PATRIOT NATIONAL BANCORP INC
For the period ended Sep 30, 2024. Filed Nov 19, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 19, 2024
PNBK$0.84+2.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-09.
0001628280-24-036436
Item 2. : Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-19.
0001628280-24-048517
Item 2. : Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 141 previous paragraphs and 167 current paragraphs.
82 unchanged; 46 reworded; 38 added; 12 removed; 1 previous and 1 current paragraphs rearranged.
Tables are not compared: 10 previous and 14 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (38)
Current report
(27)our ability to meet regulatory capital requirements.
Current report
The following table provides the composition of the commercial real estate loan portfolio segment as of September 30, 2024 and December 31, 2023:
Current report
The following table provides the commercial real estate loan portfolio segment by geographic concentrations as of September 30, 2024 and December 31, 2023:
Current report
(1) Outside Market consists of loans in all other states, none of which are greater than 5% of the total.
Current report
Allowance for Credit Losses ("ACL") on Loans
Current report
For the three months ended September 30, 2024, net charge-offs decreased $2.1 million to $1.1 million, with a net charge-offs to average loans ratio of 0.56%, compared to $3.2 million and 1.40% for the three months ended September 30, 2023.
Current report
For the nine months ended September 30, 2024, net charge-offs declined $1.4 million to $5.8 million, with a net charge-offs to average loans ratio of 0.96% , down from $7.2 million and 1.07% for the nine months ended September 30, 2023.
Current report
The reduction in net charge-offs for both three and nine months ended September 30, 2024 was primary driven by a $1.7 million decrease in charge-offs related to purchased unsecured consumer loans as the portfolio balances have declined.
Current report
The average loan balance decreased by $137.4 million, from $921.2 million for the three months ended September 30, 2023, to $783.8 million for the three months ended September 30, 2024. For the nine-month period, the average loan balance decreased $89.4 million, from $899.5 million in 2023 to $810.1 million in 2024. This decrease in average loan balance for the three and nine months ended September 30, 2024, reflects the Company's continued approach of limiting loan growth and allowing loans to pay down to strengthen capital ratios as the balance sheet is reduced.
Current report
As of September 30, 2024 and September 30, 2023, the ACL was $15.0 million and $25.7 million, respectively. The decrease was due to significant charge-offs of reserved CRE and consumer loans after September 30, 2023, which also impacted the ACL to loans ratio of 1.98%, compared to an ACL of $25.7 million and an ACL to loans ratio of 2.88% as of September 30, 2023.
Current report
The nonaccrual loan was $36.5 million as of September 30, 2024, compared to $30.8 million as of September 30, 2023. The allowance for credit losses to nonaccrual loans ratio was 41.01% as of September 30, 2024, compared to 83.26% as of September 30, 2023. The rate at September 30, 2023 was significantly higher due to reserves on individually evaluated CRE loans that were subsequently charged-off after September 30, 2023.
Current report
As of December 31, 2023, the $18.1 million of non-accrual loans was comprised of 139 borrowers. Of which, 19 loans were individually evaluated, and a specific reserve of $4.2 million was established.
Current report
As of September 30, 2024 the carrying value of the deferred tax assets is nil as there is a full valuation allowance against all of the DTAs. As of December 31, 2023, DTAs were $24.1 million, consisting predominately of Federal and state net operating losses, capitalized costs and allowance for credit losses.
Current report
As of September 30, 2024, Patriot has $54.7 million of net operating losses ("NOLs") available for Connecticut tax purposes at September 30, 2024, which may be used to offset up to 50% of taxable income in any year. The NOLs expire between 2030 and 2044.
Current report
Valuation Allowance against Deferred Tax Assets
Current report
Patriot recognizes income taxes under the asset and liability method. Under this method, deferred tax assets (DTAs) and liabilities (DTLs) are recognized for the estimated tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and loss carry forwards. DTAs and DTLs are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on DTAs and DTLs of a change in tax rates is recognized in income in the period that includes the enactment date.
Current report
In certain circumstances DTAs are subject to reduction by a valuation allowance. A valuation allowance is subject to ongoing adjustment based on changes in circumstances that affect management’s judgment about the realizability of the deferred tax asset. Adjustments to increase or decrease the valuation allowance are charged or credited to the deferred tax component of the income tax provision or benefit.
Current report
The Company recognize deferred tax assets to the extent we believe it is more likely than not the asset will be realized. Quarterly, management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit the use of existing deferred tax assets, including future reversals of existing taxable temporary differences, projected taxable income, tax-planning strategies, carryback potential if permitted, and the results of recent operations. A significant piece of objective negative evidence is the existence of a three or four year cumulative loss. Such objective negative evidence limits the ability of management to consider other subjective evidence, such as projected taxable income. When appropriate, the Company records a valuation allowance to reduce deferred tax assets to the amount that is more likely than not to be realized.
Current report
Based on our assessment performed as of September 30, 2024, we determined that a full valuation allowance was appropriate against the Company’s U.S. federal and state deferred tax assets. This resulted in an increase in our income tax expense of approximately $25.1 million for the nine months ended September 30, 2024. Currently, the key factor on the Company’s assumption of providing 100% valuation allowance was purely based on our historical operating losses. Once we begin generating profits, we will re-evaluate whether providing 100% valuation allowance is appropriate or if we can reassess that allowance. As deferred tax assets associated with NOL carryforwards are already a direct reduction to Tier 1 Capital, the valuation allowance at September 30, 2024 resulted in a reduction of Tier 1 Capital of $19.9 million.
