Tax refund may aid Mile High sale
The Longmont-based bank said Sept. 27 that its shares will be bought for $5.5 million by Strategic Growth Bancorp Inc. in El Paso, Texas. In addition, Strategic is to recapitalize the bank with $90 million, according to Dan Allen, president of Mile High Banks.
At the same time, Mile High Banks’ parent holding company, Big Sandy Holding Co., is going through a Chapter 11 bankruptcy reorganization process that is expected to take up to 90 days. A court-ordered competitive bidding process will happen as part of the deal, according to bankruptcy filing documents. The bank operates independently of the holding company, Allen said.
The potential tax refund and other benefits spelled out in court documents may attract bidders, said Brennan Ryan, a lawyer at Nelson Mullins, Riley & Scarborough LLP in Atlanta, who is following the transaction. Some banks in the Denver market are “very acquisitive” and have excess capital, Ryan said, declining to name a specific bank.
No other bank bidder has announced interest yet, said Fred Joseph, commissioner at the Colorado Division of Banking, the state agency that regulates the bank along with the Federal Deposit Insurance Corp.
At the same time, Strategic Growth Bancorp is being paid $1 million essentially to pay for strategic review and due diligence of the bank, according to bankruptcy documents.
A Strategic Growth Bancorp spokeswoman declined to comment, other than to issue a statement saying that the bank “is applying to the Federal Reserve Board for permission to acquire Mile High Banks, Longmont, Colorado.”
The bank will not comment further until final completion of the review by the Federal Reserve Board, said Jeanne Lipson, the spokeswoman.
The risk to any potential buyer is Mile High Banks’ loan portfolio, said Wes Brown, managing director at St. Charles Capital, an investment bank in Denver. Going through a bankruptcy process for parent holding company Big Sandy may help save the actual bank, Brown said.
“The holding company bankruptcy is very critical (in that) it dissolves a lot of liabilities of the parent,” Brown said. “The big question is the asset quality, and that has to be determined by any prospective buyer.”
Mile High Banks previously contacted more than 70 banking entities in its search for a buyer, Allen said.
The bank’s value is in its franchise of 20,000 customers with a deposit base of $770 million, Allen said. It has cash flow from loans that are performing, he said. In addition, the bank’s 13 branches extend its presence along the Front Range from Loveland to Parker, he said.
The bank has been operating under federal regulatory supervision since Dec. 1, when the FDIC issued a “supervisory prompt correction action directive,” calling for the bank to find more capital. The bank owes about $43 million in debts, according to U.S. Bankruptcy Court documents.
With the $90 million in new capital from Strategic Growth Bancorp, the bank will meet capital requirements set by federal banking regulators and will be able to resume making loans to customers, Allen has said.
The transaction on the table with Strategic Growth Bancorp indicates that the banking industry is getting stronger, said David Barr, an FDIC spokesman. Recapitalization of a bank is “always a good thing,” Barr said.
Strategic Growth Bancorp is a regional banking company formed in 2009 by El Paso businessman Bill Sanders and Dallas partners. Sanders is best known nationally for founding LaSalle Partners real estate firm in 1968. The firm was sold in the 1980s for an estimated $64 million, according to media reports.
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