PNBK Patriot National Bancorp Inc

Patriot National Bancorp, Inc. (“Patriot,” “Bancorp” or the “Company”) (NASDAQ: PNBK), the parent company of Patriot Bank, N.A. (the “Bank”), today announced net income of $1.0 million, or $0.26 basic and diluted earnings per share for the quarter ended June 30, 2021, compared to a net loss of $1.3 million, or $0.32 basic and diluted loss per share reported in the second quarter of 2020. On a year-to-date basis, net income was $1.9 million, or $0.48 per fully diluted share, compared to a net loss of $2.4 million, or $0.60 fully diluted loss per share during the same year to date period in 2020.

The Bank continued to show improved net interest margins, core deposit growth, and lower operating expenses. The prepaid portfolio continues to be a low-cost funding source for the Bank and has increased substantially to $137.8 million as of June 30, 2021 from $50.0 million in July 2020. The portfolio growth provides a substantial improvement to the Bank’s net interest margin and overall funding costs. In addition, during the first half of 2021 the Bank recognized a gross payroll tax credit of $2.0 million under the Employee Retention Credit program of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). Pre-tax income was $1.4 million and $2.6 million for the three months ended and six months ended June 30, 2021, respectively. Excluding the employee tax credit, pre-tax income was $257,000 and $587,000 for the three months and six months periods, respectively.

Since 2020, the Bank had provided payment deferrals on approximately $232.7 million of loans as permitted under the CARES Act. A significant percentage of those loans deferred have now resumed normal payments. Loans remaining on deferral in conjunction with the CARES Act declined to $21.3 million at June 30, 2021.

Patriot President & CEO Robert Russell stated: “The Bank’s focus on improving its funding sources, asset quality and loan growth continues to have a positive impact on the Bank’s financial condition. Key additions to staff and ongoing process improvements will contribute to continued advancement of our pursuit of performance. We are pleased with the progress that we have made so far even in what remains a challenging economic environment.”

Financial Results:

As of June 30, 2021, total assets increased to $963.1 million, as compared to $880.7 million at December 31, 2020. Net loans totaled $660.5 million versus $719.6 million as of December 31, 2020. Total deposits increased from $685.7 million at December 31, 2020 to $761.2 million at June 30, 2021.

The Bank has substantially improved its deposit and funding mix over the past year. During the past six months, brokered deposits declined by $28.5 million while growth in core funding of $40.5 million and prepaid deposits of $63.5 million combined to produce growth in total deposits of 11% or $75.5 million for the six-month period. Excluding the planned reduction of brokered deposits, total deposits increased $104.0 million during the first half of 2021.

Net interest income for the three months ended June 30, 2021, was $5.9 million, an increase of $251,000 or 4.4% from the comparable period in 2020. Net interest income for the six months ended June 30, 2021 was $12.1 million, an increase of $54,000 or 0.4% from the first half of 2020.

The Bank’s net interest margin showed strong improvement and was 2.90% for the six months ended June 30, 2021 compared with 2.59% for the comparable 2020 period. As economic activity continues to expand, loan balances are expected to grow, and coupled with reductions in funding costs, the Bank expects further improvements in net interest income.

The recovering economy, lower loan balances and lower pooled reserves resulted in no additions to the Bank’s allowance for loan and lease losses as compared to $1.7 million that was recognized in the first half of 2020. The majority of the provision in the first six-months of 2020 was primarily attributable to conditions and the uncertainty created by the COVID-19 pandemic. As of June 30, 2021, the allowance for loan losses was 1.54% of total loans, compared with 1.45% at December 31, 2020.

Non-interest income was $753,000 and $389,000 for the second quarter of 2021 and 2020, respectively. Non-interest income was $1.2 million and $810,000 for the six months ended June 30, 2021 and 2020, respectively. The increase was primarily attributable to an increase in gains on sales of SBA loans in 2021.

Non-interest expense was $5.3 million and $6.9 million for the second quarter of 2021 and 2020, respectively. Non-interest expense was $10.7 million and $14.3 million for the year-to-date 2021 and 2020 periods, respectively. The decrease in non-interest expense in the first half of 2021 was primarily driven by an Employee Retention Credit of $2.0 million under the Employee Retention Credit program of the CARES Act and a reduction of $368,000 in regulatory assessments expense.

