Failed bank purchase yields much growth for Minnesota bank

BankVista had considered expanding. Acquiring a bank relatively near its Sartell, Minn., base would have made sense two or three years ago. The bank opened in 2000, and its one-branch, $130-plus million operation at the time had come through the worst of the recession in promising condition.."In 2012, we were really starting to gain some traction," said President Stefan Freeman, who joined the bank in 2005. "We would kick the tires on different things, but never got real serious about any of the opportunities that came along. At that point, we said, 'hey, we're not aggressively seeking, but now we've put ourselves in position where we could take advantage of something if it came up.'".BankVista did indeed take advantage — even if that something was a failed bank more than two hours south — when the FDIC took over Northern Star Bank, with branches in Mankato and St. Cloud, Minn., in late 2014. As of Sept. 30, 2014, Northstar Bank had $18.8 million in assets and $18.2 in deposits, enticing four Minnesota banks to submit bids. BankVista and Freeman, recognizing the Mankato market could support growth, made an offer that valued the assets at a $2.45 million discount.."Mankato has a lot of similarities to the St. Cloud area," Freeman said. "They're college towns. They're both an hour from the Twin Cities. They're both kind of transportation hubs, north-south and east-west. St. Cloud and Mankato have some trucking and similar industries.".BankVista quickly folded its new St. Cloud location into its Sartell branch, separated by only a few miles to start with, and focused on Mankato, where its founder, Jay Abdo, is originally from. Abdo and Freeman, in fact, walked into the Mankato branch shortly after the FDIC did late in the afternoon of Friday, Dec. 19, 2014.."That is one of the toughest things," Freeman said. "When we came in, Jay Abdo in particular, we met with some of the staff. That was a scary time for the employees. What's going on? What's happening? A lot of the job that weekend was reassuring.".Although it pales in comparison to the uncertainty felt by the Northern Star employees, BankVista suddenly found itself in a time of unexpected change, as well. Less than 60 days earlier, its leadership was still only abstractly considering expansion. The FDIC receivership process moved quickly, much faster than any other version of a merger or an acquisition..Northern Star was the 23rd bank the Minnesota Department of Commerce had closed since 2008. The process was, unfortunately, finely-tuned.."I think they came into the bank about 10 minutes before the end of the day," Freeman said. "We were with them the whole weekend process. Then they spent the whole weekend closing out the books of the old bank so that by Monday morning we're opening under BankVista.."They have communications and marketing people and press releases, all of those things very specifically laid out in an exacting timeframe.".No Minnesota bank has been closed since..While the process was certainly abrupt and undoubtedly difficult for those involved on the Northern Star side, it has worked out well for BankVista. Now with $209 million in assets, BankVista opened a Chaska, Minn., branch in early February with plans to move into a 4,200-square-foot building by the end of the year pending construction, and moved its Mankato branch into a brand new 5,300-square-foot facility in late March.."We got lucky," Freeman said. "You put yourself in good positions and then sometimes you get lucky. We got lucky because the way the assets of Northern Star blended in with ours was nice. They had more deposits than loan customers. We had more loans to deposits. It blended in really nicely.".Add in an influx of ambitious personnel, and the Mankato branch has grown much in line with BankVista's original hopes, now with more than $30 million in assets, according to Freeman.."Part of the reason this worked, especially as a first acquisition or new market for us, is the bank was so small," Freeman said. "The Northern Star Bank, right around 2000, it was a $60-plus million bank. … We thought with the right people and the right marketing, we can get back to that.".Having grown about 40 percent in assets since the immediate post-merger period, BankVista has continued to develop a robust SBA loan business. With greater capital, the bank can take on larger loans and work with bigger customers.."It's an unplanned additional benefit," Freeman said. "We want to be experts at helping customers, experts at this. Then the growth happens. That's the way we've always tried to view it."