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 $2.3 million, or $0.59 basic and diluted earnings per share for the quarter ended September 30, 2022.

These results reflect an increase as compared to $1.3 million, or $0.32 per basic and diluted earnings per share for the second quarter of 2022 and net income of $1.3 million, or $0.34 basic and diluted earnings per share reported in the third quarter of 2021. The 2021 third quarter included the benefit of a non-recurring employee retention tax credit (“ERC”) of $906,000.

For the nine months ended September 30, 2022, net income was $4.4 million, or $1.11 basic and diluted earnings per share, compared to a net income of $3.2 million, or $0.81 basic and diluted earnings per share for the nine months ended September 30, 2021. The nine months ended September 30, 2021, included the recognition of an ERC of $2.9 million, while no ERC was recognized in 2022.

Along with reporting a substantial improvement in net interest income and strong earnings, the Bank reported loan growth of 16.7% and deposit growth of 11.5% compared to December 31, 2021. Net interest margin improved to 3.68% for the quarter and 3.35% for the first three quarters of 2022, up from 2.87% for the first three quarters of 2021. The Bank’s prepaid debit card program continues to be an increasing, low-cost funding source. This relatively new funding silo has grown from $50 million in July 2020 to $169.1 million as of September 30, 2022. Growth in the prepaid portfolio is expected to increasingly contribute to the Bank’s funding strategy and improve the Bank’s net interest margin and overall funding costs.

Patriot President & CEO Robert Russell stated: “We are very pleased with the results for the quarter which reflect continued strong growth in our balance sheet and continued improvement in our asset quality even in the current economic conditions. Net interest margin expanded to 3.68% in the quarter while return on average equity, fueled in part by tax benefits related to the terminated transaction, was 15% for the quarter. Cost control and substantial improvement in the Bank’s net interest margin contributed to the improvement in the efficiency ratio to 73% in the third quarter of 2022.” Mr. Russell added, “The Bank continues to navigate the ever-changing interest rate landscape and remains well positioned for continued growth and improvement.”

Mr. Russell added: “We are also pleased to announce today the hiring of Thomas E. Slater as our new Executive Vice President-Chief Credit Officer. Mr. Slater takes on this new role following his tenure as Senior Vice President and Senior Credit Officer at Investors Bank. Mr. Slater has extensive experience in commercial real estate, as well as commercial and industrial lending, and has led teams successfully through growth and change. I am pleased to add someone of Tom’s caliber and pedigree to the Bank’s leadership team. Tom brings a strong and diverse background to the Bank, and I look forward to his contributions.”

Financial Results:

Total assets increased $110.5 million to $1.1 billion, as of September 30, 2022, as compared to $948.5 million on December 31, 2021, primarily due to the increase in net loans from $729.6 million to $852.9 million on September 30, 2022. Total deposits increased from $748.6 million on December 31, 2021, to $834.4 million on September 30, 2022.

Net interest income for the three months ended September 30, 2022, was $9.2 million, an increase of $2.9 million or 46.9% from the third quarter of 2021. Net interest income for the nine months ended September 30, 2022, was $23.7 million, an increase of $5.3 million or 29.1% from the nine months ended September 30, 2021. These increases were 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 3.68% in the quarter and 3.35% for the nine months ended September 30, 2022, compared with 2.82% and 2.87% for the three and nine months ended September 30, 2021, respectively.

For the three and nine months ended September 30, 2022, provision for loan losses of $200,000 and $475,000 was recorded, respectively. For the three and nine months ended September 30, 2021, a credit for loans losses of $300,000 was recorded. As of September 30, 2022, the allowance for loan losses was 1.15% of total loans, compared with 1.34% on December 31, 2021.

Non-interest income for the quarter ended September 30, 2022, and 2021 was $654,000 and $923,000, respectively. Non-interest income for the nine months ended September 30, 2022, and 2021, was $2.3 million and $2.1 million, respectively. The higher non-interest income for the quarter ended September 30, 2021, was primarily attributable to a non-recurring gain on the termination of a cash flow interest rate swap of $512,000 recognized in the third quarter of 2021. The increase in non-interest income for the nine months ended September 30, 2022, compared to the same period in 2021 was primarily attributable to gains from sales of SBA loans totaling $691,000 along with higher non-interest income from the payments division.

Non-interest expenses for the quarter ended September 30, 2022, and 2021, were $7.2 million and $5.7 million, respectively. Non-interest expenses for the nine months ended September 30, 2022, and 2021, were $20.1 million and $16.4 million, respectively. During the first three quarters of 2021 the Company recognized an ERC of $2.9 million. The Company was no longer eligible for the ERC under the CARES Act program after the third quarter of 2021.

For the nine months ended September 30, 2022, a provision for income taxes of $944,000 was recorded, compared to a provision for income taxes of $1.2 million for the nine months ended September 30, 2021. The effective tax rate in 2022 was 6.3% for the third quarter, and 17.6% in the year-to-date period, compared with 26.5% and 26.9% in the corresponding 2021 periods. The lower effective tax rates in 2022 were due to the tax treatment of merger-related expenses incurred in 2021 deemed deductible in the third quarter of 2022 due to the previously announced termination of the merger agreement.

