UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
FORM 10-QSB/A
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 2002 Commission file number 000-29599
PATRIOT NATIONAL BANCORP, INC.
(Exact name of small business issuer as specified in its charter)
Connecticut 06-1559137
(State of incorporation) (I.R.S. Employer Identification Number)
900 Bedford Street, Stamford, Connecticut 06901
(Address of principal executive offices)
(203) 324-7500
------------------
(Issuer's telephone number)
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
Common stock, $2.00 par value per share, 2,400,525 shares issued and outstanding
as of the close of business July 31, 2002.
Transitional Small Business Disclosure Format (check one):Yes No X
----- -----
Explanatory Note
----------------
This amendment is being filed to correct a typographical error in net
income in the Company's consolidated statement of income for the six months
ended June 30, 2002.
Table of Contents
Page
----
Part I FINANCIAL INFORMATION
------
Item 1. Consolidated Financial Statements 3
2
PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Consolidated Financial Statements
------- ---------------------------------
PATRIOT NATIONAL BANCORP, INC
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2002 2001
-------------------------------------
(Unaudited)
ASSETS
Cash and due from banks ............................................ $ 10,960,941 $ 7,544,242
Federal funds sold ................................................. 7,500,000 12,700,000
Short term investments ............................................. 2,786,500 6,788,569
------------ ------------
Cash and cash equivalents ..................................... 21,247,441 27,032,811
Available for sale securities (at fair value) ...................... 57,560,390 34,717,930
Federal Reserve Bank stock ......................................... 481,050 481,050
Federal Home Loan Bank stock ....................................... 621,300 617,900
Loans receivable (net of allowance for loan losses: 2002 $2,062,454;
2001 $1,894,454) .............................................. 137,953,798 135,680,036
Accrued interest receivable ........................................ 1,144,823 1,079,450
Premises and equipment, net ........................................ 945,157 1,102,428
Deferred tax asset, net ............................................ 618,774 662,296
Goodwill ........................................................... 930,091 930,091
Other assets ....................................................... 285,223 265,465
------------ ------------
Total assets .............................................. $221,788,047 $202,569,457
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits:
Noninterest bearing deposits .............................. $ 18,450,586 $ 16,961,636
Interest bearing deposits ................................. 174,040,298 166,302,303
------------ ------------
Total deposits ....................................... 192,490,884 183,263,939
Securities sold under agreements to repurchase ................ 5,700,000 --
Federal Home Loan Bank borrowings ............................. 4,000,000 --
Capital lease obligation ...................................... 306,097 364,836
Collateralized borrowings ..................................... 399,444 474,444
Accrued expenses and other liabilities ........................ 1,010,504 1,060,222
------------ ------------
Total liabilities .................................... 203,906,929 185,163,441
------------ ------------
Shareholders' equity
Common stock, $2 par value: 5,333,333 shares authorized;
2,400,525 shares issued and outstanding ................... 4,801,050 4,801,050
Additional paid-in capital .................................... 11,484,649 11,484,649
Retained earnings ............................................. 1,242,678 864,202
Accumulated other comprehensive income - net unrealized
gain on available for sale securities, net of tax ......... 352,741 256,115
------------ ------------
Total shareholders' equity ........................... 17,881,118 17,406,016
------------ ------------
Total liabilities and shareholders' equity ........... $221,788,047 $202,569,457
============ ============
See accompanying notes to consolidated financial statements.
