Patriot National Bancorp, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; balance-sheet comparisons are with December 31, 2023 unless noted. Patriot operates Patriot Bank, N.A., with lending concentrated in Connecticut, Westchester County and New York City, alongside a Digital Payments business.
Key financial results
| Metric | Q1 2024 | Comparable / prior date |
|---|---|---|
| Net loss; loss per share | $0.3 million; $0.08 | Q1 2023: $0.7 million; $0.18 |
| Net interest income | $5.4 million | Q1 2023: $8.0 million |
| Net interest margin | 2.20% | Q1 2023: 3.29% |
| Provision for credit losses | $0.7 million | Q1 2023: $2.2 million on the income statement |
| Noninterest income / expense | $2.2 million / $7.2 million | Q1 2023: $0.8 million / $7.6 million |
| Operating cash flow | $1.8 million provided | Q1 2023: $0.2 million used |
| Total assets / shareholders’ equity | $1.07 billion / $43.6 million | December 31, 2023: $1.09 billion / $44.4 million |
Financial condition and material changes
- Loans and balance-sheet strategy: Gross loans fell $38.5 million to $810.3 million. Management said it is restricting loan growth and allowing loans to pay down to reduce the balance sheet and strengthen capital ratios. Net loans were $796.5 million.
- Funding and liquidity: Deposits rose 2.3% to $859.7 million. Brokered deposits increased 66.7% to $67.6 million; uninsured deposits fell to $266.0 million, or 30.94% of deposits, from $334.3 million, or 39.78%. Cash, cash equivalents and restricted cash rose to $92.8 million. Management reported balance-sheet liquidity of 9.4% of assets and liquidity including available off-balance-sheet sources of 21.9%, above its 10% policy minimum.
- Borrowings: Total borrowings were $161.1 million, down from $201.1 million. FHLB advances declined $40 million to $61 million; the Bank also had $70 million borrowed under the Federal Reserve’s Bank Term Funding Program (BTFP). The BTFP stopped accepting new advances after March 11, 2024. The filing reports $98.1 million of unused FHLB borrowing capacity.
- Credit quality: The allowance for loan losses was $13.8 million, or 1.70% of gross loans, versus $15.9 million, or 1.88%, at year-end. Q1 net charge-offs were $2.8 million, including $2.2 million net charge-offs in consumer and other loans. Nonaccrual loans rose to $19.1 million from $18.1 million; nonperforming assets were $22.4 million, or 2.09% of assets, versus $21.3 million, or 1.95%.
- Capital: Patriot Bank’s total capital, Tier 1, CET1 and leverage ratios were 11.26%, 10.40%, 10.40% and 8.55%, respectively. The company holding-company ratios were 9.95%, 7.94%, 7.03% and 6.53%. The filing’s “well capitalized” designation applies to the Bank, not the holding company.
- Securities and equity: Available-for-sale securities were $87.6 million at fair value, with $21.4 million of gross unrealized losses. The company reported a $0.5 million after-tax unrealized securities loss in Q1; shareholders’ equity decreased $0.7 million overall.
Performance drivers, outlook and risks
- Net interest income fell $2.6 million year over year. Interest income increased modestly, but interest expense rose $3.0 million, chiefly as deposit costs increased; management also cited lower loan balances and higher wholesale funding costs. Average deposit cost rose to 3.59% from 2.32%.
- Noninterest income increased to $2.2 million, mainly due to higher Digital Payments income. Digital Payments income was $964,000 versus $361,000 in Q1 2023.
- Net loss improved year over year, reflecting lower credit-loss provision and higher noninterest income, partly offset by lower net interest income. The quarter included $3.1 million in charge-offs and a $0.7 million provision on unfunded commitments.
- No quantified earnings or balance-sheet guidance is provided. Management’s stated near-term balance-sheet direction is to limit loan growth, reduce loans through paydowns, and bolster liquidity and capital.
- Key disclosed risks include interest-rate and repricing changes, deposit costs and potential deposit runoff, access to cost-effective funding, real-estate values and regional economic conditions, loan delinquencies and losses, and regulatory or competitive changes. Management cautions that Q1 results are not necessarily indicative of full-year results.
- Management reported effective disclosure controls and no material change in internal control over financial reporting. No material subsequent events or material pending legal proceedings were reported.
Important facts for investors to verify
- Whether deposit pricing, brokered funding and the BTFP borrowing affect funding costs, liquidity and refinancing needs in coming quarters.
- Whether the loan contraction and capital-building strategy can improve capital ratios without further weakening recurring earnings.
- Performance of nonaccrual and criticized loans, especially commercial real estate and construction exposures, and the adequacy of the allowance after substantial consumer-loan charge-offs.
- Whether Digital Payments income growth is durable and how it contributes to profitability after funding and operating costs.
- The potential effect of the securities portfolio’s unrealized losses and interest-rate changes on equity, liquidity and net interest income.