FDIC lifts sanction against Advantage Bank
LOVELAND — The Federal Deposit Insurance Corp. has terminated a cease-and-desist order it had issued in 2009 against Loveland-based Advantage Bank, the agency said Friday.
The order to vacate the increased federal scrutiny was issued March 31 and signed by John R. Jilovec, the FDIC’s deputy regional director.
The Loveland-based bank, with branches in Fort Collins and Greeley, had been under the FDIC’s watchful eye since 2009 when the federal regulator of banks ordered Advantage to stop what it determined were risky banking practices. At the time, the FDIC said Advantage Bank was operating with inadequate capital and an excessive level of adversely classified assets and delinquent loans, and was using inadequate lending and collection practices.
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Since then, the bank made slow progress toward complying with FDIC standards while going through an ownership change and restructuring its management team.
Advantage Bank owners Jeff Demaske and Larry Buckendorf did not return calls seeking comment on Friday, and an FDIC spokesperson declined comment. However, Advantage Bank chief executive John Nigh told BizWest late Friday that “a large contribution to capital by our owners, coupled with a significant amount of profit, put the wheels back on us.”
Demaske and Buckendorf, co-owners of Greeley-based homebuilder Journey Homes, took ownership of the bank in 2014 after Demaske, a shareholder and customer of the bank, called in a $2 million promissory note in March that the bank could not repay. When they took ownership, shareholders at the time were left with nothing.
Demaske pumped money into the bank and paid off loans he had with Advantage when he decided to pursue ownership of the bank, to eliminate any perceived conflict of interest. Last September, Demaske’s J&J Enterprises Property Management LLC paid $5.8 million to buy the building at 4532 McMurry Ave. in Fort Collins where Advantage has a branch.
Nigh, who had been the bank’s chairman since its inception in 2000, took over as acting CEO and hired former bank examiner Tina Daniels as chief financial officer. His CEO position became permanent in September.
Nigh’s task was to grow the bank’s earnings, assets, deposits, capital level and portfolio of good loans to the federal regulators’ satisfaction, and on Friday he credited his team for making it happen.
“The other thing the regulators looked favorably on was the operations of the bank, and that was largely thanks to Tina,” he said. “Our chief credit officer, Michael Lombardelli, was responsible for corrections to some of our concerned assets. We have formed a very good staff, and our lending area, headed by Jeff Kincaid, is doing very well.
“The combination of these three people is the core reason for the bank to graduate off the cease-and-desist order,” Nigh said, “but I don’t want to play down the significance of the $13 million in capital that was put in by our owners.”
The bank currently has $265 million in assets and expects to increase that to $300 million by the end of the year, Nigh said. It has $215 million in loans — up from $195.2 million at the end of 2015 — and $236 million in deposits. It made $2.4 million in profit in 2015, he said, and plans to make $3.2 million this year.
Advantage Bank’s Tier 1 leverage capital ratio, a key metric in determining the health of a bank, had been on a downhill roller coaster since 2009, but that trajectory reversed in the final quarter of 2014. The ratio is calculated by dividing a bank’s core capital by its total assets. 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.
That ratio began to decline in 2009 when it was at 8.38 percent, and hit its low mark at 2.44 in September 2014, according to FDIC records. By the end of that year, however, it had rebounded to 4.61 percent — and in the latest “call report” issued March 31 by the FDIC, however, Advantage’s Tier 1 level capital ratio had risen to 9.0417 percent.
Nigh had told BizWest last year that the bank’s troubles were caused by having a large percentage of its loans in real estate and construction companies as well as in land developers, two sectors hit hard by the Great Recession.
Now, he’s confident in the future of the bank and the region.
“We’re continuing to grow organically,” Nigh said. “We think we have a good, solid team and support from our shareholders. We’re very pleased with the environment we’re working in, and we’re bullish on the outlook for Northern Colorado.
“We’re even commencing evaluating the possibilities of an acquisition.”
