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 $1.9 million, or $0.48 basic and diluted earnings per share for the quarter ended December 31, 2021, compared to a net loss of $1.4 million, or $0.35 basic and diluted loss per share reported in the fourth quarter of 2020. For the year ended December 31, 2021, net income was $5.1 million, or $1.29 per fully diluted share, compared to a net loss of $3.8 million, or $0.97 fully diluted loss per share for the year ended December 31, 2020.

During the year ended December 31, 2021, the Bank recognized payroll tax credits of $2.9 million, under the Employee Retention Credit program of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The Bank did not recognize any amounts related to the Employee Retention Credit program in the fourth quarter of 2021. During the fourth quarter of 2021, Patriot announced a transformational merger transaction with American Challenger Development Corp. (“American Challenger”). As a result of the proposed merger transaction, material, non-recurring acquisition-related expenses of $1.85 million, or $0.47 per share, were incurred in the fourth quarter. Pre-tax GAAP income for the quarter ended December 31, 2021 was $633,000; and excluding the merger related charges, pre-tax income was $2.5 million. For the full year ended December 31, 2021, pre-tax income was $5.0 million. Excluding income from the Employee Retention Credit program and merger related charges, pre-tax income for the full year ended December 31, 2021 was $4.0 million, or $1.01 per share.

The Bank reported loan growth of 3.5% and core deposit growth of 2.83% for the quarter. Net interest margin improved to 3.05% for the fourth quarter of 2021. The Bank’s prepaid debit card program continues to be an increasing, low-cost funding source for the Bank and has grown substantially in the last year and a half to $150.4 million as of December 31, 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.

Patriot President & CEO Robert Russell stated: “Throughout 2021 the Patriot team continued pursuing operational improvements, with a focus on earnings growth and profitability. The results demonstrate these wide-spread achievements throughout the Bank, including growth across all asset classes and overall net margin improvement. The Bank is positioned for continued earnings and asset growth."

Financial Results:

As of December 31, 2021, total assets increased $67.8 million to $948.5 million, as compared to $880.7 million at December 31, 2020, primarily due to increase in available-for-sale securities of $45.0 million. Net loans increased from $719.6 million as of December 31, 2020, to $729.6 million at December 31, 2021. Total deposits increased from $685.7 million at December 31, 2020, to $748.6 million at December 31, 2021.

The Bank has substantially improved its deposit and funding mix over the past year. During the past twelve months, total deposits increased $62.9 million, primarily due to growth in prepaid deposits of $76.0 million, which was partially offset by decline of $24.3 million in brokered deposits and certificates of deposits. Excluding brokered deposits, total deposits increased 13.5% during 2021.

Net interest income for the quarter ended December 31, 2021, was $6.9 million, versus $6.2 million for the quarter ended December 31, 2020. Net interest income for the year ended December 31, 2021, was $25.3 million, versus $24.2 million for the year ended December 31, 2020.

The Bank’s net interest margin showed strong improvement, with an increase to 3.05% for the quarter and 2.92% for the year ended December 31, 2021, compared with 2.93% and 2.68%, respectively, for the comparable period in 2020.  

The recovering economy and improvement in classified loans resulted in a credit of provision for loan losses of $200,000 and $500,000 for the quarter and the year ended December 31, 2021, respectively. For the quarter and the year ended December 31, 2020, a provision for loan losses of $371,000 and $2.2 million was recorded, respectively. Most of the provision in 2020 was primarily attributable to conditions and the uncertainty created by the COVID-19 pandemic and a charge-off on one borrower in the fourth quarter of 2020. As of December 31, 2021, the allowance for loan losses was 1.34% of total loans, compared with 1.45% at December 31, 2020.

Non-interest income for the quarter ended December 31, 2021, was $2.3 million, versus $465,000 for the quarter ended December 31, 2020.   Non-interest income for the year ended December 31, 2021, was $4.4 million, versus $2.0 million for the year ended December 31, 2020. The increase in the current quarter was primarily attributable to gains from sales of SBA loans totaled $1.5 million.

