Kerry J. Tomasevich
Counsel 205 Church Street
203.784.8204 P.O. Box 1936 New Haven
Fax: 203.865.7865 New Haven, CT Hartford
ktomasevich@tylercooper.com 06509-1910 Stamford
www.tylercooper.com 203.784.8200 Madison
June 21, 2005
BY EDGAR AND OVERNIGHT COURIER
Mr. William Friar
Barry McCarty, Esq.
Securities and Exchange Commission
Division of Corporation Finance
450 Fifth Street, N.W.
Judiciary Plaza
Washington, D.C. 20549
RE: PATRIOT NATIONAL BANCORP, INC.
REGISTRATION STATEMENT ON FORM SB-2
COMMISSION FILE NO. 333-124312
Dear Mr. Friar and Mr. McCarty:
Enclosed for each of you are three copies of Amendment No. 1 to the
Registration Statement (the "Registration Statement") on Form SB-2 (File No.
333-124312) of Patriot National Bancorp, Inc. (the "Company") relating to the
registration under the Securities Act of 1933, as amended (the "Securities
Act"), of shares of common stock, $2.00 par value per share, of the Company,
having an aggregate offering price of $12,000,000, which is being filed with the
Securities and Exchange Commission (the "Commission") today. Two of the enclosed
copies have been marked to indicate all changes made to the Registration
Statement as originally filed with the Commission on April 25, 2005.
Set forth below are responses to the comments provided to Charles F.
Howell of the Company by William Friar in a letter dated May 25, 2005. All
responses set forth below are keyed to the sequential numbering of the comments
in such letter and to the headings used in such letter, a paper copy of which
has been forwarded to each of you. All factual statements and information set
forth below are based entirely on information furnished to us by the Company and
its representatives, which we have not independently verified. All statements of
belief are the belief of the Company.
Mr. William Friar
Barry McCarty, Esq.
June 21, 2005
Page 2
GENERAL
COMMENT 1: Please update the filing to a date as most recently as
practicable. Please include information for the interim
period ended March 31, 2005. Refer to Item 310(b) of
Regulation S-B.
RESPONSE: The registration statement has been updated to a date as
most recent as practicable, to include information for the
quarter ended March 31, 2005.
COVER PAGE
COMMENT 2: We note that you omit pricing information and information
regarding arrangements for the standby purchase. Please be
aware that we may have additional comments or require
additional time to complete our review once you complete
this information.
RESPONSE: The registration statement does not yet contain pricing
information, which has been omitted in reliance on Rule
430A promulgated under the Securities Act of 1933, as
amended, and information regarding the standby purchasers
has not yet been updated. The Company will file an
amendment containing information regarding the standby
purchasers as soon as practicable.
PROSPECTUS SUMMARY - PAGE 1
COMMENT 3: We note the second paragraph of this section. Please
revise the prospectus to make clear from context all
references so that this sentence will be unnecessary.
Please see Rule 421.
RESPONSE: The sentence identified in Comment 3 states that the terms
"we," "our" and "us" as used in the prospectus refer to
the Company and its subsidiary, Patriot National Bank. The
Company has reviewed the prospectus and has made revisions
that the Company believes makes clear from context that
the terms "we," "our" and "us" refer to the Company AND
Patriot National Bank, on a consolidated basis. The
Company conducts no operations of its own. Where
appropriate, the prospectus distinguishes between the
Company and its subsidiary (that together constitute the
consolidated entity) by referring to the Company as
"Bancorp" and the subsidiary as the "Bank." Accordingly,
the second paragraph of the Prospectus Summary has been
deleted.
Mr. William Friar
Barry McCarty, Esq.
June 21, 2005
Page 3
OUR COMPANY - PAGE 1
COMMENT 4: The disclosure beginning with this caption through page 4
is too promotional. Please balance the presentation. For
example, but not limited to, the fifth bullet of the
Financial Highlights points to Net Income growth. We note
that Net Income decreased 30% from $1.34 Million in 2003
to $926,000 in 2004. This material decrease in Net Income
is not mentioned in your highlights. Please revise to
balance the entire section, pages 1 through page 4. Also
please delete the five year compound growth information at
the bottom of page 1. You may give that same information
broken out by each year, which we believe gives
shareholders a more accurate picture of the discussed
change.
RESPONSE: The prospectus has been revised to include updated
financial information through the first quarter of 2005.
The disclosure appearing on pages one through four also
references the first quarter of 2005 and that information,
together with changes made pursuant to the Staff's
comments, provides a more balanced presentation of the
Company. For example, the bullet points containing
five-year compound growth rates appearing under the
caption "Financial Highlights" in the original filing have
been revised to delete the five-year compound growth
rates.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES - PAGE 28
COMMENT 5: Please delete the word "certain" from the heading and
narrative. Please revise to disclose all material federal
income tax consequences of the subscription offering to
current shareholders. In addition, please identify tax
counsel and file their opinion and consent or advise us
why no opinion will be filed.
