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Patriot Reports Third Quarter 2022 Net Income of $2.3 million, $0.59 per share; continued growth in loans and deposits
Source: Nasdaq GlobeNewswire / 10 Nov 2022 16:43:32 America/Chicago
Tom Slater hired as Chief Credit Officer
Payment Card Business Triples Since Inception, as Bank Assets Approach $1.1 Billion
STAMFORD, Conn., Nov. 10, 2022 (GLOBE NEWSWIRE) -- 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.
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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,
2022December 31,
2021September 30,
2021Assets 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,
2022June 30,
2022September 30,
2021September 30,
2022September 30,
2021Interest 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,
2022June 30,
2022September 30,
2021September 30,
2022September 30,
2021Quarterly 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,
2022June 30,
2022September 30,
2021Non-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,
2022June 30,
2022September 30,
2021Tangible 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 
