Source: Sherman Publications

Oxford Bank shareholders approve sale to Level One

by CJ Carnacchio

November 14, 2012

Oxford Bank shareholders have spoken and a majority of them wish to sell their stock to the Farmington Hills-based Level One Bank.

That was the result of a vote taken at the Nov. 13 shareholders meeting held at American Legion Post 108 in Oxford.

Level One’s offer to purchase all of Oxford Bank’s stock for $3 per share was approved by “about 51 percent,” according to Oxford Bank President and CEO James Bess.

That’s 51 percent of the bank’s 1,156,690 outstanding shares.

The shareholders’ affirmative vote brings Level One one step closer to owning Oxford Bank, which has been in business since 1884.

Being merged with a highly-rated bank that has approximately $500 million in assets “solves (Oxford) bank’s financial problems and it’s capital deficiency issues,” Bess said.

“We greatly appreciate the confidence the shareholders have placed in Level One and our growing relationship with Oxford and the surrounding communities,” said Patrick Fehring, president and CEO of Level One, in a press release. “We look forward to building upon their nearly 130-year tradition of service while bringing new resources – including residential and mortgage services, business loans and Treasury Management services – to the community.”

Back in September, it was announced that Oxford Bank had entered into a definitive agreement under which it would be acquired for $3.47 million by Level One, which was founded in 2007.

Multiply the 1,156,690 outstanding shares by Level One’s $3-per-share offer and there’s the $3.47 million sale price.

Combined, the two banks will have approximately $750 million in assets.

“My job was to recapitalize the bank –escue it, if I could, then rehabilitate it and then restore the capital account,” Bess said. “That was my charge from the FDIC (Federal Insurance Deposit Corporation). That’s what the (bank’s) directors hired me to do. That’s what I did. I tried to find a merger partner that could solve the financial and the capital ills of the bank. It happened to be Level One and it got approved.”

Before the sale can be finalized, it must still be approved by three regulatory bodies – the Federal Reserve Bank of Chicago, the Michigan Office of Finance and Insurance Regulation and the FDIC.

Obtaining approval from these bodies is Level One’s responsibility, according to Bess.

“We don’t foresee any issues whatsoever as far as regulatory approval goes because the regulators want to see this happen,” he said. “I would be surprised if there (were) any regulatory issues. But they do have 60 days to go through their process and I think the clock’s been ticking now for probably (two or three weeks). I think Level One anticipates a close maybe the first week in January of 2013.”

When the deal closes, all eight Oxford Bank branches will change their name to Level One and the 128-year financial institution will cease to exist as an independent entity as its operations will be merged with Level One’s existing seven branches.

“Compared to (the bank’s) annual meetings,” Bess indicated the Nov. 13 shareholders meeting was “fairly well-attended.”

“There was a lot of discussion,” Bess said. “There were some comments for (the sale) and there were some comments against it.”

For longtime shareholders and those who remember when Oxford Bank’s stock was trading at around $50 per share back in 2002, the vote to sell was certainly a bitter pill to swallow.

For shareholders hoping to hold on a while longer – giving the bank more time to build its financial strength and the stock extra time to hopefully become more valuable than $3 – the vote was not welcome news either.

But for those worried about the possibility of federal regulators deciding at some point to close the undercapitalized bank, making its stock worthless, Level One’s offer appeared to be the best deal they could hope for under the circumstances.

Since May 2008, Oxford Bank’s been operating under an order from federal and state regulators mandating it to either recapitalize the institution or sell it.

Despite some improvements, including eight consecutive quarters of profitability, the bank remains capital-deficient.

At the end of the third quarter (Sept. 30), Oxford Bank’s Tier 1 capital ratio was 4.27 percent. The regulatory mandate is to have a minimum of 8 percent.

The Tier 1 capital ratio is the ratio of a bank’s core equity capital to its total risk-weighted assets such as mortgages and other loans. This ratio is considered to be a more reliable measure of financial strength than other numbers that can be calculated to evaluate a bank. In general, the higher the ratio the better the bank. A higher Tier 1 ratio implies that the bank is being run very conservatively.