Company buying up bank branches in Nevada

By Steve Green (contact)

Published Tuesday, July 14, 2009 | 8:27 a.m.

Updated Tuesday, July 14, 2009 | 11:06 a.m.

Businessman Jason Ader and one of his investment companies today announced a plan to take over the Nevada branches of Colonial Bank as well as 1st Commerce Bank of North Las Vegas.

Ader's New York-based Global Consumer Acquisition Corp. (GCAC) plans to buy 21 Nevada branches of Colonial Bank, now owned by Colonial BancGroup of Montgomery, Ala., as well as North Las Vegas-based 1st Commerce Bank, an affiliate of Capitol Bancorp Ltd. of Lansing, Mich., and Phoenix.

Global Consumer Acquisition Corp. says it's a "blank check" company with $300 million in equity.

"The company completed its initial public offering in November 2007 with the objective of generating shareholder value by affecting a transaction with one or more domestic operating businesses in the global consumer products and services industry," company literature says.

Global didn't explicitly say what it's paying for the banking operations it plans to acquire and Global officials couldn't immediately be reached for comment.

In a regulatory filing today, Global it said its proposed Nevada banking company would have stockholders' equity of about $298 million.

The deals are subject to approval by Nevada and federal regulators.

The deals were engineered by Ader, a former gaming industry analyst and current board member of Las Vegas Sands Corp.; and Mark Daigle, CEO of Colonial Bank's Nevada operations.

Under the plan, Global will be re-named Western Liberty Bancorp (WLB) and WLB will become a bank holding company and its banking operations will have 22 branches and use the "1st Commerce Bank" name.

The company said it will have approximately $477 million of loan assets, $320 million of transaction account deposits and $214 million in time deposits.

Western Liberty said it will focus on conservative business and commercial real estate lending, consumer lending, trade finance and depository products.

"We are pleased to utilize our ... investment vehicle to create this 'new' Nevada financial institution, which will benefit investors and consumers alike. This transaction is a positive step for the Nevada banking system, as we expect our self-selected loan portfolio and well-capitalized balance sheet will enable us to lend and acquire loan assets at attractive levels. WLB plans to be a very active partner in government-assisted deals involving other depository institutions, and will seek organic growth in deposits driven by our strong branch network and external growth through prudent acquisitions. Few of our competitors have the capital and the team required to execute on our business plan in today's economic environment," said Ader, future chairman and chief executive officer of Western Liberty Bancorp.

"We are creating what we expect to be recognized by consumers and local businesses as the dominant community bank in Nevada, given our strong capital base and balance sheet. We have an outstanding Nevada banking team, and are very excited about the future," said Daigle, future president and CEO of 1st Commerce Bank. "Nevada continues to offer one of the most favorable business environments in the country, which combined with a revitalized platform for growth makes for a truly winning formula. As with the predecessor operations, we will continue to be strong supporters of the business and civic communities in which we operate."

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Colonial BancGroup has been hit hard by loan losses. Today's announcement is one in a series of events this year that included an agreement with Alabama and federal bank regulators to bolster its finances, the departure of longtime Chief Executive Robert Lowder and the announcement of plans for it to be taken over by an investment group and converted into a savings and loan.

Lewis Beville, a Colonial BancGroup director, last month was appointed president and chief executive of Colonial BancGroup and Colonial Bank.

In April, Colonial disclosed a plan to bolster its finances with a $300 million equity investment and a deal to obtain $536 million in government bailout money.

Under the plan, Colonial would convert from a commercial bank to a savings and loan, or thrift. Thrifts typically focus on home loans and savings accounts.

The bank holding company lost $880.5 million last year because of bad loans.

Colonial said in its 2008 annual report that in Nevada, where it has about a dozen branches in the Las Vegas area, its loans and other assets totaled $976 million at the end of 2008; and deposits totaled $833 million. The Nevada assets at year end included $432 million in construction loans and $200 million in real estate loans. Because of a provision for loan losses totaling $87.7 million, the bank in Nevada lost $86.2 million in 2008 vs. a profit of $29.4 million in 2007, Colonial said.

