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 loss of $546 thousand, or $(0.14) basic and diluted loss per share for the quarter ended June 30, 2023.

These results compared to net loss of $53 thousand, or $(0.01) per basic and diluted loss per share for the first quarter of 2023 and net income of $1.3 million, or $0.32 basic and diluted earnings per share reported in the second quarter of 2022.

For the six months ended June 30, 2023, net loss was $599 thousand, or $(0.15) basic and diluted loss per share, compared to a net income of $2.1 million, or $0.52 basic and diluted earnings per share for the six months ended June 30, 2022.

The first half year of 2023 financial results were adversely impacted by increasing reserves, which resulted in an elevated provision for credit losses of $2.6 million, compared to provision for loan losses of $275 thousand recorded for the same period of 2022; and the impact of lower net interest margin which was impacted by the higher funding costs resulting from the recent uncertainty in the banking sector.

The Bank reported steady loan growth of almost 6% in the second quarter of 2023, as compared to the prior quarter. Net interest margin decreased slightly, but remained strong at 2.96%.

Commenting on the results, Patriot President & CEO David Lowery, stated: “The Bank continued to invest in its long-term strategic plan and numerous value-add initiatives during the second quarter of 2023, which, combined with higher loan loss reserves and increased interest expense, from the extraordinary actions taken to combat inflation, resulted in a loss for the quarter.   We believe that as the Bank fully ramps up its many initiatives, particularly the Digital Payments Division, the Bank will have the tools necessary for long-term sustained growth, even during challenged markets.

Though the speed of recent interest rate increases may have knock-on effects that require further reserve increases, fresh market signals indicate the need for continued increases may be slowing.   Over the long term, the Bank’s in-process investments are expected to more than offset impacts from increased rates, driven by low-cost deposit and fee income generators.

In the near term, as these programs continue to build out, the Bank will refocus efforts on credit quality and continue to manage non-interest expense. Additionally, the Bank continues to actively pursue a number of strategic actions that will position us for further growth opportunities.”

Financial Results:

Total assets increased to $1.2 billion, as of June 30, 2023, as compared to $1.0 billion on December 31, 2022. This was primarily due to an increase in loans from $848.3 million at December 31, 2022, to $930.7 million as of June 30, 2023. Total deposits for the quarter remained stable at $863.4 million as of June 30, 2023, relative to $860.4 million as of December 31, 2022.

Net interest income for the three months ended June 30, 2023, was $7.7 million, which was consistent with the net interest income of $7.7 million reported in the second quarter of 2022 and a decline from $8.0 million reported in the first quarter of 2023. The decline from the first quarter of 2023 was due to narrower net interest margin due to higher deposit costs and an increase in wholesale borrowings. Net interest income for the six months ended June 30, 2023 was $15.7 million, an increase of $1.3 million or 8.9% from the first half of 2022. These increases were primarily attributable to the growth in the loan portfolio over the past year.

The Bank’s net interest margin was 2.96% for the three months ended June 30, 2023, compared with 3.29% for the three months ended March 31, 2023 and 3.27% for the three months ended June 30, 2022. For the six months ended June 30, 2023 and 2022, the net interest margin was 3.12% and 3.17%, respectively.

A provision for credit losses of $1.2 million and $2.6 million was recorded for the three and six months ended June 30, 2023, respectively. For the three and six months ended June 30, 2022, a provision for loan losses of $275 thousand was recorded. The allowance and provision for the three and six months ended June 30, 2023 are not comparable to prior periods due to adoption of the current expected credit loss methodology.

Non-interest income was $829 thousand and $798 thousand for the three months ended June 30, 2023 and 2022, respectively. For the six months ended June 30, 2023 and 2022, the non-interest income was $1.7 million and $1.6 million, respectively. The higher non-interest income for the first half of 2023, was primarily attributable to higher non-interest income from the Bank’s Deposit Strategies Division.

Non-interest expenses for the quarter ended June 30, 2023, and 2022, were $8.1 million and $6.5 million, respectively. Non-interest expenses for the six months ended June 30, 2023, and 2022, were $15.6 million and $12.9 million, respectively.

In 2023, a benefit for income taxes of $206 thousand and $225 thousand was recorded for the three and six months ended June 30, 2023, respectively, compared to a provision for income taxes of $476 thousand and $787 thousand for the three and six months ended June 30, 2022, respectively. The effective tax rate for the six months ended June 30, 2023 and 2022 was 27.3% and 27.6%, respectively.

