Patriot Reports Second Quarter Results
Increases Loan Balances, Credit Reserves & Liquidity
STAMFORD, Conn., Aug. 11, 2023 (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 net loss of $546 thousand, or $(0.14) basic and diluted loss per share for the quarter ended June 30, 2023.These results compared to net loss of $53 thousand, or $(0.01) per basic and diluted loss per share for the first quarter of 2023 and net income of $1.3 million, or $0.32 basic and diluted earnings per share reported in the second quarter of 2022.
For the six months ended June 30, 2023, net loss was $599 thousand, or $(0.15) basic and diluted loss per share, compared to a net income of $2.1 million, or $0.52 basic and diluted earnings per share for the six months ended June 30, 2022.
The first half year of 2023 financial results were adversely impacted by increasing reserves, which resulted in an elevated provision for credit losses of $2.6 million, compared to provision for loan losses of $275 thousand recorded for the same period of 2022; and the impact of lower net interest margin which was impacted by the higher funding costs resulting from the recent uncertainty in the banking sector.
The Bank reported steady loan growth of almost 6% in the second quarter of 2023, as compared to the prior quarter. Net interest margin decreased slightly, but remained strong at 2.96%.
*Commenting on the results, Patriot President & CEO David Lowery, stated*: “The Bank continued to invest in its long-term strategic plan and numerous value-add initiatives during the second quarter of 2023, which, combined with higher loan loss reserves and increased interest expense, from the extraordinary actions taken to combat inflation, resulted in a loss for the quarter. We believe that as the Bank fully ramps up its many initiatives, particularly the Digital Payments Division, the Bank will have the tools necessary for long-term sustained growth, even during challenged markets.
Though the speed of recent interest rate increases may have knock-on effects that require further reserve increases, fresh market signals indicate the need for continued increases may be slowing. Over the long term, the Bank’s in-process investments are expected to more than offset impacts from increased rates, driven by low-cost deposit and fee income generators.
In the near term, as these programs continue to build out, the Bank will refocus efforts on credit quality and continue to manage non-interest expense. Additionally, the Bank continues to actively pursue a number of strategic actions that will position us for further growth opportunities.”
*Financial Results:*
Total assets increased to $1.2 billion, as of June 30, 2023, as compared to $1.0 billion on December 31, 2022. This was primarily due to an increase in loans from $848.3 million at December 31, 2022, to $930.7 million as of June 30, 2023. Total deposits for the quarter remained stable at $863.4 million as of June 30, 2023, relative to $860.4 million as of December 31, 2022.
Net interest income for the three months ended June 30, 2023, was $7.7 million, which was consistent with the net interest income of $7.7 million reported in the second quarter of 2022 and a decline from $8.0 million reported in the first quarter of 2023. The decline from the first quarter of 2023 was due to narrower net interest margin due to higher deposit costs and an increase in wholesale borrowings. Net interest income for the six months ended June 30, 2023 was $15.7 million, an increase of $1.3 million or 8.9% from the first half of 2022. These increases were primarily attributable to the growth in the loan portfolio over the past year.
The Bank’s net interest margin was 2.96% for the three months ended June 30, 2023, compared with 3.29% for the three months ended March 31, 2023 and 3.27% for the three months ended June 30, 2022. For the six months ended June 30, 2023 and 2022, the net interest margin was 3.12% and 3.17%, respectively.
A provision for credit losses of $1.2 million and $2.6 million was recorded for the three and six months ended June 30, 2023, respectively. For the three and six months ended June 30, 2022, a provision for loan losses of $275 thousand was recorded. The allowance and provision for the three and six months ended June 30, 2023 are not comparable to prior periods due to adoption of the current expected credit loss methodology.
Non-interest income was $829 thousand and $798 thousand for the three months ended June 30, 2023 and 2022, respectively. For the six months ended June 30, 2023 and 2022, the non-interest income was $1.7 million and $1.6 million, respectively. The higher non-interest income for the first half of 2023, was primarily attributable to higher non-interest income from the Bank’s Deposit Strategies Division.
Non-interest expenses for the quarter ended June 30, 2023, and 2022, were $8.1 million and $6.5 million, respectively. Non-interest expenses for the six months ended June 30, 2023, and 2022, were $15.6 million and $12.9 million, respectively.
