Patriot National Bancorp Earns $546,000 In First Quarter

Patriot National Bancorp, Inc. (NASDAQ:PNBK)(“Patriot”), the parent of Patriot National Bank (the “Bank”), today reported it earned $546,000, or $0.01 per diluted share, in the first quarter of 2012 compared to earnings of $443,000, or $0.01 per diluted share, in the fourth quarter of 2011 and a net loss of $9.0 million, or $0.23 loss per share, in the first quarter a year ago. First quarter 2011 results included a $6.2 million loss on a bulk sale of non-performing assets. The improving results were driven by the continued success of management’s recovery plan.

“We are pleased to post a profit for the third consecutive quarter on the heels of Patriot’s turnaround. Both top-and bottom line improvements were recognized this quarter,” said Michael Carrazza, Chairman of the Board. “Continued efforts remain focused on operational refinements and varying paths of enterprise and product growth.”

Financial Highlights:
  • Patriot earned $546,000, or $0.01 per diluted share, in the quarter ended March 31, 2012 compared to a net loss of $9.0 million, or $0.23 loss per share, in the first quarter a year ago.
  • The net interest margin increased 39 basis points to 3.25% for the quarter ended March 31, 2012, compared to 2.86% in the first quarter a year ago.
  • Non-accrual loans decreased 24.8% to $15.5 million at March 31, 2012, or 3.3%, of total loans as compared to $20.7 million three months earlier.
  • Other real estate owned (OREO) decreased 47.1% to $1.5 million at March 31, 2012 compared to $2.8 million three months earlier.
  • Non-performing assets, which consist of non-accrual loans and OREO, declined to $17.0 million, or 2.5% of total assets compared to $23.4 million, or 3.5% just three months earlier, and $33.5 million, or 4.7% of total assets a year ago.
  • Non-interest income increased 28.6% compared to the same quarter in the prior year as a result of a gain from the sale of residential loans.
  • Non-interest operating expenses were 17.4% lower in the current quarter compared to the same period in the prior year resulting from lower salaries and benefits, occupancy and OREO expenses.
  • Total Capital to Risk Weighted Assets was 16.0% for Patriot and 15.5% for the Bank at March 31, 2012.

Asset Quality

“Improving the risk profile of Patriot and aggressively managing our troubled assets has been and will remain a priority focus for the company. Non-performing assets have declined for ten consecutive quarters. In addition to asset quality improvements, we continue to focus on increasing revenue and decreasing operating expenses to improve earnings. Staff reductions in the first quarter and the planned closing of a branch in the second quarter will reduce future expenses by approximately $1.0 million per annum,” said Christopher Maher, President and Chief Executive Officer.

Total non-accrual loans decreased to $15.5 million, or 3.3% of gross loans, at March 31, 2012 compared to $20.7 million, or 4.1% of gross loans three months earlier, and $32.5 million, or 6.8% of gross loans, a year ago.

Due to the sale of two properties, other real estate owned (OREO) decreased 47.1% to $1.5 million at March 31, 2012 compared to $2.8 million three months earlier. There are now only two properties remaining in OREO. Non-performing assets, which consist of non-accrual loans and OREO, declined 27.5% to $17.0 million, or 2.5% of total assets, at March 31, 2012 compared to $23.4 million, or 3.5% of total assets, at December 31, 2011, and $33.5 million, or 4.7% of total assets, at March 31, 2011.

The reduction in total loans due to the sale of $66.4 million of residential real estate loans and the improved credit quality of the overall loan portfolio resulted in a release of $845,000 from the loan loss reserve for the first quarter of 2012, compared to the $7.0 million provision recorded in the first quarter last year, of which $6.0 million was related to the bulk loan sale of non-performing assets.

The allowance for loan losses totaled $8.5 million, or 1.78% of gross loans, at March 31, 2012 compared to $9.4 million, or 1.84%, of gross loans, at December 31, 2011, and $12.2 million, or 2.55%, of gross loans a year ago.

Balance Sheet Review

“During the first quarter we sold $65.8 million in residential loans resulting in a decrease in net loans compared to the preceding quarter end,” added Mr. Maher. “However, our continued focus on growing the loan portfolio is evident by our loan pipeline, which was $105 million at March 31, 2012.” Loans outstanding were $474.7 million at March 31, 2012, compared to $510.6 million at December 31, 2011 as a result of the previously mentioned loan sale, and $479.1 million a year ago.

While total deposits decreased compared to a year ago, non-interest bearing accounts increased 6.0%, representing Patriot’s planned strategy to reduce higher cost certificates of deposit and replace them with lower cost deposits. Deposits totaled $539.6 million at March 31, 2012, compared to $544.9 million at December 31, 2011, and $581.3 million a year ago. Non-interest bearing accounts increased to $59.0 million at March 31, 2012 compared to $55.7 million a year earlier.

