The Small Business Administration’s high-flying 7(a) lending program continues to attract attention from banks. The latest example: Patriot National Bancorp in Stamford, Conn., which announced plans Tuesday to acquire Hana Financial’s SBA lending unit for $83 million.
The $852 million-asset Patriot became an approved SBA lender last year with plans for its involvement to grow into a major line of business. Patriot President Richard Muskus, however, acknowledged Tuesday that Patriot’s in-house team was still “in its infancy.” The Hana deal would elevate it to big-time status in quick order.
During the SBA’s 2017 fiscal year, which ended Sept. 30, Hana ranked as the nation’s second-largest nonbank 7(a) lender. It closed 147 loans for $133.6 million, according to agency statistics. Since its inception, Hana’s SBA unit has originated nearly $1 billion in 7(a) loans.
“Hana SBL has built a strong reputation with a highly regarded and experienced team,” Michael Carrazza, Patriot’s Chairman and CEO, said in a press release. “The integration of Hana SBL into Patriot’s growing specialty finance category delivers impactful market presence, product diversification and significant earnings accretion.”
Patrick Shim, Hana’s senior vice president of corporate strategy and administration, called the unit “the best of the best.”
Patriot plans to rebrand the business with the Patriot name.
Carrazza and Patriot did not detail how much they expect acquiring Hana Small Business Lending would add to earnings in 2018. The company reported record profits of $4.1 million in 2017.
As part of the deal, Patriot will acquire $120 million in 7(a) loans for its portfolio, as well as the servicing rights to another pool of loans totaling $370 million. According to Muskus, the management team leading Hana’s SBA operation will join Patriot.
The transaction is awaiting regulatory approval, which is expected to come in the second quarter, Shim said.
Hana marks the second significant acquisition Patriot has announced in the past six months. On Aug. 1, it said it would acquire the $73 million-asset Prime Bank in Orange, Conn., for about $10.4 million. That deal is expected to close before the end of the first quarter, according to Muskus.
Under 7(a), SBA guarantees small-business loans of up to $5 million. Through Jan. 26, the program’s guarantee volume topped $8.7 billion, an increase of 17% from the same period in fiscal 2017.