In 2023, a benefit for income taxes of $206 thousand and $225 thousand was recorded for the three and six months ended June 30, 2023, respectively, compared to a provision for income taxes of $476 thousand and $787 thousand for the three and six months ended June 30, 2022, respectively. The effective tax rate for the six months ended June 30, 2023 and 2022 was 27.3% and 27.6%, respectively.
*About the Company:*
Founded in 1994, and now celebrating its 29th 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. The 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, Mississippi, along with a Rhode Island operations center.
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. The emphasis on building strong client relationships and community involvement are cornerstones of Patriot’s philosophy as it seeks 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. These forward-looking statements are based on Patriot’s current expectations and assumptions regarding Patriot’s business, the economy, and other future conditions. Because forward-looking statements relate to future results and occurrences, they are subject to inherent risks, uncertainties, changes in circumstances and other factors that are difficult to predict. Many possible events or factors could affect Patriot’s future financial results and performance and could cause the actual results, performance, or achievements of Patriot to differ materially from any anticipated results expressed or implied by such forward-looking statements. Such risks and uncertainties include, among others: (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; (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; (25) our compensation expense associated with equity allocated or awarded to our employees; and (26) other such factors, including risk factors, as may be described in the Company’s other filings with the Securities and Exchange Commission.
*PATRIOT NATIONAL BANCORP, INC. AND SUBSIDIARIES*
*CONSOLIDATED BALANCE SHEETS (Unaudited)*
*June 30,
**2023* *December 31,
**2022* *June 30,
**2022*
*Assets*
Cash and due from banks:
Noninterest bearing deposits and cash $ 2,320 $ 5,182 $ 4,507
Interest bearing deposits 68,489 33,311 33,009
Total cash and cash equivalents 70,809 38,493 37,516
Investment securities:
Available-for-sale securities, at fair value 90,547 84,520 76,971
Other investments, at cost 4,450 4,450 4,450
Total investment securities 94,997 88,970 81,421
Federal Reserve Bank stock, at cost 2,523 2,627 2,762
Federal Home Loan Bank stock, at cost 8,072 3,874 4,474
Gross loans receivable 930,734 848,316 859,107
Allowance for credit losses (16,858 ) (10,310 ) (9,929 )
Net loans receivable 913,876 838,006 849,178
SBA loans held for sale 5,860 5,211 7,556
Accrued interest and dividends receivable 7,628 7,267 5,727
Premises and equipment, net 30,262 30,641 31,128
Deferred tax asset 18,169 15,527 14,910
Goodwill 1,107 1,107 1,107
Core deposit intangible, net 226 249 273
Other assets 9,202 11,387 13,128
*Total assets* *$* *1,162,731* *$* *1,043,359* *$* *1,049,180*
*Liabilities*
Deposits:
Noninterest bearing deposits $ 127,817 $ 269,636 $ 271,165
Interest bearing deposits 735,562 590,810 575,618
Total deposits 863,379 860,446 846,783
Federal Home Loan Bank and correspondent bank borrowings 207,000 85,000 100,000
Senior notes, net 11,653 11,640 12,000
Subordinated debt, net 9,854 9,840 9,825
Junior subordinated debt owed to unconsolidated trust, net 8,132 8,128 8,123
Note payable 481 585 689
Advances from borrowers for taxes and insurance 3,094 886 2,967
Accrued expenses and other liabilities 6,693 7,251 8,991
*Total liabilities* 1,110,286 983,776 989,378
Commitments and Contingencies - - -
*Shareholders' equity*
Preferred stock - - -
Common stock 106,611 106,565 106,520
Accumulated deficit (38,127 ) (31,337 ) (35,433 )
Accumulated other comprehensive loss (16,039 ) (15,645 ) (11,285 )
*Total shareholders' equity* 52,445 59,583 59,802
*Total liabilities and shareholders' equity* *$* *1,162,731* *$* *1,043,359* *$* *1,049,180*
*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,
