If all goes according to plan, Patriot National Bancorp will be a much lighter company in the next few months.
Patriot, of Stamford, Conn., announced late Thursday that it is selling the majority of its nonperforming assets at a discount as it tries to right-size itself and move on from its problems. The company had $783 million of assets as of Dec. 31 and received a $50 million investment last quarter.
"We are making progress, and it is encouraging to know our nonperforming assets will be in the rearview mirror by the end of the month," Christopher D. Maher, the president and chief executive of Patriot, said in an interview. "This is just one step, but it is an important step."
For struggling companies that have managed to raise capital, bulk sale of nonperformers are becoming popular. Late last year, Flagstar Bancorp Inc. in Troy, Mich., announced the sale of nearly half of its nonperforming assets at 44 cents on the dollar. It appears Patriot’s problems are fetching a higher premium. The deal calls for ES Ventures One LLC to pay $65 million for the pool. Maher said the company is not disclosing the exact size of the pool until closing, but data from the Federal Deposit Insurance Corp. show Patriot National Bank had roughly $90 million of nonperforming loans at Dec. 31. That would suggest as much as 72 cents on the dollar.
Maher said the company received several bids.
Ken Segal, the director of asset finance services at Howe Barnes Hoefer & Arnett Inc., said the make-up of pools can sway prices. Patriot’s nonperforming assets are mostly high-end homes in southern Connecticut.
"I would hazard to guess that it has something to do with product mix. Single-family homes are priced better than land and construction," Segal said. "And there have not been a ton of distressed asset sales in New England."
Maher said the company anticipates recapturing the loss it will take on the sale within a year from cost savings and the redeployment of capital on performing loans that should yield interest income.
Patriot also announced that it would shutter four of its 19 branches by June 30.
"As we looked at the size of the bank and our future plans, we had too much operating expense," Maher said.
