Patriot Reports Fourth Quarter 2022 Net Income of $1.8 million, $0.45 per share; Full Year Net Income of $6.2 million, $1.56 per share

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 $1.8 million, or $0.45 basic and diluted earnings per share for the quarter ended December 31, 2022. These results compare to net income of $2.3 million, or $0.59 basic and diluted earnings per share for the third quarter of 2022 and net income of $1.9 million, or $0.48 basic and diluted earnings per share reported in the fourth quarter of 2021.

Net income for the full year ended December 31, 2022 was $6.2 million, or $1.56 basic and $1.55 diluted earnings per share, compared to a net income of $5.1 million, or $1.29 basic and diluted earnings per share for the year ended December 31, 2021. For the year ended December 31, 2021, pre-tax income included the recognition of an Employee Retention Credit (“ERC”) of $2.9 million and non-recurring merger related costs of $1.9 million. Pre-tax income for the year ended 2022 of $7.8 million increased $3.8 million or 95% from the full year 2021 results, exclusive of non-recurring items. There were no non-recurring items in 2022 pre-tax income.

Along with reporting a substantial improvement in net interest income and strong earnings, the Bank reported loan growth of 14.7% and deposit growth of 14.9% at December 31, 2022 compared to December 31, 2021. The Bank’s average net interest margin increased significantly to 3.77% for the quarter and 3.46% for the full year ended December 31, 2022, up from 3.05% and 2.92% for the quarter and full year ended December 31, 2021, respectively. The Bank’s Payments division has increasingly been contributing to the Bank’s lower-cost funding sources. This new Group is keenly focused on expanding unique deposit gathering channels, while continuing to widen the Bank’s net interest margin.

Patriot President & CEO Robert Russell stated: “Despite the myriad impacts related to the changing interest rate environment, we are proud of the increasing operational and financial results achieved for the fourth quarter and full year 2022. Operational and business unit initiatives are gaining good traction, and we are seeing the results expressed in increasing earnings and widening net interest margin.” Mr. Russell added “Our efficiency ratio has improved significantly in the fourth quarter to 64.88%.

Michael Carrazza, Patriot’s Chairman commented, “Patriot remains aggressively committed to completing one or more transformational events that will elevate the scale of Patriot and its digital forward capabilities. Strategic discussions are actively underway; such event(s) will be coupled with the organic roll-out of initiatives on the digital deposit gathering and asset generating sides of the balance sheet.”

In December 2022, Patriot successfully completed its refinancing of its $12.0 million senior debt facility that was scheduled to mature in December 2022.

Financial Results:Total assets increased $94.9 million to $1.0 billion as of December 31, 2022, as compared to $948.5 million at December 31, 2021, primarily due to the increase in net loans from $729.6 million at December 31, 2021 to $838.0 million at December 31, 2022. Total deposits increased from $748.6 million on December 31, 2021 to $860.4 million as of December 31, 2022.

Net interest income for the three months ended December 31, 2022 was $9.6 million, an increase of $2.7 million or 38.6% from the fourth quarter of 2021. Net interest income for the year ended December 31, 2022 was $33.3 million, an increase of $8.0 million or 31.7% from the year ended December 31, 2021. These increases were primarily attributable to the growth in the loan portfolio and growth in prepaid deposits from the Payments division.

The Bank’s net interest margin showed continued improvement, with an increase to 3.77% for the quarter and 3.46% for the full year ended December 31, 2022. This compares with 3.05% and 2.92% for the fourth quarter of 2021 and the full year ended December 31, 2021, respectively.

For the three months ended and year ended December 31, 2022, additional provisions for loan losses of $1.4 million and $1.9 million were recorded, respectively. As of December 31, 2022, the allowance for loan losses was $10.3 million (1.22%) of total loans, compared with $9.9 million (1.34%) on December 31, 2021.

