PNBK Patriot National Bancorp Inc

Patriot National Bancorp, Inc. (“Patriot”, “Bancorp”) (NASDAQ: PNBK), the parent company of Patriot Bank, N.A. (the “Bank”), today announced quarterly pre-tax earnings of $1.4 million and quarterly net income of $1.0 million, or $0.26 per fully diluted share for the quarter ended June 30, 2018.

Patriot’s second quarter net income includes $592 thousand of expenses related to the acquisition costs associated with Prime Bank and Hana Small Business Lending (“Hana SBL”) and, as a result, was essentially unchanged from the $1.1 million, $0.27 per fully diluted share, reported in the first quarter.  Net income for the quarter was 29% higher than the $804 thousand, $0.21 per share, reported for the same quarter a year ago.  For the six months ended June 30, 2018, net income was $2.1 million, or $0.54 per fully diluted share, as compared with $2.5 million, or $0.65 per fully diluted share, for the first half of 2017.

The year-to date net income is not comparable to the same period last year due to a material 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 second and first quarter 2018 included non-recurring transaction expenses of $592 thousand and $523 thousand, respectively, which were associated with the Prime acquisition closed in May 2018 and the Hana SBL acquisition that is underway. These non-recurring expenses will cease once the acquisitions are consummated and the acquired companies are fully integrated.

On May 10, 2018 Patriot completed its acquisition of Prime Bank. The closing of the transaction adds a new Patriot branch located in the Town of Orange, New Haven County, Connecticut.  In addition, on July 2nd, 2018 Patriot announced the successful completion of a $10 million subordinated debt offering, which closed on June 29, 2018.  The funds were raised in connection with the pending Hana SBL acquisition and for general corporate purposes.

CEO Michael Carrazza stated: “We are pleased with the execution of our planned initiatives for the first half of 2018, while core earnings and assets continue to grow.  We have followed 2017, the best earnings year in Patriot’s history, with a very strong first half of 2018.  Quarterly income includes material transaction-related costs, which will taper off; we are confident these investments will bear much fruit into the second half of 2018 and then the full year of 2019 and beyond.”   

Mr. Carrazza added: “The results show the strategies we have been implementing since mid-2016, including key additions to our executive team and a re-focusing on our core strengths in commercial lending and retail banking, are the right initiatives for Patriot, enabling the Bank to achieve a pattern of consistent earnings improvement.”

Richard Muskus, Patriot’s President, added: “The successful completion of the Prime transaction represents another critical step in further building Patriot into a leading community bank.  We look forward to executing additional growth strategies, including the expansion into a national SBA lending platform, and the continued building of our retail banking presence.”  

Patriot also announced today the declaration of its fifth consecutive quarterly dividend of $0.01 per fully diluted share. The record date for this quarterly dividend will be August 17, 2018 with a dividend payment date of August 24, 2018.

Financial Results

As of June 30, 2018, total assets increased to $930 million, as compared to $870 million at March 31, 2018 and $773 million at June 30, 2017, for a total asset growth of 20% in the one-year period.  Net loans receivable totaled $751 million, up 5% over $718 million at March 31, 2018, and up 12% over $673 million at June 30, 2017. Deposits continued to grow to $712 million at June 30, 2018, as compared to $655 million at March 31, 2018 and $562 million at June 30, 2017.

All of these balance sheet categories were positively impacted by the completed merger with Prime Bank, which added total assets of $61.6 million, deposits of $46.2 million and loans of $21.6 million as of the acquisition date.

Net interest income was $7.0 million in the quarter, essentially unchanged from the prior quarter and up 12% over $733 thousand from the corresponding 2017 period. Net interest income of $14.1 million in the year-to-date period was 19% higher than the $11.8 million in the six month period ended June 30, 2017.

Net interest margin was 3.34% for the second quarter of 2018, as compared to 3.55% in the prior quarter and 3.61% for the second quarter of 2017.

The provision for loan losses in the quarter was $50 thousand, as compared to $260 thousand in the prior quarter of 2017. The year-to-date provision for loan losses was $235 thousand, as compared to a net credit for loan losses of $1.5 million, which reflected the previously noted recovery.

Non-interest income was $386 thousand in the quarter, 20% higher than the prior quarter.  The current quarter included $66 thousand from the gain on sale of SBA loans as Patriot’s internal SBA initiative began to contribute to earnings growth.  Year-to-date non-interest income of $708 thousand was 13% higher than the prior year, primarily due to a loss on security sales recognized in the first half of 2017 and gains on the sale of loans recognized in the second quarter of 2018.