Current report
Non-GAAP Financial Measures:
Current report
In addition to evaluating the Company's financial performance in accordance with U.S. generally accepted accounting principles ("GAAP"), management may evaluate certain non-GAAP financial measures, such as uninsured deposits to total deposits excluding Digital Payments deposits. A computation and reconciliation of non-GAAP financial measures used for these purposes is contained in the accompanying Reconciliation of GAAP to Non-GAAP Measures tables. We believe that by excluding Digital Payments deposits, management can present a view of uninsured deposits that better reflects the Company's traditional deposit base, providing investors with useful information for understanding our uninsured deposits position and financial stability. Digital Payments deposits are analyzed for FDIC insurance at the Program Manager level. Certain accounts are reciprocal deposits through the IntraFi network and therefore the entire deposit balances qualify for FDIC insurance. The remaining deposit balances are aggregated at the Program Manager level, and any deposits exceeding $250,000 are considered uninsured.
Current report
The non-GAAP financial measures should not be considered a substitute for GAAP basis measures and results, and we strongly encourage investors to review our consolidated financial statements in their entirety and not to rely on any single financial measure.
Current report
Reconciliation of GAAP to Non-GAAP Measures (unaudited):
Current report
Interest expense incurred for the three and nine months ended September 30, 2024 were $292,000 and $1.0 million, respectively. Interest expense incurred for the three and nine months ended September 30, 2023 were $748,000 and $3.8 million, respectively.
Current report
For the three and nine months ended September 30, 2024, the Company recognized interest expense of $290,000 and $869,000, respectively. Interest expense incurred for the three and nine months ended September 30, 2023 was $290,000 and $869,000, respectively.
Current report
For the three and nine months ended September 30, 2024, the Company recognized interest expense of $229,000 and $680,000, respectively. Interest expense incurred for the three and nine months ended September 30, 2023 was $229,000 and $556,000, respectively.
Current report
For the three and nine months ended September 30, 2024, the Company recognized interest expense of $1,000 and $4,000, respectively. Interest expense incurred for the three and nine months ended September 30, 2023 was $2,000 and $7,000, respectively.
Current report
Provision for Credit Losses ("PCL")
Current report
For the three months ended September 30, 2024, the Bank has been selectively managing down its credit exposure in certain higher-risk areas. The loan portfolio declined from $889.9 million as of September 30, 2023, to $755.7 million as of September 30, 2024. This reduction in credit exposure has required a lower level of reserves. Consequently, the ACL for loans outstanding decreased from $25.7 million as of September 30, 2023, to $15.0 million as of September 30, 2024.
Current report
One key driver in both the level of outstanding loans and reserves is the pool of purchased unsecured consumer loans, which decreased from $58.3 million as of September 30, 2023 to $26.1 million as of September 30, 2024. Correspondingly, the reserves for this pool also fell, declining from $9.2 million as of September 30, 2023 to $3.8 million as of September 30, 2024. Additionally, as of September 30, 2023, the Bank had obligations of $18.1 million yet to fund under these same pools, against which the bank held $1.1 million of reserves. During the fourth quarter of 2023, the Bank entered into an agreement with the originator and servicer that released the Bank from any obligation for further funding, thereby freeing up the aforementioned $1.1 million of reserves.
Current report
As of September 30, 2023, the ACL also included $6.2 million of reserves against an $8.9 million loan that had been originated in part for community development purposes. The loan was used to finance a special-use property and was charged-off during the fourth quarter of 2023, resulting in a loss of approximately $5.9 million.
Current report
The Company measures liquidity in two primary ratios: on-hand liquidity to total liabilities, and total liquidity to total liabilities. On-hand liquidity is comprised of interest-bearing cash and cash equivalents and unpledged available-for-sale securities. Total liquidity includes on-hand liquidity, plus total available credit lines, plus availability of brokered deposits which is subject to internal limitations. The Company monitors other metrics in addition to on-hand liquidity and total liquidity to manage concentration risk in certain types of liabilities.
Current report
The Company's on-hand liquidity and total liquidity ratios for the periods ending September 30, 2024 and December 31, 2023, are as follows:
Current report
On-hand liquidity increased $53 million from December 31, 2023 to September 30, 2024 due to the payoff of the $70 million Federal Reserve BTFP borrowing, which released the pledge of certain available-for-sale securities. The payoff of the BTFP will have a slight benefit on the Company's Net Interest Income as the rate on the BTFP was slightly higher than the current replacement funding. Both on-hand liquidity to total liabilities and total liquidity to total liabilities increased at September 30, 2024 compared to December 31, 2023 due to the increased total liquidity and the reduction in total liabilities as the overall balance sheet has shrunk in an effort to improve the Bank's capital ratios.
Current report
Net cash provided by operating activities increased by $15.8 million in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. Within this activity there was a significant increase in originations of loans held for sale and proceeds from sale of assets held for sale. This activity is primarily related to the Digital Payments Division credit card loans. This program started in the third quarter of 2023 and continues today. The activity generates non-interest income and only requires short term liquidity as the loans are originated and expected to be sold within three days.
Current report
Net cash provided by investing activities increased by $149 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The increase is primarily due to lower originations of loans receivable and purchases of loans receivable as the Company is focused on lowering total assets to improve the Company's capital ratios.
Current report
Net cash provided by financing activities decreased by $199 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The decrease is primarily due to activity in proceeds from FRB and correspondent bank borrowings and repayments of FRB and correspondent bank borrowings. The Company did not require as much funding from FRB and correspondent bank borrowings due to the net cash provided by lower loan originations and loan purchases.