Non-interest income for the three months ended and year ended December 31, 2022 was $1.3 million and $3.6 million, respectively. Non-interest income for the three months ended and year ended December 31, 2021 was $2.3 million and $4.4 million, respectively. The decrease in non-interest income for the year ended December 31, 2022, compared to the same period in 2021 was primarily attributable to lower gains from sales of SBA loans resulting from lower market premiums.

Non-interest expenses for the quarter ended and year ended December 31, 2022 were $7.1 million and $27.2 million, respectively. Non-interest expenses for the quarter ended and year ended December 31, 2021 were $8.8 million and $25.2 million, respectively, net of the ERC recognized by the Company in 2021 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 year ended December 31, 2022, a provision for income taxes of $1.6 million was recorded, compared to a benefit for income taxes of $81,000 for the year ended December 31, 2021. The benefit for income taxes in 2021 was primarily due to a full $1.9 million reversal of the valuation reserve for deferred tax assets, which decreased the income tax provision in 2021.

As of December 31, 2022, shareholders’ equity was $59.6 million, as compared with $67.3 million on December 31, 2021. While Patriot achieved a material increase in operating and earnings performance in 2022, its equity account declined as a result of market value accounting applied to the Bank’s available-for-sale investment portfolio (“AFS”) during the period; this market value adjustment is directly correlated to the fluctuation of interest rates and does not represent a permanent impairment in value as the Company holds such investment grade securities to maturity Accordingly, on a GAAP basis, Patriot’s book value per share was $15.03 on December 31, 2022, as compared with $17.02 on December 31, 2021. Excluding the net impact of the valuation of the AFS portfolio, non-GAAP tangible book value per share was $18.63, as compared with $18.21 in the third quarter of 2022 and $17.08 on December 31, 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)	December 31, 2022			September 30, 2022			December 31, 2021
Assets
Cash and due from banks:
Noninterest bearing deposits and cash	$	5,182		$	4,319		$	3,264
Interest bearing deposits		33,311			26,865			43,781
Total cash and cash equivalents		38,493			31,184			47,045
Investment securities:
Available-for-sale securities, at fair value		84,520			85,917			94,341
Other investments, at cost		4,450			4,450			4,450
Total investment securities		88,970			90,367			98,791

Federal Reserve Bank stock, at cost		2,627			2,671			2,843
Federal Home Loan Bank stock, at cost		3,874			5,474			4,184

Gross loans receivable		848,316			862,870			739,488
Allowance for loan losses		(10,310	)		(9,952	)		(9,905	)
Net loans receivable		838,006			852,918			729,583

SBA loans held for sale		5,211			8,748			3,129
Accrued interest and dividends receivable		7,267			6,504			5,822
Premises and equipment, net		30,641			30,861			31,500
Deferred tax asset		15,527			16,057			12,146
Goodwill		1,107			1,107			1,107
Core deposit intangible, net		249			261			296
Other assets		11,387			12,839			12,035
Total assets	$	1,043,359		$	1,058,991		$	948,481

Liabilities
Deposits:
Noninterest bearing deposits	$	269,635		$	247,704		$	226,713
Interest bearing deposits		590,811			586,691			521,849
Total deposits		860,446			834,395			748,562

Federal Home Loan Bank and correspondent bank borrowings		85,000			125,000			90,000
Senior notes, net		11,640			12,000			12,000
Subordinated debt, net		9,840			9,832			9,811
Junior subordinated debt owed to unconsolidated trust, net		8,128			8,125			8,119
Note payable		585			637			791
Advances from borrowers for taxes and insurance		886			2,262			1,101
Accrued expenses and other liabilities		7,251			8,736			10,753
Total liabilities		983,776			1,000,987			881,137

Commitments and Contingencies		—			—			—

Shareholders' equity
Preferred stock		—			—			—
Common stock		106,565			106,542			106,479
Accumulated deficit		(31,337	)		(33,107	)		(37,498	)
Accumulated other comprehensive loss		(15,645	)		(15,431	)		(1,637	)
Total shareholders' equity		59,583			58,004			67,344

