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 $1.3 million, or $0.34 basic and diluted earnings per share for the quarter ended September 30, 2021, compared to a net loss of $87,000, or $0.02 basic and diluted loss per share reported in the third quarter of 2020. On a year-to-date basis, net income was $3.2 million, or $0.81 per fully diluted share, compared to a net loss of $2.4 million, or $0.62 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 debit card program continues to be an increasing, low-cost funding source for the Bank and has grown substantially to $142.4 million as of September 30, 2021, from the $50.0 million acquired in July 2020. The portfolio growth provides a substantial improvement to the Bank’s net interest margin and overall funding costs.

During the three and nine months ended September 30, 2021, the Bank recognized payroll tax credits of $906,000 and $2.9 million, respectively, under the Employee Retention Credit program of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). Also, during the third quarter, the Bank recorded a credit to provision for loan losses of $300,000 due to overall improvement in asset quality.   Pre-tax income was $1.8 million and $4.4 million for the three and nine months ended September 30, 2021, respectively. Excluding the employee tax credit, pre-tax income was $896,000 and $1.5 million for the three- and nine-months periods, respectively.

Patriot President & CEO Robert Russell stated: “I am incredibly proud of the continued progress made over the past year. Improvement continues with respect to funding sources, asset quality and asset generation, all of which provide a positive impact on the Bank’s financials. The growth in our prepaid programs is a significant contributor to the reduction in the Bank’s funding costs over the last year. The Company has enhanced processes and added strategic talent to position for an effective future and we are very encouraged by the path we have forged.”

Since 2020, the Bank had provided payment deferrals on approximately $232.7 million of loans as permitted under the CARES Act. Virtually all of those loans deferred have now resumed normal payments. Only three loans remaining on deferral totaled $7.3 million at September 30, 2021.

Financial Results:

As of September 30, 2021, total assets increased to $952.3 million, as compared to $880.7 million at December 31, 2020, primarily due to increase in available-for-sale securities of $74.8 million. Net loans totaled $704.5 million versus $719.6 million as of December 31, 2020. Total deposits increased from $685.7 million at December 31, 2020, to $734.7 million at September 30, 2021.

The Bank has substantially improved its deposit and funding mix over the past year. During the past nine months, total deposits increased $49.0 million, primarily due to growth in prepaid deposits of $68.1 million, which was partially offset by decline of $27.3 million in brokered deposits and certificates of deposits. Excluding brokered deposits, total deposits increased 9.8% during the first nine months of 2021.

Net interest income was $6.3 million and $18.4 million for the three and nine months ended September 30, 2021, respectively. Net interest income for the three and nine months ended September 30, 2020, was $5.9 million and $17.9 million, respectively.

The Bank’s net interest margin showed strong improvement and was 2.87% for the nine months ended September 30, 2021, compared with 2.60% 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 improvement in delinquencies of classified loans resulted in a $300,000 credit of provision for loan losses for the three and nine months ended September 30, 2021, as compared to a provision for loan losses of $85,000 and $1.8 million for the three and nine months ended September 30, 2020, respectively. The majority of the provision in 2020 was primarily attributable to conditions and the uncertainty created by the COVID-19 pandemic. As of September 30, 2021, the allowance for loan losses was 1.41% of total loans, compared with 1.45% at December 31, 2020.

Non-interest income was $923,000 and $2.1 million for the three and nine months ended September 30, 2021, respectively.   Non-interest income was $704,000 and $1.5 million for the three and nine months ended September 30, 2020, respectively. The increase in the current quarter was primarily attributable to a gain of $512,000 recognized from the termination of an interest rate swap cash flow hedge in the third quarter of 2021.

Non-interest expense was $5.7 million and $16.4 million for the three and nine months ended September 30, 2021, respectively. Non-interest expense was $6.6 million and $20.9 million for the three and nine months ended September 30, 2020, respectively. The decrease in non-interest expense in the nine months ended September 30, 2021, was primarily driven by an Employee Retention Credit of $2.9 million under the CARES Act and a reduction of $510,000 in regulatory assessments expense.

For the nine months ended September 30, 2021, a provision for income taxes of $1.2 million was recorded, compared to a benefit for income taxes of $811,000 for the nine months ended September 30, 2020.

As of September 30, 2021, shareholders’ equity was $66.7 million, compared with $63.2 million at December 31, 2020. Patriot’s book value per share rose to $16.89 at September 30, 2021, compared with $16.03 at December 31, 2020.