3
PATRIOT NATIONAL BANCORP INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
----------- ----------- ----------- -----------
Interest and Dividend Income
Interest and fees on loans ...................... $ 2,438,451 $ 2,826,483 $ 4,823,456 $ 5,740,573
Interest and dividends on
investment securities ........................ 468,547 545,250 974,159 1,089,611
Interest on federal funds sold .................. 39,852 84,471 81,541 367,309
----------- ----------- ----------- -----------
Total interest and dividend income ............ 2,946,850 3,456,204 5,879,156 7,197,493
----------- ----------- ----------- -----------
Interest Expense
Interest on deposits ............................ 1,081,217 1,685,381 2,228,571 3,652,442
Interest on other borrowings .................... 39,934 -- 40,286 --
Interest on capital lease obligation ............ 11,132 14,925 23,261 30,719
Interest on collateralized borrowings ........... 5,454 9,463 11,374 20,577
----------- ----------- ----------- -----------
Total interest expense ........................ 1,137,737 1,709,769 2,303,492 3,703,738
----------- ----------- ----------- -----------
Net interest income ........................... 1,809,113 1,746,435 3,575,664 3,493,755
Provision for Loan Losses .......................... 84,000 58,500 158,000 102,000
----------- ----------- ----------- -----------
Net interest income after
provision for loan losses .................. 1,725,113 1,687,935 3,417,664 3,391,755
----------- ----------- ----------- -----------
Non-Interest Income
Mortgage brokerage referral fees ................ 671,229 764,009 1,327,271 1,225,339
Loan processing fees ............................ 122,257 137,936 247,055 275,704
Fees and service charges ........................ 70,949 61,707 143,794 126,166
Gains and origination fees from loans sold ...... 249,365 24,510 249,365 40,144
Loss on impaired investment security ............ -- (117,678) -- (117,678)
Loss on sale of investment securities ........... -- -- (31,275) --
Other income .................................... 18,965 2,155 40,370 20,475
----------- ----------- ----------- -----------
Total non-interest income ..................... 1,132,765 872,639 1,976,580 1,570,150
7Non-Interest Expenses
Salaries and benefits ........................... 1,502,206 1,344,595 2,910,557 2,450,022
Occupancy and equipment expenses, net ........... 242,816 232,482 504,885 448,901
Data processing and other outside services ...... 143,246 160,492 313,780 288,241
Professional services ........................... 105,790 85,498 176,627 180,819
Advertising and promotional expenses ............ 98,442 70,078 155,438 126,804
Forms, printing and supplies .................... 41,925 39,090 78,828 77,965
Regulatory assessments .......................... 24,324 22,889 48,648 46,587
Directors' fees and expenses .................... 50,900 17,000 75,100 30,900
Other operating expenses ........................ 197,511 259,554 369,881 481,387
----------- ----------- ----------- -----------
Total non-interest expenses ................... 2,407,160 2,231,678 4,633,744 4,131,626
----------- ----------- ----------- -----------
Income before income taxes .................... 450,718 328,896 760,500 830,279
----------- ----------- ----------- -----------
Provision for Income Taxes ......................... 163,000 120,751 274,000 314,557
----------- ----------- ----------- -----------
Net income .................................... $ 287,718 $ 208,145 $ 486,500 $ 515,722
=========== =========== =========== ===========
Basic income per share ........................ $ 0.120 $ 0.090 $ 0.200 $ 0.210
=========== =========== =========== ===========
Diluted income per share ...................... $ 0.120 $ 0.090 $ 0.200 $ 0.210
=========== =========== =========== ===========
Dividends per share ........................... $ 0.025 $ 0.020 $ 0.045 $ 0.020
=========== =========== =========== ===========
See accompanying notes to consolidated financial statements
4
PATRIOT NATIONAL BANCORP, INC
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
----------- ----------- ----------- -----------
Net income ..................................... $ 287,718 $ 208,145 $ 486,500 $ 515,722
Unrealized holding gains (losses) on securities:
Unrealized holding gains (losses) arising
during the period, net of taxes ............. 249,073 (37,503) 96,626 90,950
----------- ----------- ----------- -----------
Comprehensive income ........................ $ 536,791 $ 170,642 $ 583,126 $ 606,672
=========== =========== =========== ===========
See accompanying notes to consolidated financial statements.
