Metropolitan faces vital rally after sale

Traffic passes 40-story Metropolitan National Bank in downtown Little Rock on Thursday. The bank’s headquarters is in the building at 425 W. Capitol Ave.

Traffic passes 40-story Metropolitan National Bank in downtown Little Rock on Thursday. The bank’s headquarters is in the building at 425 W. Capitol Ave.

Sunday, July 14, 2013

Correction: Doyle Rogers bought Metropolitan National Bank in 1983. Articles including this one incorrectly reported when Rogers took control of the bank.

It took only six years for the value of Metropolitan National Bank of Little Rock to drop from $300 million to virtually nothing.

Metropolitan was the fifth largest Arkansas-based bank in 2007 with almost $1.9 billion in assets. At the time, the bank had equity - or book value - of $143 million. Book value is the net worth - or total assets minus liabilities - of a bank.

In 2007, banks sold for about 2.1 times book value, meaning Metropolitan was worth about $300 million, said Garland Binns, a Little Rock banking lawyer. Banks today are selling at about book value.

On July 5, Dallas-based Ford Financial Fund II agreed to pay $16 million for Metropolitan, which has lost about $95 million since 2009. The money will go toward paying creditors of Rogers Bancshares, Metropolitan’s holding company, but it will fall well short. Those creditors are owed more than $92 million, according to a July 5 bankruptcy filing by Rogers Bancshares.

Another $25 million the federal government gave to Metropolitan as part of the Troubled Asset Relief Program, plus unpaid dividends, will not be repaid.

Metropolitan executives argued that the drop from $300 million in value to zero is not an accurate reading of the bank’s value.

“You have to separate the holding company and the bank,” said Lunsford Bridges, Metropolitan’s chief executive officer. “The Fords see great value here.”

Ford Financial said it was attracted to Metropolitan because of the strength of its management team and its brand.

“Metropolitan is an outstanding community bank with a solid [group of branches] and reputation in Arkansas,” Gerald Ford of Ford Financial said in a prepared statement at the time of the purchase.

Susan Smith, Metropolitan’s senior executive vice president, said the valuation of banks today is much different from what it was in 2009.

“It’s apples and oranges,” Smith said. “It’s hard to compare. Across the United States, bank valuations are different now than they were four years ago.”

Ford Financial is the last of 35 potential investors that showed an interest in buying Metropolitan from 2009 until this year. Its $16 million offer was the highest, Bridges said.

Doyle Rogers Sr. started the bank in 1970 in southwest Little Rock, where Metropolitan focused on “nearby and neighborly” banking, a slogan it retains. Rogers, who died at 94 in February, owned essentially all of Rogers Bancshares and its only asset, Metropolitan National Bank.

Rogers’ estate “has lost every penny [invested in Metropolitan],” Binns said. “The common shareholders won’t get any of [the $16 million]. That just goes to the debt holders.”

Rogers built his financial empire on real estate developments throughout the country, including about 100 properties in states such as Arkansas, Colorado, Florida, Kentucky, Michigan, South Carolina and Wisconsin. He developed major sites in Little Rock, such as what is now the Marriott International hotel and the 25-story Stephens Building. He also owned more than 20 percent of Citizens Bank in Batesville, his hometown.

Other than Metropolitan, it’s impossible to quantify the value of Rogers’ empire - his estate’s probate filing in Independence County did not list a value of the estate as of this month.

The downfall for the bank began in 2006, when it added its first two branches to Benton and Washington counties, its first move outside central Arkansas. By 2007, Metropolitan had five branches in Benton County and four in Washington County, with a total of about $70 million in deposits. That eventually grew to 13 branches with about $112 million in deposits in 2010.

By June last year, the most recent information available, Metropolitan had 12 branches in Northwest Arkansas and almost $75 million in deposits.

The growth “significantly increased operating costs,” according to the bankruptcy filing.

“Timing can be everything,” Bridges said. “Our timing for anticipated growth was not good. And the economy in Northwest Arkansas hit the skids in late 2007. Then you compound that with the national economy. In 2008, we were just completing our 12th branch up there. The timing and the commercial real estate market caused huge problems for a lot of banks.”

Metropolitan has always been committed to commercial development loans in its markets, according to the bankruptcy filing.

“This strategy served both the bank and the communities it serves well until the late 2008 economic downturn,” according to the filing.

The expansion into Northwest Arkansas was what brought Metropolitan down, said Randy Dennis, president of DD&F Consulting Group, a Little Rock bank consulting firm. Metropolitan made scores of bad loans there, with nonperforming loans peaking at almost $155 million in 2009.

“It wasn’t just bad loans,” Dennis said. “Putting 12 to 14 branches in Northwest Arkansas hurt. Had the economy not crashed, we would say they were geniuses. But it did. And they put all their eggs in that particular basket.”

Altogether, Metropolitan opened 33 branches in central and Northwest Arkansas from 2004 through 2007, more than doubling its offices. It now has 45 offices in 15 cities.

In 2008, federal regulators filed their first sanction against Metropolitan, insisting that it raise its two primary capital ratios to at least 12 percent and 8 percent. In the five years since that first sanction, Metropolitan never has been able to hit those targets.

Regulators wanted Metropolitan to increase its capital levels to improve its stability. During the banking crisis, many banks in the country also were told to increase their capital levels.

Ford Financial will invest as much as $100 million in Metropolitan to raise capital to the regulators’ goals.

Regulators filed another sanction against Metropolitan in 2012. In 2008, the Federal Reserve filed a sanction against Rogers Bancshares, preventing it from paying dividends or selling stock.

Rogers Bancshares hired New York-based investment bank Keefe Bruyette & Woods in 2009 to find investors to recapitalize the bank. From 2010 through 2012, Rogers Bancshares met almost monthly with the investment bank to attempt to find an investor, the bankruptcy filing said.

If the sale to Ford Financial is not approved or if equity cannot be infused into the bank through another means, “the bank may not be capable of surviving long term,” according to the bankruptcy filing.

Rogers was always in touch, involved and “determined to get this worked out,” Bridges said.

Through the difficult times the past few years, it was common for Rogers to begin meetings at the bank with a prayer, Smith said.

“He has not been gone very long,” Smith said. “But he had great strength. During challenging times, he would shepherd us through.”

“His dream was to have a good Arkansas bank,” Bridges said. “And the family and we are working with that in mind. I think to an extent Doyle’s dream will be realized.”

Business, Pages 61 on 07/14/2013