Magazine article American Banker

Deal Price Drops 29% as Ailing Seller Boosts Its Loan-Lost Reserve

Magazine article American Banker

Deal Price Drops 29% as Ailing Seller Boosts Its Loan-Lost Reserve

Article excerpt

The takeover price for a troubled Oregon bank has fallen 29% -- to less than its shares' market value. But the shareholders are likely to go for the deal anyway, an investment banker says.

Under a September agreement, the price for Northern Bank of Commerce in Portland fell automatically because it put money into its loan-loss reserves, reducing shareholder equity.

"I don't see Northern Bank shareholders backing out," said Robert Rogowski, principal at Columbia Financial Advisors, a Seattle investment banking firm. "They don't have any attractive alternatives."

Cowlitz Bancorp of Longview, Wash., announced in early September that it would pay up to $7.3 million in cash and stock for 5-year-old Northern, which is under a disciplinary order from the Federal Deposit Insurance Corp. But that sum has now been chopped to $5.2 million.

Cowlitz is now offering 0.5165232 shares of its own shares for each of the more than one million of Northern outstanding, instead of the 0.825842 originally offered.

The deal works out to $2.58 per Northern share, 20% below the midday price Thursday of $3.2343.

Cowlitz, the $199 million-asset parent of Cowlitz Bank and Bay Bank, operates six branches in Washington. Northern Bank has $60 million of assets and operates eight branches in retirement communities in and around Portland.

Northern has been under an FDIC cease-and-desist order since last summer for underperforming loans and lack of capital. If the bank is not sold, it is in danger of being shut down. …

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