Current report
If a bank fails to maintain its capital ratios above the higher minimums established in the IMCR, the OCC may issue a capital directive requiring the bank to submit and adhere to an acceptable plan to achieve or maintain its required capital levels. Additionally, the OCC may deem a bank’s failure to maintain capital ratios above the IMCR an unsafe or unsound practice within the meaning of 12 USC 1818.1
Removed paragraphs (12)
Previous report
The financial results for the six months ended June 30, 2024 were adversely impacted by an elevated provision for credit losses of $3.8 million, compared to provision of $3.5 million for loan losses recorded for the first half year of 2023.
Previous report
Deferred tax assets were $25.1 million and $24.1 million at June 30, 2024 and December 31, 2023, respectively. Deferred tax assets consist predominately of state net operating losses, capitalized costs and allowances for credit losses.
Previous report
Patriot anticipates utilizing the state net operating loss carry forwards to reduce income taxes otherwise payable on future years taxable income.
Previous report
Patriot evaluates its ability to realize its net deferred tax assets on a quarterly basis. In doing so, management considers all available evidence, both positive and negative, to determine whether it is more likely than not that the deferred tax assets will be realized. In addition, management assesses tax attributes including available tax planning strategies and state net operating loss carry-forwards that do not begin to expire until the year of 2030. No valuation allowance was recorded as of June 30, 2024 and December 31, 2023. The Company will continue to evaluate its ability to realize its net deferred tax assets. If future evidence suggests that it is more likely than not that additional deferred tax assets will not be realized, the valuation allowance will be adjusted.
Previous report
At June 30, 2024, the FHLB-B advances bore fixed rates of interest ranging from 2.40% to 5.54% with maturities ranging from 1 day to 2 months, 16 days, and have a weighted average interest rate of 4.49%.
Previous report
Interest expense incurred for the three and six months ended June 30, 2024 were $362,000 and $721,000, respectively. Interest expense incurred for the three and six months ended June 30, 2023 were $1.7 million and $3.0 million, respectively.
Previous report
For the three and six months ended June 30, 2024, the Company recognized interest expense of $289,000 and $579,000, respectively. Interest expense incurred for the three and six months ended June 30, 2023 was $289,000 and $579,000, respectively.
Previous report
For the three and six months ended June 30, 2024, the Company recognized interest expense of $224,000 and $451,000, respectively. Interest expense incurred for the three and six months ended June 30, 2023 was $164,000 and $327,000, respectively.
Previous report
For the three and six months ended June 30, 2024, the Company recognized interest expense of $2,000 and $3,000, respectively. Interest expense incurred for the three and six months ended June 30, 2023 was $3,000 and $5,000, respectively.
Previous report
Provision for Credit Losses
Previous report
The Company’s balance sheet liquidity was 12.4% of total assets at June 30, 2024, compared to 8.7% at December 31, 2023. Liquidity including readily available off-balance sheet funding sources was 17.6% of total assets at June 30, 2024, compared to 18.6% at December 31, 2023. The readily available liquidity ratio remained well above the Company's 10% policy minimum.
Previous report
The following categories of assets are considered balance sheet liquidity: cash and due from banks, federal funds sold (if any), short-term investments (if any), loans held for sale, and unpledged available-for-sale securities. In addition, off balance sheet funding sources include collateral-based borrowing available from the FHLB, correspondent bank borrowing lines, and brokered deposits subject to internal limitations.
Reworded paragraphs (46)
Previous wording
(25)our compensation expense associated with equity allocated or awarded to our employees; and
Current wording
(25)our compensation expense associated with equity allocated or awarded to our employees;
Previous wording
(26)the premiums paid for the guaranteed portion of SBA loans by third party investors.
Current wording
(26)the premiums paid for the guaranteed portion of SBA loans by third party investors; and
Previous wording
The Company reported net loss of $3.1 million ($0.77 basic and diluted loss per share) for the quarter ended June 30, 2024, compared to a net loss of $615,000 ($0.16 basic and diluted loss per share) for the quarter ended June 30, 2023.
Current wording
The Company reported net loss of $27.0 million ($6.78 basic and diluted loss per share) for the quarter ended September 30, 2024, compared to a net loss of $3.8 million ($0.95 basic and diluted loss per share) for the quarter ended September 30, 2023. The $23.2 million increase in net loss for the quarter was primarily driven by a full valuation allowance on deferred tax assets ("DTA") of $25.1 million, see Note 2 - Summary of Significant Accounting Policies for more information. This increase was partially offset by a pretax $3.7 million reduction in provision for credit losses and a pretax $1.5 million decrease in net interest income.
Previous wording
For the six months ended June 30, 2024, net loss was $3.4 million, or $0.85 basic and diluted loss per share, compared to a net loss of $1.3 million, ($0.33 basic and diluted loss per share) for the six months ended June 30, 2023.
Current wording
For the nine months ended September 30, 2024, the net loss was $30.3 million, or $7.63 basic and diluted loss per share, compared to a net loss of $5.1 million, ($1.28 basic and diluted loss per share) for the nine months ended September 30, 2023. This represents a year-over-year increase in net loss of $25.3 million. The primary driver of this increase was the same $25.1 million DTA valuation allowance, see Note 2 - Summary of Significant Accounting Policies for more information. This increase is offset by fluctuations including lower pretax net interest income of $6.8 million, lower pretax provision for credit losses of $3.5 million and higher pretax noninterest income of $3.6 million, primarily from revenue on the Digital Payments Division.
Previous wording
Total assets decreased $54.4 million to $1.04 billion as of June 30, 2024, compared to $1.09 billion at December 31, 2023, primarily due to the decline in loans receivable of $72.6 million as of June 30, 2024.
Current wording
Total assets decreased $119.3 million to $974.1 million as of September 30, 2024, compared to $1.09 billion at December 31, 2023, primarily due to the decline in loans receivable of $93.2 million as of September 30, 2024.