RESPONSE: The prospectus has been revised to delete the word
"certain" from the heading and the narrative. The Company
believes that the discussion of the federal income tax
consequences of the rights offering to the existing
shareholders discloses all tax consequences to which the
shareholders may be subject, and that the consequences are
not material in nature. Accordingly, the Company has not
filed as an exhibit an opinion of counsel, an independent
public or certified public accountant or a revenue ruling
from the Internal Revenue Service, supporting the tax
matters and the consequences to the shareholders.
Mr. William Friar
Barry McCarty, Esq.
June 21, 2005
Page 4
USE OF PROCEEDS - PAGE 30
COMMENT 6: Please provide greater specificity as to how the proceeds
will be used. For example disclose how many branches you
anticipate opening in 2005 and 2006 and the estimated
costs to open these branches or the historical estimated
average cost to open a new branch.
RESPONSE: The disclosure under the "Use of Proceeds" has been
expanded to reflect that the Company expects to open one
new branch in 2005 as well as an estimate of the Company's
historical average branch opening capital costs. The
Company is unable to estimate accurately its total branch
operating costs because certain costs vary typically
depending on, among other things, the prevailing rental
rates in the branch office local area, the size of the
branch, the availability of "turn-key" facilities, and the
number of employees. The text has been revised to disclose
the existence of these variable costs and the inability of
the Company to estimate them accurately. In addition, the
section has been revised to disclose that proceeds also
will be used to satisfy regulatory capital requirements of
the Bank, which will increase in connection with business
growth generated by new and existing branches.
MANAGEMENT'S DISCUSSION AND ANALYSIS
LOANS - PAGE 38
COMMENT 7: Reference is made to the first sentence in the second
paragraph under "Commercial Real Estate Loans" on page 38.
Please also disclose whether or not you originate fixed
rate commercial real estate loans and if you do, what is
the longest term fixed rate commercial real estate loan
that you will hold in your portfolio.
RESPONSE: This disclosure, now appearing at the top of page 37, has
been revised to reflect that the Company originates fixed
rate commercial real estate loans. The additional
disclosure includes a description of the longest term
fixed rate commercial real estate loan currently held in
the Company's portfolio.
COMMENT 8: We note your disclosure on page 39 that at December 31,
2004 you had two commercial real estate loans that were
non-accrual loans that were current as to principal and
interest. Please revise to describe the nature of the two
non-performing loans and describe the timing and
circumstances
Mr. William Friar
Barry McCarty, Esq.
June 21, 2005
Page 5
that led to your determination that these should be placed
on non-accrual status. Revise to describe any changes in
status or performance subsequent to December 31, 2004 and
quantify the amount of any specific allowance attributable
to these loans.
RESPONSE: The disclosure concerning the commercial real estate loans
that were non-accrual loans has been revised to reflect
changes in circumstances that occurred after the initial
filing of the registration statement. One of the
commercial real estate loans that was previously
categorized as a non-accrual loan in the initial filing
has been placed into accrual status, while a different
commercial real estate loan has been placed into
non-accrual status. This process of continually reviewing
and periodically revising loan classifications based on
changing factual circumstances is customary at banking
institutions.
Supplementally, we advise you that, with respect to the
two loans previously described in the prospectus as
non-accrual:
o The two non-accrual loans had become delinquent
as to payment of principal and interest prior
to being placed in non-accrual status.
o After these loans had been placed in
non-accrual status, they became current again
as to payment of principal and interest.
o The Bank elevates loans from non-accrual to
accrual status only if the borrower is in
compliance with all loan covenants and only
after the borrower has been current as to
principal and interest payments for at least
six consecutive months.
CRITICAL ACCOUNTING POLICIES - ALLOWANCE FOR LOAN LOSSES - PAGE 42
COMMENT 9: We note your disclosure on page 13 that a substantial
portion of your loans are unseasoned and lack an
established record of performance. Please revise your
critical accounting policy discussion to describe the
nature of and quantify the amount of unseasoned loans.
Describe how management considers and compensates for the
lack of historical performance related to unseasoned loans
when determining the amount of the allowance for loan
losses. Refer to Section V of Interpretive Release No.
33-8350.
Mr. William Friar
Barry McCarty, Esq.
June 21, 2005
Page 6
RESPONSE: The critical accounting policy disclosure appearing on
pages 41-43 has been revised to make specific reference to
the nature of unseasoned loans. The disclosure has been
expanded to include the factors considered by the
Company's management when taking into account the lack of
seasoning in the Company's portfolio. The factors related
to seasoning have consistently been considered by the
Company in establishing its allowance for loan losses.
