Service1st Bank sale closes

Service1st Bank on Thursday became the third state-chartered Nevada bank owned by a publicly traded holding company.

Western Liberty Bancorp closed on its previously announced $20 million acquisition of $232 million-asset Service1st Bank late Thursday. Although Western Liberty will be the holding company, Service1st Bank will keep its name.

While Nevada has about 15 state-chartered banks, most are privately owned. Bank of Nevada and Nevada State Bank are the only other Nevada-chartered banks owned by holding companies with publicly traded shares.

All three bank holding companies can raise money on Wall Street to bolster their financial staying power if the recession continues to cause loan defaults and losses at Nevada banks.

Privately held banks typically raise money from investors through private placements to wealthy investors when they need to boost their capital or net worth.

Service1st Chairman Steve Hill earlier told shareholders that private investors generally agreed to pay only 30 to 40 percent of book value to boost capital at privately held banks. Book value is the equity value reflected on a bank's accounting records.

Western Liberty purchased Service1st for approximately book value, although investors may get a premium if the stock performs well. Also, the holding company agreed to add $25 million to Service1st's capital. The combined entities have more than $100 million in capital.

"We are especially pleased that the combined Western Liberty/Service1st platform will showcase one of the community's best capitalized balance sheets to effectively serve our local businesses and residents," William Martin, chief executive officer of the bank and the bank holding company, said in a statement.

Service1st lost $1.4 million in the third quarter. It lost $2.2 million in the second quarter and $1.8 million in the first quarter this year.

Michael Frankel will be the holding company's chairman.

Founding CEO John Dedolph opened the bank almost four years ago but stepped aside when Martin left Nevada State Bank and became available for the job.

Former Wall Street casino analyst Jason Ader started Western Liberty, formerly known as Global Consumer Acquisition Corp., as a special purpose acquisition company.

Before the merger, Fidelity Management and Research Co., the giant mutual fund company, was the largest shareholder with 24 percent of outstanding shares, followed by Mendon Capital Advisors Corp. at 11 percent and Weiss Multi-Strategy Advisors at 8 percent.

Other key investors included Ader's company, Hayground Cove Asset Management; KBW Asset Management; and Wells Fargo & Co.

Western Liberty had no initial business but decided to buy a Nevada bank. It first selected 1st Commerce Bank but then agreed to acquire Service1st and terminated the 1st Commerce transaction. Since then, lawyer Jason Awad agreed to buy 1st Commerce, pending regulatory approval.

Western Liberty shares have been thinly traded on the Over-The-Counter Bulletin Board in recent months, but investor interest may pick up when it moves to Nasdaq Global Market and owns an operating bank.

Western Liberty shares gained 21 cents, or 3.37 percent, Thursday to close at $6.44.

Contact reporter John G. Edwards at
jedwards@reviewjournal.com or 702-383-0420.