Previous wording
Cash, cash equivalents and restricted cash increased from $66.5 million at December 31, 2023 to $93.7 million at June 30, 2024. The increase in 2024 reflects the intention to boost balance sheet liquidity.
Current wording
Cash, cash equivalents and restricted cash increased from $66.5 million at December 31, 2023 to $72.8 million at September 30, 2024. The increase in 2024 reflects the intention to boost balance sheet liquidity. For further details, refer to the Consolidated Statements of Cash Flows.
Previous wording
Total investments decreased by $2.5 million, from $93.6 million at December 31, 2023 to $91.1 million at June 30, 2024. The decrease in the six months ended June 30, 2024 was primarily attributable to sale and repayment of available-for-sale securities totaling $4.3 million, which was partially offset by an increase in purchase of available-for-sale securities of $2.3 million. During the six months ended June 30, 2024, the Bank sold available-for-sale securities of $2.3 million and recognized a net loss of $24,000.
Current wording
Total investments increased by $0.4 million, from $93.6 million at December 31, 2023 to $94.0 million at September 30, 2024. The increase in the nine months ended September 30, 2024 was primarily attributable to a $2.3 million increase in purchase of available-for-sale securities and a $3.3 million unrealized gain on securities, partially offset by the sale and repayment of securities totaling $5.3 million. During the nine months ended September 30, 2024, the Bank sold available-for-sale securities of $2.3 million and recognized a net loss of $24,000.
Previous wording
The Company’s loan portfolio decreased $72.6 million, from $848.9 million at December 31, 2023 to $776.3 million at June 30, 2024. The Company has continued the trend of restricting loan growth and allowing loans to pay down as the balance sheet is reduced in order to strengthen capital ratios.
Current wording
The Company’s loan portfolio decreased $93.2 million, from $848.9 million at December 31, 2023 to $755.7 million at September 30, 2024. The Company has continued the trend of restricting loan growth and allowing loans to pay down as the balance sheet is reduced in order to strengthen capital ratios.
Previous wording
SBA loans held for investment were included in the commercial real estate loans and commercial and industrial loan classifications above. As of June 30, 2024 and December 31, 2023, SBA loans included in the commercial and industrial loans were $13.0 million and $17.1 million, respectively. SBA loans included in the commercial real estate loans were $18.8 million and $12.9 million, respectively.
Current wording
SBA loans held for investment were included in the commercial real estate loans and commercial and industrial loan classifications above. As of September 30, 2024 and December 31, 2023, SBA loans included in the commercial and industrial loans were $11.6 million and $17.1 million, respectively. SBA loans included in the commercial real estate loans were $19.5 million and $12.9 million, respectively.
Previous wording
At June 30, 2024, the net loan to deposit ratio was 95.1% and the net loan to total assets ratio was 73.3%. At December 31, 2023, these ratios were 99.1% and 76.2%, respectively.
Current wording
At September 30, 2024, the net loan to deposit ratio was 89.8% and the net loan to total assets ratio was 76.0%. At December 31, 2023, these ratios were 99.1% and 76.2%, respectively.
Previous wording
The allowance for credit losses on loans was $15.0 million as of June 30, 2024, compared to $15.9 million as of December 31, 2023. The decrease in allowance was mainly due to reduction in loan balances and the recognition of charge-offs on the unsecured consumer loan portfolio. Based upon the overall assessment and evaluation of the loan portfolio at June 30, 2024, management believes $15.0 million in the allowance for credit losses, which represented 1.93% of gross loans outstanding, is adequate under prevailing economic conditions to absorb existing losses in the loan portfolio.
Current wording
The allowance for credit losses on loans was $15.0 million as of September 30, 2024, compared to $15.9 million as of December 31, 2023, a reduction of $941,000. The decrease in allowance was mainly due to reduction in loan balances and the recognition of charge-offs on the unsecured consumer loan portfolio. Based upon the overall assessment and evaluation of the loan portfolio at September 30, 2024, management believes $15.0 million in the allowance for credit losses, which represented 1.98% of gross loans outstanding, is adequate under prevailing economic conditions to absorb existing losses in the loan portfolio.
Previous wording
The following table provides detail of activity in the allowance for credit losses on loans for the three and six months ended June 30, 2024 and 2023:
Current wording
The following table provides detail of activity in the allowance for credit losses on loans for the three and nine months ended September 30, 2024 and 2023:
Previous wording
As of June 30, 2024, the $37.4 million of non-accrual loans were individually evaluated for impairment, and a specific reserve of $5.7 million was established for them. For collateral dependent loans, the Bank has obtained appraisal reports from independent licensed appraisal firms and discounted those values based on the Bank’s experience selling OREO properties and for estimated selling costs to determine estimated impairment. For cash flow dependent loans, the Bank determined the reserve based on the present value of expected future cash flows discounted at the loan's effective interest rate.
Current wording
As of September 30, 2024, non-accrual loans increased to $36.5 million, compared to $18.1 million as of December 31, 2023. The non-accrual loans at September 30, 2024 was comprised of 116 borrowers. Of these, 14 loans were individually evaluated, and a specific reserve of $7.0 million was established for them. For collateral dependent loans, the Bank has obtained appraisal reports from independent licensed appraisal firms and discounted those values based on the Bank’s experience selling OREO properties and for estimated selling costs to determine estimated impairment. For cash flow dependent loans, the Bank determined the reserve based on the present value of expected future cash flows discounted at the loan's effective interest rate.
