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 $800,000, or $0.20 basic and diluted earnings per share for the quarter ended March 31, 2022, compared to a net income of $854,000, or $0.22 basic and diluted earnings per share reported in the first quarter of 2021. The prior year first quarter results included the recognition of an employee retention tax credit (ERC) of $843,000, while no ERC was recognized in the first quarter of 2022.

Along with reporting a substantial improvement net interest income and strong earnings, the Bank reported loan growth of 4.6% and deposit growth of 4.2% for the quarter. Net interest margin improved to 3.06% for the first quarter of 2022. The Bank’s prepaid debit card program continues to be an increasing, low-cost funding source and has nearly tripled in size to $146.8 million as of March 31, 2022, from the $50.0 million 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: “The Bank experienced strong earnings and asset generation in the first quarter of 2022. Additionally, margin expansion and continued improvement in nonperforming assets contributed to the outcome for the quarter. The Bank continues to focus on solid asset generation and its cost of funds as we navigate the current economic cycle.”

Michael Carrazza, Patriot’s Chairman added, “Patriot is on a strong earnings trajectory as exhibited by the demonstrable improvement in business line growth and pre-tax income. The financial performance and internal preparation are supportive toward the pending merger transaction with American Challenger Development Corp (“American Challenger”), which is nearing the final stages of its process. The merger transaction remains subject to regulatory and shareholder approvals.”

Financial Results:

As of March 31, 2022, total assets increased $27.0 million to $975.5 million, as compared to $948.5 million on December 31, 2021, primarily due to increase in net loans which increased from $729.6 million on December 31, 2021, to $763.6 million on March 31, 2022. Total deposits increased from $748.6 million on December 31, 2021, to 779.8 million on March 31, 2022.

Net interest income for the quarter ended March 31, 2022, was $6.8 million, versus $6.1 million for the quarter ended March 31, 2021, with the increase primarily attributable to the growth in the loan portfolio over the past year.

The Bank’s net interest margin showed continued improvement, with an increase to 3.06% for the quarter ended March 31, 2022, compared with 2.99% for the first quarter of 2021.

No provision for loan losses was recorded for the quarter ended March 31, 2022 and 2021, due to stability and improvement in classified loans. As of March 31, 2022, the allowance for loan losses was 1.26% of total loans, compared with 1.34% on December 31, 2021.

Non-interest income for the quarter ended March 31, 2022, was $814,000, versus $442,000 for the quarter ended March 31, 2021. The increase in the current quarter was primarily attributable to gains from sales of SBA loans totaled $208,000 along with higher non-interest income from the prepaid card program.

Non-interest expense for the quarter ended March 31, 2022, was $6.4 million, versus $5.4 million for the quarter ended March 31, 2021. The 2021 first quarter included an employee retention credit in the amount of $843,000. The organization was no longer eligible for the Employee Retention Credits under the CARES Act program in 2022.

For the quarter ended March 31, 2022, a provision for income taxes of $311,000 was recorded, compared to a provision for income taxes of $319,000 for the quarter ended March 31, 2021.

As of March 31, 2022, shareholders’ equity was $62.7 million, compared with $67.3 million on December 31, 2021. Patriot’s book value per share was $15.84 on March 31, 2022, compared with $17.02 on December 31, 2021. The change was attributable to a decline in the market value of the Bank’s investment portfolio during the quarter associated with rising market interest rates.

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, Mississippi, 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. These forward-looking statements are based on Patriot’s current expectations and assumptions regarding Patriot’s businesses, 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 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; (25) our compensation expense associated with equity allocated or awarded to our employees, (26) the occurrence of any event, change or other circumstances that could give rise to the right of one or both of the parties to terminate the Merger Agreement, as amended, between the Company and American Challenger, or the Investment Agreements between the Company and the investors in the capital raise, (27) the failure to obtain the necessary approvals of the Company’s shareholders, (28) the outcome of any legal proceedings that may be instituted against the Company and/or American Challenger, (29) the failure to obtain required governmental approvals or a delay in obtaining such approvals, (30) the failure of any of the closing conditions in the Merger Agreement, as amended or Investment Agreements related to the capital raise, to be satisfied on a timely basis or at all, (31) delays in closing the proposed Merger or capital raise, (32) the possibility that the proposed Merger and capital raise may be more expensive to complete than anticipated, including as a result of unexpected factors or events, and (33) the dilution caused by the Company’s issuance of additional shares of its capital stock in connection with the proposed transactions.

