- Key insight: The debts of a wealthy art collector and real estate mogul have opened an opportunity for Oklahoma's Bank7 to acquire Century Bank of New Mexico.
- Supporting data: Bank7 has offered to pay $68 million for a 71% stake in the Santa Fe lender.
- Expert quote: "I think it's a very compelling opportunity for them." — Piper Sandler analyst Nathan Race
A community bank in Oklahoma is on the verge of acquiring a New Mexico competitor, thanks to a complex legal saga involving a shareholder with massive debts.
Bank7 Corp., the Oklahoma City parent company of Bank7, has entered an agreement to buy 71% of Century Financial Services Corp., the Santa Fe-based owner of Century Bank. The purchase — which is not yet final — would increase Bank7's total assets from $1.9 billion to $3.4 billion, as well as expand its footprint into New Mexico.
"The Century team members have built a solid franchise through a trusted, relationship-driven banking model that has served New Mexico communities for generations," Bank7 CEO Thomas Travis said in a statement. "We look forward to working closely together to continue building on their work."
That part of the story is simple. The story of how the two banks got here is anything but.
For starters, Bank7 is not attempting to acquire Century through typical M&A dealmaking, but through a court-ordered sale. According to court documents, Century's majority shareholder, Gerald Peters, has defaulted on more than $40 million in loans from another community bank, KS StateBank of Kansas. His stake in Century was his collateral.
A court-appointed receiver has now taken possession of Peters' shares. Earlier this month, Bank7 expressed interest in buying them for $68 million, which the receiver approved. But Bank7 is technically a "stalking horse bidder," meaning it could still lose to a better offer in a competitive bidding process later on.
In other words, the acquisition is far from a done deal.
"There can be no assurance that the transaction will be completed on the terms described, or at all," Bank7 said in its press release.
But if it can pull it off, Bank7 could greatly benefit from the acquisition, according to Nathan Race, an analyst at Piper Sandler.
"I think it's a very compelling opportunity for them," Race told American Banker. "This puts Bank7 in a position to acquire the 71% stake in Century Financial Services at a pretty attractive price."
Century, Race said, brings with it $1.2 billion in low-cost, high-quality deposits, a fairly liquid balance sheet and an opportunity for Bank7 — which currently operates in Oklahoma, Kansas and Texas — to expand its business into nearby New Mexico.
"It just provides — theoretically, if this deal gets closed — significant dry powder in terms of core deposit funding to support Bank7's proven commercial loan growth prospects," Race said.
The deal, pending the bidding process as well as the usual regulatory approvals, is expected to close in the third quarter.
How a single shareholder's debts grew to the point of altering two banks' trajectories is not entirely clear. According to reporting by the
Lawyers for Peters did not immediately respond to American Banker's request for comment.