About the Company:

Founded in 1994, and now celebrating its 29th 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 SUBSIDIARIESCONSOLIDATED BALANCE SHEETS (Unaudited)

	June 30, 2023				December 31, 2022				June 30, 2022
Assets
Cash and due from banks:
Noninterest bearing deposits and cash	$	2,320			$	5,182			$	4,507
Interest bearing deposits		68,489				33,311				33,009
Total cash and cash equivalents		70,809				38,493				37,516
Investment securities:
Available-for-sale securities, at fair value		90,547				84,520				76,971
Other investments, at cost		4,450				4,450				4,450
Total investment securities		94,997				88,970				81,421
Federal Reserve Bank stock, at cost		2,523				2,627				2,762
Federal Home Loan Bank stock, at cost		8,072				3,874				4,474
Gross loans receivable		930,734				848,316				859,107
Allowance for credit losses		(16,858	)			(10,310	)			(9,929	)
Net loans receivable		913,876				838,006				849,178
SBA loans held for sale		5,860				5,211				7,556
Accrued interest and dividends receivable		7,628				7,267				5,727
Premises and equipment, net		30,262				30,641				31,128
Deferred tax asset		18,169				15,527				14,910
Goodwill		1,107				1,107				1,107
Core deposit intangible, net		226				249				273
Other assets		9,202				11,387				13,128
Total assets	$	1,162,731			$	1,043,359			$	1,049,180
Liabilities
Deposits:
Noninterest bearing deposits	$	127,817			$	269,636			$	271,165
Interest bearing deposits		735,562				590,810				575,618
Total deposits		863,379				860,446				846,783
Federal Home Loan Bank and correspondent bank borrowings		207,000				85,000				100,000
Senior notes, net		11,653				11,640				12,000
Subordinated debt, net		9,854				9,840				9,825
Junior subordinated debt owed to unconsolidated trust, net		8,132				8,128				8,123
Note payable		481				585				689
Advances from borrowers for taxes and insurance		3,094				886				2,967
Accrued expenses and other liabilities		6,693				7,251				8,991
Total liabilities		1,110,286				983,776				989,378
Commitments and Contingencies		-				-				-
Shareholders' equity
Preferred stock		-				-				-
Common stock		106,611				106,565				106,520
Accumulated deficit		(38,127	)			(31,337	)			(35,433	)
Accumulated other comprehensive loss		(16,039	)			(15,645	)			(11,285	)
Total shareholders' equity		52,445				59,583				59,802
Total liabilities and shareholders' equity	$	1,162,731			$	1,043,359			$	1,049,180

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

	Three Months Ended											Six Months Ended
(In thousands, except per share amounts)	June 30, 2023				March 31, 2023				June 30, 2022			June 30, 2023				June 30, 2022
Interest and Dividend Income
Interest and fees on loans	$	14,052			$	12,550			$	9,044		$	26,602			$	16,708
Interest on investment securities		687				680				510			1,367				1,080
Dividends on investment securities		171				135				65			306				130
Other interest income		399				281				68			680				89
Total interest and dividend income		15,309				13,646				9,687			28,955				18,007
Interest Expense
Interest on deposits		5,248				3,579				757			8,827				1,166
Interest on Federal Home Loan Bank and correspondent bank borrowings		1,723				1,436				747			3,159				1,484
Interest on senior debt		289				290				210			579				420
Interest on subordinated debt		333				326				251			659				485
Interest on note payable		3				2				2			5				6
Total interest expense		7,596				5,633				1,967			13,229				3,561
Net interest income		7,713				8,013				7,720			15,726				14,446
Provision for credit losses		1,231				1,336				275			2,567				275
Net interest income after provision for credit losses		6,482				6,677				7,445			13,159				14,171
Non-interest Income
Loan application, inspection and processing fees		121				123				89			244				176
Deposit fees and service charges		74				68				60			142				124
Gains on sale of loans		85				81				301			166				509
Rental income		105				119				132			224				324
Gain on sale of investment securities		-				24				—			24				—
Other income		444				420				216			864				479
Total non-interest income		829				835				798			1,664				1,612
Non-interest Expense
Salaries and benefits		4,661				4,267				3,763			8,928				7,109
Occupancy and equipment expenses		839				884				881			1,723				1,717
Data processing expenses		316				294				283			610				613
Professional and other outside services		727				914				559			1,641				1,348
Project expenses, net		66				27				29			93				81
Advertising and promotional expenses		77				85				73			162				141
Loan administration and processing expenses		103				51				42			154				147
Regulatory assessments		317				182				179			499				353
Insurance expenses		68				77				76			145				153
Communications, stationary and supplies		241				191				139			432				274
Other operating expenses		648				612				478			1,260				995
Total non-interest expense		8,063				7,584				6,502			15,647				12,931
(Loss) income before income taxes		(752	)			(72	)			1,741			(824	)			2,852
(Benefit) provision for income taxes		(206	)			(19	)			476			(225	)			787
Net (loss) income	$	(546	)		$	(53	)		$	1,265		$	(599	)		$	2,065
Basic (loss) earnings per share	$	(0.14	)		$	(0.01	)		$	0.32		$	(0.15	)		$	0.52
Diluted (loss) earnings per share	$	(0.14	)		$	(0.01	)		$	0.32		$	(0.15	)		$	0.52

