Patriot nears final close for third community bank fund

  • Fund III targets $300 mln
  • Makes growth investments in community banks
  • Congress just passed bill easing rules on smaller banks

Patriot Financial Partners, which focuses on investments in community banks, is nearing completion of its fundraising for its third pool as Congress just made life easier for small banks.

Patriot has raised more than its $300 million target for Patriot Financial Partners III, according to a person with knowledge of the firm. It’s not clear if the pool will hit the $400 million hard cap. Fund III is expected to close in the next few weeks, the person said.

The firm, based in Philadelphia, makes growth investments in community banks around the U.S. with $500 million to $5 billion in assets. Patriot doesn’t buy banks outright, which would force the firm to become a bank holding company.

Rather, the firm focuses on banks with high-quality loan portfolios and strong core deposit bases, according to a fund document seen by Buyouts. Growth comes from expanding each bank’s core deposits, the person with knowledge said.

The most important aspect of a community bank is the loan portfolio, including whether it’s commercial, personal or real estate-heavy. Patriot also examines the credit quality of the portfolio, as well as the nature and quality of the bank’s deposits, the document said.

Kirk Wycoff and Jim Lynch formed Patriot in 2007. The firm collected $300 million for its debut in 2008 and $305 million for Fund II in 2013. Patriot generated a gross internal rate of return of 22.2 percent and gross multiple of 2.2x across the two funds as of June 30, 2017, the fund document shows.

Prior to forming Patriot, Wycoff was chairman, president and CEO of Continental Bank from 2005 to 2014. He was chairman and CEO of Progress Financial Corp from 1991 to 2004.

Lynch was vice chairman of Sovereign Bancorp from 2005 to 2007 and chairman and CEO of the Mid-Atlantic division for Sovereign Bank from 2002 to 2007.

Other executives at Patriot include Jim Deutsch, former president and CEO of Team Capital Bank, Mike High, former executive vice president and chief financial officer for Harleysville National Corp, and Ira Lubert, who co-founded Lubert-Adler Management Co, LLR Management, Quaker Partners Management, LEM Capital and LBC Credit Management.

Wycoff and Lynch did not respond to a request for comment.

As Patriot brings its fresh pool into the market, Congress this week approved a banking bill that eases certain regulations on smaller banks.

The House and Senate passed the bill, which rolls back aspects of the Dodd-Frank financial reform act passed in 2010.

President Donald Trump is expected to approve the bill, which raises the threshold at which banks face stricter regulation to $250 billion from $50 billion. The bill also eases rules on mortgage lending for smaller lenders, generally with $10 billion in assets and under.

Action Item: Check out Patriot’s Form ADV here:

Co-sponsors of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Sen. Christopher Dodd (left) and Rep. Barney Frank, wait for U.S. President Barack Obama to sign it into law at the Ronald Reagan Building in Washington on July 21, 2010.  REUTERS/Larry Downing