Non-interest expense increased $170 thousand over the prior quarter, and increased $947 thousand over the second quarter of 2017. The expenses were impacted by non-recurring project costs associated with the acquisition of Prime Bank and pending acquisition of Hana SBL, and an income tax related consulting project.  These costs totaled $592 thousand and $1.1 million for the second quarter and year-to-date period, respectively. The first half of 2017 non-interest expense did not include any non-recurring project costs.

The income tax provision in the second quarter of $380 thousand represented an effective tax rate of 27% and reflects the positive impact of the tax rate changes enacted in the fourth quarter of 2017.

As of June 30, 2018 shareholders’ equity was $68.4 million, an increase of $3.1 million from a year ago.  Patriot’s book value per share increased to $17.51 at June 30, 2018, as compared to $16.77 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 June 30, 2018, Tier 1 leverage ratio was 10.03%, Tier 1 risk based capital was 11.05% and total risk based capital was 11.85%.

About the CompanyFounded in 1994, Patriot National Bancorp, Inc. (“Patriot” or “Bancorp”) is the parent holding company of Patriot Bank N.A. (“Patriot”), 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 business 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			June 30,  2018				March 31,  2018				June 30,  2017
Assets
Noninterest bearing deposits and cash			$	4,589			$	3,865			$	3,185
Interest bearing deposits				81,052				58,127				7,658
	Total cash and cash equivalents			85,641				61,992				10,843
Available-for-sale securities, at fair value				23,982				24,793				24,981
Other investments, at cost				4,450				4,450				4,450
	Total investment securities			28,432				29,243				29,431
FRB & FHLB stock, at cost				8,371				8,415				8,257
Gross loans receivable				757,329				724,555				679,088
Allowance for loan losses				(6,525	)			(6,485	)			(5,944	)
	Net loans receivable			750,804				718,070				673,144
Accrued interest and dividends receivable				3,306				3,505				3,208
Premises and equipment, net				35,715				35,638				34,471
Other real estate owned				991				-				851
Deferred tax asset, net				11,085				11,335				11,212
Goodwill				2,100				-				-
Core deposit intangible, net				534				-				-
Other assets				3,256				2,219				2,003
	Total assets		$	930,235			$	870,417			$	773,420
Liabilities and Shareholders' Equity
Deposits
	Noninterest bearing deposits		$	83,808			$	71,736			$	77,778
	Interest bearing deposits			628,504				583,562				484,261
				712,312				655,298				562,039
Federal Home Loan Bank and correspondent bank borrowings				110,000				120,000				120,000
Senior  notes, net				11,740				11,722				11,666
Subordinated debt, net				9,576				-				-
Junior subordinated debt owed to unconsolidated trust				8,090				8,088				8,082
Note payable				1,484				1,532				1,675
Advances from borrowers for taxes and insurance				2,876				1,904				3,111
Accrued expenses and other liabilities				5,796				4,268				1,547
		Total liabilities		861,874				802,812				708,120
				-								-
Common stock				40				40				40
Additional paid-in capital				106,982				106,928				106,797
Accumulated deficit				(36,808	)			(37,805	)			(40,368	)
Treasury stock, at cost				(1,179	)			(1,179	)			(1,177	)
Accumulated other comprehensive (loss) gain				(674	)			(379	)			8
		Total Shareholders' Equity		68,361				67,605				65,300
	Total Liabilities and Shareholders' Equity		$	930,235			$	870,417			$	773,420

 

