Categories: Wire Stories

Patriot Reports Break Even First Quarter

Increases Loan Balances, Credit Reserves & Liquidity

STAMFORD, Conn., May 12, 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 $53.0 thousand, or $(0.01) basic and diluted loss per share for the quarter ended March 31, 2023.

These results compared to net income of $1.8 million, or $0.45 per basic and diluted earnings per share for the fourth quarter of 2022 and net income of $800 thousand, or $0.20 basic and diluted earnings per share reported in the first quarter of 2022.

The first quarter of 2023 financial results were adversely impacted by increasing reserves, which resulted in an elevated provision for credit losses of $1.3 million, compared to no provision for loan losses recorded for the first quarter 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 quarterly loan growth of 3.6%, as compared to December 31, 2022. Net interest margin remained strong at 3.29%. The Bank continued executing its, low-cost deposit gathering strategies to complement its branch franchise. Prepaid deposits have grown to $176.2 million as of March 31, 2023. The combination of timing events associated with the onboarding of new deposit channels and rate increases in the Bank’s steady state deposit funding has resulted in a decrease in net interest margin from the previous quarter. Net interest margin decreased 48bps from 3.77% reported in the fourth quarter of 2022, but increased 23bps from 3.06% for the first quarter of last year. The Bank’s prepaid debit card and deposit strategy programs are expected to increasingly become significant contributors to the Bank’s diversified funding sources.

Patriot President & CEO David Lowery stated: “I am excited to have been promoted to Patriot’s President and CEO and look forward to providing increased value to our customers, driving shareholder returns, and establishing Patriot as a preferred work environment for our employees. The first quarter of 2023 was a particularly challenging time for banks overall. However, during this period, PNBK made great strides in investing in its future, growing and diversifying its loan book and deposit base year over year, and increasing reserves.”

While the full impact of recent investments will take time to flow to the bottom line, the Bank’s strengths can be evidenced by:

  1)   A diversified portfolio with no outsized exposures, ending the quarter split between Commercial Loans, Non-Owner-Occupied CRE, and Consumer Loans at 30%, 44% and 25%, respectively.
  2)   A highly conservative Non-Owner-Occupied CRE portfolio with a weighted average LTV of 47%, and less than 9% of that portfolio attributable to office, land, or construction.
  3)   Minimal duration risk across all loans; 34% of the loan portfolio is tied to variable rates, and the fixed rate loans have a weighted average term to rate reset of less than a year-and-a-half, so they will reprice if deposit costs continue to increase; and
  4)   A deposit base, supported by strong relationships, insulated from risk of flight, with more than 60% federally insured and 20% tied to the Bank’s prepaid vertical.


Financial Results:

Total assets increased to $1.1 billion, as of March 31, 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 $878.8 million as of March 31, 2023. Total deposits for the quarter remained stable at $856.5 million, relative to $860.4 million as of December 31, 2022.

Effective January 1, 2023, the Company adopted ASU 2016-13, pertaining to the measurement of credit losses on financial instruments (“CECL”), and as a result, recorded an increase in the allowance for credit losses on loans of $7.4 million, an allowance for credit losses on off-balance sheet exposure of $1.1 million, and a cumulative adjustment to the opening balance of accumulated deficit of $6.2 million, net of a deferred tax adjustment of $2.3 million. The adoption of CECL does not impact Patriot’s income statement, but such adoption is reflected in Patriot’s shareholder’s equity.

Net interest income for the three months ended March 31, 2023, was $8.0 million, an increase of $1.3 million or 19.1% from the first quarter of 2022 and a decline from $9.6 million reported in the fourth quarter of 2022. The increase from the prior year first quarter was primarily attributable to the growth in the loan portfolio and growth in prepaid deposits from the Bank’s Deposit Strategies Division. The decline from the fourth quarter of 2022 was due to narrower net interest margin due to higher deposit costs and an increase in wholesale borrowings to purposely increase liquidity.

The Bank’s net interest margin was 3.29% for the three months ended March 31, 2023, compared with 3.77% in the fourth quarter of 2022 and 3.06% for the three months ended March 31, 2022.

Non-interest income for the quarter ended March 31, 2023, and 2022 was $835 thousand and $814 thousand, respectively. The higher non-interest income for the quarter ended March 31, 2023, was primarily attributable to higher non-interest income from the Bank’s Deposit Strategies Division.

Non-interest expenses for the quarter ended March 31, 2023, and 2022, were $7.6 million and $6.4 million, respectively.

