Metropolitan National Bank in Little Rock was purchased Friday by Ford Financial Fund II LP of Texas - potentially bolstering the struggling financial institution.
Rogers Bancshares, parent company of Metropolitan, agreed to allow Ford Financial to purchase the bank’s stock for $16 million. Ford Financial also will invest an undisclosed amount to adjust the bank’s capital, Metropolitan officials said.
As a result of the purchase, and eventual recapitalization of the bank, Rogers Bancshares voluntarily filed for Chapter 11 bankruptcy Friday.
“You’re looking at an $85 [million] to $100 million investment,” said Randy Dennis, president of DD&F Consulting Group in Little Rock.
Rogers Bancshares’ bankruptcy filing and the Texas company’s purchase of the bank will not affect Metropolitan nor result in any layoffs at the bank, said Lunsford Bridges, president and chief executive officer of Metropolitan.
“This is a great solution for us,” he said. “It’s a great opportunity for Metropolitan.”
The $16 million will go to Rogers Bancshares’ creditors, said Jackson Williams, senior counsel for Williams & Anderson, speaking on behalf of the holding company, which was controlled by Doyle Rogers Sr., who died earlier this year. The company is owned by Rogers’ estate and family.
Williams said the acquisition of Metropolitan will be completed once the bankruptcy court and regulators approve it.
Rogers Bancshares owes money to preferred trust holders, preferred stockholders and the U.S. Treasury, which lent it federal bailout money in 2009, said Garland Binns, a banking specialist in Little Rock.
To help stabilize the bank after the recession started, Rogers Bancshares sold more than 26,000 shares of preferred stock to the U.S. Treasury Department for $25 million in 2009 as part of the department’s Troubled Asset Relief Program. Metropolitan was just one of Arkansas’ banks to apply for the federal bailout money, which was given to help stabilize lending.
He said the reason Rogers Bancshares filed for bankruptcy was to make the court distribute the money from the transaction to those it owes.
“It’s a legal device to allow Rogers Bancshares to sell Metropolitan, which it could not do otherwise without the court forcing the creditors to take a portion of the $16 million,” Binns said.
Ford Financial’s acquisition of Metropolitan also can be stopped if another company tries to outbid the company and Ford Financial didn’t try to counter the offer, he said.
Binns said a second bidder would have to invest more than $16 million with a small percentage of the money going to Ford Financial - essentially a fee for going through the process of trying to acquire the bank.
Since the financial crisis hit in 2008, Metropolitan has been burdened with real-estate loans in Northwest and central Arkansas, and in Texas, and since then, the bank’s assets have declined from $1.8 billion to just under $1 billion.
“They went into Northwest Arkansas at the exact wrong time and got hammered by the recession,” said Dennis.
In 2008 and 2012, the bank also was sanctioned by the federal Office of Comptroller of the Currency, which ordered Metropolitan to raise its capital ratio to 8 percent and its risk-based capital ratio to 12 percent.
But the bank has not been able to do that.
As of March, Metropolitan’s capital ratio was 6.30 percent and its risk-based ratio was 10.85 percent.
“The [recapitalization] of the bank will take on capitalizing to at least the minimum the regulators are requiring,” Bridges said Friday.
Metropolitan also was unable to turn a profit in 2012; it had a loss of $1.9 million. In 2009, the bank’s losses peaked at more than $80 million.
In the first quarter this year, Metropolitan had a profit of $662,000, reversing a $1.04 million loss in the same period in 2012.
Metropolitan attributed the turnaround to its ability to decrease its nonperforming assets by more than $46 million.
Ford Financial’s acquisition of Metropolitan is expected to get the bank back on its feet.
Gerald Ford and Carl Webb, the principals of Ford Financial, have a history of turning around struggling banks and will become members of Metropolitan’s board of directors when the transaction is finalized. Listed at No. 831 on Forbes magazine’s 2013 list of billionaires, Ford’s net worth is estimated at $1.8 billion. He is said to have made his fortune buying and selling banks.
“They have been extremely successful in purchasing banks, such as Metropolitan, that are in need of capital and turning those banks around into moneymakers,” Binns said. “I would think this would be a very good deal for both Gerald Ford and Metropolitan and their customers.”
Front Section, Pages 1 on 07/06/2013