Patriot National Bancorp Inc. needed a silver bullet, and it got one in former-Banc of California Inc. CEO Steven Sugarman, the bank's financial advisers said.
The Stamford, Connecticut-based bank needed capital and hired Performance Trust Capital Partners LLC to conduct a private placement so as not to spook depositors and risk a run on the bank, Matthew Shields, head of FIG capital markets at Performance Trust Capital Partners, said in an interview. Patriot National selected Sugarman as a lead investor for the private placement and elected him as company president and a director to revive the bank's operations and capital ratios. On April 30, he took on the title of CEO.
Patriot National announced the purchase agreement, and the planned departure of then-CEO David Lowery, on March 20. A week later, the bank announced that it completed the roughly $57.8 million private placement and that its CFO, David Finn, would resign, followed by the retirement of the bank's Chief Credit Officer, Thomas Slater.
In an email to S&P Global Market Intelligence, Lowery called the capital raise a success and Sugarman's decision to bring in his own executives "a positive and appropriate step forward." The investment resulted in Patriot National Bancorp delaying the filing of its annual Form 10-K report. Once the company filed the report in mid-April, its stock jumped 143.0% between April 10 and April 17, after weeks of declines.
Now Sugarman and Patriot National Bancorp's board of directors are close to announcing replacements for the remaining executives who have announced their departure since the deal's closing.
"I thought that Patriot could be a really exciting investment platform, but in order for it to succeed, it needed to enhance its management team to enhance its strategic plan," Sugarman said in an interview.
Angie Miranda, who most recently served as Chief Risk Officer at the Sugarman-led The Change Company CDFI LLC, is joining Patriot in the same role — a new position at the bank — effective May 6. Some other executives may come from connections Sugarman made at Banc of California.
"I'm excited to work with a lot of people that I've worked with in the past," Sugarman said. "We're appreciative of the executives who are leaving for their stewardship to this private placement, understand their decisions to move on and have really talented people who we've reached out to and who will be joining the bank pretty shortly."
Long relationship
Shortly after Patriot National hired Performance Trust Capital Partners in December 2024 to evaluate strategic alternatives, the advisers determined that a private placement was the quickest and most discreet way to raise capital, Shields said. Investors could do their due diligence on the bank's condition and see if they wanted to get involved without the public knowing about the capital raise.
The advisers learned from Silicon Valley Bank's capital raise, which the company announced before it was completed, causing a run on the bank, Shields said. They did not want Patriot National Bancorp to have the same fate.
"Our framework, first and foremost, was the survival of the bank and the depositors," Lorenzo Zefferino, Performance Trust Capital Partners managing director, said in an interview. "That was our North Star."
Sugarman has a yearslong relationship with Performance Trust Capital Partners. The advisers zeroed in on him as a potential lead investor due to his past experience with Banc of California, which they considered "synonymous" with what was happening at Patriot National Bancorp, Zefferino said.
Sugarman, who joined Banc of California under its former name Pacific Trust Bank (PacTrust) as CEO in 2012, also cited his experience at the bank as a factor in his selection.
Sugarman resigned as chairman and CEO of Banc of California in January 2017 while the company was the target of a probe by the SEC. The probe followed a blog post from an anonymous short-seller who claimed improper ties between several company executives and Jason Galanis, who pleaded guilty in 2016 to market manipulation and fraud. Sugarman was not charged with any wrongdoing by the SEC, and a subsequent investigation by a law firm hired by the company found no evidence to support the allegations.
Banc of California paid $19.8 million to settle various class-action shareholder lawsuits related to the matter in 2019.
Exemption letter
To expedite the capital raise, the Performance Trust advisers were granted a Nasdaq exemption letter, which allowed the transaction to be completed without a shareholder vote, by demonstrating that the delay caused by a shareholder vote would jeopardize the bank's financial viability, according to Patriot National Bancorp's shareholder letter published March 5. This is the first time either of the investment bankers were granted such a waiver for a community bank deal, Shields said.
"It seems like every corner we turned, there was something else that we had to work on, negotiate," Shields said.
Patriot National has also been dealing with regulatory issues. According to a Jan. 21 regulatory filing, the Office of the Comptroller of the Currency (OCC) issued the bank a due date to reach specific capital ratios in a formal agreement between the OCC and the company's subsidiary, Patriot Bank NA.
The formal agreement notes that the OCC found unsafe or unsound practices and violations of law, rule or regulation, including those relating to strategic planning, capital planning, Bank Secrecy Act/Anti-Money Laundering risk management, payment activities oversight, credit administration and concentrations risk management.
