Patriot Bank Reports Deposits, Assets Grow In 3Q

From Patriot National Bank: Patriot National Bancorp, Inc. (“Patriot”, “Bancorp”) (NASDAQ: PNBK), the parent company of Patriot Bank, N.A. (the “Bank”), today announced quarterly pre-tax earnings of $1.0 million and quarterly net income of $769 thousand, or $0.20 per fully diluted share for the quarter ended September 30, 2018, as assets were up 11% over the same period in 2017, and deposits grew 19%.

Patriot’s third quarter net income includes $653 thousand of expenses primarily related to the acquisition costs associated with Prime Bank and Hana Small Business Lending (“Hana SBL”). As a result, the third quarter net income was reduced 26% from the $1.0 million, $0.26 per fully diluted share, reported in the second quarter, and was 24% lower than the $1.0 million, $0.26 per share, reported for the same quarter a year ago. For the nine months ended September 30, 2018, net income was $2.9 million, or $0.73 per fully diluted share, as compared with $3.5 million, or $0.91 per fully diluted share, for the nine months ended September 30, 2017.

The year-to-date net income is not comparable to the same period last year due to a $2.8 million credit recovery that was recognized in the first quarter of 2017 and material non-recurring acquisition-related expenses recognized in the current year. Pre-tax earnings reported for the three quarters of 2018 included non-recurring transaction expenses of $1.8 million. On May 10, 2018 Patriot completed its acquisition of Prime Bank. The closing of the transaction added a new Patriot branch located in the Town of Orange, New Haven County, Connecticut.

CEO Michael Carrazza stated: “This past quarter was highlighted by our investment in building out the SBA product category for Patriot. Quarterly results reflect the impact of material regulatory and transaction costs associated with the pending acquisition of Hana SBL and broadening overall compliance and oversight as our presence in SBA expands. The onboarding of former SBA and FDIC regulator, Brent Ciurlino, as announced on October 31, 2018, along with the continued investment in the building of our SBA business, were significant accomplishments during the quarter, which is expected to enhance Patriot’s performance in future periods”.

Patriot became an approved SBA lender at the end of 2017 and was designated a “preferred lender” by the SBA earlier in this year, enabling it to approve loans to small businesses and entrepreneurs more quickly and efficiently. In 2018 Patriot opened SBA Business Development offices in Stamford, CT and Atlanta, GA and plans to open in Jacksonville, FL later this month.

Mr. Carrazza added: “We have followed 2017, the best earnings year in Patriot’s history, with encouraging results for the first nine months of 2018, which include material transaction-related costs that are not expected to continue into 2019. Excluding these costs and a credit associated with a non-recurring credit recovery in 2017, pre-tax and net income have dramatically improved year over year, demonstrating our strong earnings momentum.”

Richard Muskus, Patriot’s President, added: “The first three quarters of 2018 have seen many positive and encouraging developments at Patriot as we continue our growth as a leading community bank. We will continue to build upon these most recent achievements with the expansion into a national SBA lending platform, and the continued expansion of our retail banking presence.”

Patriot also announced today the declaration of its sixth consecutive quarterly dividend of $0.01 per fully diluted share. The record date for this quarterly dividend will be November 26, 2018 with a dividend payment date of December 4, 2018.

Financial Results

As of September 30, 2018, total assets were $915.3 million, as compared to $930.2 million at June 30, 2018 and $826.7 million at September 30, 2017, for a total asset growth of 11% in the one-year period. Net loans receivable totaled $756.6 million, up 1% over $750.8 million at June 30, 2018, and up 7% over $703.9 million at September 30, 2017. Deposits continued to grow to $719.5 million at September 30, 2018, as compared to $712.3 million at June 30, 2018 and $605.4 million at September 30, 2017.

Net interest income was $6.8 million in the quarter, decreased 4% from both the prior quarter and the corresponding 2017 period. The year-to-date net interest income of $20.9 million was 11% higher than the $18.9 million in the nine month period ended September 30, 2017.

Net interest margin was 3.11% for the third quarter of 2018, as compared to 3.34% in the prior quarter and 3.65% for the third quarter of 2017. The decline in net interest margin in the current quarter reflects the impact of subordinated debt added June 29, 2018 and increasing deposit costs associated with higher rates paid on retail deposits and an increased reliance on more expensive wholesale funding sources.

The provision for loan losses in the quarter was $50 thousand, as compared to $545 thousand in the third quarter of 2017. The year-to-date provision for loan losses was $285 thousand, as compared to a net credit for loan losses of $944 thousand, which reflected the previously noted recovery.

Non-interest income was $354 thousand in the quarter, 8% lower than the prior quarter. Year-to-date non-interest income of $1.1 million was 5% higher than the prior year, primarily due to a loss on security sales recognized in the same period of 2017 and gains on the sale of SBA loans recognized in 2018.

Non-interest expense increased $86 thousand over the prior quarter, and increased $825 thousand over the third quarter of 2017. The expenses were impacted by non-recurring project costs. These costs totaled $653 thousand and $1.8 million for the third quarter and year-to-date period, respectively.

The income tax provision in the third quarter of $276 thousand represented an effective tax rate of 26% and reflects the positive impact of the tax rate changes enacted in the fourth quarter of 2017.

As of September 30, 2018 shareholders’ equity was $68.9 million, an increase of $2.6 million from a year ago. Patriot’s book value per share increased to $17.64 at September 30, 2018, as compared to $17.02 a year ago.

The Bank’s capital ratios continue to be strong, as the Bank maintained its “well capitalized” regulatory status. The capital ratios improved from the first quarter 2018 level as the result of the subordinated debt issuance completed at the end of the quarter. A material amount of the proceeds from the debt issuance were down-streamed to the Bank. As of September 30, 2018, Tier 1 leverage ratio was 9.92%, Tier 1 risk based capital was 10.61% and total risk based capital was 11.38%.

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