GlobeNewswire Inc | Aug 25, 2020 09:00AM EDT

August 25, 2020

STAMFORD, Conn., Aug. 25, 2020 (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 a pretax loss of $1.7 million (net loss of $1.3 million), or $0.32 basic and diluted loss per share for the quarter ended June 30, 2020.

The six-month, year-to-date net loss is $2.4 million, or $0.60 per fully diluted share, as compared to a net loss of $1.3 million, or $0.34 per fully diluted shares, during the same period in the prior year. The 2020 results to date, reflect a higher loan loss provision the Bank has put in place as a precaution relating to COVID-19, along with lower net interest income and non-interest income, due to the lower market interest rates.

The Bank continues to provide CARES Act payment relief on loan balances, now totaling approximately $223.2 million - predominately commercial real estate loans and commercial industrial loans.

In the second quarter of 2020, total assets decreased 2% to $979.5 million, as of June 30, 2020, as compared to the first quarter of 2020. The Banks Net Loan portfolio decreased 3.3% or by $26.5 million, to $781.4 million, while Deposits decreased $20.1 million or 2.5%, to $783.1 million. This decrease in Deposits is reflective of a decline in the use of wholesale brokered deposits.

Excluding that change in brokered deposits, total deposits to the institution actually increased $43 million (5%) for the quarter, reflecting success in Patriots new on-line national deposit initiative, which grew by $35 million during the second quarter of 2020, along with a simultaneous growth in regional retail branch banking deposits. This is all part of a strategic balance sheet repositioning designed to downsize and strengthen the Banks capital ratios and position the Company for a return to profitability.

As far as the impact of COVID-19, Patriot has kept all branches open with customers re-directed to non-contact ATMs and Live Banker ATMs as on-line banking services continue to be optimized with expanded customer call center staffing. Its multi-year investment to enhance customers technological banking experience has been well tested during the pandemic, as from January 1 to June 30, 2020, Patriots mobile deposits were up 163%, use of its mobile app banking was up 31%, monthly average log-ins rose 16% and the number of customers completely new to digital banking rose by 26%.

Michael Carrazza, Patriots Chairman stated The past six months have been incredibly challenging to U.S. businesses and consumers, but we have capably managed through the pandemic, while strengthening our valued customer base. With strategic adjustments to our balance sheet, we believe we have initiated steps to bolster our capital position to bridge us through what we hope is the tail end of the pandemic and back to profitability. In addition, we have made numerous operating and staff changes to strengthen Patriots management team and improve operating efficiency. The latest change includes the recruitment of a seasoned community bank executive, Robert Russell, to lead Patriot as its new President/CEO. We have also enhanced our funding base through the closing of a $52 million pre-paid debit card transaction that was completed in mid-July. The benefits of this transaction will begin being reflected in the 3rd quarter.

Patriot President & CEO Robert Russell added I believe the Bank has established the right foundation for future growth and enhanced profitability. Patriots focus on organic growth of customer deposits is making an impact at the local branch level and our national on-line deposit gathering has also seen success. The Bank has invested in building strong customer relationships, a well-developed technology platform and intends to continue to leverage those activities. We received approval to compete in the pre-paid card business during July and we completed a transaction resulting in over $50 million in prepaid deposits which will have a positive impact on the Banks cost of funds. Patriot is committed to growing the SBA division and is focused on small business and commercial lending. We believe that the decisions we are making today as an organization will position the Bank for the future, especially as the local and national economies recover from the impact of the pandemic.

Financial Results:As of June 30, 2020, total assets were $979.5 million, as compared to $999.6 million at March 31, 2020 and $977.8 million at June 30, 2019. Net loans receivable totaled $781.4 million, as compared to $807.9 million at March 31, 2020 and $803.3 million at June 30, 2019. Deposits totaled $783.1 million at June 30, 2020, as compared to $803.2 million at March 31, 2020 and $767.6 million at June 30, 2019.

The decline in loans and total assets represents the intentional downsizing of the Banks balance sheet as the current economic uncertainties associated with the COVID-19 pandemic are assessed. The Company continues to originate loans, but at a slower pace than in the past, and has seen loan maturities and loan payoffs outpace loan originations during the first six months of 2020.