For the first half of 2021, a provision for income taxes of $702,000 was recorded, compared to a benefit for income taxes of $805,000 for the first half of 2020.

As of June 30, 2021, shareholders’ equity was $65.9 million, compared with $63.2 million at December 31, 2020. Patriot’s book value per share rose to $16.69 at June 30, 2021, compared with $16.03 at December 31, 2020. The Bank’s capital ratios continue to be strong, maintaining its “well capitalized” regulatory status. As of June 30, 2021, the Bank’s Tier 1 leverage ratio was 10.10%, Tier 1 risk-based capital ratio was 12.04% and total risk-based capital ratio was 13.29%.

About the Company:

Patriot Bank is headquartered in Stamford and operates 9 branch locations: in Scarsdale, NY; and Darien, Fairfield, Greenwich, Milford, Norwalk, Orange, Stamford, Westport, CT with Express Banking locations at Bridgeport/ Housatonic Community College, downtown New Haven and Trumbull at Westfield Mall. The Bank also maintains SBA lending offices in Stamford, Connecticut, Florida, Georgia, Ohio, along with a Rhode Island operations center.

Founded in 1994, and now celebrating its 27th year, 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 the Company’s interest earning assets and the interest paid on its interest bearing liabilities; (2) the timing of re-pricing of the Company’s interest earning assets and interest bearing liabilities; (3) the effect of changes in governmental monetary policy; (4) the effect of changes in regulations applicable to the Company and the Bank and the conduct of its business; (5) changes in competition among financial service companies, including possible further encroachment of non-banks on services traditionally provided by banks; (6) the ability of competitors that are larger than the Company to provide products and services which it is impracticable for the Company to provide; (7) the state of the economy and real estate values in the Company’s market areas, and the consequent effect on the quality of the Company’s loans; (8) demand for loans and deposits in our market area; (9) 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 Company; (10) 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 the Company; (11) the application of generally accepted accounting principles, consistently applied; (12) the fact that one period of reported results may not be indicative of future periods; (13) the state of the economy in the greater New York metropolitan area and its particular effect on the Company's customers, vendors and communities and other such factors, including risk factors, as may be described in the Company’s other filings with the Securities and Exchange Commission (the “SEC”); (14) political, social, legal and economic instability, civil unrest, war, catastrophic events, acts of terrorism; (15) widespread outbreaks of infectious diseases, including the ongoing novel coronavirus (COVID-19) outbreak; (16) changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses; (17) our ability to access cost-effective funding; (18) our ability to implement and change our business strategies; (19) changes in the quality or composition of our loan or investment portfolios; (20) technological changes that may be more difficult or expensive than expected; (21) our ability to manage market risk, credit risk and operational risk in the current economic environment; (22) our ability to enter new markets successfully and capitalize on growth opportunities; (23) changes in consumer spending, borrowing and savings habits; (24) our ability to retain key employees; and (25) our compensation expense associated with equity allocated or awarded to our employees.

PATRIOT NATIONAL BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands)			June 30, 2021				December 31, 2020				June 30, 2020
Assets
Cash and due from banks:
Noninterest bearing deposits and cash			$	2,397			$	3,006			$	1,616
Interest bearing deposits				113,794				31,630				64,280
		Total cash and cash equivalents		116,191				34,636				65,896
Investment securities:
Available-for-sale securities, at fair value				108,612				49,262				46,624
Other investments, at cost				4,450				4,450				4,450
		Total investment securities		113,062				53,712				51,074
Federal Reserve Bank stock, at cost				2,744				2,783				2,897
Federal Home Loan Bank stock, at cost				4,185				4,503				4,503
Gross loans receivable				670,896				730,180				792,500
Allowance for loan losses				(10,362	)			(10,584	)			(11,148	)
	Net loans receivable			660,534				719,596				781,352
SBA loans held for sale				2,636				1,217				7,579
Accrued interest and dividends receivable				6,207				6,620				5,624
Premises and equipment, net				32,824				33,423				33,962
Other real estate owned				1,216				1,906				2,400
Deferred tax asset, net				10,560				11,496				12,180
Goodwill				1,107				1,107				1,107
Core deposit intangible, net				319				343				586
Other assets				11,469				9,387				10,384
	Total assets		$	963,054			$	880,729			$	979,544
Liabilities
Deposits:
	Noninterest bearing deposits		$	218,374			$	158,676			$	97,360
	Interest bearing deposits			542,824				526,980				685,728
		Total deposits		761,198				685,656				783,088
Federal Home Loan Bank and correspondent bank borrowings				90,000				90,000				90,000
Senior notes, net				11,965				11,927				11,890
Subordinated debt, net				9,796				9,782				9,767
Junior subordinated debt owed to unconsolidated trust, net				8,114				8,110				8,106
Note payable				893				994				1,094
Advances from borrowers for taxes and insurance				3,607				3,786				3,773
Accrued expenses and other liabilities				11,619				7,255				7,654
		Total liabilities		897,192				817,510				915,372
Commitments and Contingencies				-				-				-
Shareholders' equity
Preferred stock				-				-				-
Common stock				106,409				106,329				106,251
Accumulated deficit				(40,716	)			(42,592	)			(41,123	)
Accumulated other comprehensive loss				169				(518	)			(956	)
		Total shareholders' equity		65,862				63,219				64,172
	Total liabilities and shareholders' equity		$	963,054			$	880,729			$	979,544