Additional Information and Where to Find It

In connection with the proposed Merger and capital raise, the Company will file a proxy statement and other relevant documents with the SEC. SHAREHOLDERS ARE ADVISED TO READ THE PROXY STATEMENT WHEN IT BECOMES AVAILABLE AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Shareholders may obtain a free copy of the proxy statement (when available) and other documents filed by the Company at the SEC's Web site at http://www.sec.gov. The proxy statement and such other documents may also be obtained for free from the Company by directing such request to the Company at 900 Bedford Street, Stamford, CT, 06901, Attention: Michael Carrazza, telephone: (203) 251-8230.

Participants in the Solicitation

The Company and its directors, executive officers and other members of its management and employees may be deemed to be participants in the solicitation of proxies from its shareholders in connection with the Merger and capital raise. A list of the names of such directors and executive officers and information concerning such participants’ ownership of Company common stock is set forth in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as modified or supplemented by any Form 3 or Form 4 filed with the SEC since the date of such Annual Report. Additional information about the interests of those participants may be obtained from reading the proxy statement relating to the Merger and capital raise when it becomes available, or by directing a request to the Company at 900 Bedford Street, Stamford, CT, 06901, Attention: Michael Carrazza, telephone: (203) 251-8230.

American Challenger and its directors and executive officers may also be deemed to be participants in the solicitation of proxies from the Company’s shareholders in connection with the Merger and capital raise. A list of the names of such directors and executive officers and information regarding their interests in the Merger will be contained in the proxy statement when available.

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)			March 31, 2022				December 31, 2021				March 31, 2021
Assets
Cash and due from banks:
Noninterest bearing deposits and cash			$	9,026			$	3,264			$	2,593
Interest bearing deposits				35,290				43,781				81,681
		Total cash and cash equivalents		44,316				47,045				84,274
Investment securities:
Available-for-sale securities, at fair value				83,260				94,341				57,893
Other investments, at cost				4,450				4,450				4,450
		Total investment securities		87,710				98,791				62,343
Federal Reserve Bank stock, at cost				2,869				2,843				2,744
Federal Home Loan Bank stock, at cost				4,184				4,184				4,503
Gross loans receivable				773,339				739,488				676,676
Allowance for loan losses				(9,737	)			(9,905	)			(10,426	)
	Net loans receivable			763,602				729,583				666,250
SBA loans held for sale				5,820				3,129				2,829
Accrued interest and dividends receivable				5,596				5,822				6,270
Premises and equipment, net				31,269				31,500				33,128
Other real estate owned				-				-				1,216
Deferred tax asset				13,755				12,146				11,274
Goodwill				1,107				1,107				1,107
Core deposit intangible, net				284				296				331
Other assets				14,992				12,035				9,919
	Total assets		$	975,504			$	948,481			$	886,188
Liabilities
Deposits:
	Noninterest bearing deposits		$	237,825			$	226,713			$	173,520
	Interest bearing deposits			542,024				521,849				519,358
		Total deposits		779,849				748,562				692,878
Federal Home Loan Bank and correspondent bank borrowings				90,000				90,000				90,000
Senior notes, net				12,000				12,000				11,946
Subordinated debt, net				9,818				9,811				9,789
Junior subordinated debt owed to unconsolidated trust, net				8,121				8,119				8,112
Note payable				740				791				943
Advances from borrowers for taxes and insurance				2,574				1,101				2,158
Accrued expenses and other liabilities				9,719				10,753				6,425
		Total liabilities		912,821				881,137				822,251
Commitments and Contingencies				-				-				-
Shareholders' equity
Preferred stock				-				-				-
Common stock				106,500				106,479				106,363
Accumulated deficit				(36,698	)			(37,498	)			(41,738	)
Accumulated other comprehensive loss				(7,119	)			(1,637	)			(688	)
		Total shareholders' equity		62,683				67,344				63,937
	Total liabilities and shareholders' equity		$	975,504			$	948,481			$	886,188