As of September 30, 2022, shareholders’ equity was $58.0 million, compared with $67.3 million on December 31, 2021. Patriot’s book value per share was $14.66 on September 30, 2022, compared with $17.02 on December 31, 2021. The change was attributable to a decline in the market value of the Bank’s Held for Sale investment portfolio (HFS) during the quarter associated with rising market interest rates. Excluding the net impact of the valuation of the HFS portfolio, book value per share was $18.21, compared with $17.61 in the second quarter of 2022 and $16.62 on September 30, 2021.

* * * * *About the Company:

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. 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)
(In thousands)			September 30,2022				December 31,2021				September 30,2021
Assets
Cash and due from banks:
Noninterest bearing deposits and cash			$	4,319			$	3,264			$	5,298
Interest bearing deposits				26,865				43,781				40,967
		Total cash and cash equivalents		31,184				47,045				46,265
Investment securities:
Available-for-sale securities, at fair value				85,917				94,341				124,103
Other investments, at cost				4,450				4,450				4,450
		Total investment securities		90,367				98,791				128,553
Federal Reserve Bank stock, at cost				2,671				2,843				2,843
Federal Home Loan Bank stock, at cost				5,474				4,184				5,009
Gross loans receivable				862,870				739,488				714,538
Allowance for loan losses				(9,952	)			(9,905	)			(10,079	)
	Net loans receivable			852,918				729,583				704,459
SBA loans held for sale				8,748				3,129				4,128
Accrued interest and dividends receivable				6,504				5,822				6,186
Premises and equipment, net				30,861				31,500				32,638
Other real estate owned				-				-				-
Deferred tax asset				16,057				12,146				10,352
Goodwill				1,107				1,107				1,107
Core deposit intangible, net				261				296				308
Other assets				12,839				12,035				10,498
	Total assets		$	1,058,991			$	948,481			$	952,346
Liabilities
Deposits:
	Noninterest bearing deposits		$	247,704			$	226,713			$	207,941
	Interest bearing deposits			586,691				521,849				526,732
		Total deposits		834,395				748,562				734,673
Federal Home Loan Bank and correspondent bank borrowings				125,000				90,000				110,000
Senior notes, net				12,000				12,000				11,983
Subordinated debt, net				9,832				9,811				9,803
Junior subordinated debt owed to unconsolidated trust, net				8,125				8,119				8,116
Note payable				637				791				842
Advances from borrowers for taxes and insurance				2,262				1,101				2,253
Accrued expenses and other liabilities				8,736				10,753				7,976
		Total liabilities		1,000,987				881,137				885,646
Commitments and Contingencies				-				-				-
Shareholders' equity
Preferred stock				-				-				-
Common stock				106,542				106,479				106,439
Accumulated deficit				(33,107	)			(37,498	)			(39,393	)
Accumulated other comprehensive loss				(15,431	)			(1,637	)			(346	)
		Total shareholders' equity		58,004				67,344				66,700
	Total liabilities and shareholders' equity		$	1,058,991			$	948,481			$	952,346

PATRIOT NATIONAL BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
			Three Months Ended										Nine Months Ended
(In thousands, except per share amounts)			September 30,2022			June 30,2022			September 30,2021				September 30,2022			September 30,2021
Interest and Dividend Income
	Interest and fees on loans		$	11,250		$	9,044		$	7,189			$	27,958		$	22,199
	Interest on investment securities			555			510			692				1,635			1,422
	Dividends on investment securities			99			65			59				229			150
	Other interest income			135			68			20				224			67
		Total interest and dividend income		12,039			9,687			7,960				30,046			23,838
Interest Expense
	Interest on deposits			1,493			757			448				2,659			1,856
	Interest on Federal Home Loan Bank borrowings			806			747			756				2,290			2,230
	Interest on senior debt			218			210			229				638			686
	Interest on subordinated debt			276			251			233				761			700
	Interest on note payable and other			3			2			4				9			12
		Total interest expense		2,796			1,967			1,670				6,357			5,484
		Net interest income		9,243			7,720			6,290				23,689			18,354
Provision (credit) for loan losses				200			275			(300	)			475			(300	)
		Net interest income after provision (credit) for loan losses		9,043			7,445			6,590				23,214			18,654
Non-interest Income
	Loan application, inspection and processing fees			102			89			79				278			203
	Deposit fees and service charges			67			60			61				191			190
	Gains on sale of loans			182			301			-				691			352
	Rental income			124			132			130				448			400
	Loss on sale of investment securities			-			-			26				-			119
	Other income			179			216			627				658			854
		Total non-interest income		654			798			923				2,266			2,118
Non-interest Expense
	Salaries and benefits			4,330			3,763			2,843				11,439			7,506
	Occupancy and equipment expenses			862			881			832				2,579			2,530
	Data processing expenses			297			283			376				910			1,088
	Professional and other outside services			541			559			633				1,889			2,199
	Project expenses, net			50			29			4				131			15
	Advertising and promotional expenses			50			73			57				191			196
	Loan administration and processing expenses			37			42			23				184			61
	Regulatory assessments			245			179			213				598			649
	Insurance expenses			54			76			79				207			214
	Communications, stationary and supplies			208			139			161				482			450
	Other operating expenses			540			478			490				1,535			1,484
		Total non-interest expense		7,214			6,502			5,711				20,145			16,392
		Income before income taxes		2,483			1,741			1,802				5,335			4,380
Provision for income taxes				157			476			479				944			1,181
		Net income	$	2,326		$	1,265		$	1,323			$	4,391		$	3,199
		Basic earnings per share	$	0.59		$	0.32		$	0.34			$	1.11		$	0.81
		Diluted earnings per share	$	0.59		$	0.32		$	0.34			$	1.11		$	0.81

