After Patriot Bank and American Challenger Development Corp. combine in a reverse subsidiary merger that is expected to close next year, Patriot will convert to the technology platform that American Challenger has been building for its digital bank.
The parent company of Patriot Bank has agreed to acquire American Challenger Development Corp., both based in Stamford, in a deal valued at approximately $119 million. The reverse subsidiary merger will see American Challenger’s leadership take over management of the combined entity, and Patriot will adopt American Challenger’s business plan and technology, the companies said in a statement Monday.
Following the merger, the combined company will operate with two divisions: the Patriot Bank division, which will continue to operate Patriot Bank’s existing business, and the American Challenger division.
American Challenger, which formed in January 2020, said it has been developing proprietary technology and data architecture in partnership with several financial technology and software companies, including Temenos, Mortgage Cadence, Wolters Kluwer and Wealth Dynamix. The challenger bank has partnered with Cognizant to implement the platform.
American Challenger said it was “reimagining what it means to be a bank,” noting that its infrastructure would let the digital bank deliver better rates and customer experience.
“American Challenger believes that caring for customers’ money is caring for them – their values, their beliefs, their families, and their planet,” the statement said.
The companies said converting Patriot to American Challenger’s platform would let the bank operate with a largely fixed technology cost structure as opposed to a more variable cost structure typical at most banks.
“Patriot Bank expects this cost structure to drive efficiencies and allow it to share the benefits with customers by offering competitive rates on its products and a differentiated, premium customer experience,” the statement said.
The technology will include the ability to connect with customers via video, account opening and funding initiation in less than a minute, and mortgages that close in as few as 20 days.
The American Challenger division of the combined company will offer a nationwide digital bank.
“American Challenger was founded to share digital cost efficiencies with the consumer through better rates and bring a new banking experience to the segment of the population who research has shown is looking for a partner to help them achieve even more, in a simpler, smarter way,” Felix Scherzer, American Challenger’s founder, chairman and president, said in Monday’s statement. “This segment consists of savvy consumers of banking products and services, spanning generations from millennials to ‘Gen X’; from those who have begun to build their personal wealth, to entrepreneurially-minded people in the prime of their lives. We are a digital-first bank that puts care into every moment of customers’ financial futures, from savings accounts that put their interest first, to mortgages that move at the speed of their lives.”
The boards of Patriot and American Challenger have approved the deal, which is expected to close in the first quarter of 2022, subject to the regulatory approvals and other closing conditions. Patriot’s shareholders will need to approve the deal.