PATRIOT NATIONAL BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
			Three Months Ended
(In thousands, except per share amounts)			March 31, 2022			December 31, 2021				March 31, 2021
Interest and Dividend Income
	Interest and fees on loans		$	7,664		$	7,916			$	7,743
	Interest on investment securities			570			502				310
	Dividends on investment securities			65			73				34
	Other interest income			21			22				24
		Total interest and dividend income		8,320			8,513				8,111
Interest Expense
	Interest on deposits			409			387				785
	Interest on Federal Home Loan Bank borrowings			737			756				733
	Interest on senior debt			210			227				229
	Interest on subordinated debt			234			233				234
	Interest on note payable and other			4			3				4
		Total interest expense		1,594			1,606				1,985
		Net interest income		6,726			6,907				6,126
(Credit) provision for loan losses				-			(200	)			-
		Net interest income after provision for loan losses		6,726			7,107				6,126
Non-interest Income
	Loan application, inspection and processing fees			87			54				63
	Deposit fees and service charges			64			61				65
	Gains on sale of loans			208			1,534				94
	Rental income			192			143				130
	Loss on sale of investment securities			-			(43	)			-
	Other income			263			556				90
		Total non-interest income		814			2,305				442
Non-interest Expense
	Salaries and benefits			3,346			3,583				2,216
	Occupancy and equipment expenses			836			900				920
	Data processing expenses			330			363				350
	Professional and other outside services			789			956				852
	Project expenses, net			52			1,867				10
	Advertising and promotional expenses			68			39				62
	Loan administration and processing expenses			105			73				24
	Regulatory assessments			174			258				228
	Insurance expenses			77			66				60
	Communications, stationary and supplies			135			154				145
	Other operating expenses			517			520				528
		Total non-interest expense		6,429			8,779				5,395
		Income before income taxes		1,111			633				1,173
Provision (benefit) for income taxes				311			(1,262	)			319
		Net income	$	800		$	1,895			$	854
		Basic earnings per share	$	0.20		$	0.48			$	0.22
		Diluted earnings per share	$	0.20		$	0.48			$	0.22

FINANCIAL RATIOS AND OTHER DATA
					Three Months Ended
			(Dollars in thousands)		March 31, 2022				December 31, 2021				March 31, 2021
Quarterly Performance Data:
		Net income			$	800			$	1,895			$	854
		Return on Average Assets				0.34	%			0.79	%			0.39	%
		Return on Average Equity				4.88	%			11.21	%			5.42	%
		Net Interest Margin				3.06	%			3.05	%			2.99	%
		Efficiency Ratio				85.27	%			95.30	%			82.14	%
		Efficiency Ratio excluding project costs				84.58	%			75.03	%			81.99	%
		% increase (decrease) in loans				4.58	%			3.49	%			-7.33	%
		% increase in deposits				4.18	%			1.89	%			1.05	%
		% increase in deposits excluding brokered deposits				1.83	%			3.38	%			4.66	%
Asset Quality:
		Nonaccrual loans			$	23,466			$	23,095			$	24,587
		Other real estate owned			$	-			$	-			$	1,216
		Total nonperforming assets			$	23,466			$	23,095			$	25,803
		Nonaccrual loans / loans				3.03	%			3.12	%			3.63	%
		Nonperforming assets / assets				2.41	%			2.43	%			2.91	%
		Allowance for loan losses			$	9,737			$	9,905			$	10,426
		Allowance for loan losses / loans				1.26	%			1.34	%			1.54	%
		Allowance / nonaccrual loans				41.49	%			42.89	%			42.40	%
		Gross loan charge-offs			$	185			$	-			$	272
		Gross loan (recoveries)			$	(17	)		$	(25	)		$	(114	)
		Net loan charge-offs (recoveries)			$	168			$	(25	)		$	158
Capital Data and Capital Ratios
		Book value per share (1)			$	15.84			$	17.02			$	16.21
		Shares outstanding				3,956,492				3,956,492				3,944,272
		Bank Leverage Ratio				9.94	%			9.86	%			10.12	%
	(1) Book value per share represents shareholders' equity divided by outstanding shares.
Deposits:
			(In thousands)
					March 31, 2022				December 31, 2021				March 31, 2021
	Non-interest bearing:
	Non-interest bearing				$	120,835			$	127,420			$	104,766
	Prepaid DDA					116,990				99,293				68,754
		Total non-interest bearing				237,825				226,713				173,520
	Interest bearing:
	NOW					42,272				34,741				34,433
	Savings					105,871				109,744				103,025
	Money market					117,049				113,428				128,069
	Money market - prepaid deposits					29,770				51,090				3,775
	Certificates of deposit, less than $250,000					158,625				142,246				165,130
	Certificates of deposit, $250,000 or greater					53,513				53,584				66,470
	Brokered deposits					34,924				17,016				18,456
		Total Interest bearing				542,024				521,849				519,358
		Total Deposits			$	779,849			$	748,562			$	692,878
		Total Prepaid deposits			$	146,760			$	150,383			$	72,529
			Total deposits excluding brokered deposits		$	744,925			$	731,546			$	674,422