Patriot National Bancorp, Inc. (NASDAQ: PNBK) (“Patriot”), the parent of Patriot National Bank (the “Bank”), today reported it earned $345,000, or $0.01 per diluted share, in the second quarter of 2012 compared to a net loss of $7.2 million, or $0.19 loss per share, in the second quarter a year ago. Second quarter 2011 results included $3.0 million of restructuring charges associated with management’s turnaround plan.
“Posting our fourth consecutive quarter of profitability highlights the success of our turnaround plan and management’s effectiveness in executing,” said Michael Carrazza, Chairman of the Board. “With health and stability restored, our mandate is to significantly increase core earnings in the face of a challenging and low rate market environment. We’ve set in motion a series of tailored restructuring initiatives in the third quarter aimed at elevating core earnings to our target run rate level by year end.” In the first six months of 2012, Patriot earned $891,000, or $0.02 per diluted share, compared to a net loss of $16.2 million, or $0.42 loss per share, in the first six months of 2011.
- Patriot earned $345,000, or $0.01 per diluted share, in the quarter ended June 30, 2012 compared to a net loss of $7.2 million, or $0.19 loss per share, in the second quarter a year ago. Included in the year-earlier loss was $3.0 million of restructuring charges.
- The net interest margin was 2.81% for the quarter ended June 30, 2012, compared to 3.16% for the second quarter a year ago. For the six months ended June 30, 2012 the net interest margin was 3.03% compared to 3.00% for the six months ended June 30, 2011.
- Non-accrual loans were $17.5 million at June 30, 2012, or 3.6 % of total loans as compared to $26.7 million, or 5.8% of total loans at June 30, 2011.
- Non-performing assets, which consist of non-accrual loans and OREO, were $19.0 million, or 2.9% of total assets at June 30, 2012 compared to $30.3 million, or 4.7% of total assets a year ago.
- Non-interest operating expenses were 45.8% lower in the current quarter compared to the same quarter a year ago resulting primarily from lower salaries and benefits, occupancy, restructuring and OREO expenses.
- Total Capital to Risk Weighted Assets was 15.9% for Patriot and 15.4% for the Bank at June 30, 2012.
“Improving our risk profile and aggressively managing our troubled assets has been, and will remain, a priority focus for our management team,” said Christopher Maher, President and Chief Executive Officer. “As a result of this focus, credit costs continued to decline and were significantly below those of a year ago. In addition to asset quality improvements, we continue to focus on increasing revenue and decreasing operating expenses to improve earnings.
“Total non-accrual loans decreased more than 34% to $17.5 million, or 3.6% of gross loans, at June 30, 2012 compared to $26.7 million, or 5.8 % of gross loans at June 30, 2011,” Mr. Maher added.
Other real estate owned (OREO) was $1.5 million at June 30, 2012 compared to $3.6 million at June 30, 2011. Only two properties remain in OREO. Non-performing assets, which consist of non-accrual loans and OREO, totaled $19.0 million, or 2.9% of total assets, at June 30, 2012, compared to $30.3 million, or 4.7% of total assets, a year ago.
“The continued improved credit quality of the loan portfolio and favorable recent loss history as it relates to our assessment of the adequacy of the allowance for loan losses resulted in a $1.7 million release from the loan loss reserve during the quarter,” Mr. Maher said. In the second quarter a year ago Patriot recorded a $1.5 million provision. The allowance for loan losses totaled $6.7 million, or 1.36% of gross loans, at June 30, 2012 compared to $11.4 million, or 2.46% of gross loans a year ago.
Balance Sheet Review
Total assets of $644.3 million at June 30, 2012 were relatively flat compared to $648.2 million at June 30, 2011. Net loans increased to $483.9 million at June 30, 2012, compared to $452.0 million a year ago. At quarter end the loan pipeline totaled $108.2 million, up from $83.5 million at June 30, 2011, which reflects an increasing focus on new loan production, which is targeted to deploy excess liquidity and build fee income.
Total deposits were $522.1 million at June 30, 2012, compared to $524.5 million at June 30 of the prior year. Interest bearing deposits decreased $12.5 million but non-interest bearing deposits increased $10.1 million, or 16.4%, from $61.6 million at June 30, 2011 to $71.7 million at June 30, 2012. This increase reflects Patriot’s planned strategy to reduce higher cost deposits with core transaction accounts.
