Chairman of GMB board: Shareholders should reject BayCom’s acquisition of Grand Mountain Bank
Editor’s note: An abridged version of Mike Tompkin’s letter to the editor appeared in today’s edition of the Sky-Hi News.
I believe it is important for me to explain why I will be voting against the proposed acquisition of Grand Mountain Bank by BayCom Corp.
First, a little background is in order. Grand Mountain Bank has been serving the Grand County community for over 16 years. The planning for Grand Mountain Bank began when WestStar closed their Grand Lake branch in 2001. Funds were raised, and Grand Mountain Bank opened in 2003, with its headquarters in Granby and branches in Fraser, Kremmling and Grand Lake. I’ve been proud to serve on the Grand Mountain Bank Board of Directors for over 16 years, and as chairman of the board for the last three years.
Growth of the bank was good in the early years, but then the recession hit in 2008. Like most of Grand County businesses, Grand Mountain Bank suffered as a result of the recession. But as a result of fantastic management and a solid team of employees, the bank recovered. However, additional capital was needed, and new stock shares were sold. This greatly increased ownership by investors from outside Grand County. Before these funds were secured, we received assurances from our investment advisor, FIG Partners LLC (now a part of Janney Montgomery Scott LLC), that the new investors had a long-term investment horizon.
In particular, FIG assured us that they knew the new investors well, and that the new investors would not insist on selling the bank after a few years if the stock increased in price, as expected. Even though the bank had other options, based on FIG’s representations, we proceeded with the stock sale. The bank issued new shares at $1.70 per share. The bank once again grew rapidly, yet prudently, surpassing even the optimistic financial goals set by the board.
The bank’s management team, led by President Frank DeLay and Vice Presidents Mark Lund and Randy Quillen where instrumental in the Bank’s recovery and subsequent growth. Unfortunately, all three of these outstanding bank employees have been notified by BayCom Corp that their services are no longer needed. I hope the entire county will join me in thanking these three fine individuals for their services. If you don’t know them from the bank, you probably know them from their involvement with Lions, Rotary, Chambers, high school sports and other community organizations and many charities.
One of the reasons that I believe the BayCom Corp offer should be rejected is that the offer price of $3.40 per share is too low. The price is too low because the premium over the book value is too small. Book value per share tells investors what the bank’s book value is on a per-share basis, and is determined by subtracting liabilities from assets, and dividing that number by the number shares outstanding.
Currently the bank’s book value is about $2.70 per share, and therefore the premium of the offer price ($3.40) over book value ($2.70) is $0.70, or about 26%. Premiums over book value can vary widely, but I believe it is too low for a bank as healthy as Grand Mountain Bank. In addition, FIG had estimated the value of Grand Mountain Bank shares at $3.80 just a few months before BayCom Corp made their initial offer.
In addition, the value of the bank is increasing, and as the value goes up, the premium over the book value typically increases, providing a strong incentive to take a longer term view, as FIG assured us the new investors would. Additionally, I believe a more robust marketing of the bank would result in a fairer price. We really only considered two offers, and we did not formally put the bank on the market.
Coincidently, the same day as we began voting on the BayCom Corp offer, The Business Roundtable redefined the Purpose of a Corporation to promote an economy that serves all Americans. In effect, they encouraged businesses to consider shareholders, employees, customers, suppliers and the community when making corporate decisions. This is a viewpoint that I strongly support.
I believe that Grand Mountain Bank employees would be better off working for a strong local community bank than a large business bank located in San Francisco. In addition, employees who have been terminated would likely retain their jobs.
I also believe customers will suffer as a result of the merger. BayCom Corp plans to discontinue offering home mortgages. They will be offering commercial loans, but so does Grand Mountain Bank. Although BayCom Corp will be able to offer larger loans, this will only benefit business customers who want commercial loans in excess of 2 million dollars. Thus, an extremely small number of Grand County customers will benefit.
I also believe the community will suffer. Our friends and neighbors in Grand County have voted Grand Mountain Bank as their favorite bank every year since it opened. I don’t believe the new bank, headquartered in California, will provide the same hometown service that the current bank does, because current management lives and works here and participates in local organizations, alongside their neighbors. And since it will not offer home mortgages, the community as a whole will have to go elsewhere.
For these reasons, I encourage all shareholders to vote against the BayCom Corp offer.
I’d like to take this opportunity to thank the entire community for their support of Grand Mountain Bank and its employees for the past 16 years. I would also like to thank the shareholders who helped found and maintain the Bank.
If anybody would like to discuss this matter with me further, please feel free to contact me at email@example.com.
— Mike Tompkins, Chairman of the Board, Grand Mountain Bank
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