Got $9M? Then You Can Get A Bank

Got $9 million? You can buy a nice house on expansive grounds, and maybe a fancy car, or three.

Or … you could buy a bank.

The recent news that Colorado National Bank had been bought for that sum begs a few questions. Who were the buyers? How? Why? And how come so … cheap?

Well, for starters, as bankingtech.com reported this week, the bank was bought by Latvian FinTech entrepreneurs Marks Moskvins and Maksims Jarosevskis. They are the owners of Transact Pro, which operates as a payments processing firm in Latvia.

The bank itself? It was in Chapter 11 bankruptcy, as had been declared in November of last year. And it is a relatively small bank, with just two branches in Colorado.

The bank now gets a bit of fashioning, as the Latvian duo now join the board (Chapter 11 allows firms to operate as they restructure their debts).

“Our knowledge and experience will help to build innovative new banking services for the bank that will transform it into a modern bank for the 21st century,” Moskvins said, according to the site.

The bank ranked 23rd in the state as measured by assets at the end of last year.

The site Baltic-course.com noted that the two new co-owners put two million Euros in the bank to boost its capital position. TransactPro itself is likely looking to diversify beyond its home base and processing activities, spanning payment card issuance, acquisition and online payments.

The company’s own turnover (or top line) was off 9.7 percent to 15.4 million Euros in 2017, while the bottom line slipped 14.8 percent to 5.8 million Euros. Moskvins owns 90 percent of the firm, Maksims the remainder.

One might raise an eyebrow at the “dog bites man” aspect of the story here, where typically it has been the traditional FI that has latched onto the digital age through acquisition.

The fire sale aspect? In a series of events as reported by businessden.com that led to the bankruptcy and the sale, a holding company was in place for the bank and court filings as detailed by that site said leadership had been trying to sell it for two years.

“That effort has roots in $4.7 million of promissory notes the company says it issued between January 2013 and November 2013,” according to the site. Note holders sued the bank. The bank was ordered to pay $4.2 million in January of 2017. Bankruptcy followed, in an effort to prevent equity stakes from being sold, and an agreement was struck between bank and regulators…

And in came the Latvian pair, who offered to buy the bank for tangible book value, at $5 million cash and $2 million equity contribution. The eventual purchase price, we note, is above that initial offer, and would seem to be a decent premium above tangible book.  Which means that folks are willing to pay up for potential — in this case, perhaps cross-border, cross-market potential? Synergies? Digital services in a small market, with an eye for new testing of branches leveraged for FinTech?

Perhaps a bargain that will pay dividends.

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