Home / Top News / Patriot reports second quarter 2019 net loss of $1.66 million; Assets Up 5% as loans and deposits expand & SBA lending business grows; Declares quarterly dividend  

Patriot reports second quarter 2019 net loss of $1.66 million; Assets Up 5% as loans and deposits expand & SBA lending business grows; Declares quarterly dividend  

STAMFORD, Conn., Aug. 23, 2019 (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 a pre-tax loss of $2.29 million, and net loss of $1.66 million, or $0.42 per fully diluted share for the quarter ended June 30, 2019, even as bank assets, loans, deposits and investment in its retail and SBA lending network continues to expand.

The quarterly loss results from an increase in the provision for loan losses of $2.9 million in the quarter and $3.1 million, year-to-date, largely associated with a $2.3 million charge-off on a single non-performing commercial loan.  This resulted in a year-to-date net loss of $1.33 million, or $0.34 per fully diluted share, as compared to a net income of $2.1 million, or $0.54 per fully diluted shares in the prior year.

The second quarter and full-year results also reflect an increase in operating expenses associated with the organic build-up and expansion of the Bank’s SBA lending business, deposit initiatives, and costs incurred in conjunction with strengthened institutional infrastructure, processes, controls and documentation to address regulatory requirements.

During the quarter, loans receivable increased $23.2 million (up 3%) as new loan originations continued at a strong pace, and total deposits increased $14.7 million (up 2%).  Patriot recognized a gain on the sale of SBA loans of $367,000, compared with $456,000 in the prior quarter and $66,000 in the second quarter of 2018.  The Bank continues to maintain strong capital ratios and earnings which are expected to return to normalized levels in future periods.

Richard Muskus, Patriot’s President stated: “The results for the quarter reflect the impact of a single customer credit problem that we have fully charged off.  We have taken a prudent, proactive approach with this non-performing loan at this point and are moving forward to pursue all available options to obtain a recovery on this credit and the assets it is securitized by.”

In 2019 Patriot instituted enhanced governance policies, procedures and practices, invested in strengthened institutional infrastructure, expanded banking locations into the New Haven and Orange, Connecticut markets and made material advancements in building out its SBA business.  These activities are intended to bolster performance in future quarters by investing in the Bank’s future growth.

Mr. Muskus added: “Patriot’s continued retail location expansion into urban centers across southern Connecticut has now resulted in the Bank having a presence in every major community along the busy I-95 corridor, from downtown Greenwich to downtown New Haven, Connecticut, plus a quite dynamic market in the community of Scarsdale, NY.  Patriot’s investment in repositioning and adding to its now 12-retail and four SBA lending locations, better positions the institution to cater to busy, youthful downtown environments and customers who want banking options that match their active lifestyle.”

Growth in loan originations continued, as evidenced by total loans outstanding reaching $812 million, a 3% increase from the prior quarter and 7% higher than the second quarter of 2018.  Contributions from SBA operations were significant for the last two consecutive quarters and new depositor initiatives in the second half are expected to reduce funding costs and strengthen operating performance.

Patriot also announced today the declaration of its ninth consecutive quarterly dividend of $0.01 per share. The record date for this quarterly dividend will be September 3, 2019, with a dividend payment date of September 13, 2019.

Financial Results

As of June 30, 2019, total assets were $977.8 million, as compared to $953.1 million at March 31, 2019 and $930.2 million at June 30, 2018, for a total asset growth of 5% over the past 12 months.  Net loans receivable totaled $803.3 million, up 3% over $780.7 million at March 31, 2019, and up 7% over $750.8 million at June 30, 2018.  Deposits continued to grow to $767.6 million at June 30, 2019, as compared to $752.8 million at March 31, 2019 and $712.3 million at June 30, 2018.

Net interest income was $6.5 million in the second quarter of 2019, an increase of 3% from the prior quarter, and a decline of 7% from the second quarter of 2018.  For the year-to-date period, the net interest income was $12.9 million, a decrease of 9% from the prior year. The recent decline in net interest income was due to higher deposit costs, the impact of non-performing and reduced rate loans, lower loan fees, and the impact of subordinated debt costs raised in June of 2018.

Net interest margin was 2.93% for the second quarter of 2019, as compared to 2.87% in the prior quarter and 3.34% for the second quarter of 2018. 