Total assets were $671.1 million at March 31,2012 compared to $709.7 million at March 31, 2011 primarily as a result of the reduction in high cost deposits.

Income Statement Review

Patriot’s first quarter net interest income increased 5.3% to $5.2 million, compared to $4.9 million in the first quarter a year ago. Interest income decreased 2.4% compared to the first quarter a year ago as a result of lower average outstanding loan balances and the lower interest rate environment. Interest expense decreased 16.6% compared to the first quarter a year ago due to the reduction in certificates of deposit and the increase in non-interest bearing deposits. As a result, Patriot’s first quarter net interest margin increased 39 basis points to 3.25%, compared to 2.86% in the first quarter a year ago.

First quarter non-interest income increased 28.6% to $750,000 compared to $583,000 in the first quarter a year ago. The increase was primarily due to a gain on sale of residential loans of $264,000, and was partially offset by lower fees and service charges on deposit accounts of $53,000.

“We made a concerted effort to reduce our operating costs and as a result operating expenses, including the $368,000 impact of a restructuring charge recorded in the first quarter of 2012, declined 17.4% compared to the first quarter a year ago,” Mr. Maher continued. Excluding the restructuring charge, total non-interest expenses declined 22.3% compared to the first quarter a year ago. Non-interest expenses declined $1.3 million to $6.2 million in the first quarter compared to $7.5 million in the first quarter a year ago. Salary and employee benefits were down $323,000, or 10.0%, and occupancy and equipment expenses were down $231,000, or 17.0%, compared to the first quarter a year ago. In addition, OREO expenses were $421,000 lower due to $200,000 in gains recognized on the sale of two properties and lower operating costs relating to fewer properties being managed.

Capital

The capital ratios at March 31, 2012 for Patriot National Bancorp, Inc. and Patriot National Bank were:
 

Patriot National

Bancorp, Inc.
 

Patriot National

Bank
 

Well Capitalized

Requirement
 
Total Capital (to Risk Weighted Assets) 16.00% 15.52% 10.00%
Tier 1 Capital (to Risk Weighted Assets) 14.74% 14.26% 6.00%
Tier 1 Capital (to Average Assets) 8.89% 8.60% 5.00%

About the Company

Patriot National Bank is headquartered in Stamford, Connecticut and currently has 15 full service branches, 12 in Connecticut and three in New York. It also has a loan production office in Stamford, CT.

Statements in this earnings release that are not historical facts are considered to be forward-looking statements. Such statements include, but are not limited to, statements regarding management beliefs and expectations, based upon information available at the time the statements are made, regarding future plans, objectives and performance. All forward-looking statements are subject to risks and uncertainties, many of which are beyond management’s control and actual results and performance may differ significantly from those contained in forward-looking statements. Bancorp intends any forward-looking statement to be covered by the Litigation Reform Act of 1995 and is including this statement for purposes of said safe harbor provisions. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this news release. Bancorp undertakes no obligation to update any forward-looking statements to reflect events or circumstances that occur after the date as of which such statements are made. A discussion of certain risks and uncertainties that could cause actual results to differ materially from those contained in forward-looking statements is included in Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2011.
PATRIOT NATIONAL BANCORP, INC.
STATEMENTS OF OPERATIONS
(unaudited)   Three Months Ended
Dollars in thousands, except per share data Mar. 31, 2012   Dec. 31, 2011   Mar. 31, 2011
 
Interest and dividend income
Interest and fees on loans $ 6,666 $ 6,277 $ 6,957
Interest on investment securities 477 565 274
Dividends on investment securities 33 33 70
Interest on federal funds sold - - 4
Other interest income   11     16     62  
Total interest and dividend income   7,187     6,891     7,367  
 
Interest expense
Interest on deposits 1,517 1,480 1,865
Interest on Federal Home Loan Bank borrowings 357 362 419
Interest on subordinated debt 76 73 71
Interest on other borrowings   77     78     76  
Total interest expense   2,027     1,993     2,431  
 
Net interest income 5,160 4,898 4,936
 
Provision for loan losses   (845 )   (1,000 )   6,982  
 

Net interest income after provision for loan losses
6,005 5,898 (2,046 )
 
Non-interest income
Mortgage brokerage referral fees 12 30 13
Loan origination and processing fees 15 17 17
Fees and service charges 228 229 281
Gains on sale of loans 264 - -
Gain (loss) on sale of investment securities (8 ) 330 -
Earnings on cash surrender value of life insurance 143 145 168
Other income   96     86     104  
Total non-interest income   750     837     583  
 