Previous wording
SBA loans held for sale totaled $4.4 million and $9.9 million as of June 30, 2024 and December 31, 2023, respectively. SBA loans held for sale represent the guaranteed portion of SBA loans and are reflected at the lower of aggregate cost or market value. SBA loans held for sale at June 30, 2024 consisted of $4.4 million SBA commercial and industrial loans. SBA loans held for sale at December 31, 2023, consisted of $3.5 million SBA commercial and industrial loans and $6.4 million SBA commercial real estate loans, respectively.
Current wording
SBA loans held for sale totaled nil and $9.9 million as of September 30, 2024 and December 31, 2023, respectively. SBA loans held for sale represent the guaranteed portion of SBA loans and are reflected at the lower of aggregate cost or market value. SBA loans held for sale at December 31, 2023, consisted of $3.5 million SBA commercial and industrial loans and $6.4 million SBA commercial real estate loans, respectively.For the three and nine months ended September 30, 2024, total gain on sale of $67,000 and $378,000 was recorded. A servicing asset of $791,000 and $857,000 was recognized as of September 30, 2024 and December 31, 2023, respectively.
Previous wording
As of June 30, 2024, the credit card loans held for sale from Digital Payments division totaled $8.4 million. The credit card loans expected to be held for no longer than three days before being sold. The credit card receivable are fully cash-secured by deposits at Patriot. The credit card loans are sold to the third party as a whole loan sale transaction, priced at Par, thus there is no servicing asset or gain or loss on sale.
Current wording
As of September 30, 2024, the credit card loans held for sale from Digital Payments division totaled $10.2 million. The credit card loans expected to be held for no longer than three days before being sold. The credit card receivable are fully cash-secured by deposits at Patriot. The credit card loans are sold to the third party as a whole loan sale transaction, priced at Par, thus there is no servicing asset or gain or loss on sale.
Previous wording
In 2024, the Bank reentered the residential mortgage business. The Residential Mortgage Division, located in Jacksonville, FL, generates the loans and typically sells them to third parties. As of June 30, 2024, the Company reported residential mortgage loans held for sale totaling $1.3 million. These loans are recorded at the lower of aggregate cost or market value. For the three and six months ended June 30, 2024, a total gain on sale of $10,000 was recorded and no servicing asset was recognized.
Current wording
In 2024, the Bank reentered the residential mortgage business. The Residential Mortgage Division, located in Jacksonville, FL, generates the loans and typically sells them to third parties. As of September 30, 2024, the Company reported residential mortgage loans held for sale totaling $3.5 million. These loans are recorded at the lower of aggregate cost or market value. For the three and nine months ended September 30, 2024, a total gain on sale of $10,000 and $24,000 was recorded. A servicing asset of $8,000 was recognized as of September 30, 2024.
Previous wording
The effective tax benefit rate for the three and six months ended June 30, 2024 was (23.07)% and (20.25)%, compared to the effective tax benefit rate of (27.30)% and (27.08)% for the three and six months ended June 30, 2023. The Company’s effective rates for both periods was affected by state taxes and non-deductible expenses.
Current wording
The effective tax provision rate for the three months ended September 30, 2024 was 1067.85%, compared to the effective tax benefit rate for the three months ended September 30, 2023 of (26.12)%. The effective tax provision and benefit rates for the nine months ended September 30, 2024 and September 30, 2023 were 363.40% and (26.37)%, respectively. The Company’s effective rates for both periods were affected by state taxes and non-deductible expenses and the full valuation allowance against all of the DTAs in the third quarter of 2024.
Previous wording
Total borrowings were $187.0 million and $201.1 million as of June 30, 2024 and December 31, 2023, respectively. Borrowings consist primarily of FHLB advances, senior notes, subordinated notes, junior subordinated debentures and a note payable. The senior notes, subordinated notes and junior subordinated debentures contain affirmative covenants that require the Company to maintain its and its subsidiaries’ legal entity and tax status, pay its income tax obligations on a timely basis, and comply with SEC and FDIC reporting requirements.
Current wording
Total borrowings were $123.9 million and $201.1 million as of September 30, 2024 and December 31, 2023, respectively. Borrowings consist primarily of FHLB advances, senior notes, subordinated notes, junior subordinated debentures and a note payable. The senior notes, subordinated notes and junior subordinated debentures contain affirmative covenants that require the Company to maintain its and its subsidiaries’ legal entity and tax status, pay its income tax obligations on a timely basis, and comply with SEC and FDIC reporting requirements.
Previous wording
FHLB-B advances are structured to facilitate the Bank’s management of its balance sheet and liquidity requirements. Outstanding advances from the FHLB-B decreased from $101.0 million at December 31, 2023 to $87.9 million at June 30, 2024.
Current wording
FHLB-B advances are structured to facilitate the Bank’s management of its balance sheet and liquidity requirements. During the three months ended September 30, 2024, the Company repaid $30.0 million in long-term advances. As a result, the outstanding advances decreased from $101.0 million as of December 31, 2023, to $93.8 million as of September 30, 2024. At September 30, 2024, the FHLB-B advances carried a fixed interest rates of 5.03% with maturities of 1 day.
Previous wording
At June 30, 2024, collateral for FHLB-B borrowings consisted of a mixture of real estate loans and securities with book value of $235.9 million. Remaining unused borrowing capacity under this line totaled $27.9 million at June 30, 2024.
Current wording
At September 30, 2024, collateral for FHLB-B borrowings consisted of a mixture of real estate loans and securities with book value of $221.2 million. Remaining unused borrowing capacity under this line totaled $5.4 million at September 30, 2024.
Previous wording
In addition, Patriot has a $2.0 million revolving line of credit with the FHLB-B. For the three and six months ended June 30, 2024 and 2023, no funds had been borrowed under the line of credit.
Current wording
In addition, Patriot has a $2.0 million revolving line of credit with the FHLB-B. For the three and nine months ended September 30, 2024 and 2023, no funds had been borrowed under the line of credit.