5
PATRIOT NATIONAL BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
2002 2001
------------------------------
Cash Flows from Operating Activities
Net income ......................................................... $ 486,500 $ 515,722
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization and accretion of investment premiums and discounts, net (9,737) (6,726)
Originations of loans held for sale ................................ (208,000) (20,509,950)
Proceeds from sales of loans held for sale ......................... 208,000 20,509,950
Gain on sale of loans .............................................. (249,365) --
Provision for loan losses .......................................... 158,000 102,000
Loss on impaired investment security ............................... -- 117,678
Loss on sale of investment securities .............................. 31,275 --
Depreciation and amortization ...................................... 213,885 213,082
Changes in assets and liabilities:
Increase in deferred loan fees ................................. 164,343 61,362
(Increase) decrease in accrued interest receivable ............. (65,373) 24,052
Increase in other assets ....................................... (19,757) (100,087)
(Decrease) increase in accrued expenses and other liabilities .. (61,722) 19,576
------------ ------------
Net cash provided by operating activities ...................... 648,049 946,659
------------ ------------
Cash Flows from Investing Activities
Purchases of available for sale securities ......................... (37,015,836) (10,115,072)
Proceeds from sales of available for sale securities ............... 10,369,844 6,000,000
Principal repayments on available for sale securities .............. 2,922,141 1,953,830
Proceeds from maturities of available for sale securities .......... 1,000,000 499,290
Proceeds from maturities of held to maturity securities ............ -- 500,000
Purchase of Federal Reserve Bank Stock ............................. -- (5,850)
Purchase of Federal Home Loan Bank Stock ........................... (3,400) (24,300)
Net increase in loans .............................................. (3,896,104) (7,075,027)
Proceeds from sale of loan receivable .............................. 1,549,365 --
Purchases of bank premises and equipment ........................... (56,614) (243,140)
------------ ------------
Net cash used in investing activities .......................... (25,130,604) (8,510,269)
------------ ------------
Cash Flows from Financing Activities
Net increase in demand, savings and money market deposits .......... 13,434,970 14,020,453
Net decrease in time certificates of deposits ...................... (4,208,025) (28,496,878)
Increase in FHLB borrowings ........................................ 4,000,000 --
Increase in securities sold under agreements to repurchase ......... 5,700,000 --
Principal payments on capital lease obligation ..................... (58,739) (51,283)
Decrease in collateralized borrowings .............................. (75,000) --
Dividends paid on common stock ..................................... (96,021) --
Proceeds from issuance of common stock ............................. -- 1,179
------------ ------------
Net cash provided by financing activities ...................... 18,697,185 (14,526,529)
------------ ------------
Net decrease in cash and cash equivalents ...................... (5,785,370) (22,090,139)
6
PATRIOT NATIONAL BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued
(Unaudited)
Six Months Ended
June 30,
2002 2001
------------------------------
Cash and cash equivalents
Beginning .......................................................... 27,032,811 33,065,071
------------ ------------
Ending ............................................................. $ 21,247,441 $ 10,974,932
============ ============
Supplemental Disclosures of Cash Flow Information
Cash paid for:
Interest ....................................................... $ 2,317,295 $ 3,700,114
============ ============
Income Taxes ................................................... $ 347,146 $ 645,700
============ ============
Supplemental disclosure of noncash investing and financing activities:
Transfer of held to maturity securities to
available for sale securities .................................. $ -- $ 11,796,300
============ ============
Unrealized holding gain on available for sale
securities arising during the period ........................... $ 140,147 $ 152,209
============ ============
Dividends declared on common stock ................................. $ 60,013 $ 48,007
============ ============
See accompanying notes to consolidated financial statements.
7
Notes to Consolidated Financial Statements
(1) The Consolidated Balance Sheet at December 31, 2001 has been derived from
the audited financial statements of Patriot National Bancorp, Inc.
("Bancorp") at that date, but does not include all of the information and
footnotes required by accounting principles generally accepted in the
United States of America for complete financial statements.
(2) The accompanying unaudited financial statements and related notes have
been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. Accordingly, certain information and footnote
disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United
States of America have been omitted. The accompanying consolidated
financial statements and related notes should be read in conjunction with
the audited financial statements of Bancorp and notes thereto for the
year ended December 31, 2001.
The information furnished reflects, in the opinion of management, all
adjustments, consisting of normal recurring accruals, necessary for a
fair presentation of the results of the interim periods presented. The
results of operations for the three and six months ended June 30, 2002
are not necessarily indicative of the results of operations that may be
expected for all of 2002.
(3) Bancorp is required to present basic income per share and diluted income
per share in its income statements. Basic income per share amounts are
computed by dividing net income by the weighted average number of common
shares outstanding. Diluted income per share assumes exercise of all
potential common stock in weighted average shares outstanding, unless the
effect is antidilutive. Bancorp is also required to provide a
reconciliation of the numerator and denominator used in the computation
of both basic and diluted income per share. The following is information
about the computation of income per share for the three and six months
ended June 30, 2002 and 2001.
