Grand Mountain Bank makes good on federal ‘bailout’ obligation through recapitalization
Grand Mountain Bank, which is based in Grand County, announced earlier this month that its parent company, Grand Mountain Bancshares, Inc., recently completed a major recapitalization transaction, including paying back the federal government for a bailout in 2008.
Recapitalization is a financial industry term for the restructuring of a company’s capital, typically either replacing debt — or in this case, financial obligations — with capital and equity or vice versa.
When the Great Recession hit in 2008, financial institutions were the first segment of the economy sent reeling. Community banks, such as Grand Mountain Bank, were deeply impacted. The federal government soon after passed the Emergency Economic Stabilization Act of 2008, which authorized the U.S. Treasury Department to buy distressed assets and supply cash directly to banks, commonly referred to as a “bailout.”
Grand Mountain Bank, which has four locations in Grand County, received $3.1 million from the federal government in the form of preferred stock.
Over the last nine years, Grand Mountain Bancshares and by extension its subsidiary, Grand Mountain Bank, has been able to fully repay its obligations to the Treasury — adding a modest return for the federal government — to the tune of $3.9 million.
FIG Partners, LLC acted as sole placement agent in the transaction, according to a statement from Grand Mountain Bancshares.
“We are pleased to announce the completion of the recapitalization and the retirement of the TARP preferred stock,” said Frank DeLay, president of Grand Mountain Bank. “As the only bank based in Grand County, the additional capital places Grand Mountain Bank in a unique position to continue to grow with the local economy.”
Along with retiring the Troubled Asset Relief Program, or TARP, preferred stock, Grand Mountain Bancshares has issued $5.6 million worth of common stock and $1.5 million in senior notes under the recapitalization.
The move frees additional capital for Grand Mountain Bank to use for investments and other projects by reducing the institution’s ongoing obligations.
Grand Mountain Bank’s debt-to-capital ratio currently stands at 9.25 percent, meaning the institution is categorized as “well capitalize,” according to the bank. DeLay explained that ratio places Grand Mountain Bank in the highest category for financial institutions in terms of debt-to-capital ratios.
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