For the three months ended March 31, 2023, a credit for income taxes of $19 thousand was recorded, compared to a provision for income taxes of $311 thousand for the three months ended March 31, 2022. The effective tax rate for the first quarter of 2023 and 2022 was 26.4% and 28.0%, 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) possible future 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)

  March 31,
2023
  December 31,
2022
  March 31,
2022
Assets          
Cash and due from banks:          
Noninterest bearing deposits and cash $ 1,828     $ 5,182     $ 9,026  
Interest bearing deposits   58,424       33,311       35,290  
Total cash and cash equivalents   60,252       38,493       44,316  
Investment securities:          
Available-for-sale securities, at fair value   91,736       84,520       83,260  
Other investments, at cost   4,450       4,450       4,450  
Total investment securities   96,186       88,970       87,710  
           
Federal Reserve Bank stock, at cost   2,673       2,627       2,869  
Federal Home Loan Bank stock, at cost   6,374       3,874       4,184  
           
Gross loans receivable   878,769       848,316       773,339  
Allowance for credit losses   (17,801 )     (10,310 )     (9,737 )
Net loans receivable   860,968       838,006       763,602  
           
SBA loans held for sale   6,882       5,211       5,820  
Accrued interest and dividends receivable   7,308       7,267       5,596  
Premises and equipment, net   30,467       30,641       31,269  
Deferred tax asset   17,392       15,527       13,755  
Goodwill   1,107       1,107       1,107  
Core deposit intangible, net   238       249       284  
Other assets   10,165       11,387       14,992  
Total assets $ 1,100,012     $ 1,043,359     $ 975,504  
           
Liabilities          
Deposits:          
Noninterest bearing deposits $ 152,773     $ 269,636     $ 237,825  
Interest bearing deposits   703,695       590,810       542,024  
Total deposits   856,468       860,446       779,849  
           
Federal Home Loan Bank and correspondent bank borrowings   150,000       85,000       90,000  
Senior notes, net   11,619       11,640       12,000  
Subordinated debt, net   9,847       9,840       9,818  
Junior subordinated debt owed to unconsolidated trust, net   8,130       8,128       8,121  
Note payable   533       585       740  
Advances from borrowers for taxes and insurance   2,824       886       2,574  
Accrued expenses and other liabilities   5,982       7,251       9,719  
Total liabilities   1,045,403       983,776       912,821  
           
Commitments and Contingencies                
           
Shareholders’ equity          
Preferred stock                
Common stock   106,588       106,565       106,500  
Accumulated deficit   (37,581 )     (31,337 )     (36,698 )
Accumulated other comprehensive loss   (14,398 )     (15,645 )     (7,119 )
Total shareholders’ equity   54,609       59,583       62,683  
           
Total liabilities and shareholders’ equity $ 1,100,012     $ 1,043,359     $ 975,504  

PATRIOT NATIONAL BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

  Three Months Ended
(In thousands, except per share amounts) March 31,
2023
  December 31,
2022
  March 31,
2022
Interest and Dividend Income          
Interest and fees on loans $ 12,550     $ 12,865     $ 7,664  
Interest on investment securities   680       672       570  
Dividends on investment securities   135       155       65  
Other interest income   281       274       21  
Total interest and dividend income   13,646       13,966       8,320  
           
Interest Expense          
Interest on deposits   3,579       2,641       409  
Interest on Federal Home Loan Bank borrowings   1,373       1,185       737  
Interest on senior debt   290       228       210  
Interest on subordinated debt   326       305       234  
Interest on note payable and other   65       37       4  
Total interest expense   5,633       4,396       1,594  
           
Net interest income   8,013       9,570       6,726  
           
Provision for credit losses   1,336       1,410        
           
Net interest income after provision for credit losses   6,677       8,160       6,726  
           
Non-interest Income          
Loan application, inspection and processing fees   123       108       87  
Deposit fees and service charges   68       65       64  
Gains on sale of loans   81       770       208  
Rental income   119       118       192  
Loss on sale of investment securities   24              
Other income   420       278       263  
Total non-interest income   835       1,339       814  
           
Non-interest Expense          
Salaries and benefits   4,267       4,067       3,346  
Occupancy and equipment expenses   884       849       836  
Data processing expenses   294       275       330  
Professional and other outside services   914       775       789  
Project expenses, net   27       2       52  
Advertising and promotional expenses   85       41       68  
Loan administration and processing expenses   51       50       105  
Regulatory assessments   182       219       174  
Insurance expenses   77       64       77  
Communications, stationary and supplies   191       134       135  
Other operating expenses   612       601       517  
Total non-interest expense   7,584       7,077       6,429  
           