FINANCIAL RATIOS AND OTHER DATA
					Three Months Ended												Nine Months Ended
			(Dollars in thousands)		September 30,2022				June 30,2022				September 30,2021				September 30,2022				September 30,2021
Quarterly Performance Data:
		Net income (loss)			$	2,326			$	1,265			$	1,323			$	4,391			$	3,199
		Return on Average Assets				0.87%				0.50%				0.56%				0.58%				0.47%
		Return on Average Equity				15.00%				8.20%				7.86%				9.28%				6.56%
		Net Interest Margin				3.68%				3.27%				2.82%				3.35%				2.87%
		Efficiency Ratio				72.89%				76.33%				79.18%				77.61%				80.07%
		Efficiency Ratio excluding project costs				72.39%				76.00%				79.12%				77.11%				80.00%
		% increase (decrease) in loans				0.44%				11.09%				6.51%				16.68%				-2.14%
		% increase (decrease) in deposits				-1.46%				8.58%				-3.48%				11.47%				7.15%
Asset Quality:
		Nonaccrual loans			$	19,182			$	23,324			$	28,046			$	19,182			$	28,046
		Nonaccrual loans / loans				2.22%				2.71%				3.93%				2.22%				3.93%
		Nonaccrual loans / assets				1.81%				2.22%				2.94%				1.81%				2.94%
		Allowance for loan losses			$	9,952			$	9,929			$	10,079			$	9,952			$	10,079
		Allowance for loan losses / loans				1.15%				1.16%				1.41%				1.15%				1.41%
		Allowance / nonaccrual loans				51.88%				42.57%				35.94%				51.88%				35.94%
		Loan charge-offs			$	366			$	100			$	6			$	651			$	358
		Loan (recoveries)			$	(189	)		$	(17	)		$	(23	)		$	(223	)		$	(153	)
		Net loan charge-offs (recoveries)			$	177			$	83			$	(17	)		$	428			$	205
Capital Data and Capital Ratios
		Book value per share (1)			$	14.66			$	15.11			$	16.89			$	14.66			$	16.89
		Tangible book value per share (2)			$	14.31			$	14.76			$	16.54			$	14.31			$	16.54
		Tangible book value excluding other comprehensive loss per share (3)			$	18.21			$	17.61			$	16.62			$	18.21			$	16.62
		Shares outstanding				3,957,269				3,957,269				3,947,976				3,957,269				3,947,976
		Bank Leverage Ratio				9.23%				9.44%				9.88%				9.23%				9.88%
	(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)
					September 30,2022				June 30,2022				September 30,2021
	Non-interest bearing:
	Non-interest bearing				$	125,396			$	137,320			$	114,820
	Prepaid DDA					122,308				133,845				93,121
		Total non-interest bearing				247,704				271,165				207,941
	Interest bearing:
	NOW					38,435				35,973				34,528
	Savings					87,443				99,686				102,365
	Money market					133,947				151,212				116,318
	Money market - prepaid deposits					46,825				32,891				49,353
	Certificates of deposit, less than $250,000					180,253				169,690				142,141
	Certificates of deposit, $250,000 or greater					65,362				51,491				54,991
	Brokered deposits					34,426				34,675				27,036
		Total Interest bearing				586,691				575,618				526,732
		Total Deposits			$	834,395			$	846,783			$	734,673
		Total Prepaid deposits			$	169,133			$	166,736			$	142,474
			Total deposits excluding brokered deposits		$	799,969			$	812,108			$	707,637

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)					September 30, 2022				June 30,2022				September 30,2021
Tangible book value per share
	Total shareholders' equity				$	58,004			$	59,802			$	66,700
	Goodwill					(1,107	)			(1,107	)			(1,107	)
	Core deposit intangible, net					(261	)			(273	)			(308	)
	Tangible book value				$	56,636			$	58,422			$	65,285
	Shares outstanding					3,957,269				3,957,269				3,947,976
	Tangible book value per share				$	14.31			$	14.76			$	16.54
Tangible book value excluding other comprehensive loss per share
	Tangible book value				$	56,636			$	58,422			$	65,285
	Other comprehensive loss					15,431				11,285				346
	Tangible book value excluding other comprehensive loss				$	72,067			$	69,707			$	65,631
	Shares outstanding					3,957,269				3,957,269				3,947,976
	Tangible book value excluding other comprehensive loss per share				$	18.21			$	17.61			$	16.62

 

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