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 $1.0 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 StreetStamford, CT 06901www.BankPatriot.com	Richard MuskusPresident203-252-5939	Joseph PerilloChief Financial Officer203-252-5954	Michael CarrazzaCEO and Chairman203-251-8230

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.