Categories: Wire Stories

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    

Alex

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