Income Statement Review
Patriot’s second quarter net interest income was $4.4 million, compared to $5.0 million in the second quarter a year ago. Interest income decreased 12.0% compared to the second quarter a year ago as a result of the lower interest rate environment, excess liquidity due to the loan sale in the first quarter of 2012 and the overall loan mix. Interest expense decreased 9.3% compared to the second quarter a year ago due to the reduction in interest bearing deposits and the increase in non-interest bearing deposits. In the first six months of 2012, net interest income was $9.5 million compared to $10.0 million in the first six months of 2011, primarily as the result of the overall lower rate environment and the balance sheet mix.
The net interest margin in the second quarter of 2012 was 2.81%, compared to 3.16% in the second quarter a year ago, due to a high level of balance sheet liquidity resulting from the first quarter loan sale and overall lower rates. In the first six months of the year the net interest margin was 3.03% compared to 3.00% in the first six months of 2011.
Second quarter non-interest income was $455,000 compared to $710,000 for the second quarter of 2011. Second quarter 2011 non-interest income included $111,000 in interest received from federal tax refunds and $80,000 from the gain on sale of loans. In the first six months of the year, non-interest income was $1.2 million compared to $1.3 million in the same period a year ago.
Non-interest expenses declined 45.8% to $6.2 million in the second quarter of 2012, compared to $11.4 million in the second quarter a year ago. Second quarter 2011 non-interest expenses included $3.0 million of restructuring charges associated with management’s turnaround plan. Excluding these charges, non-interest expense in the second quarter of 2011 would have been approximately $8.4 million, or 35% higher than the current quarter’s expense level. Year-to-date, non-interest expenses decreased 34.5% to $12.4 million compared to $19.0 million in the same period a year earlier.
“In the first quarter of 2012 we implemented staff reductions and during the second quarter we closed our West End branch. Three additional branches were designated for closure in the second quarter, which will be effective by September 30, 2012. These events will significantly reduce expenses by year end,” said Mr. Maher. Salary and employee benefits were down $464,000, or 14.5%, and occupancy and equipment expenses were down $157,000, or 12.1%, compared to the second quarter a year ago. In addition, OREO expenses were $758,000 lower due to reduced operating costs relating to fewer properties being managed.
The capital ratios at June 30, 2012 for Patriot National Bancorp, Inc. and Patriot National Bank were:
|Total Capital (to Risk Weighted Assets)||15.85||%||15.43||%||10.00||%|
|Tier 1 Capital (to Risk Weighted Assets)||14.60||%||14.18||%||6.00||%|
|Tier 1 Capital (to Average Assets)||9.13||%||8.88||%||5.00||%|
In addition, Patriot’s tangible common equity ratio was 8.03% at the end of June.
About the Company
Patriot National Bank is headquartered in Stamford, Connecticut and currently has 14 full service branches, 12 in Connecticut and two 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||Six Months Ended|
|Dollars in thousands, except per share data||Jun. 30, 2012||Mar. 31, 2012||Jun. 30, 2011||Jun. 30, 2012||Jun. 30, 2011|
|Interest and dividend income|
|Interest and fees on loans||$||5,811||$||6,666||$||6,539||$||12,477||$||13,495|
|Interest on investment securities||427||477||487||904||761|
|Dividends on investment securities||32||33||81||65||151|
|Interest on federal funds sold||-||-||2||-||6|
|Other interest income||40||11||58||51||120|
|Total interest and dividend income||6,310||7,187||7,167||13,497||14,533|
|Interest on deposits||1,421||1,517||1,554||2,938||3,419|
|Interest on Federal Home Loan Bank borrowings||354||357||424||712||842|
|Interest on subordinated debt||75||76||71||151||142|
|Interest on other borrowings||77||77||77||154||153|
