by Gwen Moritz
Posted 7/15/2013 12:00 am
Updated 8 months ago
Rogers Bancshares Inc., the holding company for Metropolitan National Bank, had negative common equity of $22 million as of March 31, according to its most recent financial statement filed with the Federal Reserve System.
As a result, creditors of Rogers Bancshares are likely to receive only pennies on the dollar from the proposed $16 million sale of Metropolitan, and the heirs of the late Doyle Rogers Sr. are unlikely to walk away with any cash at all.
What’s more, the Rogers family won’t be the only investors left with worthless stock: Neither the U.S. Treasury, which bought $25 million worth of preferred stock as part of the TARP bank capitalization program in 2009, nor the buyers of another $12 million worth of preferred stock sold in 2006 are likely to recoup any of their investment.
“My guess, and this would be a pure guess, would be no,” Susie Smith, senior executive vice president of Metropolitan, said when asked if the preferred shareholders would have any value left when the bank is sold.
The identity of the private preferred stock owners is expected to be revealed in future bankruptcy court filings, Smith said.
Rogers Bancshares filed for Chap-ter 11 bankruptcy reorganization on July 5 to facilitate the sale of its struggling bank to Ford Financial Fund II, a Dallas investment fund managed by billionaire Gerald J. Ford and Carl B. Webb.
In broad terms, the Ford Fund has offered to pay $16 million to the holding company for its 99.75 percent of the bank’s stock and to then invest as much as necessary — certainly tens of millions of dollars — to recapitalize the bank to meet federal regulatory requirements.
Smith stressed that the sale is subject to the bankruptcy court’s discretion, so a number of questions are left unanswered. Ford Financial Fund is playing the role of “stalking horse” in the bankruptcy; if a more favorable bid is received by the bankruptcy court, FFFII will have the opportunity to match it.
Metropolitan National Bank listed equity capital of $65.7 million at the end of the second quarter — less than required by federal regulators but still considered adequate for a bank with $1 billion in assets. Met racked up losses of nearly $100 million between 2009 and 2012, but it reported profits in the fourth quarter of 2012 and the first quarter of this year.
The bank is virtually Rogers Bancshares Inc.’s only asset, representing $67.2 million of the $68.3 million in assets shown on the holding company’s balance sheet. But that was offset by $90.3 million in liabilities, less than half of which are listed as creditor claims in the bankruptcy petition.
The creditors — all unsecured — are three trusts that loaned $41.24 million in the form of “trust preferred” collateralized debt obligations, and the buyers of those CDOs will be first in line to divide up the $16 million paid for the holding company. An additional $5.6 million in interest is due to the buyers of those CDOs, but Rogers Bancshares did not include the interest in its list of unsecured claims.
The preferred stock held by the U.S. Treasury and by the private investors is also among the liabilities listed on the financial statement, but the investors are not considered creditors. The federal TARP money came with strings attaches — quarterly dividends that Metropolitan has been unable to pay for 15 quarters. The unpaid dividends totaled $5.1 million as of June 30, according to the Treasury’s most recent TARP statement.
Some industry observers have suggested that the unpaid TARP dividends should be listed as unsecured debts. To that Smith said, “I think everyone is waiting for further instructions.”
The Other Rogers Bank
The family of Doyle Rogers, who died in February at age 94, also has a 26 percent ownership interest in Citizens Bancshares of Batesville Inc., the holding company for Citizens Bank. Neither Citizens Bancshares nor Citizens Bank is caught up in the bankruptcy of Rogers Bancshares Inc. or the sale of Metropolitan National Bank.
Citizens Bank is also in far better financial condition than Metropolitan. With $544 million in assets — barely half Metropolitan’s size — Citizens Bank had equity capital of $58.6 million as of March 31, just $7 million less than Metropolitan.
Citizens Bank, led for the past three years by President and CEO John Dews, earned $5.6 million last year and had net income of $1.14 million in the first quarter of this year.
Unlike Met Bank, Citizens Bank has continued to pay cash dividends — including $1.77 million in 2012 and $2.84 million in the first quarter of 2013 alone.