
2018
  September 30,
2017
                       
Interest and Dividend Income                  
  Interest and fees on  loans $   9,413     $   9,201   $   8,522   $   27,388   $   22,720  
  Interest on investment securities     364         291       275       921       688  
  Dividends on investment securities     125         128       105       374       280  
  Other interest income     342         270       65       763       148  
    Total interest and dividend income     10,244         9,890       8,967       29,446       23,836  
                       
Interest Expense                  
  Interest on deposits     2,457         1,997       1,339       6,111       3,457  
  Interest on Federal Home Loan Bank borrowings     486         502       248       1,245       509  
  Interest on senior debt     229         228       229       686       686  
  Interest on subordinated debt     278         112       92       489       266  
  Interest on note payable     6         10       7       23       24  
    Total interest expense     3,456         2,849       1,915       8,554       4,942  
                       
    Net interest income     6,788         7,041       7,052       20,892       18,894  
                       
Provision (credit) for loan losses     50         50       545       285       (944 )
                       
    Net interest income after provision (credit) for loan losses     6,738         6,991       6,507       20,607       19,838  
                       
Non-interest Income                  
  Loan application, inspection and processing fees     16         12       25       36       61  
  Deposit fees and service charges     126         132       149       392       444  
  Gains on sale of loans     3         66       -        69       -   
  Rental income     115         83       117       282       302  
  Loss on sale of investment securities     -          -        -        -        (78 )
  Other income     94         93       95       283       283  
    Total non-interest income     354         386       386       1,062       1,012  
                       
Non-interest Expense                  
  Salaries and benefits     2,794         2,854       2,741       8,417       7,668  
  Occupancy and equipment expense     829         776       796       2,346       2,378  
  Data processing expense     333         322       340       972       786  
  Professional and other outside services     565         457       410       1,594       1,612  
  Merger and tax initiative project expenses     653         592       39       1,768       39  
  Advertising and promotional expenses     57         59       81       194       266  
  Loan administration and processing expenses     25         30       22       68       45  
  Regulatory assessments     275         298       230       825       572  
  Insurance (income) expenses     (56 )       53       66       52       181  
  Material and communications     146         110       97       369       287  
  Other operating expenses     426         410       400       1,194       1,096  
    Total non-interest expense     6,047         5,961       5,222       17,799       14,930  
                       
    Income before income taxes     1,045         1,416       1,671       3,870       5,920  
                       
Provision for Income Taxes     276         380       658       1,000       2,373  
    Net income $    769     $    1,036   $    1,013   $    2,870   $    3,547  
                       
    Basic earnings per share  $   0.20     $   0.27   $   0.26   $   0.74   $   0.91  
    Diluted earnings per share $   0.20     $   0.26   $   0.26   $   0.73   $   0.91  
                       

 

         
PATRIOT NATIONAL BANCORP, INC. AND SUBSIDIARY        
FINANCIAL RATIOS AND OTHER DATA
(Unaudited)          
Dollars in thousands, except shares outstanding and per share data
               
      Quarter Ended
      September 30,
 2018
  June 30,
2018
  September 30,
 2017
               
Quarterly Performance Data:          
  Net Income $   769     $   1,036     $   1,013  
  Return on Average Assets   0.33 %     0.46 %     0.49 %
  Return on Average Equity   4.40 %     6.06 %     6.05 %
  Net Interest Margin   3.11 %     3.34 %     3.65 %
  Efficiency Ratio   85 %     80 %     70 %
  Qtr % increase loans   1 %     5 %     5 %
  Qtr % increase deposits   1 %     9 %     8 %
               
Asset Quality:          
  Nonaccrual loans $   6,479     $   6,577     $   2,051  
  Other real estate owned     991         991         851  
    Total nonperforming assets $   7,470     $   7,568     $   2,902  
               
  Nonaccrual loans / loans   0.85 %     0.87 %     0.29 %
  Nonperforming assets / assets   0.82 %     0.81 %     0.35 %
  Allowance for loan losses $   6,605     $   6,525     $   6,222  
  Valuation reserve $   1,684     $   1,717     $   -   
  Allowance for loan losses with valuation reserve $   8,289     $   8,242     $   6,222  
               
  Allowance for loan losses / loans   0.87 %     0.86 %     0.88 %
  Allowance / nonaccrual loans   101.94 %     99.21 %     303.36 %
  Allowance for loan losses and valuation reserve / loans   1.09 %     1.09 %     0.88 %
  Allowance for loan losses and valuation reserve / nonaccrual loans   127.94 %     125.32 %     303.36 %
               
  Gross loan charge-offs for the quarter $   5     $   13     $   275  
  Gross loan (recoveries) for the quarter $   (35 )   $   (3 )   $   (8 )
  Net loan charge-offs (recoveries) for the quarter $   (30 )   $   10     $   267  
               
Capital Data and Capital Ratios          
  Book value per share (1) $   17.64     $   17.51     $   17.02  
  Shares outstanding     3,906,966         3,904,578         3,895,720  
Bank Capital Ratios:          
  Leverage Ratio   9.92 %     10.03 %     9.57 %
  Tier 1 Capital   10.61 %     11.05 %     10.69 %
  Total Risk Based Capital   11.38 %     11.85 %     11.55 %
               
(1)  Book value per share represents shareholders' equity divided by outstanding shares.