Patriot National Bancorp, Inc. :PNBK-US: Earnings Analysis: Q4, 2016 By the Numbers : April 5, 2017

Patriot National Bancorp, Inc. reports financial results for the quarter ended December 31, 2016.

Highlights

  • Summary numbers: Revenues of USD 6.25 million, Net Earnings of USD 1.05 million.
  • Net interest income margins widened from 93.66% to 94.11% compared to the same period last year.
  • Net loan assets changed 20.42% compared to same period last year and 4.37% from previous period, total deposits changed 18.40% compared to same period last year and 12.34% from previous period.
  • Change in operating cash flow of -57.83% compared to same period last year is about the same as change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth from operating margin improvements as well as from one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income (See complete table at the end of this report):

2016-12-31 2016-09-30 2016-06-30 2016-03-31 2015-12-31
Relevant Numbers (Quarterly)
Revenues (mil) 6.25 6.13 5.75 5.84 5.43
Revenue Growth (%YOY) 15.12 5.55 -2.59 6.65 2.79
Earnings (mil) 1.05 0.81 -0.58 0.65 0.53
Earnings Growth (%YOY) 96.43 28.59 -184.47 125.95 122.2
Net Margin (%) 16.73 13.28 -10.13 11.19 9.81
EPS 0.27 0.21 -0.15 0.16 0.13
Return on Equity (%) 6.68 5.23 -3.75 4.22 3.48
Return on Assets (%) 0.58 0.49 -0.36 0.41 0.33

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Market Share Versus Profits

Revenues History
Earnings History

Compared to the same period last year, PNBK-US‘s change in revenue was close to the amount of its change in earnings. It remains to be seen how the rest of its peer group’s results will turn out and if PNBK-US‘s performance is a sign of any major shift in the composition of market share in this sector. Also, for comparison purposes, revenues changed by 1.91% and earnings by 28.38% compared to the previous period.

Earnings Growth Analysis

The company’s earnings growth was influenced by the year-on-year improvement in net interest income margins from 93.66% to 94.11%. However, the company’s loan loss provisions have prevented it from fully capitalizing on these net interest income margin improvements. PNBK-US‘s net interest income after provisions margin showed no improvement. Loan loss provisions as a percentage of net interest income were 2.55% this period, and 0% a year ago.

Net Interest Income Margin History
Loan Loss Provisions Margin History

Net Loans and Total Deposits

A financial institution’s core operations represented by Net Interest Income and Net Interest Income after Provisions are dependent on both the growth and quality of its deposits as well as the growth and quality of its loans. A firm could boost its interest income in the short-term by just increasing its loan assets with less concern about their quality – but this would eventually lead to greater loan loss provisions. Similarly a drive to increase deposits could result in higher interest expenses and eventually effect the firm’s equity. It is thus important to understand net interest income performance in context to loan loss provisions, loan assets and deposits.

Loan Assets Growth Rate History (Qtr YOY)
Total Deposits Growth Rate History (Qtr YOY)

The firm’s improvement in net interest income margins was influenced by both the relative increase in the levels of net loan assets and the level of total deposits as a percentage of equity. On an absolute basis, net loan assets changed 20.42% compared to the same period last year and 4.37% from the previous period. Total deposits changed 18.40% compared to the same period last year and 12.34% from the previous period.

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

PNBK-US‘s year-on-year change in operating cash flow of -57.83% is around its change in earnings. This suggests that there are likely no significant movement in accruals or reserves for managing earnings this period.

Margins

The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating margins from 15.06% to 26.92% and (2) one-time items. The company’s pretax margins are now 26.92%, compared to 15.06% for the same period last year.

EBIT Margin History
PreTax Margin History

Access our Ratings and Scores for Patriot National Bancorp, Inc.

Company Profile

Patriot National Bancorp, Inc. operates as a bank holding company. The company operates through its subsidiary, Patriot Bank NA which offers consumer and commercial banking services to individuals, government and nonprofit entities, small and medium-sized businesses and professionals. Its deposit products include checking accounts, Negotiable Order of Withdrawal accounts, time certificates of deposit, savings accounts, individual retirement accounts and health savings accounts. The bank’s lending portfolio comprises of commercial mortgage and construction loans; working capital loans; equipment loans; real estate loans; and other personal loans. The company was founded in 1999 and is headquartered in Stamford, CT.

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