The provision for loan losses in the second quarter of 2019 was $2.9 million, as compared to $165,000 in the prior quarter and $50,000 for the second quarter of 2018. The year-to-date provision for loan losses was $3.1 million, as compared to $235,000 for the prior year. The increase in provision for loan losses in the second quarter of 2019 was primarily due to a large provision booked in the quarter associated with a single loan stemming from operating cash flow weaknesses and collateral shortfall.

Non-interest income was $829,000 in the second quarter of 2019, 1% higher than the prior quarter, and 115% higher than the second quarter of 2018. The year-to-date non-interest income was $1.7 million in 2019, 133% higher than the prior year. The increase in non-interest income was primarily due to realized gains on the sale of SBA loans.

Non-interest expense was $6.7 million in the second quarter of 2019, 3% higher than the last quarter, and 13% higher than the second quarter of 2018. The year-to-date non-interest expense was $13.2 million, 13% higher than the prior year.

The increase in 2019 was primarily due to an increase in salaries and benefits associated with the build-up of the SBA lending team, the completion of the acquisition of Prime Bank expanding Patriot’s presence in New Haven County, and increased headcount supporting new deposit initiatives and the expansion of credit, finance and compliance support functions.

The income tax benefit was $632,000 in the second quarter of 2019, represented an effective tax rate of 28%.

As of June 30, 2019, shareholders’ equity was $68.3 million, a decrease of $1.4 million as compared to March 31, 2019.  Patriot’s book value per share decreased to $17.41 at June 30, 2019, as compared to $17.77 at March 31, 2019.

The Bank’s capital ratios continue to be strong, as the Bank maintains its “well capitalized” regulatory status. As of June 30, 2019, the Bank’s Tier 1 leverage ratio was 9.61%, Tier 1 risk-based capital ratio was 10.66% and total risk-based capital ratio was 11.65%.

Patriot Bank is headquartered in Stamford and operates 12 locations: in Scarsdale, NY; and Darien, Fairfield, Greenwich, Milford, Norwalk, Orange, Stamford, Westport, with Express Banking locations at Bridgeport/ Housatonic Community College, downtown New Haven and Trumbull at Westfield Mall.  It also maintains SBA lending offices in Atlanta, Jacksonville, Indianapolis, and Stamford.

About the Company

Founded in 1994, and now celebrating its 25th 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 Bancorp’s interest earning assets and the interest paid on its interest bearing liabilities, (2) the timing of repricing of Bancorp’s interest earning assets and interest bearing liabilities, (3) the effect of changes in governmental monetary policy, (4) the components of Bancorp’s periodic earnings and assets, (5) the fact that certain of the income recognized by Bancorp in any quarter may not be repeated in future periods, (6) the effect of changes in regulations applicable to Bancorp and the Bank and the conduct of its business, (7) changes in competition among financial service companies, including possible further encroachment of non-banks on services traditionally provided by banks, (8) the ability of competitors that are larger than Bancorp to provide products and services which it is impracticable for Bancorp to provide, (9) the state of the economy and real estate values in Bancorp’s market areas, and the consequent effect on the quality of Bancorp’s loans, (10) 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 Bancorp, (11) 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 Bancorp, (12) the application of generally accepted accounting principles, consistently applied,  (13) the fact that one period of reported results may not be indicative of future periods,  (14)  the state of the economy in the greater New York metropolitan area and its particular effect on Bancorp customers, vendors and communities and other such factors, including risk factors, as may be described in Bancorp’s other filings with the SEC.

Contacts:      
Patriot Bank, N.A. Richard Muskus Joseph Perillo Michael Carrazza
900 Bedford Street  President Chief Financial Officer CEO and Chairman
Stamford, CT 06901 203-252-5939 203-252-5954 203-251-8230
www.BankPatriot.com      

PATRIOT NATIONAL BANCORP, INC. AND SUBSIDIARY          
CONSOLIDATED BALANCE SHEETS          
(Unaudited)          
Dollars in thousands June 30,
 2019
  March 31,
 2019
  June 30,
 2018
               
Assets            
Cash and due from banks:          
Noninterest bearing deposits and cash $   5,578     $   6,661     $   4,839  
Interest bearing deposits     45,538         49,971         80,290  
    Total cash and cash equivalents     51,116         56,632         85,129  
Investment securities:           
Available-for-sale securities, at fair value     43,839         40,275         23,982  
Other investments, at cost     4,963         4,963         4,962  
    Total investment securities     48,802         45,238         28,944  
               