PATRIOT NATIONAL BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
			Three Months Ended										Six Months Ended
(In thousands, except per share amounts)			June 30, 2021			March 31, 2021			June 30, 2020				June 30, 2021			June 30, 2020
Interest and Dividend Income
	Interest and fees on loans		$	7,267		$	7,743		$	9,111			$	15,010		$	19,144
	Interest on investment securities			420			310			378				730			794
	Dividends on investment securities			57			34			90				91			228
	Other interest income			23			24			24				47			159
		Total interest and dividend income		7,767			8,111			9,603				15,878			20,325
Interest Expense
	Interest on deposits			623			785			2,792				1,408			5,992
	Interest on Federal Home Loan Bank borrowings			741			733			638				1,474			1,335
	Interest on senior debt			228			229			228				457			457
	Interest on subordinated debt			233			234			253				467			521
	Interest on note payable and other			4			4			5				8			10
		Total interest expense		1,829			1,985			3,916				3,814			8,315
		Net interest income		5,938			6,126			5,687				12,064			12,010
Provision for loan losses				-			-			910				-			1,714
		Net interest income after provision for loan losses		5,938			6,126			4,777				12,064			10,296
Non-interest Income
	Loan application, inspection and processing fees			61			63			40				124			93
	Deposit fees and service charges			64			65			66				129			180
	Gains on sale of loans			258			94			72				352			84
	Rental income			140			130			131				270			262
	Gain on sale of investment securities			93			-			-				93			-
	Other income			137			90			80				227			191
		Total non-interest income		753			442			389				1,195			810
Non-interest Expense
	Salaries and benefits			2,447			2,216			3,645				4,663			7,506
	Occupancy and equipment expenses			778			920			921				1,698			1,870
	Data processing expenses			362			350			371				712			761
	Professional and other outside services			714			852			726				1,566			1,510
	Project expenses, net			1			10			54				11			148
	Advertising and promotional expenses			77			62			123				139			270
	Loan administration and processing expenses			14			24			36				38			60
	Regulatory assessments			208			228			364				436			804
	Insurance expenses			75			60			78				135			148
	Communications, stationary and supplies			144			145			133				289			253
	Other operating expenses			466			528			439				994			931
		Total non-interest expense		5,286			5,395			6,890				10,681			14,261
		Income (loss) before income taxes		1,405			1,173			(1,724	)			2,578			(3,155	)
Provision (benefit) for income taxes				383			319			(446	)			702			(805	)
		Net income (loss)	$	1,022		$	854		$	(1,278	)		$	1,876		$	(2,350	)
		Basic earnings (loss) per share	$	0.26		$	0.22		$	(0.32	)		$	0.48		$	(0.60	)
		Diluted earnings (loss) per share	$	0.26		$	0.22		$	(0.32	)		$	0.48		$	(0.60	)

