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Patriot National Bancorp in Stamford, Conn., has appointed one of its director to become its chief executive.
February 27 -
Late last year, several ailing banks landed new equity and several hit the ground running in 2011. Still, analysts caution that some recaps could hit the wall in 2012.
December 19 -
Shareholders of BankUnited (BKU) in Miami Lakes, Fla., are preparing to sell about one-fifth of the company's outstanding stock.
March 6 -
A key investor in Webster Financial is reducing its stake in the Waterbury, Conn., company.
December 7 -
OceanFirst Financial in Toms River, N.J., has hired the former chief executive of Patriot National Bancorp as its president.
February 28 -
Four months after the Portland, Ore., company lost a deal in the state to a higher bidder, Umpqua has agreed to buy Circle Bancorp in Novato, Calif., for about $25million.
August 30 -
Columbia Banking System has agreed to buy West Coast Bancorp. The acquisition, valued at about $506 million, will create a community bank in the Pacific Northwest with more than $7 billion in assets.
September 26
Patriot National Bancorp (PNBK) is struggling to stay profitable, but its biggest investor remains pleased with its progress.
For Michael Carrazza, all is going according to plan. That includes a recent decision to make veteran banker Kenneth Neilson the Stamford, Conn.,
Neilson succeeded Christopher Maher, who quickly resurfaced in New Jersey as president of OceanFirst Financial (OCFC). Carrazza, Patriot National's chairman, says the transition was planned, with Neilson's ascension marking the "second phase" of his strategy for the $618 million-asset company.
"We had an aggressive plan to cure asset quality issues, bring [the company] back to compliance health and bring it back to" profitability, says Carrazza, chairman and chief executive of Solaia Capital Advisors. (He characterizes his involvement with Patriot National as a "stand-alone" investment that is not associated with Solaia.)
Carrazza appears to be sticking to a popular playbook for private-equity investors, particularly those that fund community banks, says Sam Hamadeh, chief executive of the financial data provider PrivCo. New management "closes money-losing branches and cuts costs to bring the banks from distressed to profitability," he says.
Patriot National used Carrazza's 2010 investment to arrange a
The company is still struggling with profitability at its bank. Patriot National Bank lost roughly $1.3 million in the fourth quarter after recording a $2.4 million loan-loss provision, according to filings with the Federal Deposit Insurance Corp. For the year, the bank earned $463,000.
Neilson's move from the boardroom to the corner office could indicate that Carrazza is eyeing an exit strategy, says Peter Kovalski, a portfolio manager at Alpine Woods Capital Investors who invests in bank stocks. "A rule of thumb is that private equity has a three- to five-year time horizon," he says.
Most funds began pumping money into community banks in 2010, suggesting that it is too soon for private equity to pull out, Hamadeh says.
To be sure, there have been some notable pullbacks by private-equity firms in recent months.
Four private-equity firms — Blackstone Group, WL Ross & Co., Carlyle Group and Centerbridge Partners — and a few other investors said last week that they would sell
In December, Warburg Pincus
Exit strategies have also involved mergers.
Shoreline Capital Partners in Mill Valley, Calif.,
It might be too soon to discuss private equity's wholesale retreat from community banks. Still, those investors usually look to exit once a management team can show that "underperforming loan rates have improved, with full financial controls in place," Hamadeh says.
Carrazza would not discuss any timetables for his Patriot National investment. He also declined to discuss the possibility of looking for a buyer. "We want to make sure we have a very strong, capable platform," he says. "Our focus is exclusively on profits and earnings."
Neilson could not be reached for comment. The company also has a relatively new chief financial officer; William Gray, who joined the company in August 2011, became the CFO in November when Robert O'Connell retired.
Carrazza claims that Patriot National was in such bad shape when he made his investment that it was unclear if he would break even, much less make a profit.
"I don't think any bank that had the credit statistics that Patriot had has survived," he says. "The challenge was monumental."
About 15% of Patriot National's assets were nonperforming at Sept. 30, 2010, according to the Federal Deposit Insurance Corp. At the end of last year's third quarter, they made up just 5% of total assets.
The company's Tier 1 capital ratio was 14% at Sept. 30, 2012, compared with 6.4% just before Carrazza's investment. Return on equity improved from minus-37.4% to 0.8% over the same time.
Patriot National's turnaround is largely completed, Maher says, adding that it was time for someone else to come in and move the company in a new direction.
"The fixing job is finished," says Maher, who also