Federal Reserve Bank stock, at cost     2,922         2,892         2,564  
Federal Home Loan Bank stock, at cost     4,513         4,513         5,807  
               
Gross loans receivable     811,777         788,536         757,329  
Allowance for loan losses     (8,458 )       (7,823 )       (6,525 )
  Net loans receivable     803,319         780,713         750,804  
               
Loans held for sale     4,283         –         –  
Accrued interest and dividends receivable     3,678         3,621         3,306  
Premises and equipment, net     35,249         35,335         35,715  
Other real estate owned     1,954         2,945         991  
Deferred tax asset, net      11,132         10,357         11,085  
Goodwill     1,107         1,107         2,100  
Core deposit intangible, net     661         680         534  
Other assets     9,031         9,075         3,256  
  Total assets $    977,767     $    953,108     $    930,235  
               
Liabilities          
Deposits:          
  Noninterest bearing deposits $   84,295     $   82,248     $   83,808  
  Interest bearing deposits     683,271         670,573         628,504  
    Total deposits     767,566         752,821         712,312  
               
Federal Home Loan Bank and correspondent bank borrowings     100,000         90,000         110,000  
Senior  notes, net     11,815         11,796         11,740  
Subordinated debt, net     9,738         9,731         9,576  
Junior subordinated debt owed to unconsolidated trust, net     8,098         8,096         8,090  
Note payable     1,291         1,339         1,484  
Advances from borrowers for taxes and insurance     3,239         1,922         2,876  
Accrued expenses and other liabilities     7,730         7,754         5,796  
    Total liabilities     909,477         883,459         861,874  
               
Commitments and Contingencies          
               
Shareholders’ equity          
Preferred stock     –         –         –  
Common stock     40         40         40  
Additional paid-in capital     107,198         107,143         106,982  
Accumulated deficit     (37,210 )       (35,517 )       (36,808 )
Treasury stock, at cost     (1,179 )       (1,179 )       (1,179 )
Accumulated other comprehensive loss     (559 )       (838 )       (674 )
    Total shareholders’ equity     68,290         69,649         68,361  
               
  Total liabilities and shareholders’ equity $    977,767     $    953,108     $    930,235  
               

 

PATRIOT NATIONAL BANCORP, INC. AND SUBSIDIARY            
CONSOLIDATED STATEMENTS OF INCOME (LOSS)                
(Unaudited) Three Months Ended   Six Months Ended 
Dollars in thousands, except per share data June 30,
2019
  March 31,
2019
  June 30,
2018
  June 30,
2019
  June 30,
2018
                       
Interest and Dividend Income                  
  Interest and fees on  loans $   10,274     $   9,741   $   9,201   $   20,015     $   17,975
  Interest on investment securities     398         379       291       777         557
  Dividends on investment securities     114         118       128       232         249
  Other interest income     237         333       270       570         421
    Total interest and dividend income     11,023         10,571       9,890       21,594         19,202
                       
Interest Expense                  
  Interest on deposits     3,533         3,264       1,997       6,797         3,654
  Interest on Federal Home Loan Bank borrowings     426         439       502       865         759
  Interest on senior debt     228         229       228       457         457
  Interest on subordinated debt     279         289       112       568         211
  Interest on note payable and other     8         6       10       14         17
    Total interest expense     4,474         4,227       2,849       8,701         5,098
                       
    Net interest income     6,549         6,344       7,041       12,893         14,104
                       
Provision for loan losses     2,937         165       50       3,102         235
                       
    Net interest income after provision for loan losses     3,612         6,179       6,991       9,791         13,869
                       
Non-interest Income                  
  Loan application, inspection and processing fees     28         14       12       42         20
  Deposit fees and service charges     116         127       132       243         266
  Gains on sale of loans     367         456       66       823         66
  Rental income     192         130       83       322         167
  Other income     126         95       93       221         189
    Total non-interest income     829         822       386       1,651         708
                       
Non-interest Expense                  
  Salaries and benefits     3,608         3,184       2,854       6,792         5,623
  Occupancy and equipment expenses     744         917       776       1,661         1,517
  Data processing expenses     361         370       322       731         639
  Professional and other outside services     803         771       457       1,574         1,029
  Project Expenses     (15 )       80       592       65         1,115
  Advertising and promotional expenses     77         115       59       192         137
  Loan administration and processing expenses     43         14       30       57         43
  Regulatory assessments     395         315       298       710         550
  Insurance expenses     54         41       53       95         108
  Material and communications     131         134       110       265         223
  Other operating expenses     527         569       410       1,096         768
    Total non-interest expense     6,728         6,510       5,961       13,238         11,752
                       