While total deposits declined $20 million during the quarter, this solely reflects a decline in wholesale brokered deposits, which declined $64 million during the quarter due in part to the decline in loan volumes. Excluding the change in brokered deposits, total deposits increased $43 million (5%) for the quarter, reflecting the success of the Banks on-line national deposit initiative, which grew by $35 million during the second quarter, along with a growth in retail branch banking deposits.

Net interest income was $5.7 million in the second quarter of 2020, a decrease of 10.1% from the first quarter of 2020, and a decline of 14.1% from the second quarter of 2019. The year-to-date net interest income was $12.0 million, a decrease of 7.5% over the year-to-date June 2019.

Net interest margin was 2.46% in the second quarter of 2020, as compared to 2.72% in the first quarter of 2020 and 2.96% in the second quarter of 2019.

This decline reflects the impact of lower interest rates connected with the 1.50% decline in market interest rates in late first quarter of 2020 connected to the COVID-19 pandemic. Asset yields were impacted by those changes in the second quarter while retail and brokered deposit rates have declined at a slower pace. Compared to the prior year, net interest income was also negatively impacted by an increase in the rate paid on FHLB borrowings associated with the conversion of certain borrowings from a low variable teaser rate to higher fixed rate.

The provision for loan losses in the second quarter of 2020 was $910,000, as compared to $804,000 in the first quarter of 2020 and $2.9 million in the second quarter of 2019. The provision for loan losses in 2020 was primarily due to loan charge-offs and an additional reserve attributable to the COVID-19 pandemic. The provision for loan losses in the second quarter of 2019 was primarily due to a large provision booked in the quarter associated with a single commercial loan charge off. The Allowance for Loan losses now totals 1.41% of total loans compared with 1.33% in the first quarter of 2020 and 1.04% a year ago.

Noninterest income was $389,000 in the second quarter of 2020, 7.6% lower than the first quarter of 2020, and 48.7% lower than the second quarter of 2019. The year-to-date non-interest income was $810,000, a 46.1% decrease over year-to-date non-interest income as of June 30, 2019. The decrease in noninterest income was primarily due to lower realized gains on the sale of SBA loans associated with delays in executing the sale of those loans.

Noninterest expense was $6.9 million in the second quarter of 2020, 6.5% lower than the first quarter of 2020, and 2.4% higher than the second quarter of 2019. The year-to-date non-interest expense was $14.3 million, 8.2% higher than the prior year. The increase in non-interest expense was primarily driven by an increase of $714,000 in salaries and benefits reflecting the build-up of staffing in the SBA business during the second half of 2019 and lower loan origination cost deferrals due to the lower volume of loan originations.

The income tax benefit was $446,000 in the second quarter of 2020, representing an effective tax rate of 26%.

As of June 30, 2020, shareholders equity was $64.2 million, as compared to $64.6 million at March 31, 2020. Patriots book value per share was $16.30 at June 30, 2020, as compared to $16.43 at March 31, 2020. The Banks capital ratios continue to be strong, maintaining its well capitalized regulatory status. As of June 30, 2020, the Banks Tier 1 leverage ratio was 9.03%, Tier 1 risk-based capital ratio was 10.52% and total risk-based capital ratio was 11.77%.

Patriot suspended its quarterly dividend and expects to resume when the current economic uncertainties are settled.

Patriot 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 Jacksonville and Stamford, along with a Rhode Island operations center.

About the Company:Founded in 1994, and now celebrating its 26th 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. Patriot operates with full service branches in Connecticut and New York and provides lending products and services nationally. Patriots 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. An emphasis on building strong client relationships and community involvement are cornerstones of our philosophy as we seek to maximize shareholder value.

Safe Harbor Statement Under Private Securities Litigation Reform Act of 1995:Certain statements contained in Bancorps public statements, including this one, may be forward looking and subject to a variety of risks and uncertainties. These factors include, but are not limited to: (1) changes in prevailing interest rates which would affect the interest earned on the Companys interest earning assets and the interest paid on its interest bearing liabilities; (2) the timing of re-pricing of the Companys 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 Companys market areas, and the consequent effect on the quality of the Companys 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 and other such factors, including risk factors, as may be described in the Companys other filings with the Securities and Exchange Commission (the SEC); (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; and (25) our compensation expense associated with equity allocated or awarded to our employees.