Non-interest expense
Salaries and benefits 2,891 3,151 3,214
Occupancy and equipment expense, net 1,124 1,147 1,355
Data processing 346 307 328
Professional services and other outside services 615 843 882
Advertising and promotional expenses 18 52 158
Loan administration and processing expenses 8 97 37
Regulatory assessments 410 321 611
Insurance expense 169 183 231
Other real estate operations (150 ) (141 ) 271
Material and communications 131 157 200
Restructuring charges 368 - -
Other operating expenses   279     175     233  
Total non-interest expenses   6,209     6,292     7,520  
 
Income (loss) before income taxes 546 443 (8,983 )
 
Provision for income taxes   -     -     -  
Net income (loss) $ 546   $ 443   $ (8,983 )
 
Basic and diluted income (loss) per share $ 0.01   $ 0.01   $ (0.23 )
 
(Dollars in thousands, except per share data)   Mar. 31, 2012   Dec. 31, 2011   Mar. 31, 2011
(Unaudited)
 

Assets
Cash and due from banks $ 103,264 $ 54,716 $ 146,548
Federal funds sold - - 10,000
Short-term investments   710     709     501  
Total cash and cash equivalents 103,974 55,425 157,049
 
Securities-available for sale 58,592 66,470 38,539
Other investments 3,500 3,500 3,500
FRB & FHLB stock   6,036     6,215     6,684  
Total securities 68,128 76,185 48,723
 
Gross loans 474,726 510,612 479,078
Allowance for loan losses   (8,461 )   (9,385 )   (12,209 )
Net loans 466,265 501,227 466,869
 
Loans held for sale - 250 -
Accrued interest and dividend receivable 2,243 2,453 2,326
Premise and equipment, net 4,882 4,147 4,915
Cash surrender value of life insurance 21,127 20,985 20,517
Other real estate owned 1,462 2,763 950
Deferred tax asset, net (1) - - -
Other assets   3,047     2,381     8,365  
Total assets $ 671,128   $ 665,816   $ 709,714  
 

Liabilities and Stockholders' Equity
 
Deposits
Non interest bearing deposits $ 59,049 $ 65,613 $ 55,692
Interest bearing deposits   480,541     479,296     525,591  
539,590 544,909 581,283
 
FHLB advances and repurchase agreements 67,000 57,000 57,000
Subordinated debt 8,248 8,248 8,248
Accrued expenses and other liabilities   5,052     5,110     4,990  
Total Liabilities 619,890 615,267 651,521
 
Common stock 384 384 384
Treasury stock (160 ) (160 ) (160 )
Additional paid-in capital 105,130 105,050 105,050
Accumulated deficit (54,313 ) (54,859 ) (48,382 )
Accumulated other comprehensive income   197     134     1,301  
Total stockholders' equity   51,238     50,549     58,193  
 
Total liabilities and stockholders' equity $ 671,128   $ 665,816   $ 709,714  
 
(1) Includes the deferred tax asset and a full valuation allowance of $14.1 million, $14.4 million and $16.1 million respectively.
 

Financial Ratios and Other Data
(Dollars in thousands, except per share data)      
(Unaudited) Mar. 31, Dec. 31, Mar. 31,
2012 2011 2011
Asset Quality:
Nonaccrual loans $ 15,545 $ 20,683 $ 32,530
Other real estate owned   1,462     2,763     950  
Total nonperforming assets $ 17,007   $ 23,446   $ 33,480  
 
 
Nonaccrual loans / portfolio loans 3.27 % 4.05 % 6.79 %
Nonperforming assets / assets 2.53 % 3.52 % 6.99 %
Allowance for loan losses $ 8,461 $ 9,385 $ 12,208
Allowance for loan losses / portfolio loans 1.78 % 1.84 % 2.55 %
Allowance / nonaccrual loans 54.43 % 45.37 % 37.50 %
Gross loan charge-offs for the quarter $ 102 $ 847 $ 4,154
Gross loan recoveries for the quarter $ 24 $ 74 $ 21
Net loan charge-offs for the quarter $ 78 $ 773 $ 4,133
 
Capital Data:
Book value per share (1) $ 1.33 $ 1.32 $ 1.52
Tangible book value per share (2) $ 1.33 $ 1.32 $ 1.52
Shares outstanding 38,467,073 38,362,727 38,326,727
 
(1) Book value per share represents shareholders’ equity divided by outstanding shares.
(2) Tangible book value per share represents shareholders’ equity less intangible assets divided by outstanding shares.

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