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Patriot National Bancorp, Inc. (Nasdaq:PNBK) reported net income of $525,000 or $0.01 per diluted share for the second quarter of 2014.
The results compare to net income of $319,000 in the first quarter of this year, (a 65% increase) and compared to a net loss of $3,912,000 in the second quarter of 2013.
Excluding a prior period interest expense adjustment of $117,000 in the first quarter of 2014, earnings improved by 20% in the second quarter of 2014 over the first quarter.
Kenneth T. Neilson, President and CEO commented “Patriot’s second quarter results continue to reflect improvement in the company’s operations including margin, other income, expense reduction, and new business generation. We are pleased with our results to date and look forward to continued improvement and growth.”
Michael Carrazza, Chairman, stated, “Based on our continuing results and earnings expectations, we believe Patriot, in the near future, will no longer require a valuation allowance on its deferred tax assets which could add over $17 million to capital and increase book value by approximately 45 cents per share.”
Interest income in the second quarter of 2014 decreased by 0.5% from the first quarter and by 8.5% from the second quarter of last year. The decreases were due to lower loan balances outstanding and the low interest rate environment.
Interest expense in the second quarter of 2014 decreased by 4.1% from the first quarter of 2014 (excluding the prior period interest adjustment) and by 43.5% from the second quarter of last year. The decrease from the first quarter is due to the continuation of our deposit rate strategy and the decrease from last year is due to the deposit strategy along with the repayment of high cost borrowings.
Net interest income was $4,134,000 for the second quarter of 2014, a 3.1% increase compared with $4,009,000 for the first quarter of 2014 and a 2.5% increase from the $4,033,000 for the second quarter of last year. The net interest margin was 3.31%, in the second quarter of 2014 compared to 3.25%, in the first quarter of 2014 and 3.00% in the second quarter of 2013.
Non-interest income was $623,000 in the second quarter of 2014 compared to $593,000 in the first quarter of 2014, an increase of 5.0%. Compared to the second quarter of last year, non-interest income decreased by 19.0% primarily due to lower mortgage banking fees after closing down the mortgage banking operation mid-year 2013.
Non-interest expense was $4,232,000 in the second quarter of 2014, a 1.2% decrease from the first quarter as a result of continuing expense control initiatives. Non-interest expense was down 51.4% compared to the second quarter of last year and by 24.5% from last year’s second quarter excluding 2013 expense of $2,711,000 for prepayment penalties on borrowings and net restructuring charges of $394,000. Patriot’s efficiency ratio for the second quarter is under 89% and we expect that revenue growth will provide further improvement to this ratio over the remainder of this year.
For the six months ended June 30, 2014, Patriot reported net income of $844,000 ($0.02 basic and diluted income per share), an increase of $6.7 million, compared to net loss of $5.9 million ($0.15 basic and diluted loss per share) for the six months ended June 30, 2013. Results for the quarter and six months ended June 30, 2013 included prepayment penalty fees on borrowings of $2.7 million and net restructuring charges of $394,000. Excluding these expenses, net income at June 30, 2014 increased $1.3 million ($0.03 per share) and $3.6 million ($0.09 per share) from the prior year’s quarter and year-to-date net income, respectively.
At June 30, 2014 total assets were $552 million compared to $562 million at March 31, 2014 and $569 million at June 30, 2013. Loans totaled $408 million at June 30, 2014 compared with $421 million at March 31, 2014 and $465 million at June 30, 2013. Deposits were $426 million at June 30, 2014 compared with $428 million at March 31, 2014 and $478 million at June 30, 2013. In connection with Patriot’s profit improvement plan, total assets were reduced to ensure maintenance of capital requirements.
Asset quality remains strong with nonperforming assets totaling $13.9 million at June 30, 2014, compared with $10.4 million at March 31, 2014 and compared with $30.4 million at June 30, 2013. At June 30, 2014, the allowance for loan losses represented 1.28% of total loans and 37.5% of nonperforming loans. For the second quarter of 2014, net charge-offs were $266,000 compared with $201,000 in the first quarter of 2014 and $395,000 in the second quarter of 2013.
At June 30, 2014, stockholder’s equity was $43.3 million and book value was $1.11 per share. Patriot’s Leverage Capital Ratio was 9.63% as of June 30, 2014. The Tier I Risk Based Capital Ratio was 12.99% and the Total Risk Based Capital Ratio was 14.24%. These Regulatory Capital Ratios exceed those necessary to be considered a well-capitalized institution under Federal guidelines.