Contacts: Patriot Bank, N.A. Joseph Perillo Robert Russell Michael Carrazza900 Bedford Street Chief Financial Officer President & CEO ChairmanStamford, CT 06901 203-252-5954 203-252-5939 203-251-8230www.BankPatriot.com

PATRIOT NATIONAL BANCORP, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands, except share June 30, March 31, June 30,data) 2020 2020 2019 Assets Cash and due from banks: Noninterest bearing deposits $ 1,616 $ 1,806 $ 5,578 and cashInterest bearing deposits 64,280 50,350 45,538 Total cash and cash 65,896 52,156 51,116 equivalentsInvestment securities: Available-for-sale securities, 46,624 44,830 43,839 at fair valueOther investments, at cost 4,450 4,450 4,963 Total investment 51,074 49,280 48,802 securities Federal Reserve Bank stock, at 2,897 2,897 2,922 costFederal Home Loan Bank stock, 4,503 4,477 4,513 at cost Gross loans receivable 792,500 818,841 10,819 Allowance for loan losses (11,148 ) (10,916 ) 792,500 Net loans receivable 781,352 807,925 803,319 SBA loans held for sale 7,579 17,996 4,283 Accrued interest and dividends 5,624 3,801 3,678 receivablePremises and equipment, net 33,962 34,312 35,249 Other real estate owned 2,400 2,400 1,954 Deferred tax asset, net 12,180 11,989 11,132 Goodwill 1,107 1,107 1,107 Core deposit intangible, net 586 605 661 Other assets 10,384 10,634 9,031 Total assets $ 979,544 $ 999,579 $ 977,767 Liabilities Deposits: Noninterest bearing deposits $ 97,360 $ 83,583 $ 84,295 Interest bearing deposits 685,728 719,631 683,271 Total deposits 783,088 803,214 767,566 Federal Home Loan Bank and 90,000 90,000 100,000 correspondent bank borrowingsSenior notes, net 11,890 11,871 11,815 Subordinated debt, net 9,767 9,760 9,738 Junior subordinated debt owed 8,106 8,104 8,098 to unconsolidated trust, netNote payable 1,094 1,143 1,291 Advances from borrowers for 3,773 2,637 3,239 taxes and insuranceAccrued expenses and other 7,654 8,227 7,730 liabilities Total liabilities 915,372 934,956 909,477 Commitments and Contingencies - - - Shareholders' equity Preferred stock - - - Common stock 106,251 106,213 106,059 Accumulated deficit (41,123 ) (39,845 ) (37,210 )Accumulated other comprehensive (956 ) (1,745 ) (559 )loss Total shareholders' 64,172 64,623 68,290 equity Total liabilities and $ 979,544 $ 999,579 $ 977,767 shareholders' equity

PATRIOT NATIONAL BANCORP, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended Six Months Ended(In thousands, June 30, March 31, June 30, June 30, June 30,except per share 2020 2020 2019 2020 2019amounts) Interest and Dividend Income Interest and $ 9,111 $ 10,033 $ 10,345 $ 19,144 $ 20,100 fees on loans Interest on investment 378 416 398 794 777 securities Dividends on investment 90 138 114 228 232 securities Other interest 24 135 237 159 570 income Total interest and 9,603 10,722 11,094 20,325 21,679 dividend income Interest Expense Interest on 2,792 3,200 3,533 5,992 6,797 deposits Interest on Federal Home 638 697 426 1,335 865 Loan Bank borrowings Interest on 228 229 228 457 457 senior debt Interest on subordinated 253 268 279 521 568 debt Interest on note payable 5 5 8 10 14 and other Total interest 3,916 4,399 4,474 8,315 8,701 expense Net interest 5,687 6,323 6,620 12,010 12,978 income Provision for Loan 910 804 2,937 1,714 3,102 Losses Net interest income after provision 4,777 5,519 3,683 10,296 9,876 for loan losses Non-interest Income Loan application, 40 53 28 93 42 inspection and processing fees Deposit fees and service 66 114 116 180 243 charges Gains on sale 72 12 296 84 676 of loans Rental income 131 131 192 262 322 Other income 80 111 126 191 221 Total non-interest 389 421 758 810 1,504 income Non-interest Expense Salaries and 3,645 3,861 3,608 7,506 6,792 benefits Occupancy and equipment 921 949 744 1,870 1,661 expenses Data processing 371 390 361 761 731 expenses Professional and other 726 784 803 1,510 1,512 outside services Project 54 94 (15 ) 148 65 expenses, net Advertising and promotional 123 147 77 270 192 expenses Loan administration 36 24 43 60 57 and processing expenses Regulatory 364 440 395 804 710 assessments Insurance 78 70 54 148 95 expenses Communications, stationary and 133 120 131 253 265 supplies Other operating 439 492 527 931 1,096 expenses Total non-interest 6,890 7,371 6,728 14,261 13,176 expense Loss before (1,724 ) (1,431 ) (2,287 ) (3,155 ) (1,796 ) income taxes Benefit for Income (446 ) (359 ) (632 ) (805 ) (464 )Taxes Net loss $ (1,278 ) $ (1,072 ) $ (1,655 ) $ (2,350 ) $ (1,332 ) Basic loss $ (0.32 ) $ (0.27 ) $ (0.42 ) $ (0.60 ) $ (0.34 ) per share Diluted loss $ (0.32 ) $ (0.27 ) $ (0.42 ) $ (0.60 ) $ (0.34 ) per share