**2023* *March 31,
**2023* *June 30,
**2022* *June 30,
**2023* *June 30,
**2022*
*Interest and Dividend Income*
Interest and fees on loans $ 14,052 $ 12,550 $ 9,044 $ 26,602 $ 16,708
Interest on investment securities 687 680 510 1,367 1,080
Dividends on investment securities 171 135 65 306 130
Other interest income 399 281 68 680 89
*Total interest and dividend income* 15,309 13,646 9,687 28,955 18,007
*Interest Expense*
Interest on deposits 5,248 3,579 757 8,827 1,166
Interest on Federal Home Loan Bank and correspondent bank borrowings 1,723 1,436 747 3,159 1,484
Interest on senior debt 289 290 210 579 420
Interest on subordinated debt 333 326 251 659 485
Interest on note payable 3 2 2 5 6
*Total interest expense* 7,596 5,633 1,967 13,229 3,561
*Net interest income* 7,713 8,013 7,720 15,726 14,446
*Provision for credit losses* 1,231 1,336 275 2,567 275
*Net interest income after provision for credit losses* 6,482 6,677 7,445 13,159 14,171
*Non-interest Income*
Loan application, inspection and processing fees 121 123 89 244 176
Deposit fees and service charges 74 68 60 142 124
Gains on sale of loans 85 81 301 166 509
Rental income 105 119 132 224 324
Gain on sale of investment securities - 24 — 24 —
Other income 444 420 216 864 479
*Total non-interest income* 829 835 798 1,664 1,612
*Non-interest Expense*
Salaries and benefits 4,661 4,267 3,763 8,928 7,109
Occupancy and equipment expenses 839 884 881 1,723 1,717
Data processing expenses 316 294 283 610 613
Professional and other outside services 727 914 559 1,641 1,348
Project expenses, net 66 27 29 93 81
Advertising and promotional expenses 77 85 73 162 141
Loan administration and processing expenses 103 51 42 154 147
Regulatory assessments 317 182 179 499 353
Insurance expenses 68 77 76 145 153
Communications, stationary and supplies 241 191 139 432 274
Other operating expenses 648 612 478 1,260 995
*Total non-interest expense* 8,063 7,584 6,502 15,647 12,931
*(Loss) income before income taxes* (752 ) (72 ) 1,741 (824 ) 2,852
*(Benefit) provision for income taxes* (206 ) (19 ) 476 (225 ) 787
*Net (loss) income* $ (546 ) $ (53 ) $ 1,265 $ (599 ) $ 2,065
*Basic (loss) earnings per share* $ (0.14 ) $ (0.01 ) $ 0.32 $ (0.15 ) $ 0.52
*Diluted (loss) earnings per share* $ (0.14 ) $ (0.01 ) $ 0.32 $ (0.15 ) $ 0.52
*FINANCIAL RATIOS AND OTHER DATA*
*Three Months Ended* *Year Ended*
*(Dollars in thousands)* *June 30,*
*2023* *March 31,*
*2023* *June 30,*
*2022* *June 30,*
*2023* *June 30,*
*2022*
*Quarterly Performance Data:*
Net (loss) income $ (546 ) $ (53 ) $ 1,265 $ (599 ) $ 2,065
Return on Average Assets -0.20 % -0.02 % 0.50 % -0.11 % 0.42 %
Return on Average Equity -3.93 % -0.39 % 8.20 % -2.18 % 6.49 %
Net Interest Margin 2.96 % 3.29 % 3.27 % 3.12 % 3.17 %
Efficiency Ratio 94.39 % 85.72 % 76.33 % 89.98 % 80.53 %
Efficiency Ratio excluding project costs 94.32 % 85.42 % 76.00 % 89.79 % 80.03 %
% increase in loans 5.91 % 3.59 % 11.09 % 9.72 % 16.18 %
% increase (decrease) in deposits 0.81 % -0.46 % 8.58 % 0.34 % 13.12 %
*Asset Quality:*
Nonaccrual loans $ 20,634 $ 23,769 $ 23,324 $ 20,634 $ 23,324
Nonaccrual loans / loans 2.22 % 2.70 % 2.71 % 2.22 % 2.71 %
Nonaccrual loans / assets 1.77 % 2.16 % 2.22 % 1.77 % 2.22 %
Allowance for loan losses $ 16,858 $ 17,801 $ 9,929 $ 16,858 $ 9,929
Allowance for loan losses / loans 1.81 % 2.03 % 1.16 % 1.81 % 1.16 %
Allowance / nonaccrual loans 81.70 % 74.89 % 42.57 % 81.70 % 42.57 %
Loan charge-offs $ 2,670 $ 1,798 $ 100 $ 4,468 $ 285
Loan (recoveries) $ (280 ) $ (180 ) $ (17 ) $ (460 ) $ (34 )
Net loan charge-offs $ 2,390 $ 1,618 $ 83 $ 4,008 $ 251
*Capital Data and Capital Ratios*
Book value per share (1) $ 13.23 $ 13.77 $ 15.11 $ 13.23 $ 15.11
Non-GAAP Tangible book value per share (2) $ 12.89 $ 13.43 $ 14.76 $ 12.89 $ 14.76
Non-GAAP Tangible book value excluding other comprehensive loss per share (3) $ 16.94 $ 17.06 $ 17.61 $ 16.94 $ 17.61
Shares outstanding 3,965,186 3,965,186 3,957,269 3,965,186 3,957,269
Bank Leverage Ratio 8.70 % 9.29 % 9.44 % 8.70 % 9.44 %
(1) Book value per share represents shareholders' equity divided by outstanding shares.