Quarter ended June 30, 2002
Net Income Shares Amount
-----------------------------------
Basic Income Per Share
Income available to common shareholders $ 287,718 2,400,525 $ 0.12
Effect of Dilutive Securities
Warrants/Stock Options outstanding - 25,398 -
-----------------------------------
Diluted Income Per Share
Income available to common shareholders
plus assumed conversions $ 287,718 2,425,923 $ 0.12
===================================
8
Quarter ended June 30, 2001
Net Income Shares Amount
-----------------------------------
Basic Income Per Share
Income available to common shareholders $ 208,145 2,400,525 $ 0.09
Effect of Dilutive Securities
Warrants/Stock Options outstanding - 24,621 -
-----------------------------------
Diluted Income Per Share
Income available to common shareholders
plus assumed conversions $ 208,145 2,425,146 0.09
===================================
Six months ended June 30, 2002
Net Income Shares Amount
-----------------------------------
Basic Income Per Share
Income available to common shareholders $ 486,500 2,400,525 $ 0.20
Effect of Dilutive Securities
Warrants/Stock Options outstanding - 25,114 -
-----------------------------------
Diluted Income Per Share
Income available to common shareholders
plus assumed conversions $ 486,500 2,425,639 $ 0.20
===================================
Six months ended June 30, 2001
Net Income Shares Amount
-----------------------------------
Basic Income Per Share
Income available to common shareholders $ 515,722 2,400,450 $ 0.21
Effect of Dilutive Securities
Warrants/Stock Options outstanding - 27,112 -
-----------------------------------
Diluted Income Per Share
Income available to common shareholders
plus assumed conversions $ 515,722 2,427,562 $ 0.21
===================================
(4) Bancorp has two reportable segments, the commercial bank and the mortgage
broker. The commercial bank provides its commercial customers with
products such as commercial mortgage and construction loans, working
capital loans, equipment loans and other business financing arrangements,
and provides its consumer customers with residential mortgage loans, home
equity loans and other consumer installment loans. The commercial bank
segment also attracts deposits from both consumer and commercial
customers, and invests such deposits in loans, investments and working
capital. The commercial bank's revenues are generated primarily from net
interest income from its lending, investment and deposit activities.
The mortgage broker solicits and processes conventional mortgage loan
applications from consumers on behalf of permanent investors and
originates loans for sale. Revenues are generated from loan brokerage and
application processing fees received from permanent investors and gains
and origination fees from loans sold.
9
Information about reportable segments and a reconciliation of such
information to the consolidated financial statements for the three and
six months ended June 30, 2002 and 2001 is as follows (in thousands):
Quarter ended June 30, 2002
Mortgage Consolidated
Bank Broker Totals
--------------------------------------
Net interest income ..... $ 1,809 $ -- $ 1,809
Non-interest income ..... 317 816 1,133
Non-interest expense .... 1,774 633 2,407
Provision for loan losses 84 -- 84
Income before taxes ..... 268 183 451
Assets .................. 220,791 997 221,788
Quarter ended June 30, 2001
Mortgage Consolidated
Bank Broker Totals
--------------------------------------
Net interest income ..... $ 1,746 $ -- $ 1,746
Non-interest income ..... (74) 947 873
Non-interest expense .... 1,553 679 2,232
Provision for loan losses 58 -- 58
Income before taxes ..... 61 268 329
Assets .................. 182,576 1,152 183,728
Six months ended June 30, 2002
Mortgage Consolidated
Bank Broker Totals
--------------------------------------
Net interest income ..... $ 3,576 $ -- $ 3,576
Non-interest income ..... 357 1,620 1,977
Non-interest expense .... 3,364 1,270 4,634
Provision for loan losses 158 -- 158
Income before taxes ..... 411 350 761
Assets .................. 220,791 997 221,788
Six months ended June 30, 2001
Mortgage Consolidated
Bank Broker Totals
--------------------------------------
Net interest income ..... $ 3,494 $ -- $ 3,494
Non-interest income ..... 11 1,559 1,570
Non-interest expense .... 2,922 1,210 4,132
Provision for loan losses 102 -- 102
Income before taxes ..... 481 349 830
Assets .................. 182,576 1,152 183,728
(5) Certain 2001 amounts have been reclassified to conform with the 2002
presentation. Such reclassifications had no effect on net income.
10
(6) In June 2001, the Financial Accounting Standards Board issued SFAS No.
142 "Goodwill and Other Intangible Assets." SFAS No. 142 no longer
permits the amortization of goodwill and indefinite-lived intangible
assets. Instead, these assets must be reviewed annually (or more
frequently under prescribed conditions) for impairment in accordance with
this statement. This impairment test uses a fair value approach rather
than the undiscounted cash flows approach previously required by SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of." The goodwill impairment test under
SFAS No. 142 requires a two-step approach, which is performed at the
reporting unit level, as defined in SFAS No. 142. Step one identifies
potential impairments by comparing the fair value of the reporting unit
to its carrying amount. Step two, which is only performed if there is a
potential impairment, compares the carrying amount of the reporting
unit's goodwill to its implied value, as defined in SFAS No. 142. If the
carrying amount of the reporting unit's goodwill exceeds the implied
value of that goodwill, an impairment loss is recognized in an amount
equal to that excess.