Previous wording
Patriot has entered into unsecured federal funds sweep and federal funds line of credit facility agreements with certain correspondent banks. Borrowings available under the agreements totaled $22.0 million at both June 30, 2024 and December 31, 2023. The purpose of the agreements is to provide a credit facility intended to satisfy overnight federal account balance requirements and to provide for daily settlement of FRB, Automated Clearing House (ACH), and other clearinghouse transactions.
Current wording
Patriot has entered into unsecured federal funds sweep and federal funds line of credit facility agreements with certain correspondent banks. Borrowings available under the agreements totaled $5.0 million and $22.0 million at September 30, 2024 and December 31, 2023, respectively. The purpose of the agreements is to provide a credit facility intended to satisfy overnight federal account balance requirements and to provide for daily settlement of FRB, Automated Clearing House (ACH), and other clearinghouse transactions.
Previous wording
There was no outstanding balance under the agreements at June 30, 2024 and December 31, 2023. Interest expense incurred for the three and six months ended June 30, 2024 was $0 and $2,000, respectively. For three and six months ended June 30, 2023, interest expense incurred was $54,000 and $117,000, respectively.
Current wording
There was no outstanding balance under the agreements at September 30, 2024 and December 31, 2023. Interest expense incurred for the three and nine months ended September 30, 2024 was $2,000 and $4,000, respectively. For three and nine months ended September 30, 2023, interest expense incurred was nil and $117,000, respectively.
Previous wording
The Federal Reserve Bank of New York (“FRBNY”) accepts loan pledges from qualifying depository institutions to secure borrowings from the Discount Window. Patriot has pledged eligible loans as collateral to support its borrowing capacity at the FRBNY. As of June 30, 2024, the book value of the pledged loans totaled $14.3 million, with a collateral value of $10.5 million. No funds were borrowed from the Discount Window under the FRBNY's Borrower-in-Custody ('BIC") program, and no interest expense was incurred for the three and six months ended June 30, 2024. For the three and six months ended June 30, 2023, a total of $12.0 million was borrowed, and interest expense incurred was $5,000.
Current wording
The Federal Reserve Bank of New York (“FRBNY”) accepts loan pledges from qualifying depository institutions to secure borrowings from the Discount Window. Patriot has pledged eligible loans as collateral to support its borrowing capacity at the FRBNY. As of September 30, 2024, the book value of the pledged loans totaled $25.5 million, with a collateral value of $19.4 million. No funds were borrowed from the Discount Window under the FRBNY's Borrower-in-Custody ('BIC") program, and no interest expense was incurred for the three and nine months ended September 30, 2024. For the three and nine months ended September 30, 2023, a total of $12.0 million was borrowed, and interest expense incurred was $43,000 and $48,000, respectively.
Previous wording
In July 2023, the Bank established a collateralized funding line of $73.8 million at par value under the Federal Reserve's newly established Bank Term Funding Program ("BTFP"). The program provided additional funding to eligible depository institutions, assuring they can meet the needs of all their depositors. The program served as an additional source of liquidity against high-quality securities, eliminating the need of an institution to quickly sell those securities in times of stress. The line allowed for a fixed rate borrowing at market rates, for up to one year, with repayment permitted at any time without penalty. The BTFP ceased allowing any new advances after March 11, 2024. As of June 30, 2024, the collateral value of the pledged securities was $69.9 million. Patriot borrowed a total of $69.0 million under the BTFP. Interest expense incurred for the three and six months ended June 30, 2024 was $852,000 and $1.7 million, respectively. No interest expense was incurred for the three and six months ended June 30, 2023.
Current wording
In July 2023, the Bank established a collateralized funding line of $73.8 million at par value under the Federal Reserve's newly established Bank Term Funding Program ("BTFP"). The program provided additional funding to eligible depository institutions, assuring they can meet the needs of all their depositors. The program served as an additional source of liquidity against high-quality securities, eliminating the need of an institution to quickly sell those securities in times of stress. The line allowed for a fixed rate borrowing at market rates, for up to one year, with repayment permitted at any time without penalty. The BTFP ceased allowing any new advances after March 11, 2024. As of September 30, 2024, Patriot paid off the BTFP borrowing of $70.0 million that was outstanding as of December 31, 2023. Interest expense incurred for the three and nine months ended September 30, 2024 was $632,000 and $2.3 million, respectively. Interest expense incurred for the three and nine months ended September 30, 2023 was $833,000.
Previous wording
On December 21, 2022, the Company completed an issuance and sale of $12 million in aggregate principal amount of 8.50% fixed rate senior notes due January 15, 2026 (“2022 Senior Notes”). In connection with the issuance of the 2022 Senior Notes, the Company incurred $326,000 of costs, which are being amortized over the term of the 2022 Senior Notes to recognize a constant rate of interest expense. At June 30, 2024 and December 31, 2023, $208,000 and $277,000 of unamortized debt issuance costs were deducted from the face amount of the 2022 Subordinated Notes included in the Consolidated Balance Sheet, respectively.
Current wording
On December 21, 2022, the Company completed an issuance and sale of $12 million in aggregate principal amount of 8.50% fixed rate senior notes due January 15, 2026 (“2022 Senior Notes”). In connection with the issuance of the 2022 Senior Notes, the Company incurred $326,000 of costs, which are being amortized over the term of the 2022 Senior Notes to recognize a constant rate of interest expense. At September 30, 2024 and December 31, 2023, $173,000 and $277,000 of unamortized debt issuance costs were deducted from the face amount of the 2022 Subordinated Notes included in the Consolidated Balance Sheet, respectively.