Non-interest expense for the quarter ended December 31, 2021, was $8.8 million, versus $7.2 million for the quarter ended December 31, 2020. For the year ended December 31, 2021, non-interest expense was $25.2 million, versus $28.1 million for the year ended December 31, 2020. The increase in non-interest expense in the quarter ended December 31, 2021, was primarily driven by increased project expenses of $1.85 million related to the proposed merger with American Challenger. The Employee Retention Credits of $2.9 million drove part of the reduction year-over-year.

For the year ended December 31, 2021, a benefit for income taxes of $81,000 was recorded, compared to a benefit for income taxes of $337,000 for the year ended December 31, 2020. The provision for income taxes reflected a full reversal of the valuation reserve for deferred tax assets, which decreased the income tax provision of $1.7 million in the fourth quarter of 2021.

As of December 31, 2021, shareholders’ equity was $67.3 million, compared with $63.2 million at December 31,2020. Patriot’s book value per share rose to $17.02 at December 31, 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 28th 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 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 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.

 

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

PATRIOT NATIONAL BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands)			December 31,2021				September 30,2021				December 31,2020
Assets
Cash and due from banks:
	Noninterest bearing deposits and cash		$	3,264			$	5,298			$	3,006
	Interest bearing deposits			43,781				40,967				31,630
		Total cash and cash equivalents		47,045				46,265				34,636
Investment securities:
	Available-for-sale securities, at fair value			94,341				124,103				49,262
	Other investments, at cost			4,450				4,450				4,450
		Total investment securities		98,791				128,553				53,712
Federal Reserve Bank stock, at cost				2,843				2,843				2,783
Federal Home Loan Bank stock, at cost				4,184				5,009				4,503
Gross loans receivable				739,488				714,538				730,180
Allowance for loan losses				(9,905	)			(10,079	)			(10,584	)
	Net loans receivable			729,583				704,459				719,596
SBA loans held for sale				3,129				4,128				1,217
Accrued interest and dividends receivable				5,822				6,186				6,620
Premises and equipment, net				31,500				32,638				33,423
Other real estate owned				-				-				1,906
Deferred tax asset, net				12,146				10,352				11,496
Goodwill				1,107				1,107				1,107
Core deposit intangible, net				296				308				343
Other assets				12,035				10,498				9,387
	Total assets		$	948,481			$	952,346			$	880,729
Liabilities
Deposits:
	Noninterest bearing deposits		$	226,713			$	207,941			$	158,676
	Interest bearing deposits			521,849				526,732				526,980
		Total deposits		748,562				734,673				685,656
Federal Home Loan Bank and correspondent bank borrowings				90,000				110,000				90,000
Senior notes, net				12,000				11,983				11,927
Subordinated debt, net				9,811				9,803				9,782
Junior subordinated debt owed to unconsolidated trust, net				8,119				8,116				8,110
Note payable				791				842				994
Advances from borrowers for taxes and insurance				1,101				2,253				3,786
Accrued expenses and other liabilities				10,753				7,976				7,255
		Total liabilities		881,137				885,646				817,510
Commitments and Contingencies				-				-				-
Shareholders' equity
Preferred stock				-				-				-
Common stock				106,479				106,439				106,329
Accumulated deficit				(37,498	)			(39,393	)			(42,592	)
Accumulated other comprehensive loss				(1,637	)			(346	)			(518	)
		Total shareholders' equity		67,344				66,700				63,219
	Total liabilities and shareholders' equity		$	948,481			$	952,346			$	880,729

