We find ourselves in the middle of one of the greatest wealth transfer periods of all time. Those with wealth must decide whether they want to make transfers, and if they do, they must decide how much, to whom, when and in what structure?
Sponsor Generated Content
Greeley-based Richmark Holdings Inc., which represents Mineral Resources Inc. President Arlo Richardson and his family, filed a motion for a preliminary injunction against Advantage Bank creditor Jeff Demaske of Windsor in Weld County District Court in Greeley July 21.
A hearing on the preliminary injunction has been scheduled for 1:30 p.m. Sept. 18 in Weld District Court.
Facing losses incurred during the recession as did many banks, holding company Advantage Bancorp was directed by the Federal Deposit Insurance Corp. to raise capital. A promissory note issued by the bank worth $2 million, secured by 5,000 shares in the bank, was acquired in June 2013 by Demaske, owner of Greeley-based Journey Homes.
The bank’s financial position dropped precipitously at the end of 2013, and Demaske called in the note, demanding cure for his $2 million investment by March 31. Advantage couldn’t pay, and Demaske filed an intent to foreclose on the note on May 21. Because state law generally prohibits a secured party from purchasing collateral except through a public disposition, Demaske couldn’t own the bank outright through the foreclosure, so he engaged Denver-based St. Charles Capital LLC to market the shares of bank stock to potential buyers. St. Charles Capital was to begin accepting and assembling bids. Under that schedule, the winning bidder could take over the bank after state and federal regulators approved a “change of control” application, a process which usually takes 60 to 90 days, according to the Colorado Division of Banking.
If no buyer were found, regulators could close the bank and sell the loans on the bank’s books to other banks or auction them off.
In the lawsuit, Richmark says just two bids were made at the auction: its bid of $3.6 million and Demaske’s credit bid for slightly more than $2.754 million. Even though Richmark’s bid was higher, the lawsuit states, Demaske raised concerns about Richmark’s qualifications to submit the bid but offered to sell the stock to Richmark in a “private sale” if Richmark were willing to agree to terms which included “nine never-before disclosed demands.” The suit claims Demaske rejected Richmark’s July offer of a compromise and that his “commercially unreasonable conduct” means that “it appears Demaske intends to unilaterally declare his low bid to be the winning bid of the public sale.”
Representatives of the parties in the suit and Advantage Bank had yet to return calls seeking comment by BizWest’s deadline.
Advantage Bank’s Tier 1 leverage capital ratio, a key metric in determining the health of a bank, rose to 2.6 percent in the second quarter of 2014 from 2.4 percent in the first quarter, However, that figure was a drop from 2.6 percent in the fourth quarter of 2013. Bank regulators consider a 4 percent ratio “adequate,” and once a bank’s ratio falls below that threshold, the bank must improve its capital levels or face a potential shutdown.
When state banking regulators are forced to shut down a bank, “they would bring us in as a receiver,” said David Barr, a spokesman for the FDIC in Washington. “It would be business as usual for the depositors. We’ve gone through this about 500 times since the recession. No depositor has ever lost a penny in 80 years.”
Advantage Bank has three branches – in Loveland, Fort Collins and Greeley. It sold its Boulder branch to Citywide Banks in 2012. The bank held $260 million in assets at the end of the second quarter on June 30, down slightly from the $264 million it reported as of March 31.
Former BizWest reporter Molly Armbrister contributed to this report.