The quarter ended June 30, 2010 is the third consecutive quarter during which total nonperforming assets declined. Nonperforming assets which consist of non-accrual loans and other real estate owned (“OREO”) were $110.6 million at June 30, 2010 as compared to $145.6 million at September 30, 2009; this represents an improvement of $35.0 million or 24% over the nine month period. This decrease supports Management’s opinion, stated in the 2009 earnings release, that nonperforming assets peaked during the third quarter of 2009. The $110.6 million of nonperforming assets is comprised of $6.7 million of OREO properties and $103.9 million of non-accrual loans. Of the $103.9 million in non-accrual loans, $31.3 million or 30% of non-accrual loans consisting of 25 notes are under 30 days past due as to payments. The $6.7 million in OREO consists of three properties none of which have been in OREO greater than one year. During the six month period ended June 30, 2010, OREO declined by $12.3 million or 65% reflecting the disposition of six properties on which the Company recorded net losses of $173,000 or approximately 1% at the time of sale.The quarter ended June 30, 2010 is also the fifth consecutive quarter during which the level of loans placed on nonaccrual declined demonstrating a consistent improvement in the risk profile of the portfolio. Additions to nonaccrual loans during each of the previous five quarters were: June 30, 2010 - $3.3 million, March 31, 2010 - $4.0 million, December 31, 2009 - $9.3 million, September 30, 2009 - $26.2 million and June 30, 2009 - $54.8 million. Mr. Charles F. Howell, President and Chief Executive Officer of Patriot National Bank stated that he is encouraged by the improvements described above, as well as by continuing increases in the median sales prices and the volume of single family residences sold in Fairfield County, Connecticut and Westchester County, New York, two of the primary lending areas of the Bank. He further stated that these are hopeful signs that confirm management’s belief that negative conditions “bottomed out” in mid-2009 and there are indications that prospects for a recovery remain favorable.
Mr. Howell further stated that the Bank weathered the worst financial crisis and local real estate market decline since the Great Depression. “We assembled a strong loan workout team and loan review team and are experiencing positive results. Management is confident that the loan loss reserve is ample to absorb any losses embedded in the portfolio”.Despite the residual effects of the economic crisis of 2008 – 2009, actual losses on loans paid-off continue to remain low. For the six months ended June 30, 2010, loan payoffs totaled $78.7 million on which Bancorp incurred approximately $189,000 or 0.24% in actual realized losses as compared to the loan loss allowance coverage ratio of 2.26% to total loans at June 30, 2010. The Bank’s traditionally conservative underwriting standards and low loan-to-value ratios at loan origination have mitigated the level of these actual realized losses at the time the loans are paid off. Net interest income increased to $5.9 million for the three months ended June 30, 2010 as compared to $4.4 million for the three months ended June 30, 2009. The improvement in net interest income is primarily the result of the continuing improvement in the overall cost of funds; interest expense on deposits declined 51% when compared to the same period last year. The net interest margin for the second quarter of 2010 was 3.12% which reflects an impact of 53 basis points for delinquent interest payments received on nonaccrual loans in the second quarter; the net interest margin for the same period last year was 1.91%. The provision for loan losses of $512,000 recorded for the second quarter of 2010 represents a decrease of $5.4 million when compared to the same period last year. Loans decreased $108.9 million or 15% as compared to June 30, 2009. This decrease in the loan portfolio combined with the downward trend in nonperforming assets contributed to the improvement in the provision. This decrease also reflects the ongoing execution of the Bank’s strategic decision to improve the risk profile of its loan portfolio by reducing its construction and commercial real estate loan concentrations. Loan charge-offs, net of recoveries for the second quarter of 2010 were $1.6 million as compared to $6.0 million for the second quarter of 2009.
Noninterest income of $560,000 for the three months ended June 30, 2010 represents a decrease of $106,000 when compared to the same period last year. The results for last year include higher levels of mortgage brokerage referral fees and higher earnings on the cash surrender value of life insurance. Noninterest expenses of $7.3 million are $111,000 or 1% less than those recorded for the second quarter of 2009.Total assets decreased $49.9 million from $866.4 million at December 31, 2009 to $816.4 million at June 30, 2010. Total loans decreased $41.2 million from $645.2 million at December 31, 2009 to $603.9 million at June 30, 2010. Total deposits decreased $46.1 million from $761.3 million at December 31, 2009 to $715.2 million at June 30, 2010. Much of the decrease in deposits can be attributed to Bancorp’s strategy to reduce rate sensitive deposits resulting in a lower cost of funds and an improvement in spreads. Strategic balance sheet management and a reduction in higher risk loans resulted in an increase in Bancorp’s Capital Ratios at June 30, 2010 compared to December 31, 2009:
|June 30, 2010||December 31, 2009|
|Total Risk Based Capital||8.70%||8.58%|
|Tier 1 Risk Based Capital||7.36%||7.22%|
|Tier 1 Leverage||4.74%||4.72%|
Patriot National Bank is headquartered in Stamford, Connecticut and currently has 19 full service branches, 16 in Connecticut and three in New York. It also has a loan production office in Stamford, CT.
|Three Months Ended June 30, 2010||Three Months Ended June 30, 2009||Six Months Ended June 30, 2010||Six Months Ended June 30, 2009|
|Net interest income||$||5,887||$||4,404||$||11,896||$||9,932|
|Provision for loan losses||512||5,956||1,239||7,556|
|Loss before taxes (Provision) Benefit for Income Taxes Net loss||1,400 - 1,400||8,333 3,696 4,637||4,307 (225 4,532||)||9,688 3,954 5,734|
|Loans at period end||603,964||712,918||603,964||712,918|
|Deposits at period end||715,243||859,377||715,243||859,377|
|Assets at period end||816,470||980,835||816,470||980,835|
|Loss per share||$||0.29||$||0.98||$||0.95||$||1.21|