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The acquisition of a small Dallas-area bank has been called off because the buyer was unable to raise enough capital to complete the deal.
September 23
A small Dallas-area bank whose sale collapsed in September is still looking for a buyer or investor.
The $41 million-asset Bank Arlington still needs growth capital after its aborted sale to an acquisition vehicle called TAB Capital Corp., says Billy Allen, Bank Arlington's president and chief executive.
TAB Capital was unable to raise a minimum of $20 million to complete the purchase of the single-branch bank, which focuses on banking with doctors, lawyers and other professional services providers near Arlington, where it is based.
Bank Arlington has "heard from a few" potential suitors, Allen says, declining to be more specific. The bank now aims to merge with a larger bank or sell a stake to a person or investment group with money in hand.
"There are some banks that are not in the market that would like to be in this market," Allen said.
Allen says he wants to avoid another would-be buyer with funding issues. The sale agreement with TAB in April required the buyer to raise $20 million to $30 million. By June, it had raised just $570,000 from two investors, according to a filing with the Securities and Exchange Commission. Allen sent a letter to shareholders in September that said the deal had expired due to TAB's "lack of success" raising money.
"I think it's challenging for any size bank or company to raise capital in this environment," Allen says.
Mergers are disruptive. So Allen says his main focus is the bank's day-to-day affairs. Finding capital is a secondary priority.
The bank had no investment bank on the aborted deal and has not hired one. Its credit quality is sound, and profits more than doubled year-over-year, to $99,000, in the first half of 2011, according to the Federal Deposit Insurance Corp.
But it takes money to keep growing, Allen says. "Capital is king. We do need more capital. But we're in good stead with the regulators and all of our ratios are good," he says.
The amount of capital it seeks depends on the partner, he said. While TAB had pledged at least $20 million in a full sale, but "it might make sense" to raise $3 million to $5 million in a non-control deal, Allen says.
Allen 71, has been a banker in Dallas since the mid-70s. He started at Arlington Bank of Commerce, an institution absorbed in the 80s by one JPMorgan Chase & Co.'s many predecessors.
Allen started Bank Arlington in 2006 with his wife, Cathy Allen, as executive vice president and her childhood friend, Jim Tipton, as chief financial officer.
The bank was not looking to sell when it was approached by TAB, founded in 2010 by Olie Williams and his son Chris Williams to buy a Dallas-Fort Worth bank in decent shape that they could grow. Their plan was to open an additional Bank Arlington branch in Dallas.
Texas is a highly desirable market for banks because its economy is in better shape than that of the rest of the country. But that has not translated into a robust consolidation market because the healthy banks worth buying are reluctant to sell at a low price in a down market. Regulators also are not putting as much pressure on Texas banks to solve their financial problems by selling.
Bank mergers in the Southwestern have tended to be smaller and pricier than in other parts of the country, according to data from SNL Financial in Charlottesville, Va.