Colonial, in its announcement today, said Ader's GCAC will take over about $492 million in deposits and approximately $440 million in loans, of which approximately $326 million were originated in the Nevada franchise.

GCAC is paying a deposit premium of about $28 million or 9.33 percent based on a balance of $300 million of non-time deposits, GCAC said.

Some $565 million of loans and $399 million of time deposits that were originated in the Nevada franchise are expected to be retained by Colonial.

Colonial said it and GCAC also agreed to identify additional loans satisfactory to GCAC so that the principal balance of all loans acquired by GCAC will be at least $450 million.

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Capitol Bancorp also owns Bank of Las Vegas, Desert Community Bank and Red Rock Community Bank in Las Vegas as well as Black Mountain Community Bank of Henderson.

For the quarter ending March 31, Capitol said it was hurt by problem loans in Michigan and Arizona and reported a loss of $15.672 million or 91 cents per share vs. a profit in the year-earlier quarter of $2.191 million or 13 cents per share.

1st Commerce, with loans and other assets of $45.379 million, lost $159,000 on revenue of $590,000 in the first quarter vs. a loss in the year-ago quarter of $97,000 on revenue of $568,000, owner Capitol Bancorp said. It said nonperforming loans at 1st Commerce totaled $1.545 million at the end of the third quarter, up from $1 million at the end of the year.

In April, Capitol Bancorp said it retained financial advisor Keefe, Bruyette & Woods to evaluate divestiture opportunities -- and since then announced the sale of banking operations or its interest in banks in Yuma, Ariz.; Belleville, Ill.; and Santa Barbara, Calif.

Capitol, in its announcement today, said GCAC will pay total cash consideration of about 1.5 times the tangible common equity value of its 1st Commerce Bank affiliate.

"The proposed divestiture of 1st Commerce Bank serves to facilitate Capitol's well-publicized efforts to better allocate capital and resources within our organization," said Capitol Chairman and CEO Joseph D. Reid. "We welcome the opportunity to align the 1st Commerce Bank organization with a group dedicated to the local market."

"We are pleased to have supported 1st Commerce Bank's team, under the leadership of President Al Gourrier, over the last two years, to build a strong banking platform focused on the needs of the North Las Vegas market," Reid said in a statement.

Capitol has described 1st Commerce as a full-service community bank specializing in total relationship banking for owners of small to mid-sized businesses, medical professionals, real estate professionals and residents.

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Executives said the new and recapitalized 1st Commerce will be positioned to capitalize on recent financial market turmoil, troubled assets and increased regional and commercial banking closures over the past year.

The recapitalization plan is anticipated to create what is likely to be a substantially "over capitalized" financial institution to benefit from tight lending markets and current economic conditions, GCAC said.

GCAC said that as part of the acquisition process, it had the opportunity to select which assets of Colonial Bank it would acquire. GCAC and its outside consultants and advisors also analyzed 1st Commerce Bank's loan portfolio. GCAC engaged Crowe Horwath LLP, Proskauer Rose LLP and Brownstein Hyatt Farber Schreck LLP to assist in reviewing the loan portfolios.

GCAC said it expects to "create" the new bank at a "compelling valuation" of approximately 1.29 times its initial tangible book value of $255.7 million and that it will have a capital ratio of 32 percent.

"Western Liberty Bancorp's management team will have significant experience in growing core deposits and deep relationships in the local community, and expects to retain and expand its core deposit base through its branch network and traditional business and private banking," the company said.

Daigle and Ader -- also founder and CEO of Hayground Cove Asset Management, a New York-based investment management firm -- will be joined by executives including Daniel Silvers and Laus Abdo.

Silvers will serve as president of WLB and will serve on WLB's board of directors. Silvers, president of Hayground Cove Capital Partners LLC, previously had responsibility for gaming and real estate investments at asset management company Fortress Investment Group.

Abdo will serve as chief operating officer of WLB, bringing more than 20 years of Nevada-based experience in commercial real estate and gaming lending, the new company said.