In The News

Big Merger Touts Technology Vision

Patriot National Bancorp and American Challenger Development Corp. agree to merge and create the largest digital challenger bank in America and select the new Mortgage Cadence Platform to create a truly differentiated customer experience. The combination will create a purpose-driven, digital-first national bank offering better rates and a premium customer experience.

Patriot National Bancorp, Inc. (“Patriot” (NASDAQ: PNBK)), the parent company of Patriot Bank, N.A. (the “Bank”), and American Challenger Development Corp. (“American Challenger”), announced that they have entered into a definitive agreement (the “Merger Agreement”) under which Patriot will acquire American Challenger via a reverse subsidiary merger, with American Challenger surviving as a wholly owned subsidiary of Patriot (the “Merger”). Pursuant to the terms of the Merger Agreement, at the effective 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. The Merger will create a purpose-driven, digital-first national bank with highly efficient operations to generate industry leading financial performance and a technology driven banking experience that will offer competitive rates and a premium customer experience. 

Patriot also announced that it has entered into separate definitive agreements (the “Investment 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 (collectively, the “Recapitalization,” and together with the Merger, the “Proposed Transactions”). Pursuant to the terms and conditions of the Investment Agreements and the Merger Agreement, the Recapitalization and the Merger will be completed on the same day.

Following the Merger, Patriot Bank 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

As soon as practicable following the closing of the Proposed Transactions, Patriot Bank will adopt American Challenger’s proprietary technology platform for its operations. This should allow Patriot Bank to operate with a technology cost structure that is largely fixed, in contrast to the typical, more variable cost structure at most banks. Patriot Bank expects this cost structure to drive efficiencies and allow it to share the benefits with customers by offering competitive rates on its products and a differentiated, premium customer experience. This will include connecting with customers via video, account opening and funding initiation in less than a minute, as well as mortgages that close in as little as 20 days.

The Proposed 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, said, “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, said, “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, “We are building a digital bank that will leverage the best in technology and operational excellence to serve our customers and communities. 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.”

Separately, American Challenger is also announcing today it has entered into a term sheet, which, subject to agreement on definitive documentation, would result in a strategic partnership with Sunlight Financial LLC, the subsidiary of Sunlight Financial Holdings Inc., a leading financing platform for U.S. residential solar and energy-efficient home improvement projects, with respect to a new, multi-year loan purchase program for up to $1.75 billion. The program will focus on loans for solar energy systems, as well as battery storage, to help further accelerate the adoption of clean energy in homes across the United States. Scherzer said, “As a responsible, full-service digital bank, we will be focused on lending in ways that help communities and the planet, with the intent of investing over half of its assets in support of sustainability, local community, and good health.”