Bancorp adopted the provisions of SFAS No. 142 effective January 1, 2002
and, as a result, goodwill is no longer amortized, and is evaluated for
impairment under SFAS No. 142. Based on Bancorp's initial goodwill
impairment test, no impairment losses have been recognized related to
goodwill upon the adoption of SFAS No. 142. Bancorp will perform the
required annual impairment reviews as of October 31 of each year. In
addition, the following represents the effect of adopting SFAS No. 142 on
Bancorp's net income and earnings per share for all periods presented.
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
--------------------------- ---------------------------
Reported net income ......... $ 287,718 $ 208,145 $ 486,500 $ 515,722
Add goodwill amortization.... -- 31,003 -- 61,930
----------- ----------- ----------- -----------
Adjusted net income ......... $ 287,718 $ 239,148 $ 486,500 $ 577,652
=========== =========== =========== ===========
Basic earnings per share
Reported net income ....... $ 0.12 $ 0.09 $ 0.20 $ 0.21
Goodwill amortization ..... -- 0.01 -- 0.03
----------- ----------- ----------- -----------
Adjusted net income ....... $ 0.12 $ 0.10 $ 0.20 $ 0.24
=========== =========== =========== ===========
Diluted earnings per share
Reported net income ....... $ 0.12 $ 0.09 $ 0.20 $ 0.21
Goodwill amortization ..... -- 0.01 -- 0.03
----------- ----------- ----------- -----------
Adjusted net income ...... $ 0.12 $ 0.10 $ 0.20 $ 0.24
=========== =========== =========== ===========
11
(7) Other comprehensive income which is comprised solely of the change in
unrealized gains and losses on available for sale securities is as
follows:
Three Months Ended Six Months Ended
June 30, 2002 June 30, 2002
Before Tax Tax Net of Tax Before Tax Tax Net of Tax
Amount Effect Amount Amount Effect Amount
--------------------------------------------------------------------------------
Unrealized holding gain
arising during the period ....... $ 395,375 $(146,302) $ 249,073 $ 108,872 $ (33,810) $ 75,062
Reclassification adjustment
for losses recognized in income.. -- -- -- 31,275 (9,711) 21,564
--------- --------- --------- --------- --------- ---------
Unrealized holding gain on
available for sale securities,
net of taxes .................... $ 395,375 $(146,302) $ 249,073 $ 140,147 $ (43,521) $ 96,626
========= ========= ========= ========= ========= =========
Three Months Ended Six Months Ended
June 30, 2002 June 30, 2002
Before Tax Tax Net of Tax Before Tax Tax Net of Tax
Amount Effect Amount Amount Effect Amount
--------------------------------------------------------------------------------
Unrealized holding loss
arising during the period ....... $(334,614) $ 134,725 $(199,889) $(119,617) $ 48,142 $ (71,475)
Adjustment for unrealized
losses of held to maturity
securities transferred to
available for sale securities ... 154,147 (62,061) 92,086 154,147 (62,039) 92,108
Reclassification adjustment for
losses recognized in income ..... 117,679 (47,379) 70,300 117,679 (47,362) 70,317
--------- --------- --------- --------- --------- ---------
Unrealized holding (loss) gain
on available for sale securities,
net of taxes .................... $ (62,788) $ 25,285 $ (37,503) $ 152,209 $ (61,259) $ 90,950
========= ========= ========= ========= ========= =========
(8) During the six months ended June 30, 2002 the Bank entered into the
following borrowing transactions:
Amount Rate Maturity
------ ---- --------
Securities sold under agreements to repurchase:
$2,900,000 1.92% 08/23/2002
$2,800,000 2.69% 05/23/2003
Federal Home Loan Bank Advances:
$2,000,000 4.48% 05/13/2005
$2,000,000 5.11% 05/14/2004
12
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has caused this amendment to its report to be signed on its behalf by
the undersigned thereunto duly authorized.
PATRIOT NATIONAL BANCORP, INC.
(Registrant)
By: /s/ Robert F. O'Connell
---------------------------
Robert F. O'Connell,
Senior Executive Vice President
Chief Financial Officer
(On behalf of the registrant and as
chief financial officer)
August 15, 2002