Patriot National Bancorp, Inc. (PNBK): Navigating Challenging Times with Resilience

Published on September 24, 2024 | Ticker: PNBK

Patriot National Bancorp, Inc. (PNBK) is a Connecticut-based bank holding company that operates through its wholly-owned subsidiary, Patriot Bank, N.A. The company has weathered the recent economic turbulence, demonstrating resilience in its financial performance.

Financials

For the fiscal year ended December 31, 2023, Patriot National Bancorp reported annual net income of -$4,179,000, annual revenue of $64,962,000, annual operating cash flow of $4,672,000, and annual free cash flow of $4,260,000. While the company faced some headwinds, it has continued to execute its strategic initiatives to position itself for long-term success.

In the first quarter of 2024, Patriot National Bancorp reported a net loss of $299,000, or $0.08 per basic and diluted share, compared to a net loss of $699,000, or $0.18 per basic and diluted share, in the same period of the prior year. The decrease in net income was primarily attributable to a decline in net interest income, which fell by $2.6 million, or 32.5%, year-over-year. This was driven by a lower loan balance and a narrower net interest margin due to higher deposit costs.

The company's total assets decreased by $20.2 million, or 1.8%, to $1.07 billion as of March 31, 2024, compared to $1.09 billion at the end of 2023. This decline was primarily due to a $38.5 million, or 4.5%, decrease in the loan portfolio, as the company continued its strategy of restricting loan growth and allowing loans to pay down in order to strengthen its capital ratios.

Loan Portfolio Composition

Patriot National Bancorp's loan portfolio composition as of March 31, 2024, was as follows: Commercial Real Estate (57.1%), Residential Real Estate (12.7%), Commercial and Industrial (18.3%), Consumer and Other (11.1%), Construction (0.5%), and Construction to Permanent - CRE (0.3%). The company's net loan to deposit ratio was 92.7% as of March 31, 2024, down from 99.1% at the end of 2023, reflecting the reduction in loan balances.

Credit Quality

The company's allowance for credit losses on loans decreased from $15.9 million, or 1.88% of gross loans, at the end of 2023, to $13.8 million, or 1.70% of gross loans, as of March 31, 2024. This decrease was mainly due to the reduction in loan balances and the recognition of charge-offs on the unsecured consumer loan portfolio. Management believes the $13.8 million allowance is adequate to cover existing losses in the loan portfolio.

Nonperforming assets, which include nonaccrual loans and other real estate owned, increased from $21.3 million, or 1.95% of total assets, at the end of 2023, to $22.4 million, or 2.09% of total assets, as of March 31, 2024. The increase in nonperforming assets was primarily driven by a rise in nonaccrual loans in the Commercial Real Estate and Construction to Permanent - CRE portfolios.

Capital and Liquidity

Patriot National Bancorp's capital ratios remained strong as of March 31, 2024, with a Total Capital ratio of 9.95%, a Tier 1 Capital ratio of 7.94%, a Common Equity Tier 1 Capital ratio of 7.03%, and a Tier 1 Leverage ratio of 6.53%. These ratios were well above the regulatory requirements for a "well-capitalized" institution.

The company's liquidity position also remained robust, with balance sheet liquidity at 9.4% of total assets and readily available off-balance sheet funding sources bringing total liquidity to 21.9% of total assets as of March 31, 2024. This liquidity position provides the company with the flexibility to manage its operations and pursue strategic initiatives.

Funding

In terms of funding, Patriot National Bancorp's deposit base increased by $19.4 million, or 2.3%, to $859.7 million as of March 31, 2024, compared to $840.3 million at the end of 2023. The increase was primarily driven by a $27.0 million, or 66.7%, rise in brokered deposits, which offset declines in other deposit categories. The company's cost of deposits increased from 2.32% in the first quarter of 2023 to 3.59% in the first quarter of 2024, reflecting the higher interest rate environment.

Borrowings, which include FHLB advances, FRB borrowings, senior notes, subordinated debt, and a note payable, decreased from $201.1 million at the end of 2023 to $161.1 million as of March 31, 2024. This reduction in borrowings was part of the company's strategy to strengthen its balance sheet and reduce its reliance on wholesale funding sources.

Non-Interest Income and Expense

Patriot National Bancorp's non-interest income increased by $1.4 million, or 169.3%, to $2.2 million in the first quarter of 2024, compared to $835,000 in the same period of the prior year. This increase was primarily attributable to higher income from the company's Digital Payments division. Non-interest expense decreased by $358,000, or 4.7%, to $7.2 million in the first quarter of 2024, compared to $7.6 million in the first quarter of 2023.

Outlook

The company did not provide any specific guidance or outlook for the remainder of 2024. However, management has indicated that it will continue to focus on balance sheet optimization, cost management, and strategic initiatives to enhance the company's long-term profitability and shareholder value.

Conclusion

In conclusion, Patriot National Bancorp has navigated the challenging economic environment with resilience, as evidenced by its strong capital position, liquidity, and strategic initiatives. While the company faced some headwinds in the first quarter of 2024, resulting in a net loss, it remains committed to executing its long-term growth plans and positioning itself for future success.

You may be interested in...

The Bancorp, Inc. (TBBK): Powering the Fintech Ecosystem with Diversified Specialties

The Bancorp, Inc. (TBBK) is a diversified financial services company that has carved out a unique niche in the banking industry. With a focus on specialty finance and payments-oriented businesses, The Bancorp has built a risk-resilient balance sheet and a consistently profitable operating model.

The First Bancorp (NASDAQ:FNLC): A Resilient Community Bank Navigating Challenges and Opportunities

The origins of The First Bancorp can be traced back to 1887, when the company was founded. Over the decades, the bank has weathered numerous economic and industry challenges, adapting and evolving to meet the changing needs of its customers. In 1985, the bank held its initial public offering and was listed on the NASDAQ exchange under the ticker symbol FNLC. The company's resilience was demonstrated during the dot-com bubble in the early 2000s and the 2008 financial crisis, as it maintained its focus on serving its local community and building a strong balance sheet.

Valley National Bancorp (VLY): Navigating the Path to Sustained Profitability

Valley National Bancorp, a diversified financial services company, has a storied history dating back to its establishment in 1927. Over the decades, the company has weathered economic cycles, technological advancements, and regulatory changes, emerging as a prominent player in the regional banking landscape. As the company navigates the current market environment, it remains focused on enhancing its operational efficiency, bolstering its balance sheet, and positioning itself for long-term success.

Patriot National Bancorp, Inc. (PNBK): Navigating Challenges and Charting a Path to Recovery

Business Overview Patriot National Bancorp, Inc. (PNBK) is a financial institution with a rich history that has weathered various storms over the years. The company is poised to emerge stronger from its recent challenges.

Pioneer Bancorp, Inc. (PBFS): A Legacy of Community Banking Excellence

Pioneer Bancorp, Inc. (PBFS) is a leading community bank that has been serving the Capital Region of New York State for over a century. With a rich history dating back to 1889, the company has evolved and adapted to the changing financial landscape, positioning itself as a trusted partner for individuals, businesses, and municipalities alike.