Patriot National in Connecticut mulls sale

Struggling to chart a new growth path after nixing its planned merger with an aspiring neobank, Stamford, Connecticut-based Patriot National Bancorp said it was exploring new strategic initiatives that could include a sale of the company.

The $974 million-asset Patriot disclosed in a regulatory filing this week that it enlisted the investment banking and advisory firm Performance Trust Capital Partners to help firm up its options, which could include a capital raise, a strategic partnership or an outright sale.

Grappling with deterioration in its commercial and consumer loan books, as well as high deposit costs tied to elevated interest rates, the bank reported a $4.2 million loss for 2023. It continued to struggle through the first nine months of this year, losing $30 million over the three-quarter period that ended Sept. 30.

The bank's shares are down more than 40% this year, while the KBW Nasdaq Bank Index is ahead about 37%.

The company declined to comment beyond its regulatory filing.

The strategic evaluation follows the July 2022 termination of the bank's plan to combine with American Challenger Development Corp. When that transaction was announced in 2021, Patriot valued the deal at $119 million in cash and stock.

The deal was called off after the two companies determined they could not "satisfy certain of the closing conditions to the merger and recapitalization," according to a press release from American Challenger at the time. The deal had called for Patriot to raise at least $875 million of fresh capital.

The Patriot-American Challenger transaction was one of two deals announced in 2021 between traditional community banks and financial technology companies that ultimately hit snags.

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BM Technologies in Radnor, Pennsylvania, which spun off from Customers Bancorp, said around the same time that it would pay $23 million to acquire the $154 million-asset First Sound Bank in Seattle. That deal fell through after regulatory delays pushed it beyond an expected closing window.

First Sound earlier this year sold to Lakewood, Washington-based Harborstone Credit Union. In October, BM Technologies agreed to sell to First Carolina Bank in Rocky Mount, North Carolina.

Patriot said in its regulatory filing this week that it has evaluated potential new initiatives and sought to minimize expenses. The bank's engagement with Performance Trust could formalize and advance that process.

No decision has been made about any potential transaction, Patriot noted in its filing this week. It said there was no certainty that a deal would develop.

Even before its most recent earnings weakness, Patriot had been under a microscope. In 2021, the Office of the Comptroller of the Currency ended a three-year formal agreement that required the bank to strengthen its board oversight and upgrade the auditing of its loan-loss allowance.

While under OCC orders, banks are often expected to focus on improving compliance, rather than on growth. Patriot's assets have essentially been flat since the order was put in place.

Though the accord with the OCC did not come with any fines, the regulator said in 2018 that Patriot was in "troubled" condition and needed to improve its corporate governance, capital and strategic planning, internal auditing, credit administration, methodology for loan and lease losses, administration of leveraged loans, asset-liability management and interest-rate risk modeling.