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)			September 30, 2021				December 31, 2020				September 30, 2020
Assets
Cash and due from banks:
Noninterest bearing deposits and cash			$	5,298			$	3,006			$	3,231
Interest bearing deposits				40,967				31,630				46,405
		Total cash and cash equivalents		46,265				34,636				49,636
Investment securities:
Available-for-sale securities, at fair value				124,103				49,262				47,823
Other investments, at cost				4,450				4,450				4,450
		Total investment securities		128,553				53,712				52,273
Federal Reserve Bank stock, at cost				2,843				2,783				2,783
Federal Home Loan Bank stock, at cost				5,009				4,503				4,503
Gross loans receivable				714,538				730,180				751,298
Allowance for loan losses				(10,079	)			(10,584	)			(11,171	)
	Net loans receivable			704,459				719,596				740,127
SBA loans held for sale				4,128				1,217				6,824
Accrued interest and dividends receivable				6,186				6,620				6,834
Premises and equipment, net				32,638				33,423				33,632
Other real estate owned				-				1,906				1,954
Deferred tax asset, net				10,352				11,496				12,066
Goodwill				1,107				1,107				1,107
Core deposit intangible, net				308				343				567
Other assets				10,498				9,387				10,623
	Total assets		$	952,346			$	880,729			$	922,929
Liabilities
Deposits:
	Noninterest bearing deposits		$	207,941			$	158,676			$	161,871
	Interest bearing deposits			526,732				526,980				565,560
		Total deposits		734,673				685,656				727,431
Federal Home Loan Bank and correspondent bank borrowings				110,000				90,000				90,000
Senior notes, net				11,983				11,927				11,909
Subordinated debt, net				9,803				9,782				9,774
Junior subordinated debt owed to unconsolidated trust, net				8,116				8,110				8,108
Note payable				842				994				1,044
Advances from borrowers for taxes and insurance				2,253				3,786				2,492
Accrued expenses and other liabilities				7,976				7,255				7,634
		Total liabilities		885,646				817,510				858,392
Commitments and Contingencies				-				-				-
Shareholders' equity
Preferred stock				-				-				-
Common stock				106,439				106,329				106,293
Accumulated deficit				(39,393	)			(42,592	)			(41,210	)
Accumulated other comprehensive loss				(346	)			(518	)			(546	)
		Total shareholders' equity		66,700				63,219				64,537
	Total liabilities and shareholders' equity		$	952,346			$	880,729			$	922,929

PATRIOT NATIONAL BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
			Three Months Ended											Nine Months Ended
(In thousands, except per share amounts)			September 30, 2021				June 30, 2021			September 30, 2020				September 30, 2021				September 30, 2020
Interest and Dividend Income
	Interest and fees on loans		$	7,189			$	7,267		$	8,578			$	22,199			$	27,722
	Interest on investment securities			692				420			340				1,422				1,134
	Dividends on investment securities			59				57			85				150				313
	Other interest income			20				23			28				67				187
		Total interest and dividend income		7,960				7,767			9,031				23,838				29,356
Interest Expense
	Interest on deposits			448				623			2,028				1,856				8,020
	Interest on Federal Home Loan Bank borrowings			756				741			628				2,230				1,963
	Interest on senior debt			229				228			229				686				686
	Interest on subordinated debt			233				233			235				700				756
	Interest on note payable and other			4				4			5				12				15
		Total interest expense		1,670				1,829			3,125				5,484				11,440
		Net interest income		6,290				5,938			5,906				18,354				17,916
(Credit) provision for loan losses				(300	)			-			85				(300	)			1,799
		Net interest income after (credit) provision for loan losses		6,590				5,938			5,821				18,654				16,117
Non-interest Income
	Loan application, inspection and processing fees			79				61			54				203				147
	Deposit fees and service charges			61				64			73				190				253
	Gains on sale of loans			-				258			380				352				464
	Rental income			130				140			131				400				393
	Gain on sale of investment securities			26				93			-				119				-
	Other income			627				137			66				854				257
		Total non-interest income		923				753			704				2,118				1,514
Non-interest Expense
	Salaries and benefits			2,843				2,447			3,460				7,506				10,966
	Occupancy and equipment expenses			832				778			810				2,530				2,680
	Data processing expenses			376				362			433				1,088				1,194
	Professional and other outside services			633				714			627				2,199				2,137
	Project expenses, net			4				1			6				15				154
	Advertising and promotional expenses			57				77			107				196				377
	Loan administration and processing expenses			23				14			75				61				135
	Regulatory assessments			213				208			355				649				1,159
	Insurance expenses			79				75			67				214				215
	Communications, stationary and supplies			161				144			118				450				371
	Other operating expenses			490				466			560				1,484				1,491
		Total non-interest expense		5,711				5,286			6,618				16,392				20,879
		Income (loss) before income taxes		1,802				1,405			(93	)			4,380				(3,248	)
Provision (benefit) for income taxes				479				383			(6	)			1,181				(811	)
		Net income (loss)	$	1,323			$	1,022		$	(87	)		$	3,199			$	(2,437	)
		Basic earnings (loss) per share	$	0.34			$	0.26		$	(0.02	)		$	0.81			$	(0.62	)
		Diluted earnings (loss) per share	$	0.34			$	0.26		$	(0.02	)		$	0.81			$	(0.62	)

