Failed Great Basin Bank said to have rejected several bids
About a year ago, Las Vegas lawyer Jason Awad and others formerly associated with Business Bank of Nevada met secretly with Great Basin Bank CEO Terry Sullivan to discuss buying the Elko-based bank.
Awad said he would put additional capital into the bank if Sullivan would sell it or a controlling interest in the $270 million-asset bank. Sullivan, who was also chairman of Great Basin, said he wasn't interested, Awad said.
It was not the first time that Great Basin Bank, which was shut down by regulators on Friday, shunned overtures from outside investors.
Attempts to reach Sullivan failed, but others said the bank was fiercely independent and didn't want out-of-town investors exerting control over the bank.
John Dedolph, former chief executive officer of Sun State Bank of Las Vegas, said his bank holding company offered to invest in Great Basin when it was being formed in 1993 and was having difficulty raising adequate capital. Great Basin's organizers rejected the offer, "apparently with concerns over having outside influences." Zions Bancorporation later acquired Sun State.
Dedolph also led an investment group that expressed interest in acquiring Great Basin a few years later. The bank said no.
William Martin, CEO of Service1st Bank, recalled informal discussions with Great Basin officers seven or eight years ago when he was CEO of Nevada State Bank. "We approached the bank because we wanted to expand our presence in northeastern Nevada," Martin said. The potential merger didn't occur.
Nevada State officers spoke with Great Basin again in 2007 about a merger. The transaction didn't occur, according to a source, but it may have given Nevada State key information about its loan portfolio that could have given Nevada State a valuable advantage in bidding for Great Basin assets after the Elko bank was closed. Terry Shirey, chief financial officer of Nevada State, had no comment.
Business Bank's attempt to buy Great Basin came after Awad and others from Business Bank decided to get back into banking after City National Bancorporation acquired the company in 2007 for $165 million in cash and stock. Awad had helped turn around the fortunes of Business Bank during seven years as chairman of the Las Vegas bank holding company.
Awad and his associates met with Sullivan in Mesquite secretly so that rumors wouldn't leak to bank's employees, causing them to fear losing their jobs after a buyout.
The Las Vegas lawyer had financial backing from two former directors of Business Bank and a team of former Business Bank officers eager to take the reins at Great Basin. Awad proposed to appoint new senior executives, change its lending policies and practices, move the bank headquarters to Las Vegas and make it a statewide bank.
"We felt the bank needed to go in a new direction and needed new management," Awad said. "The condition of raising capital would be some serious changes. We did not have an agreement. It was just an open discussion."
Sullivan told him: "I don't see an opportunity in the near future."
Awad saw it from the bank's perspective: "It was difficult for them to swallow. They did not see what we saw coming. They believed they were doing the best thing they could do for their bank."
Financial Institutions Division Commissioner George Burns said Friday that Great Basin was critically undercapitalized and had no source of additional capital.
Burns named the FDIC as receiver, and the federal agency sold Great Basin's deposits and most of its loans to Nevada State Bank.
Shares in the holding company, Great Basin Financial Corp., traded as high as $9.10 over the past 52 weeks on the Over-the-Counter Bulletin Board. Shares closed Tuesday at 9 cents, up 3 cents for the day.
Whole life insurance policies, which were valued at $4.1 million at the end of 2008, could have been used to compensate senior executives after retirement, but the FDIC probably seized the insurance assets, a banker said, speaking anonymously.
Awad said: "I'm really sorry to hear about that bank. It just breaks my heart."
But he's not giving up. He hopes to find another bank to acquire in Nevada.
Contact reporter John G. Edwards at jedwards@reviewjournal.com or 702-383-0420.
ZIONS BANCORPORATION SHARES FALL
Shares in Zions Bancorporation, the Salt Lake City-based holding company for Nevada State Bank and other banks around the west, dropped Tuesday while banks stocks generally climbed.
The Zions sell-off followed a report Monday that the banking company lost $832 million in the first quarter, largely because of charging off goodwill from the acquisition of a Texas bank.
Treasury Secretary Timothy Geithner on Tuesday goosed bank stocks up when he said most U.S. banks are well capitalized. The SPDR KBW Bank exchange traded fund surged almost 7 percent. However, Zions dropped $1.99, or 15.4 percent, to close at $10.94 on the Nasdaq National Market. Moody’s Investors Service pushed credit ratings for Zions down farther into junk bond levels, and Sandler O’Neill recommended selling the bank stock.
FBR Research kept its market perform rating for Zions but said the bank holding company must consider raising capital by issuing stock or selling assets “as the risk of allowing further deterioration in the (capital) ratio is too great to permit delay.”