PATRIOT NATIONAL BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
				Three Months Ended												Year Ended
(In thousands, except per share amounts)				December 31,2021				September 30,2021				December 31,2020				December 31,2021				December 31,2020
Interest and Dividend Income
	Interest and fees on loans			$	7,916			$	7,189			$	8,113			$	30,115			$	35,835
	Interest on investment securities				502				692				326				1,924				1,460
	Dividends on investment securities				73				59				86				223				399
	Other interest income				22				20				22				89				209
		Total interest and dividend income			8,513				7,960				8,547				32,351				37,903
Interest Expense
	Interest on deposits				387				448				1,134				2,243				9,154
	Interest on Federal Home Loan Bank borrowings				756				756				708				2,986				2,671
	Interest on senior debt				227				229				229				913				915
	Interest on subordinated debt				233				233				235				933				991
	Interest on note payable and other				3				4				4				15				19
		Total interest expense			1,606				1,670				2,310				7,090				13,750
		Net interest income			6,907				6,290				6,237				25,261				24,153
(Credit) provision for loan losses					(200	)			(300	)			371				(500	)			2,170
		Net interest income after provision for loan losses			7,107				6,590				5,866				25,761				21,983
Non-interest Income
	Loan application, inspection and processing fees				54				79				76				257				223
	Deposit fees and service charges				61				61				68				251				321
	Gains on sale of loans				1,534				-				102				1,886				566
	Rental income				143				130				130				543				523
	Gain on sale of investment securities				(43	)			26				-				76				-
	Other income				556				627				89				1,410				346
		Total non-interest income			2,305				923				465				4,423				1,979
Non-interest Expense
	Salaries and benefits				3,583				2,843				3,357				11,089				14,323
	Occupancy and equipment expenses				900				832				833				3,430				3,513
	Data processing expenses				363				376				377				1,451				1,571
	Professional and other outside services				956				633				691				3,155				2,828
	Project expenses, net				1,867				4				664				1,882				818
	Advertising and promotional expenses				39				57				77				235				454
	Loan administration and processing expenses				73				23				39				134				174
	Regulatory assessments				258				213				318				907				1,477
	Insurance expenses				66				79				70				280				285
	Communications, stationary and supplies				154				161				105				604				476
	Other operating expenses				520				490				708				2,004				2,199
		Total non-interest expense			8,779				5,711				7,239				25,171				28,118
		Income (loss) before income taxes			633				1,802				(908	)			5,013				(4,156	)
(Benefit) provision for income taxes					(1,262	)			479				474				(81	)			(337	)
		Net income (loss)		$	1,895			$	1,323			$	(1,382	)		$	5,094			$	(3,819	)
		Basic earnings (loss) per share		$	0.48			$	0.34			$	(0.35	)		$	1.29			$	(0.97	)
		Diluted earnings (loss) per share		$	0.48			$	0.34			$	(0.35	)		$	1.29			$	(0.97	)

