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Patriot National Bancorp in Stamford, Connecticut, said it has attracted investor interest as it pursues a capital raise, but the company also expects to post another quarterly loss tied to vulnerable commercial real estate loans.
The $974 million-asset Patriot, which has yet to report its fourth-quarter earnings, disclosed in a regulatory filing late Friday that it expects to report a $9.5 million net loss, compared with $900,000 in net income a year earlier. The company cited a $7.7 million loan-loss provision linked to two large CRE loans.
In the third quarter, Patriot reported a $27 million third-quarter loss that reflected the full valuation of a $25.1 million deferred tax asset. Banks recognize a valuation allowance after concluding they may not be able to realize some or all of a deferred tax asset. In Patriot's case, this resulted in a hit to its capital. The bank's 9.29% total capital ratio on Sept. 30 fell short of the 11.5% regulatory threshold needed to qualify as well-capitalized.
Last month, the Office of the Comptroller of the Currency said Patriot's banking unit was in "troubled condition." The regulator also ordered Patriot to address issues related to its Bank Secrecy Act and anti-money-laundering compliance, among other problems.
Late last year, Patriot said it was exploring new strategic initiatives. It hired the investment banking and advisory firm Performance Trust Capital Partners to help it assess a strategic partnership, an outright sale or a capital raise.
The bank has since pursued the latter option. It said in January that it hired Banc of California founder Steven Sugarman to help raise capital.
Sugarman, who joined Patriot as president and a director of the holding company, helped recapitalize Pacific Trust Bank in 2010 and later rebranded it as Banc of California. He was also part of a group that acquired and recapitalized Commerce Home Mortgage in Irvine, California, in 2018. And he led an effort to recapitalize the Omaha, Nebraska-based Legent Clearing in 2011.
In its latest regulatory filing, Patriot said it had received "non-binding term sheets from investors seeking to purchase shares of common stock and preferred stock for an aggregate purchase price of approximately $60 million."
The company noted that "there is no assurance that the proposed transaction will occur or, if undertaken, what the final form, terms or timing of such a transaction will be." But Patriot said if it does complete the deal, it intends to use the net proceeds to bolster its capital ratios to meet regulatory requirements and to ensure it is in position for "stability and growth."