FINANCIAL RATIOS AND OTHER DATA Three Months Ended Six Months Ended (Dollars in June 30, 2020 March 31, 2020 June 30, 2019 June 30, 2020 June 30, 2019 thousands) Quarterly Performance Data: Net loss $ (1,279 ) $ (1,072 ) $ (1,655 ) $ (2,350 ) $ (1,332 ) Return on Average -0.52% -0.44% -0.69% -0.48% -0.28% Assets Return on Average -7.89% -6.37% -9.44% -7.15% -3.82% Equity Net Interest Margin 2.46% 2.72% 2.96% 2.60% 2.92% Efficiency Ratio 113.41% 109.28% 91.19% 111.25% 90.98% Efficiency Ratio excluding project 112.51% 107.90% 91.38% 110.09% 90.53% costs % (decrease) -3.22% 0.82% 2.95% -2.42 % 4.02% increase loans % (decrease) -2.51% 4.38% 1.96% 1.76% 3.27% increase deposits Asset Quality: Nonaccrual loans $ 21,593 $ 16,450 $ 19,405 $ 21,593 $ 19,405 Other real estate $ 2,400 $ 2,400 $ 1,954 $ 2,400 $ 1,954 owned Total nonperforming $ 23,993 $ 18,850 $ 21,359 $ 23,993 $ 21,359 assets Nonaccrual loans / 2.72% 2.01% 2.39% 2.72% 2.39% loans Nonperforming assets 2.45% 1.89% 2.18% 2.45% 2.18% / assets Allowance for loan $ 11,148 $ 10,916 $ 8,458 $ 11,148 $ 8,458 losses Valuation reserve $ 485 $ 1,100 $ 1,416 $ 485 $ 1,416 Allowance for loan losses $ 11,633 $ 12,016 $ 9,874 $ 11,633 $ 9,874 with valuation reserve Allowance for loan 1.41% 1.33% 1.04% 1.41% 1.04% losses / loans Allowance / 51.63% 66.36% 43.59% 51.63% 43.59% nonaccrual loans Allowance for loan losses and valuation 1.47% 1.47% 1.21% 1.47% 1.21% reserve / loans Allowance for loan losses and valuation 53.87% 73.05% 50.88% 53.87% 50.88% reserve / nonaccrual loans Gross loan $ 691 $ 44 $ 2,307 $ 735 $ 2,307 charge-offs Gross loan $ (13 ) $ (41 ) $ (5 ) $ (54 ) $ (54 ) recoveries Net loan charge-offs $ 678 $ 3 $ 2,302 $ 681 $ 2,253 Capital Data and Capital Ratios Book value per share $ 16.30 $ 16.43 $ 17.41 $ 16.30 $ 17.41 (1) Shares outstanding 3,935,841 3,932,841 3,922,610 3,935,841 3,922,610 Bank Capital Ratios: Leverage Ratio 9.03% 9.16% 9.61% 9.03% 9.61% Tier 1 Capital 10.52% 10.51% 10.66% 10.52% 10.66% Total Risk Based 11.77% 11.76% 11.65% 11.77% 11.65% Capital (1) Book value per share represents shareholders' equity divided by outstanding shares.