FINANCIAL RATIOS AND OTHER DATA

	Three Months Ended												Year Ended
(Dollars in thousands)	June 30,2023				March 31,2023				June 30,2022				June 30,2023				June 30,2022
Quarterly Performance Data:
Net (loss) income	$	(546	)		$	(53	)		$	1,265			$	(599	)		$	2,065
Return on Average Assets		-0.20	%			-0.02	%			0.50	%			-0.11	%			0.42	%
Return on Average Equity		-3.93	%			-0.39	%			8.20	%			-2.18	%			6.49	%
Net Interest Margin		2.96	%			3.29	%			3.27	%			3.12	%			3.17	%
Efficiency Ratio		94.39	%			85.72	%			76.33	%			89.98	%			80.53	%
Efficiency Ratio excluding project costs		94.32	%			85.42	%			76.00	%			89.79	%			80.03	%
% increase in loans		5.91	%			3.59	%			11.09	%			9.72	%			16.18	%
% increase (decrease) in deposits		0.81	%			-0.46	%			8.58	%			0.34	%			13.12	%
Asset Quality:
Nonaccrual loans	$	20,634			$	23,769			$	23,324			$	20,634			$	23,324
Nonaccrual loans / loans		2.22	%			2.70	%			2.71	%			2.22	%			2.71	%
Nonaccrual loans / assets		1.77	%			2.16	%			2.22	%			1.77	%			2.22	%
Allowance for loan losses	$	16,858			$	17,801			$	9,929			$	16,858			$	9,929
Allowance for loan losses / loans		1.81	%			2.03	%			1.16	%			1.81	%			1.16	%
Allowance / nonaccrual loans		81.70	%			74.89	%			42.57	%			81.70	%			42.57	%
Loan charge-offs	$	2,670			$	1,798			$	100			$	4,468			$	285
Loan (recoveries)	$	(280	)		$	(180	)		$	(17	)		$	(460	)		$	(34	)
Net loan charge-offs	$	2,390			$	1,618			$	83			$	4,008			$	251
Capital Data and Capital Ratios
Book value per share (1)	$	13.23			$	13.77			$	15.11			$	13.23			$	15.11
Non-GAAP Tangible book value per share (2)	$	12.89			$	13.43			$	14.76			$	12.89			$	14.76
Non-GAAP Tangible book value excluding other comprehensive loss per share (3)	$	16.94			$	17.06			$	17.61			$	16.94			$	17.61
Shares outstanding		3,965,186				3,965,186				3,957,269				3,965,186				3,957,269
Bank Leverage Ratio		8.70	%			9.29	%			9.44	%			8.70	%			9.44	%

 

(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)	June 30,2023				December 31,2022				June 30,2022
Non-interest bearing:
Non-interest bearing	$	104,413			$	118,541			$	137,320
Prepaid DDA		23,404				151,095				133,845
Total non-interest bearing		127,817				269,636				271,165
Interest bearing:
NOW		37,970				34,440				35,973
Savings		50,981				71,002				99,686
Money market		163,982				164,827				151,212
Money market - prepaid deposits		134,735				46,173				32,891
Certificates of deposit, less than $250,000		182,680				165,793				169,690
Certificates of deposit, $250,000 or greater		56,088				59,877				51,491
Brokered deposits		109,126				48,698				34,675
Total Interest bearing		735,562				590,810				575,618
Total Deposits	$	863,379			$	860,446			$	846,783
Total prepaid deposits	$	158,139			$	197,268			$	166,736
Total deposits excluding prepaid deposits	$	705,240			$	663,178			$	680,047
Total uninsured deposits	$	285,752			$	343,980			$	351,924
Uninsured deposits to total deposits		33.10	%			39.98	%			41.56	%
Uninsured deposits to total deposits excluding prepaid deposits		17.71	%			22.35	%			27.42	%

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)	June 30, 2023				March 31, 2023				June 30, 2022
Tangible book value per share
Total shareholders' equity	$	52,445			$	54,609			$	59,802
Goodwill		(1,107	)			(1,107	)			(1,107	)
Core deposit intangible, net		(226	)			(238	)			(273	)
Tangible book value	$	51,112			$	53,264			$	58,422
Shares outstanding		3,965,186				3,965,186				3,957,269
Tangible book value per share	$	12.89			$	13.43			$	14.76
Tangible book value excluding other comprehensive loss per share
Tangible book value	$	51,112			$	53,264			$	58,422
Other comprehensive loss		16,039				14,398				11,285
Tangible book value excluding other comprehensive loss	$	67,151			$	67,662			$	69,707
Shares outstanding		3,965,186				3,965,186				3,957,269
Tangible book value excluding other comprehensive loss per share	$	16.94			$	17.06			$	17.61

Contacts:
Patriot Bank, N.A.	Joseph Perillo	David Lowery
900 Bedford Street	Chief Financial Officer	President & CEO
Stamford, CT 06901	203-252-5954	203-252-5959
www.BankPatriot.com