Total liabilities and shareholders' equity	$	1,043,359		$	1,058,991		$	948,481

PATRIOT NATIONAL BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

		Three Months Ended							Year Ended
(In thousands, except per share amounts)		December 31, 2022		September 30, 2022		December 31, 2021			December 31, 2022		December 31, 2021

Interest and Dividend Income
	Interest and fees on loans	$	12,865	$	11,250	$	7,916		$	40,823	$	30,115
	Interest on investment securities		672		555		502			2,307		1,924
	Dividends on investment securities		155		99		73			384		223
	Other interest income		274		135		22			498		89
	Total interest and dividend income		13,966		12,039		8,513			44,012		32,351

Interest Expense
	Interest on deposits		2,641		1,493		387			5,300		2,243
	Interest on Federal Home Loan Bank borrowings		1,185		806		756			3,475		2,986
	Interest on senior debt		228		218		227			866		913
	Interest on subordinated debt		305		276		233			1,066		933
	Interest on note payable and other		37		3		3			46		15
	Total interest expense		4,396		2,796		1,606			10,753		7,090

	Net interest income		9,570		9,243		6,907			33,259		25,261

Provision (credit) for loan losses			1,410		200		(200	)		1,885		(500	)

	Net interest income after provision (credit) for loan losses		8,160		9,043		7,107			31,374		25,761

Non-interest Income
	Loan application, inspection and processing fees		108		102		54			386		257
	Deposit fees and service charges		65		67		61			256		251
	Gains on sale of loans		770		182		1,534			1,461		1,886
	Rental income		118		124		143			566		543
	(Loss) gain on sale of investment securities		—		—		(43	)		—		76
	Other income		278		179		556			936		1,410
	Total non-interest income		1,339		654		2,305			3,605		4,423

Non-interest Expense
	Salaries and benefits		4,067		4,330		3,583			15,506		11,089
	Occupancy and equipment expenses		849		862		900			3,428		3,430
	Data processing expenses		275		297		363			1,185		1,451
	Professional and other outside services		775		541		956			2,664		3,155
	Project expenses, net		2		50		1,867			133		1,882
	Advertising and promotional expenses		41		50		39			232		235
	Loan administration and processing expenses		50		37		73			234		134
	Regulatory assessments		219		245		258			817		907
	Insurance expenses		64		54		66			271		280
	Communications, stationary and supplies		134		208		154			616		604
	Other operating expenses		601		540		520			2,136		2,004
	Total non-interest expense		7,077		7,214		8,779			27,222		25,171

	Income before income taxes		2,422		2,483		633			7,757		5,013

Provision (benefit) for income taxes			652		157		(1,262	)		1,596		(81	)
	Net income	$	1,770	$	2,326	$	1,895		$	6,161	$	5,094

	Basic earnings per share	$	0.45	$	0.59	$	0.48		$	1.56	$	1.29
	Diluted earnings per share	$	0.45	$	0.59	$	0.48		$	1.55	$	1.29

FINANCIAL RATIOS AND OTHER DATA

				Three Months Ended									Year Ended
			(Dollars in thousands)	December 31, 2022			September 30, 2022			December 31, 2021			December 31, 2022			December 31, 2021
Quarterly Performance Data:
		Net income		$	1,770		$	2,326		$	1,895		$	6,161		$	5,094
		Return on Average Assets			0.66	%		0.87	%		0.79	%		0.60	%		0.55	%
		Return on Average Equity			11.72	%		15.00	%		11.21	%		9.87	%		7.75	%
		Net Interest Margin			3.77	%		3.68	%		3.05	%		3.46	%		2.92	%
		Efficiency Ratio			64.88	%		72.89	%		95.30	%		73.84	%		84.80	%
		Efficiency Ratio excluding project costs			64.86	%		72.39	%		75.03	%		73.48	%		78.46	%
		% (decrease) increase in loans			-1.69	%		0.44	%		3.49	%		14.72	%		1.27	%
		% increase (decrease) in deposits			3.12	%		-1.46	%		1.89	%		14.95	%		9.17	%