Previous wording
In connection with the issuance of the Subordinated Notes, the Company incurred $291,000 of debt issuance costs, which are being amortized over the term of the Subordinated Notes to recognize a constant rate of interest expense. At June 30, 2024 and December 31, 2023, $117,000 and $131,000 of unamortized debt issuance costs were deducted from the face amount of the Subordinated Notes included in the consolidated balance sheet, respectively.
Current wording
In connection with the issuance of the Subordinated Notes, the Company incurred $291,000 of debt issuance costs, which are being amortized over the term of the Subordinated Notes to recognize a constant rate of interest expense. At September 30, 2024 and December 31, 2023, $109,000 and $131,000 of unamortized debt issuance costs were deducted from the face amount of the Subordinated Notes included in the consolidated balance sheet, respectively.
Previous wording
The junior subordinated debentures bear interest at three-month SOFR plus 3.15% and mature on March 26, 2033, at which time the principal amount borrowed will be due. The placement fee of $240,000 is amortized and included as a component of the periodic interest expense on the junior subordinated debentures, in order to produce a constant rate of interest expense. As of June 30, 2024 and December 31, 2023, the unamortized placement fee deducted from the face amount of the junior subordinated debt owed to the unconsolidated trust amounted to $106,000 and $111,000, respectively, and accrued interest on the junior subordinated debentures was $10,000 and $12,000, respectively.
Current wording
The junior subordinated debentures bear interest at three-month SOFR plus 3.15% and mature on March 26, 2033, at which time the principal amount borrowed will be due. The placement fee of $240,000 is amortized and included as a component of the periodic interest expense on the junior subordinated debentures, in order to produce a constant rate of interest expense. As of September 30, 2024 and December 31, 2023, the unamortized placement fee deducted from the face amount of the junior subordinated debt owed to the unconsolidated trust amounted to $104,000 and $111,000, respectively, and accrued interest on the junior subordinated debentures was $9,000 and $12,000, respectively.
Previous wording
For the three and six months ended June 30, 2024, the Company recognized interest expense of $180,000 and $359,000, respectively. Interest expense incurred for the three and six months ended June 30, 2023 was $169,000 and $332,000, respectively.
Current wording
For the three and nine months ended September 30, 2024, the Company recognized interest expense of $180,000 and $539,000, respectively. Interest expense incurred for the three and nine months ended September 30, 2023 was $180,000 and $512,000, respectively.
Previous wording
In September 2015, the Bank purchased the property in which its Fairfield, Connecticut branch is located for approximately $2.0 million, a property it had been leasing until that date. The purchase price was primarily satisfied by issuing the seller a $2.0 million, nine-year, promissory note bearing interest at a fixed rate of 1.75% per annum. As of June 30, 2024 and December 31, 2023, the note had a balance outstanding of $270,000 and $376,000, respectively. The note matures in August 2024 and requires a balloon payment of approximately $234,000 at that time. The note is secured by a first Mortgage Deed and Security Agreement on the purchased property.
Current wording
In September 2015, the Bank purchased the property in which its Fairfield, Connecticut branch is located for approximately $2.0 million, a property it had been leasing until that date. The purchase price was primarily satisfied by issuing the seller a $2.0 million, nine-year, promissory note bearing interest at a fixed rate of 1.75% per annum. As of September 30, 2024 and December 31, 2023, the outstanding balance on the note was $216,000 and $376,000, respectively. The note is secured by a first Mortgage Deed and Security Agreement on the purchased property. The note originally set to mature in August 2024, was extended from August 25, 2024 to September 1, 2025, with the Bank continuing its scheduled principal and interest payments.
Previous wording
As of June 30, 2024, Patriot has two interest rate swaps (“swaps”). One swap is with a loan customer to provide a facility to mitigate the fluctuations in the variable rate on the respective loan. The other swap is with an outside third party. The customer interest rate swap is matched in offsetting terms to the third party interest rate swap. The swaps are reported at fair value in other assets or other liabilities on the consolidated balance sheets. Patriot’s swaps are derivatives, but are not designated as hedging instruments, thus any net gain or loss resulting from changes in the fair value is recognized in other noninterest income. The Company recognized no gain on the swaps for the three and six months ended June 30, 2024 and 2023.
Current wording
As of September 30, 2024, Patriot has two interest rate swaps (“swaps”). One swap is with a loan customer to provide a facility to mitigate the fluctuations in the variable rate on the respective loan. The other swap is with an outside third party. The customer interest rate swap is matched in offsetting terms to the third party interest rate swap. The swaps are reported at fair value in other assets or other liabilities on the consolidated balance sheets. Patriot’s swaps are derivatives, but are not designated as hedging instruments, thus any net gain or loss resulting from changes in the fair value is recognized in other noninterest income. The Company recognized no gain on the swaps for the three and nine months ended September 30, 2024 and 2023.
Previous wording
Equity decreased $3.9 million, from $44.4 million at December 31, 2023 to $40.5 million at June 30, 2024, primarily due to a net loss of $3.4 million for the six months ended June 30, 2024, and a net unrealized holding loss for investment portfolio of $541,000.
Current wording
Equity decreased $28.0 million, from $44.4 million at December 31, 2023 to $16.4 million at September 30, 2024. This decrease was primarily due to a net loss of $30.3 million for the nine months ended September 30, 2024, partially offset by a net unrealized gain in investments of $2.2 million.
Previous wording
The Company’s off-balance sheet commitments primarily consist of commitments to lend of $103.9 million and $92.5 million as of June 30, 2024 and December 31, 2023, respectively.
Current wording
The Company’s off-balance sheet commitments primarily consist of commitments to lend of $96.6 million and $92.5 million as of September 30, 2024 and December 31, 2023, respectively.