(2) Tangible book value per share represents tangible assets divided by outstanding shares.
(3) Tangible book value excluding other comprehensive loss per share represents tangible assets excluding unrealized loss on investments, net of income tax divided by outstanding shares.*Deposits:*(In thousands) *June 30,
**2023* *December 31,
**2022* *June 30,
**2022*
*Non-interest bearing:*
Non-interest bearing $ 104,413 $ 118,541 $ 137,320
Prepaid DDA 23,404 151,095 133,845
Total non-interest bearing 127,817 269,636 271,165
*Interest bearing:*
NOW 37,970 34,440 35,973
Savings 50,981 71,002 99,686
Money market 163,982 164,827 151,212
Money market - prepaid deposits 134,735 46,173 32,891
Certificates of deposit, less than $250,000 182,680 165,793 169,690
Certificates of deposit, $250,000 or greater 56,088 59,877 51,491
Brokered deposits 109,126 48,698 34,675
Total Interest bearing 735,562 590,810 575,618
*Total Deposits* $ 863,379 $ 860,446 $ 846,783
Total prepaid deposits $ 158,139 $ 197,268 $ 166,736
*Total deposits excluding prepaid deposits* $ 705,240 $ 663,178 $ 680,047
Total uninsured deposits $ 285,752 $ 343,980 $ 351,924
Uninsured deposits to total deposits 33.10 % 39.98 % 41.56 %
Uninsured deposits to total deposits excluding prepaid deposits 17.71 % 22.35 % 27.42 %
*Non-GAAP Financial Measures:*
In addition to evaluating the Company's financial performance in accordance with U.S. generally accepted accounting principles ("GAAP"), management may evaluate certain non-GAAP financial measures, such as per share numbers that exclude intangible assets and exclude the net reduction in Book equity resulting from the change in value of its Available for Sale investment securities (AFS). A computation and reconciliation of non-GAAP financial measures used for these purposes is contained in the accompanying Reconciliation of GAAP to Non-GAAP Measures tables. We believe that due to the temporary nature of the change in AFS securities which is a result of the current interest rate environment, providing the Book value per share data excluding the Other Comprehensive Loss associated with the valuation of AFS securities provides investors with information useful in understanding our financial position. The non-GAAP financial measures should not be considered a substitute for GAAP basis measures and results, and we strongly encourage investors to review our consolidated financial statements in their entirety and not to rely on any single financial measure.
*Reconciliation of GAAP to Non-GAAP Measures (unaudited):*
*(Dollars in thousands)* *June 30, 2023* *March 31, 2023* *June 30, 2022*
*Tangible book value per share*
Total shareholders' equity $ 52,445 $ 54,609 $ 59,802
Goodwill (1,107 ) (1,107 ) (1,107 )
Core deposit intangible, net (226 ) (238 ) (273 )
*Tangible book value* *$* *51,112* *$* *53,264* *$* *58,422*
Shares outstanding 3,965,186 3,965,186 3,957,269
*Tangible book value per share* *$* *12.89* *$* *13.43* *$* *14.76*
*Tangible book value excluding other comprehensive loss per share*
Tangible book value $ 51,112 $ 53,264 $ 58,422
Other comprehensive loss 16,039 14,398 11,285
*Tangible book value excluding other comprehensive loss* *$* *67,151* *$* *67,662* *$* *69,707*
Shares outstanding 3,965,186 3,965,186 3,957,269
*Tangible book value excluding other comprehensive loss per share* *$* *16.94* *$* *17.06* *$* *17.61*
*Contacts:*
Patriot Bank, N.A. Joseph Perillo David Lowery
900 Bedford Street Chief Financial Officer President & CEO
Stamford, CT 06901 203-252-5954 203-252-5959
www.BankPatriot.com