Legal proceedings dropped as Advantage Bank bidder walks away

GREELEY – Oil and gas executive Arlo Richardson said Thursday he no longer is pursuing the purchase of financially troubled Advantage Bank.

Greeley-based Richmark Holdings Inc., which represents Richardson, president of Mineral Resources Inc., dropped a lawsuit against Advantage Bank creditor Jeff Demaske of Windsor, who wanted to block Richardson’s high-bid in an auction for the bank, and have his lower bid declared the winner. A preliminary injunction hearing scheduled for Thursday in Weld County District Court was dismissed.

“The lawsuit would have just destroyed the value of the bank,” Richardson said Thursday.

SPONSORED CONTENT

Empowering communities

Rocky Mountain Health Plans (RMHP), part of the UnitedHealthcare family, has pledged its commitment to uplift these communities through substantial investments in organizations addressing the distinct needs of our communities.

Advantage Bank’s future is unclear. The Colorado Division of Banking, which oversees sales of banks, did not return calls Thursday requesting information on a possible sale, and Demaske, who had shown interest in owning the bank, did not return phone calls Thursday requesting comment.

The auction occurred just over a year after the Federal Deposit Insurance Corp. ordered Advantage Bank to raise capital to shore up its finances. The bank issued a $2 million promissory note to Demaske in June 2013, secured by 5,000 shares of bank stock, to raise capital. Demaske, owner of Greeley-based Journey Homes, called in the note March 31, and, when the bank failed to come up the cash to pay off the note,  took ownership of the bank stock pledged as collateral.

At the public auction, Richardson bid $3.6 million for the bank, and Demaske bid $2.754 million. The lawsuit filed by Richmark stated that 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 that included “nine never-before disclosed demands.”

The suit claimed Demaske rejected Richmark’s July offer of a compromise and that because of his “commercially unreasonable conduct…it appears Demaske intends to unilaterally declare his low bid to be the winning bid of the public sale.”

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 told BizWest last month. “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 branch in Boulder 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.

.