FINANCIAL RATIOS AND OTHER DATA
					Three Months Ended												Six Months Ended
			(Dollars in thousands)		June 30, 2021				March 31, 2021				June 30, 2020				June 30, 2021				June 30, 2020
Performance Data:
		Net income (loss)			$	1,023			$	854			$	(1,279	)		$	1,876			$	(2,350	)
		Return on Average Assets				0.46	%			0.39	%			-0.52	%			0.42	%			-0.48	%
		Return on Average Equity				6.35	%			5.39	%			-7.89	%			5.87	%			-7.11	%
		Net Interest Margin				2.82	%			2.99	%			2.46	%			2.90	%			2.59	%
		Efficiency Ratio				78.99	%			82.14	%			113.41	%			80.56	%			111.24	%
		Efficiency Ratio excluding project costs				78.98	%			81.99	%			112.49	%			80.47	%			110.08	%
		% (decrease) increase in loans				-0.85	%			-7.33	%			-3.22	%			-8.12	%			-2.42	%
		% increase in deposits excluding brokered deposits				10.96	%			4.66	%			7.68	%			16.14	%			15.30	%
Asset Quality:
		Nonaccrual loans			$	24,524			$	24,587			$	21,593			$	24,524			$	21,593
		Other real estate owned			$	1,216			$	1,216			$	2,400			$	1,216			$	2,400
		Total nonperforming assets			$	25,740			$	25,803			$	23,993			$	25,740			$	23,993
		Nonaccrual loans / loans				3.66	%			3.63	%			2.72	%			3.66	%			2.72	%
		Nonperforming assets / assets				2.67	%			2.91	%			2.45	%			2.67	%			2.45	%
		Allowance for loan losses			$	10,362			$	10,426			$	11,148			$	10,362			$	11,148
		Valuation reserve			$	469			$	477			$	485			$	469			$	485
		Allowance for loan losses with valuation reserve			$	10,831			$	10,903			$	11,633			$	10,831			$	11,633
		Allowance for loan losses / loans				1.54	%			1.54	%			1.41	%			1.54	%			1.41	%
		Allowance / nonaccrual loans				42.25	%			42.40	%			51.63	%			42.25	%			51.63	%
		Allowance for loan losses and valuation reserve / loans				1.61	%			1.61	%			1.47	%			1.61	%			1.47	%
		Allowance for loan losses and valuation reserve / nonaccrual loans				44.16	%			44.34	%			53.87	%			44.16	%			53.87	%
		Gross loan charge-offs			$	80			$	272			$	691			$	352			$	735
		Gross loan (recoveries)			$	(17	)		$	(114	)		$	(13	)		$	(129	)		$	(54	)
		Net loan charge-offs			$	63			$	158			$	678			$	223			$	681
Capital Data and Capital Ratios
		Book value per share (1)			$	16.69			$	16.21			$	16.30			$	16.69			$	16.30
		Shares outstanding				3,947,276				3,944,272				3,935,841				3,947,276				3,935,841
Bank Capital Ratios:
		Leverage Ratio				10.10	%			10.12	%			9.03	%			10.10	%			9.03	%
		Tier 1 Capital				12.04	%			12.07	%			10.52	%			12.06	%			10.52	%
		Total Risk Based Capital				13.29	%			13.32	%			11.77	%			13.31	%			11.77	%
(1) Book value per share represents shareholders' equity divided by outstanding shares.
Deposits:
			(In thousands)
					June 30, 2021				December 31, 2020				June 30, 2020
	Non-interest bearing:
	Non-interest bearing				$	135,477			$	99,344			$	97,360
	Prepaid DDA					82,897				59,332				-
		Total non-interest bearing				218,374				158,676				97,360
	Interest bearing:
	NOW					36,085				30,529				26,941
	Savings					99,264				98,635				70,230
	Money market					123,327				131,378				165,658
	Money market - prepaid deposits					54,922				15,011				-
	Certificates of deposit, less than $250,000					152,700				160,968				194,388
	Certificates of deposit, $250,000 or greater					63,690				49,172				67,626
	Brokered deposits					12,836				41,287				160,885
		Total Interest bearing				542,824				526,980				685,728
		Total Deposits			$	761,198			$	685,656			$	783,088
		Total Prepaid deposits			$	137,819			$	74,343			$	-
	Total deposits excluding brokered deposits				$	748,362			$	644,369			$	622,203

Contacts:
Patriot Bank, N.A.	Joseph Perillo	Robert Russell
900 Bedford Street	Chief Financial Officer	President & CEO
Stamford, CT 06901	203-252-5954	203-252-5939
www.BankPatriot.com