Patriot Bank plans to become ‘largest digital bank’ in U.S.
STAMFORD — The parent company of Stamfordbased Patriot Bank announced Monday a merger intended to create the “largest digital bank in the U.S.,” but officials say they are keeping branches open and are not planning layoffs.
Through a “reverse subsidiary merger,” Patriot National Bancorp will acquire American Challenger Development Corp., which was formed in January 2020 to establish a new digital national bank headquartered in Stamford.
Patriot is the latest of several Connecticut banks to announce a merger deal this year. Bridgeport-based People’s United Bank is being acquired by M&T Bank, and Waterbury-based Webster Bank is combining with Sterling National Bank.
“The markets are moving to more of a digital banking environment. For Patriot, this is a transformational opportunity to leap to the forefront of the future of banking,” Patriot Chairman Michael Carrazza, who will remain on the company’s board as vice chairman following the merger, said in an interview. “Patriot will stay intact, and that just creates even more opportunities for its employees and customers.”
Following the announcement, Patriot shares closed Monday at about $15, a 50 percent jump from Friday. After the merger is completed, Patriot will continue to trade under the ticker “PNBK.”
The merger, whose “implied total transaction value” is approximately $119 million, is expected to close in the first quarter of 2022. To support the transaction, Patriot announced agreements with investors to provide $540 million as part of an $890 million recapitalization program.
Patriot has 130 employees and operates branches in Darien, Fairfield, Greenwich, Milford, Norwalk, Orange, Stamford, Westport, as well as Scarsdale, N.Y. It also operates “express banking locations” at Housatonic Community College in Bridgeport, in downtown New Haven and at Westfield Trumbull mall. In addition, it maintains Small Business Administration lending offices in Stamford, and across locations in Florida, Georgia, Ohio, along with a Rhode Island operations center.
“This merger is about building, not consolidating,” Carrazza said. “We intend to be hiring more employees — particularly in the state of Connecticut — and not having any people leaving.”
Raymond Quinlan, chief executive officer and board member of American Challenger, will serve as CEO of the post-merger company.
“We are building a digital bank that will leverage the best in technology and operational excellence to serve our customers and communities,” Quinlan said in a statement. “This will be evident in the design and pricing of our banking products, in our delivery of superior personal service and in our clear commitment to corporate social responsibility. We believe in ‘banking for good’ and through our actions we will demonstrate that we are a purpose-driven financial institution.”
American Challenger will become a wholly owned subsidiary of Patriot, and the bank will operate as two divisions. The Patriot Bank division will continue to operate Patriot Bank’s existing business, alongside an American Challenger division.
Patriot will adopt American Challenger’s proprietary technology platform for its operations — allowing the bank “to operate with a technology cost structure that is largely fixed, in contrast to the typical, more variable cost structure at most banks,” company officials said in their announcement.
“We have a world-class team,” Carrazza said. “Second, we have a significant amount of capital. Third, we have a team that can execute and a track record to back it up. And we have a compliant, well-operating platform from which to springboard. Those four ingredients will make it the largest digital bank in America. There’s no other competitor that has all those ingredients.”
Customers can expect to see post-merger benefits, including “competitive rates” on its products and offerings such as video-based customer service, account opening and funding initiation in less than a minute, as well as mortgages that close in as few as 20 days, according to Patriot officials.
“The branch network will remain in place,” Carrazza said. “Customers are free to continue to using the traditional branch banking network. This is augmenting it by allowing those capabilities to be digitally remote.”
As of Sept. 30, Patriot operated with total assets of about $952 million, net loans of about $705 million and total deposits of around $735 million. For the first nine months of 2021, it recorded net interest income of nearly $19 million, up 16 percent from the same period in 2020.
Also Monday, American Challenger announced a plan to launch a strategic partnership with a subsidiary of Sunlight Financial Holding, a financing platform for U.S. residential solar and energy-efficient home improvement projects, related to a loan-purchase program for up to $1.75 billion. The initiative will focus on loans for solar energy systems, as well as battery storage.
“American Challenger was founded to share digital cost efficiencies with the consumer through better rates and bring a new banking experience to the segment of the population who research has shown is looking for a partner to help them achieve even more, in a simpler, smarter way,” American Challenger Chairman and President Felix Scherzer said in a statement. “This segment consists of savvy consumers of banking products and services, spanning generations from millennials to ‘Gen X;’ from those who have begun to build their personal wealth, to entrepreneurially minded people in the prime of their lives.”