FINANCIAL RATIOS AND OTHER DATA
					Three Months Ended												Year- To- Date
			(Dollars in thousands)		December 31,2021				September 30,2021				December 31,2020				December 31,2021				December 31,2020
Quarterly Performance Data:
		Net income (loss)			$	1,895			$	1,323			$	(1,382	)		$	5,094			$	(3,819	)
		Return on Average Assets				0.79	%			0.56	%			-0.61	%			0.55	%			-0.40	%
		Return on Average Equity				11.21	%			7.86	%			-8.41	%			7.75	%			-5.81	%
		Net Interest Margin				3.05	%			2.82	%			2.93	%			2.92	%			2.68	%
		Efficiency Ratio				95.30	%			79.18	%			108.04	%			84.80	%			107.60	%
		Efficiency Ratio excluding project costs				75.03	%			79.12	%			98.58	%			78.46	%			104.59	%
		% increase (decrease) in loans				3.49	%			6.51	%			-2.81	%			1.27	%			-10.09	%
		% increase (decrease) in deposits excluding brokered deposits				3.38	%			-5.44	%			1.25	%			13.53	%			19.41	%
Asset Quality:
		Nonaccrual loans			$	23,095			$	28,046			$	20,005			$	23,095			$	20,005
		Other real estate owned			$	-			$	-			$	1,906			$	-			$	1,906
			Total nonperforming assets		$	23,095			$	28,046			$	21,911			$	23,095			$	21,911
		Nonaccrual loans / loans				3.12	%			3.93	%			2.74	%			3.12	%			2.74	%
		Nonperforming assets / assets				2.43	%			2.94	%			2.49	%			2.43	%			2.49	%
		Allowance for loan losses			$	9,905			$	10,079			$	10,584			$	9,905			$	10,584
		Valuation reserve			$	459			$	466			$	482			$	459			$	482
		Allowance for loan losses with valuation reserve			$	10,364			$	10,545			$	11,066			$	10,364			$	11,066
		Allowance for loan losses / loans				1.34	%			1.41	%			1.45	%			1.34	%			1.45	%
		Allowance / nonaccrual loans				42.89	%			35.94	%			52.91	%			42.89	%			52.91	%
		Allowance for loan losses and valuation reserve / loans				1.40	%			1.47	%			1.51	%			1.40	%			1.51	%
		Allowance for loan losses and valuation reserve / nonaccrual loans				44.88	%			37.60	%			55.32	%			44.88	%			55.32	%
		Gross loan charge-offs			$	-			$	6			$	968			$	358			$	1,778
		Gross loan (recoveries)			$	(25	)		$	(23	)		$	(10	)		$	(179	)		$	(76	)
		Net loan charge-offs (recoveries)			$	(25	)		$	(17	)		$	958			$	179			$	1,702
Capital Data and Capital Ratios
		Book value per share (1)			$	17.02			$	16.89			$	16.03			$	17.02			$	16.03
		Tangible book value per share (2)			$	16.67			$	16.54			$	15.66			$	16.67			$	15.66
		Tangible book value per share-fully diluted			$	16.58			$	16.41			$	15.59			$	16.58			$	15.59
		Shares outstanding				3,956,492				3,947,976				3,943,572				3,956,492				3,943,572
		Bank Leverage Ratio				9.85	%			9.88	%			9.80	%			9.85	%			9.80	%
	(1) Book value per share represents shareholders' equity divided by outstanding shares.
	(2) Tagible book value per share represents tangible assets divided by outstanding shares.
Deposits:
			(In thousands)
					December 31,2021				September 30,2021				December 31,2020
	Non-interest bearing:
	Non-interest bearing				$	127,420			$	114,850			$	99,344
	Prepaid DDA					99,293				93,091				59,332
			Total non-interest bearing			226,713				207,941				158,676
	Interest bearing:
	NOW					34,741				34,528				30,529
	Savings					109,744				102,365				98,635
	Money market					113,428				116,318				131,378
	Money market - prepaid deposits					51,090				49,353				15,011
	Certificates of deposit, less than $250,000					142,246				142,141				160,968
	Certificates of deposit, $250,000 or greater					53,584				54,991				49,172
	Brokered deposits					17,016				27,036				41,287
			Total Interest bearing			521,849				526,732				526,980
			Total Deposits		$	748,562			$	734,673			$	685,656
			Total Prepaid deposits		$	150,383			$	142,444			$	74,343
			Total deposits excluding brokered deposits		$	731,546			$	707,637			$	644,369

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 for merger and acquisition related project expenses, and pre-tax income excluding Employee Retention Credit and project expenses. A computation and reconciliation of certain non-GAAP financial measures used for these purposes is contained in the accompanying Reconciliation of GAAP to Non-GAAP Measures tables. We believe that providing certain non-GAAP financial measures provides investors with information useful in understanding our financial performance, our performance trends and financial position. These 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):
			Three Months Ended				Year Ended
(Dollars in thousands)			December 31, 2021				December 31, 2021
Net Income excluding Employee retention Credit (ERC) and project expenses:
	Net Income reported		$	1,895			$	5,094
	(Benefit) Provision for income taxes			(1,262	)			(81	)
	Income before income taxes reported			633				5,013
	Employee Retention Credit			-				(2,896	)
	Project expenses related to merger with American Challenger			1,851				1,851
	Pre-tax income excluding ERC and project expenses		$	2,484			$	3,968
	Weighted average shares outstanding			3,948,069				3,946,384
	Pre-tax income excluding ERC and project expenses per share		$	0.63			$	1.01
Project expenses per share:
	Project expenses related to merger with American Challenger		$	1,851			$	1,851
	Weighted average shares outstanding			3,948,069				3,946,384
	Project expenses per share		$	0.47			$	0.47