Patriot National Bancorp, Inc. (NASDAQ: PNBK), the parent company of Patriot Bank, N.A., and American Challenger Development Corp. have decided to merge in an attempt to create a “purpose-driven, digital-first national bank,” according to a release.
Patriot is a small bank based in Stamford, CT with total assets of less than one billion. In October, Patriot announced Q3 net earnings of $1.3 million. As the banking landscape changes, digital-first banks can operate beyond physical locations as branches decline in relevance.
Patriot is expected to acquire American Challenger via a reverse subsidiary merger, with American Challenger surviving as a wholly-owned subsidiary of Patriot. At the time of the merger, American Challenger common stockholders will receive shares of Patriot common stock as consideration and American Challenger preferred stockholders will receive cash.
Patriot also announced today that it has entered into separate definitive agreements with certain investors, consisting of a private placement in an aggregate principal amount of approximately $540 million of newly issued Patriot voting and non-voting common stock priced at $17.69 per share, warrants for the purchase of non-voting common stock of Patriot, and preferred stock of Patriot Bank.
Patriot intends to raise an additional principal amount of at least $350 million, for a total capital raise of at least $890 million and intends to negotiate and enter into definitive agreements with other investors for the purchase of subordinated debt securities and preferred stock of Patriot in addition to further sales of Patriot common stock and warrants for the purchase of Patriot non-voting common stock.
Patriot Bank says it will adopt the American Challenger business plan and will operate as two divisions – the Patriot Bank Division, which will continue to operate Patriot Bank’s existing business, and the American Challenger Division, which will execute the high-growth American Challenger business plan.
The transactions have been approved by the boards of directors of Patriot and American Challenger and are expected to close in the first quarter of 2022, subject to the satisfaction of customary closing conditions, including receipt of required regulatory approvals and approval by Patriot’s shareholders.
Michael Carrazza, Chairman of Patriot, commented:
“We’re excited to have engineered this industry-disrupting merger. The combination transforms Patriot to what will become the largest digital bank in the U.S. Customers will benefit from an expanded array of services and a tech-savvy banking experience, while shareholders should benefit from the compelling value that will be created. Patriot’s team will remain intact and will be complemented by American Challenger’s team and digital platform capabilities.”
Felix Scherzer, Chairman and President of American Challenger, stated:
“We could not be more excited about the opportunities provided by this merger as it propels our purpose of shaking up banking in your interest.”
Raymond J. Quinlan, Board Member and CEO of American Challenger, will serve as CEO of the combined entity. Quinlan said they are building a digital bank that will leverage the best in tech to serve their customers:
“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.”