FINANCIAL RATIOS AND OTHER DATA
					Three Months Ended												Nine Months Ended
			(Dollars in thousands)		September 30, 2021				June 30, 2021				September 30, 2020				September 30, 2021				September 30, 2020
Performance Data:
		Net income (loss)			$	1,323			$	1,022			$	(87	)		$	3,199			$	(2,437	)
		Return on Average Assets				0.56	%			0.46	%			-0.04	%			0.47	%			-0.33	%
		Return on Average Equity				7.86	%			6.35	%			-0.53	%			6.56	%			-4.94	%
		Net Interest Margin				2.82	%			2.82	%			2.61	%			2.87	%			2.60	%
		Efficiency Ratio				79.20	%			78.99	%			100.12	%			80.07	%			107.46	%
		% increase (decrease) in loans				6.51	%			-0.85	%			-5.20	%			-2.14	%			-7.49	%
		% (decrease) increase in deposits excluding brokered deposits				-5.44	%			10.96	%			2.29	%			9.82	%			17.94	%
Asset Quality:
		Nonaccrual loans			$	28,046			$	24,524			$	20,440			$	28,046			$	20,440
		Other real estate owned			$	-			$	1,216			$	1,954			$	-			$	1,954
		Total nonperforming assets			$	28,046			$	25,740			$	22,394			$	28,046			$	22,394
		Nonaccrual loans / loans				3.93	%			3.66	%			2.72	%			3.93	%			2.72	%
		Nonperforming assets / assets				2.94	%			2.67	%			2.43	%			2.94	%			2.43	%
		Allowance for loan losses			$	10,079			$	10,362			$	11,171			$	10,079			$	11,171
		Valuation reserve			$	466			$	469			$	492			$	466			$	492
		Allowance for loan losses with valuation reserve			$	10,545			$	10,831			$	11,663			$	10,545			$	11,663
		Allowance for loan losses / loans				1.41	%			1.54	%			1.49	%			1.41	%			1.49	%
		Allowance / nonaccrual loans				35.94	%			42.25	%			54.65	%			35.94	%			54.65	%
		Allowance for loan losses and valuation reserve / loans				1.47	%			1.61	%			1.55	%			1.47	%			1.55	%
		Allowance for loan losses and valuation reserve / nonaccrual loans				37.60	%			44.16	%			57.06	%			37.60	%			57.06	%
		Gross loan charge-offs			$	6			$	80			$	75			$	358			$	810
		Gross loan (recoveries)			$	(23	)		$	(16	)		$	(13	)		$	(153	)		$	(67	)
		Net loan charge-offs			$	(17	)		$	64			$	62			$	205			$	743
Per Share Data and Capital Ratio
		Book value per share (1)			$	16.89			$	16.69			$	16.39			$	16.89			$	16.39
		Tangible book value per share (2)			$	16.54			$	16.32			$	15.97			$	16.54			$	15.97
		Tangible book value per share-fully diluted			$	16.41			$	16.18			$	15.86			$	16.41			$	15.86
		Shares outstanding				3,947,976				3,947,276				3,937,041				3,947,976				3,937,041
		Bank Leverage Ratio				9.88	%			10.10	%			9.35	%			9.88	%			9.35	%
			(1) Book value per share represents shareholders' equity divided by outstanding shares.
			(2) Tangible book value per share represents shareholders' equity less intangible assets divided by outstanding shares.
Deposits:
					September 30, 2021				June 30, 2021				December 31, 2020				September 30, 2020
	Non-interest bearing:
	Non-interest bearing				$	114,850			$	135,477			$	99,344			$	102,004
	Prepaid DDA					93,091				82,897				59,332				59,867
		Total non-interest bearing				207,941				218,374				158,676				161,871
	Interest bearing:
	NOW					34,528				36,085				30,529				29,518
	Savings					102,365				99,264				98,635				91,169
	Money market					116,318				123,327				131,378				142,906
	Money market - prepaid deposits					49,353				54,922				15,011				3
	Certificates of deposit, less than $250,000					142,141				152,700				160,968				160,610
	Certificates of deposit, $250,000 or greater					54,991				63,690				49,172				50,359
	Brokered deposits					27,036				12,836				41,287				90,995
		Total Interest bearing				526,732				542,824				526,980				565,560
		Total Deposits			$	734,673			$	761,198			$	685,656			$	727,431
		Total Prepaid deposits			$	142,444			$	137,819			$	74,343			$	59,870
	Total deposits excluding brokered deposits				$	707,637			$	748,362			$	644,369			$	636,436

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