|Total interest expense||1,927||2,027||2,126||3,955||4,556|
|Net interest income||4,383||5,160||5,041||9,542||9,977|
|Provision for loan losses||(1,713||)||(845||)||1,483||(2,559||)||8,464|
Net interest income after provision for loan losses
|Mortgage brokerage referral fees||22||12||1||34||14|
|Loan application, inspection and processing fees||16||15||24||31||41|
|Deposit fees and service charges||227||228||248||456||529|
|Gain on sale of loans||-||264||80||264||80|
|Loss on sale of investment securities||-||(8||)||-||(8||)||-|
|Earnings on cash surrender value of life insurance||120||143||153||263||321|
|Total non-interest income||455||750||710||1,205||1,293|
|Salaries and benefits||2,725||2,891||3,189||5,616||6,404|
|Occupancy and equipment expense||1,135||1,124||1,292||2,259||2,646|
|Professional services and other outside services||854||615||1,235||1,469||2,117|
|Advertising and promotional expenses||8||18||272||26||430|
|Loan administration and processing expenses||46||8||48||54||85|
|Other real estate operations||16||(150||)||774||(134||)||1,045|
|Material and communications||133||131||164||264||364|
|Restructuring charges and asset disposals||127||368||2,986||495||2,986|
|Other operating expenses||245||279||290||524||523|
|Total non-interest expenses||6,206||6,209||11,444||12,415||18,963|
|Income (loss) before income taxes||345||546||(7,175||)||891||(16,157||)|
|Provision for income taxes||-||-||-||-||-|
|Net income (loss)||$||345||$||546||$||(7,175||)||$||891||$||(16,157||)|
|Basic and diluted income (loss) per share||$||0.01||$||0.01||$||(0.19||)||$||0.02||$||(0.42||)|
|(Dollars in thousands, except per share data)||Jun. 30, 2012||Mar. 31, 2012||Jun. 30, 2011|
|Cash and due from banks||$||62,177||$||103,264||$||59,002|
|Federal funds sold||-||-||5,000|
|Total cash and cash equivalents||62,887||103,974||64,549|
|Securities-available for sale||56,343||58,592||88,926|
|FRB & FHLB stock||6,063||6,036||6,419|
|Allowance for loan losses||(6,674||)||(8,461||)||(11,400||)|
|Accrued interest and dividend receivable||2,289||2,243||2,330|
|Premise and equipment, net||4,713||4,882||4,234|
|Cash surrender value of life insurance||21,248||21,127||20,670|
|Other real estate owned||1,518||1,462||3,611|
Deferred tax asset, net(1)
Liabilities and Shareholders' Equity
|Non interest bearing deposits||$||71,722||$||59,049||$||61,586|
|Interest bearing deposits||450,373||480,541||462,919|
|FHLB advances and repurchase agreements||57,000||67,000||57,000|
|Accrued expenses and other liabilities||5,165||5,052||7,188|
|Additional paid-in capital||105,183||105,130||105,050|
|Accumulated other comprehensive income||319||197||1,548|
|Total shareholders' equity||51,759||51,238||51,265|
|Total liabilities and shareholders' equity||$||644,267||$||671,128||$||648,206|
|(1)||Includes the deferred tax asset and a full valuation allowance of $13.5 million, $14.1 million and $16.4 million respectively.|
Financial Ratios and Other Data
|(Dollars in thousands, except per share data)|
|(Unaudited)||Jun. 30,||Mar. 31,||Jun. 30,|
|Other real estate owned||1,518||1,462||3,611|
|Total nonperforming assets||$||18,970||$||17,007||$||30,344|
|Nonaccrual loans / portfolio loans||3.56||%||3.27||%||5.77||%|
|Nonperforming assets / assets||2.94||%||2.53||%||4.68||%|
|Allowance for loan losses||$||6,674||$||8,461||$||11,400|
|Allowance for loan losses / portfolio loans||1.36||%||1.78||%||2.46||%|
|Allowance / nonaccrual loans||38.24||%||54.43||%||42.64||%|
|Gross loan charge-offs for the quarter||$||91||$||102||$||3,034|
|Gross loan recoveries for the quarter||$||17||$||24||$||743|
|Net loan charge-offs for the quarter||$||74||$||78||$||2,291|
Book value per share(1)
Tangible book value per share(2)
Book value per share represents shareholders’ equity divided by outstanding shares.
Tangible book value per share represents shareholders’ equity less intangible assets divided by outstanding shares.
Christopher D. Maher
President & CEO
Robert F. O’Connell
Sr. EVP & CFO
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