    (Loss) income before income taxes     (2,287 )       491       1,416       (1,796 )       2,825
                       
(Benefit) provision for Income Taxes     (632 )       168       380       (464 )       724
    Net (loss) income $    (1,655 )   $    323   $    1,036   $    (1,332 )   $    2,101
                       
    Basic (loss) earnings per share  $   (0.42 )   $   0.08   $   0.27   $   (0.34 )   $   0.54
    Diluted (loss) earnings per share $   (0.42 )   $   0.08   $   0.26   $   (0.34 )   $   0.54
                       

 

                           
FINANCIAL RATIOS AND OTHER DATA                    
                           
          Three Months Ended   Six Months Ended
          June 30,
 2019
  March 31,
 2019
  June 30,
 2018
  June 30,
 2019
  June 30,
 2018
                           
Quarterly Performance Data:                    
    Net (loss) income   $   (1,655 )   $   323     $   1,036     $   (1,332 )   $   2,101  
    Return on average assets     -0.69 %     0.14 %     0.46 %     -0.28 %     0.48 %
    Return on average equity     -9.44 %     1.87 %     6.06 %     -3.82 %     6.21 %
    Net interest margin     2.93 %     2.87 %     3.34 %     2.90 %     3.44 %
    Efficiency ratio     91.19 %     90.85 %     80.27 %     91.02 %     79.34 %
    Efficiency ratio excluding project costs     91.39 %     89.73 %     72.30 %     90.57 %     71.81 %
    % increase loans     2.95 %     1.05 %     4.52 %     4.02 %     5.24 %
    % increase deposits     1.96 %     1.28 %     8.72 %     3.27 %     11.76 %
                           
Asset Quality:                    
    Nonaccrual loans   $   19,405     $   28,029     $   6,464     $   19,405     $   6,464  
    Other real estate owned   $   1,954     $   2,945     $   991     $   1,954     $   991  
    Total nonperforming assets   $   21,359     $   30,974     $   7,455     $   21,359     $   7,455  
                           
    Nonaccrual loans / loans     2.39 %     3.55 %     0.85 %     2.39 %     0.85 %
    Nonperforming assets / assets     2.18 %     3.25 %     0.80 %     2.18 %     0.80 %
    Allowance for loan losses   $   8,458     $   7,823     $   6,525     $   8,458     $   6,525  
    Valuation reserve   $   1,416     $   1,384     $   1,702     $   1,416     $   1,702  
    Allowance for loan losses with valuation reserve   $   9,874     $   9,207     $   8,227     $   9,874     $   8,227  
                           
    Allowance for loan losses / loans     1.04 %     0.99 %     0.86 %     1.04 %     0.86 %
    Allowance / nonaccrual loans     43.59 %     27.91 %     100.94 %     43.59 %     100.94 %
    Allowance for loan losses and valuation reserve / loans     1.21 %     1.17 %     1.08 %     1.21 %     1.08 %
    Allowance for loan losses and valuation reserve / nonaccrual loans     50.88 %     32.85 %     127.27 %     50.88 %     127.27 %
                           
    Gross loan charge-offs    $   2,307     $   –      $   13     $   2,307     $   13  
    Gross loan (recoveries)    $   (5 )   $   (49 )   $   (3 )   $   (54 )   $   (6 )
    Net loan charge-offs (recoveries)    $   2,302     $   (49 )   $   10     $   2,253     $   7  
                           
Capital Data and Capital Ratios                    
    Book value per share (1)   $   17.41     $   17.77     $   17.51     $   17.41     $   17.51  
    Shares outstanding       3,922,610         3,919,610         3,904,578         3,922,610         3,904,578  
Bank Capital Ratios:                    
    Leverage ratio     9.61 %     9.79 %     10.03 %     9.61 %     10.03 %
    Tier 1 capital     10.66 %     10.99 %     11.05 %     10.66 %     11.05 %
    Total risk based capital     11.65 %     11.91 %     11.85 %     11.65 %     11.85 %
                           
(1)  Book value per share represents shareholders’ equity divided by outstanding shares.            
                           

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