LIQUIDITY - PAGE 50
COMMENT 10: We note your disclosure on page F-24 that you intend to
open two new branch offices in 2005. Please revise to
quantify your estimate of the impact on liquidity related
to your proposed 2005 branch openings. Refer to Item
303(b) of Regulation S-B.
RESPONSE: The disclosure under the caption "Liquidity" has been
revised to reflect the impact of opening one new branch
office in 2005 as well as the availability of additional
capital to support the Company's anticipated deposit
growth. Generally, banks, including Patriot National Bank,
experience an improvement in liquidity from the opening of
new branches as deposit activity tends to exceed loan
activity from the new branch during the first few years
after opening. In addition, the disclosure on page F-24
has been revised to conform to the disclosure elsewhere in
the prospectus that the Company currently intends to open
only one new branch in 2005.
CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - AVAILABLE FOR SALE SECURITIES - PAGE F-16
COMMENT 11: We note your disclosure that management believes that none
of the unrealized losses on available for sale securities
are other than temporary. Please provide us with your
comprehensive analysis describing how you determined that
these investments were not other than temporarily
impaired. Refer to SAB Topic 5M and provide us with your
analysis as of December 31, 2004 and March 31, 2005. In
your analysis please include, but not limit to, the
following:
o The nature of the investments;
o Severity and duration of impairment;
o The investee credit rating and asset quality;
and
Mr. William Friar
Barry McCarty, Esq.
June 21, 2005
Page 7
o Your intent and ability to retain the
investments for a period of time sufficient to
allow for any anticipated recovery in market
value.
RESPONSE: The Company's securities portfolio consists almost
entirely of debt and mortgage-backed securities issued by
the U.S. Government, Government agencies and Government
sponsored agencies.
The Company considers the severity of any impairment by
measuring the extent to which securities are in an
unrealized loss position. The Company distinguishes the
duration of any impairment based on the length of time
that any securities have been in an unrealized loss
position; either less than 12 months or 12 months or more.
At March 31, 2005, of the securities with unrealized
losses, there were five U.S. Government agency or
Government sponsored agency obligations and 13 mortgage
backed securities that had unrealized losses for a period
in excess of twelve months with a combined current
unrealized loss of $1.1 million. At December 31, 2004, the
Company had 27 available for sale securities in an
unrealized loss position with a combined current
unrealized loss of $705,000. See note 1 to the Company's
audited financial statements appearing on page F-16 of the
prospectus and note 2 to the Company's unaudited financial
statements appearing on page F-41 of the prospectus.
The Company does not believe that any of the unrealized
losses are other than temporary since they are the result
of changes in the interest rate environment and they
relate to debt and mortgage-backed securities issued by
U.S. Government agencies and Government sponsored
agencies. The Company considers the issuers of the
securities to be financially sound, and expects to receive
all contractual principal and interest related to these
investments.
The Company has both the intent and ability to hold these
securities to maturity if necessary or until the fair
value fully recovers. As a result, the Company believes
that these unrealized losses will not have a negative
impact on future earnings or a permanent effect on its
capital.
Exhibits
COMMENT 12: We note that certain exhibits (Legal Opinion and Standby
Agreement) will be filed by amendment. We may have comment
once those documents are filed.
Mr. William Friar
Barry McCarty, Esq.
June 21, 2005
Page 8
RESPONSE: A conformed copy of the Exhibit 5 legal opinion has been
filed as an exhibit to Amendment No. 1 to the registration
statement.
A "form of" Standby Purchaser Agreement was filed as
Exhibit 10.11 to the registration statement. The Company
expects that the Standby Purchasers in this transaction
will execute Standby Purchase Agreements substantially in
the form of the agreement filed as Exhibit 10.11. As a
result, the Company does not expect that it will be
required to file copies of the executed agreements in
accordance with the instruction to Item 601(a) of
Regulation S-B because all of the information omitted from
the form of Standby Purchase Agreement will be disclosed
in the prospectus.
We have contacted Mr. McCarty with regard to the schedule for reviewing
this filing. The Company will file an acceleration request pursuant to Rule 461
not later than two business days prior to the day on which the Company desires
the Commission to declare the Registration Statement effective and will provide
the information required by Rule 460 and Rule 15c2-8.
Please acknowledge receipt of this letter and the filing of the
enclosed materials by stamping the enclosed copy of this letter and returning it
in the enclosed postage prepaid envelope.
If you require any additional information concerning the Registration
Statement, please telephone William W. Bouton III, Esq. of this firm at (860)
725-6210 or the undersigned.
Thank you for your attention to this matter.
Sincerely,
/s/ Kerry J. Tomasevich
Kerry J. Tomasevich
Admitted only in Massachusetts and
The District of Columbia
Enclosures
cc: Charles F. Howell (Patriot National Bancorp. Inc.)
Robert F. O'Connell (Patriot National Bancorp. Inc.)
William W. Bouton III, Esq.
Malgorzata Bochenek, Esq.