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”) (NASDAQ: 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.