(Loss) income before income taxes   (72 )     2,422       1,111  
           
(Credit) provision for income taxes   (19 )     652       311  
Net (loss) income $ (53 )   $ 1,770     $ 800  
           
Basic (loss) earnings per share $ (0.01 )   $ 0.45     $ 0.20  
Diluted (loss) earnings per share $ (0.01 )   $ 0.45     $ 0.20  

FINANCIAL RATIOS AND OTHER DATA

  Three Months Ended
(Dollars in thousands) March 31,
2023
  December 31,
2022
  March 31,
2022
Quarterly Performance Data:          
Net (loss) income $ (53 )   $ 1,770     $ 800  
Return on Average Assets   -0.02 %     0.66 %     0.34 %
Return on Average Equity   -0.39 %     11.72 %     4.88 %
Net Interest Margin   3.29 %     3.77 %     3.06 %
Efficiency Ratio   85.72 %     64.88 %     85.27 %
Efficiency Ratio excluding project costs   85.42 %     64.86 %     84.58 %
% increase (decrease) in loans   3.59 %     -1.69 %     4.58 %
% (decrease) increase in deposits   -0.46 %     3.12 %     4.18 %
           
Asset Quality:          
Nonaccrual loans $ 23,769     $ 18,593     $ 23,466  
Other real estate owned $     $     $  
Total nonperforming assets $ 23,769     $ 18,593     $ 23,466  
           
Nonaccrual loans / loans   2.70 %     2.19 %     3.03 %
Nonaccrual loans / assets   2.16 %     1.78 %     2.41 %
           
Allowance for loan losses $ 17,801     $ 10,310     $ 9,737  
Allowance for loan losses / loans   2.03 %     1.22 %     1.26 %
Allowance / nonaccrual loans   74.89 %     55.45 %     41.49 %
           
Loan charge-offs $ 1,798     $ 1,177     $ 185  
Loan (recoveries) $ (180 )   $ (125 )   $ (17 )
Net loan charge-offs (recoveries) $ 1,618     $ 1,052     $ 168  
           
Capital Data and Capital Ratios          
Book value per share (1) $ 13.77     $ 15.03     $ 15.84  
Non-GAAP Tangible book value per share (2) $ 13.43     $ 14.68     $ 15.49  
Non-GAAP Tangible book value excluding other comprehensive loss per share (3) $ 17.06     $ 18.63     $ 17.29  
           
Shares outstanding   3,965,186     3,965,186     3,956,492
           
Bank Leverage Ratio   9.25 %     9.27 %     9.94 %

(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) March 31,
2023
  December 31,
2022
  March 31,
2022
Non-interest bearing:          
Non-interest bearing $ 124,388     $ 118,541     $ 120,835  
Prepaid DDA   28,385       151,095       116,990  
Total non-interest bearing   152,773       269,636       237,825  
           
Interest bearing:          
NOW   29,316       34,440       42,272  
Savings   56,418       71,002       105,871  
Money market   158,641       164,827       117,049  
Money market – prepaid deposits   147,833       46,173       29,770  
Certificates of deposit, less than $250,000   162,734       165,793       158,625  
Certificates of deposit, $250,000 or greater   43,664       59,877       53,513  
Brokered deposits   105,089       48,698       34,924  
Total Interest bearing   703,695       590,810       542,024  
           
Total Deposits $ 856,468     $ 860,446     $ 779,849  
           
Total Prepaid deposits $ 176,218     $ 197,268     $ 146,760  
           
Total deposits excluding brokered deposits $ 751,379     $ 811,748     $ 744,925  


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) March 31, 2023   December 31, 2022   March 31, 2022
           
Tangible book value per share          
Total shareholders’ equity $ 54,609     $ 59,583     $ 62,683  
Goodwill   (1,107 )     (1,107 )     (1,107 )
Core deposit intangible, net   (238 )     (249 )     (284 )
Tangible book value $ 53,264     $ 58,227     $ 61,292  
           
Shares outstanding   3,965,186       3,965,186       3,956,492  
Tangible book value per share $ 13.43     $ 14.68     $ 15.49  
           
Tangible book value excluding other comprehensive loss per share          
Tangible book value $ 53,264     $ 58,227     $ 61,292  
Other comprehensive loss   14,398       15,645       7,119  
Tangible book value excluding other comprehensive loss $ 67,662     $ 73,872     $ 68,411  
           
Shares outstanding   3,965,186       3,965,186       3,956,492  
Tangible book value excluding other comprehensive loss per share $ 17.06     $ 18.63     $ 17.29  

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    

Alex

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