PATRIOT NATIONAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)			Three Months Ended									Six Months Ended
Dollars in thousands, except per share data			June 30, 2018			March 31, 2018			June 30, 2017			June 30, 2018			June 30, 2017
Interest and Dividend Income
	Interest and fees on  loans		$	9,201		$	8,774		$	7,591		$	17,975		$	14,198
	Interest on investment securities			291			266			242			557			413
	Dividends on investment securities			128			121			93			249			175
	Other interest income			270			151			19			421			83
		Total interest and dividend income		9,890			9,312			7,945			19,202			14,869
Interest Expense
	Interest on deposits			1,997			1,657			1,129			3,654			2,118
	Interest on Federal Home Loan Bank borrowings			502			257			183			759			261
	Interest on senior debt			228			229			228			457			457
	Interest on subordinated debt			112			99			89			211			174
	Interest on note payable			10			7			8			17			17
		Total interest expense		2,849			2,249			1,637			5,098			3,027
		Net interest income		7,041			7,063			6,308			14,104			11,842
Provision (credit) for loan losses				50			185			260			235			(1,489	)
		Net interest income after provision (credit) for loan losses		6,991			6,878			6,048			13,869			13,331
Non-interest Income
	Loan application, inspection and processing fees			12			8			15			20			36
	Deposit fees and service charges			132			134			146			266			295
	Gains on sale of loans			66			-			-			66			-
	Rental income			83			84			91			167			185
	Loss on sale of investment securities			-			-			-			-			(78	)
	Other income			93			96			97			189			188
		Total non-interest income		386			322			349			708			626
Non-interest Expense
	Salaries and benefits			2,854			2,769			2,497			5,623			4,927
	Occupancy and equipment expense			776			741			807			1,517			1,582
	Data processing expense			322			317			326			639			446
	Professional and other outside services			457			572			550			1,029			1,202
	Merger/tax initiative project expenses			592			523			-			1,115			-
	Advertising and promotional expenses			59			78			111			137			185
	Loan administration and processing expenses			30			13			14			43			23
	Regulatory assessments			298			252			163			550			342
	Insurance expenses			53			55			56			108			115
	Material and communications			110			113			103			223			190
	Other operating expenses			410			358			387			768			696
		Total non-interest expense		5,961			5,791			5,014			11,752			9,708
		Income before income taxes		1,416			1,409			1,383			2,825			4,249
Provision for Income Taxes				380			344			579			724			1,715
		Net income	$	1,036		$	1,065		$	804		$	2,101		$	2,534
		Basic earnings per share	$	0.27		$	0.27		$	0.21		$	0.54		$	0.65
		Diluted earnings per share	$	0.26		$	0.27		$	0.21		$	0.54		$	0.65

 

PATRIOT NATIONAL BANCORP, INC. AND SUBSIDIARY
FINANCIAL RATIOS AND OTHER DATA
(Unaudited)
Dollars in thousands, except shares outstanding and per share data
				Quarter Ended
				June 30,  2018				March 31, 2018				June 30,  2017
Quarterly Performance Data:
		Net Income		$	1,036			$	1,065			$	804
		Return on Average Assets			0.46	%			0.51	%			0.43	%
		Return on Average Equity			6.06	%			6.37	%			4.95	%
		Net Interest Margin			3.34	%			3.55	%			3.61	%
		Efficiency Ratio			80.3	%			78	%			75	%
		Qtr % increase loans			5	%			1	%			8	%
		Qtr % increase deposits			9	%			3	%			0	%
Asset Quality:
		Nonaccrual loans		$	6,577			$	5,036			$	1,859
		Other real estate owned			991				-				851
			Total nonperforming assets	$	7,568			$	5,036			$	2,710
		Nonaccrual loans / loans			0.87	%			0.70	%			0.27	%
		Nonperforming assets / assets			0.81	%			0.58	%			0.35	%
		Allowance for loan losses		$	6,525			$	6,485			$	5,944
		Valuation reserve			1,717				-				-
		Allowance for loan losses with valuation reserve		$	8,242			$	6,485			$	5,944
		Allowance for loan losses / loans			0.86	%			0.90	%			0.88	%
		Allowance / nonaccrual loans			99.2	%			128.8	%			319.7	%
		Allowance for loan losses and valuation reserve / loans			1.09	%			0.90	%			0.88	%
		Allowance for loan losses and valuation reserve / nonaccrual loans			125.3	%			128.8	%			319.7	%
		Gross loan charge-offs for the quarter		$	13			$	-			$	13
		Gross loan (recoveries) for the quarter		$	(3	)		$	(3	)		$	-
		Net loan charge-offs (recoveries) for the quarter		$	10			$	(3	)		$	13
Capital Data and Capital Ratios
		Book value per share (1)		$	17.51			$	17.32			$	16.77
		Shares outstanding			3,904,578				3,902,610				3,894,128
Bank Capital Ratios:
		Leverage Ratio			10.03	%			9.72	%			9.97	%
		Tier 1 Capital			11.05	%			10.90	%			10.73	%
		Total Risk Based Capital			11.85	%			11.76	%			11.59	%
(1)  Book value per share represents shareholders' equity divided by outstanding shares.