Previous wording
As of June 30, 2024, the Bank has an irrevocable stand-by letter of credit for a maximum of $35 million, issued by the Federal Home Loan Bank of Boston on behalf of the Bank, with Mastercard as the beneficiary, which expires on April 30, 2025.
Current wording
As of September 30, 2024, the Bank has an irrevocable stand-by letter of credit for a maximum of $45 million, issued by the Federal Home Loan Bank of Boston on behalf of the Bank, with Mastercard as the beneficiary, which expires on April 30, 2025.
Previous wording
The following tables present daily average balance sheets, interest income, interest expense and the corresponding yields earned and rates paid for the three and six months ended June 30, 2024 and 2023:
Current wording
The following tables present daily average balance sheets, interest income, interest expense and the corresponding yields earned and rates paid for the three and nine months ended September 30, 2024 and 2023:
Previous wording
The following table presents the change in interest-earning assets and interest-bearing liabilities by major category and the related change in the interest income earned and interest expense incurred thereon attributable to the change in transactional volume in the financial instruments and the rates of interest applicable thereto, comparing the three and six months ended June 30, 2024 and 2023.
Current wording
The following table presents the change in interest-earning assets and interest-bearing liabilities by major category and the related change in the interest income earned and interest expense incurred thereon attributable to the change in transactional volume in the financial instruments and the rates of interest applicable thereto, comparing the three and nine months ended September 30, 2024 and 2023.
Previous wording
For the three months ended June 30, 2024, interest income and dividend income was $13.2 million, which decreased $2.1 million as compared to $15.3 million for the quarter ended June 30, 2023. Total interest expense was $8.2 million for the three months ended June 30, 2024, which increased $598,000 as compared to $7.6 million for the three months ended June 30, 2023. Net interest income decreased $2.7 million from $7.7 million for the three months ended June 30, 2023 to $5.0 million for the three months ended June 30, 2024. The decline in 2024 reflects a lower loan balance and narrower net interest margin due to higher deposit costs.
Current wording
For the three months ended September 30, 2024, interest income and dividend income was $12.8 million, which decreased $2.3 million as compared to $15.1 million for the quarter ended September 30, 2023. Total interest expense was $7.8 million for the three months ended September 30, 2024, which decreased $730,000 as compared to $8.5 million for the three months ended September 30, 2023. Net interest income decreased $1.5 million from $6.5 million for the three months ended September 30, 2023 to $5.0 million for the three months ended September 30, 2024.
Previous wording
For the six months ended June 30, 2024, interest income and dividend income was $27.2 million, which decreased $1.7 million as compared to $29.0 million for the six months ended June 30, 2023. Total interest expense was $16.8 million, which increased $3.6 million as compared to $13.2 million for the six months ended June 30, 2023. Net interest income was $10.4 million for the six months ended June 30, 2024, which decreased $5.3 million from $15.7 million for the six months ended June 30, 2023.
Current wording
For the nine months ended September 30, 2024, interest income and dividend income was $40.0 million, which decreased $4.0 million as compared to $44.0 million for the nine months ended September 30, 2023. Total interest expense was $24.6 million, which increased $2.8 million as compared to $21.8 million for the nine months ended September 30, 2023. Net interest income was $15.4 million for the nine months ended September 30, 2024, which decreased $6.8 million from $22.3 million for the nine months ended September 30, 2023.
Previous wording
The net interest margin was 2.14% for the quarter ended June 30, 2024, compared with 2.96% for the quarter ended June 30, 2023. For the six months ended June 30, 2024 and 2023, the net interest margin was 2.17% and 3.12%, respectively. The decline in interest margins for the three and six months ended June 30, 2024 compared to the same periods in 2023, was primarily associated with an increase in the cost of deposits and other borrowings due to the significant rise in market interest rates and a decline in loan interest income due to the declining loan balance and the increase in nonaccrual loans., partially mitigated by the rise in variable rate interest earning assets.
Current wording
The net interest margin was 2.18% for the quarter ended September 30, 2024, compared to 2.48% for the quarter ended September 30, 2023. For the nine months ended September 30, 2024 and 2023, the net interest margin was 2.18% and 2.90%, respectively. The decline in interest margins for the three and nine months ended September 30, 2024 compared to the same periods in 2023, was primarily associated with an increase in the cost of deposits and other borrowings due to the significant rise in market interest rates and a decline in loan interest income due to the declining loan balance and the increase in nonaccrual loans, partially mitigated by the rise in variable rate interest earning assets.
Previous wording
For the three months ended June 30, 2024, the provision for credit losses was $3.1 million, consisting of a $3.1 million loan provision and a $41,000 credit for off-balance-sheet exposure reserves. In comparison, for the three months ended June 30, 2023, the provision for credit losses was $1.3 million, including a $1.7 million loan provision and a $382,000 credit for off-balance-sheet exposure reserves. The higher provision in the second quarter was primarily due to the decline in classification of a single CRE loan along with the impact of a decline in valuation of a previously classified CRE loan.
Current wording
For the three months ended September 30, 2024, the provision for credit losses was $1.0 million, consisting of a $1.1 million loan provision and a $58,000 credit for off-balance-sheet exposure reserves. In comparison, for the three months ended September 30, 2023, the provision for credit losses was $4.7 million, including a $4.8 million loan provision and a $112,000 credit for off-balance-sheet exposure reserves.
Showing the first 40 of 46 pairs. Open the source sections for the rest.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
The decline for both three and nine months ended September 30, 2024 reflects a lower loan balance and narrower net interest margin due to higher deposit costs and increase in nonaccrual loans.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
Allowance for Credit Losses on Loans