Asset Quality:
		Nonaccrual loans		$	18,593		$	19,182		$	23,095		$	18,593		$	23,095
		Nonaccrual loans / loans			2.19	%		2.22	%		3.12	%		2.19	%		3.12	%
		Nonaccrual loans / assets			1.78	%		1.81	%		2.43	%		1.78	%		2.43	%

		Allowance for loan losses		$	10,310		$	9,952		$	9,905		$	10,310		$	9,905
		Allowance for loan losses / loans			1.22	%		1.15	%		1.34	%		1.22	%		1.34	%
		Allowance / nonaccrual loans			55.45	%		51.88	%		42.89	%		55.45	%		42.89	%

		Loan charge-offs		$	1,177		$	366		$	—		$	1,828		$	358
		Loan (recoveries)		$	(125	)	$	(189	)	$	(25	)	$	(348	)	$	(179	)
		Net loan charge-offs (recoveries)		$	1,052		$	177		$	(25	)	$	1,480		$	179

Capital Data and Capital Ratios
		Book value per share (1)		$	15.03		$	14.66		$	17.02		$	15.03		$	17.02
		Non-GAAP Tangible book value per share (2)		$	14.68		$	14.31		$	16.67		$	14.68		$	16.67
		Non-GAAP Tangible book value excluding other comprehensive loss per share (3)		$	18.63		$	18.21		$	17.08		$	18.63		$	17.08

		Shares outstanding			3,965,186			3,957,269			3,956,492			3,965,186			3,956,492

		Bank Leverage Ratio			9.26	%		9.23	%		9.86	%		9.26	%		9.86	%

	(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)	December 31, 2022			September 30, 2022			December 31, 2021
	Non-interest bearing:
	Non-interest bearing			$	118,541		$	125,396		$	127,420
	Prepaid DDA				151,095			122,308			99,293
		Total non-interest bearing			269,636			247,704			226,713

	Interest bearing:
	NOW				34,440			38,435			34,741
	Savings				71,002			87,443			109,744
	Money market				164,827			133,947			113,428
	Money market - prepaid deposits				46,173			46,825			51,090
	Certificates of deposit, less than $250,000				165,793			180,253			142,246
	Certificates of deposit, $250,000 or greater				59,877			65,362			53,584
	Brokered deposits				48,698			34,426			17,016
		Total Interest bearing		$	590,810		$	586,691		$	521,849

		Total Deposits		$	860,446		$	834,395		$	748,562

		Total Prepaid deposits		$	197,268		$	169,133		$	150,383

			Total deposits excluding brokered deposits	$	811,748		$	799,969		$	731,546

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 pre-tax income excluding Employee Retention Credit and project expenses, and 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 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, 2022			December 31, 2021			December 31, 2022			December 31, 2021

Net Income excluding Employee retention Credit (ERC) and project expenses:
	Net Income reported	$	1,770		$	1,895		$	6,161		$	5,094
	Provision (benefit) for income taxes		652			(1,262	)		1,596			(81	)
	Income before income taxes reported		2,422			633			7,757			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	$	2,422		$	2,484		$	7,757		$	3,968


(Dollars in thousands)		December 31, 2022			September 30, 2022			December 31, 2021

Tangible book value per share
	Total shareholders' equity	$	59,583		$	58,004		$	67,344
	Goodwill		(1,107	)		(1,107	)		(1,107	)
	Core deposit intangible, net		(249	)		(261	)		(296	)
	Tangible book value	$	58,227		$	56,636		$	65,941

	Shares outstanding		3,965,186			3,957,269			3,956,492
	Tangible book value per share	$	14.68		$	14.31		$	16.67


Tangible book value excluding other comprehensive loss per share
	Tangible book value	$	58,227		$	56,636		$	65,941
	Other comprehensive loss		15,645			15,431			1,637
	Tangible book value excluding other comprehensive loss	$	73,872		$	72,067		$	67,578

	Shares outstanding		3,965,186			3,957,269			3,956,492
	Tangible book value excluding other comprehensive loss per share	$	18.63		$	18.21		$	17.08