Corporate Matters: Twin Cities group acquires struggling bank

Corporate Matters: Twin Cities group acquires struggling bank . EastBank, Minneapolis, has been fully absorbed by University Financial Corp., Inc., Saint Paul, Minn., which does business as Sunrise Community Banks. EastBank's sole location in Dinkytown – a collection of unique shops serving University of Minnesota students – has been closed. . The $16 million EastBank opened in 2000 with a specific mission to serve minorities, immigrants, and non-profits. It sputtered along for five years before being handed a cease-and-desist order from the FDIC. Despite its troubles, the bank attracted a buyer in JAG Financial, Inc., a Little Canada, Minn.-based holding company. That group was unable to turn EastBank around and put it up for sale in 2007. Then Maple Bank, Champlin, Minn., filed to acquire the bank, but ultimately abandoned the deal in 2008. Finally, the $528 million Sunrise group stepped in early this year and quietly ended the story of this small bank with big ideals. Its closure is not such a gloomy end for the bank's customers, however, as the banks held by Sunrise also have a mission to serve inner-city demographics. . Sunrise CEO Dave Reiling said his company's history and experience digesting small, troubled banks made the acquisition a success, and that the collective size of Sunrise Banks is weighty enough to hold down challenging situations.. "It's very difficult to run a bank the size of EastBank. It hadn't been profitable for years," Reiling said. "I suppose it's never been easy, but these days there is a regulatory requirement and a technical requirement that makes it nearly impossible for a small bank to achieve, much less a bank making a good number of loans to non-profits. You really need to be four or five times that size to have a chance at making the bank financially sustainable. That's just the way the world has become." . The bad economy made EastBank's already challenging situation only more difficult, and Sunrise had at least one tough choice to make: after running the numbers, Sunrise determined closing EastBank's physical location was for the best. Franklin Bank, the $116 million institution that took over EastBank's loan portfolio, has a location about two miles from Dinkytown. Reiling predicts the industry will see many more similar consolidations in the months to come. . "This deal injected $20 million into Franklin immediately, which is something like a full year of growth in one shot," Reiling said. "And [EastBank's] customers weren't upset about the branch closing, so it's a winner. There's going to be more of this sort of activity in the industry, not only with charters but with branches. Times like these are the exact times that require real leadership and decisive moves." . Reiling hinted that Sunrise has an eye out for other acquisition opportunities. "We hadn't acquired a bank since 1995, so EastBank was a good way to get a little practice under our belts," he said. .Omaha bank group moves into Lincoln. Omaha-based Frontier Holdings, LLC, is trying its hand in the competitive Lincoln, Neb., market. In October, the $227 million holding company opened a loan production office in Lincoln with the goal of developing into a full-service branch as soon as possible. . To set the stage for a branch, Bank of Madison, one of Frontier's three Nebraska holdings, has changed its name to Frontier Bank and will serve as the Lincoln branch's headquarters. Madison President Tim Tighe said the Madison market differs significantly from Lincoln, and the diversity is a welcome opportunity for the bank. . "The ag base has been doing pretty well in Madison, so we've been a little insulated from the larger problems," Tighe said. "Lincoln has an enormous government presence with the [University of Nebraska], which helps make that market stable, as well as a larger base of commercial real estate. It's going to help us spread out." . Jim Bazada, an executive with Frontier Holdings, led the development of the move, which he said was almost completely instigated by the availability of two seasoned Lincoln bankers – Gale Furnas and Steve Schmidt. Both were amenable to starting a new shop, and Frontier ran with it. . "From a macro perspective, from looking at what's happening in the world, it does seem like an odd time to expand," Bazada said. "The Midwest hasn't been completely immune to the recession, but we still want to be opportunistic. There are several markets we've been interested in. Frankly, Lincoln, like a lot of other markets its size, is over-banked. But [Furnas and Schmidt] have decades of experience. It's always going to be driven by the people. I know…that's a cliché, but it's the absolute truth." .Montana regional's deal cleans up Wyoming bank's books. Glacier Bancorp, Kalispell, Mont., has completed the acquisition of First National Bank & Trust, Powell, Wyo. The $280 million First National has offices in Powell, Cody and Lovell, Wyo., and will continue to operate under the same name and separate charter.. When the acquisition was announced early this year, Glacier President Mick Blodnick said First Bank was in good condition, but was struggling with a number of out-of-state participation loans that had gone sour. With the announcement of the deal's completion, Blodnick said this issue has been resolved.. "As a result of our deal structure that removes nonperforming out-of-market loan participations, the bank will immediately return to a position of superior asset quality, strong core deposits, and solid profitability," Blodnick said.. The $5.6 billion Glacier Bancorp's now holds 11 subsidiary banks that operate in 60 communities in Montana, Idaho, Utah, Colorado, Wyoming and Washington.