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Level One Bancorp in Farmington Hills, Mich., has found its next growth opportunity with a deal to buy a struggling 128-year-old bank.
September 13 -
After two weeks without any failures, the Federal Deposit Insurance Corp. seized two small banks on Friday. The banks, with $365.3 million in combined assets, are expected to cost the Deposit Insurance Fund $113.1 million.
December 10
Level One Bancorp in Farmington Hills, Mich., is applying its experience working on failed banks to buy and integrate one that is merely struggling.
The $470 million-asset company announced on Thursday that it would buy Oxford Bank in Michigan for $3.5 million. The deal,
Oxford has not been well capitalized since the third quarter of 2008 and is dealing with a high level of nonperforming assets, but Patrick Fehring, Level One’s chief executive, said his company bank is up for the challenge. An improving economy should also lessen the burden, he added.
“With our two FDIC deals, our team is pretty experienced in working through residential and commercial problems,” Fehring said in an interview Friday. “And the market is coming back toward us in terms of valuations.”
Oxford Bank has slowly been rebuilding. It returned to profitability at the end of 2010, while adding capital and shrinking assets. Tier 1 capital at the company increased 69% in the second quarter compared to the third quarter of 2010, to $12 million.
“The CEO, Jim Bess, has done a good job the last couple of years getting Oxford through a challenging period,” Fehring said. “But it still needed additional capital and that is what we bring.”
Although Fehring and his team were able to get comfortable with Oxford’s loan book, Level One is raising $13 million to $15 million in a private placement alongside the Oxford acquisition for extra protection. “Capital is available for those that are performing well and have transactions that are accretive to their earnings,” Fehring said.
Fehring said that geography was a big driver behind the acquisition. Oxford fleshes out Level One’s operations in Oakland County, a tony Detroit suburb. Level One has good coverage of the southern edge of the county, and Oxford will expand the company’s visibility in the central and northern sectors.
"We look forward to building upon Oxford Bank's 128-year history and culture of community engagement while also adding residential and mortgage services, business loans and a wide range of treasury management services," Fehring said in a press release Thursday. “This acquisition is also in keeping with our plan for strategic growth."
Despite starting a bank in Michigan on the onset of the financial crisis, Level One has grown tremendously in the last five years
“Many of the experienced lenders are frustrated with the bigger guys,” he said. “And we are fortunate enough to bring them in. Banking is commodity and you win on the talent.”
The Oxford acquisition will take Level One to $750 million in assets. Through future acquisitions and organic growth, Fehring has his eyes set on a much loftier goal.
“We are going to continue our organic growth strategy and augment that with an acquisition every year or so,” he said. “Those two will get us to a couple of billion in assets in the next few years.”