By: Brian Bandell
The tribe filed an application with the Federal Reserve Insurance Corp. on May 27 to acquire Fort Lauderdale-based Valley Bank, a “critically undercapitalized” bank with $84.3 million in assets and four mostly underutilized branches. It would have been renamed Seminole Bank, given a tribe-owned holding company and received a capital injection so the bank can grow.
RELATED CONTENT: Seminole Tribe aims to acquire Fort Lauderdale’s Valley Bank
“After doing a more thorough review, they decided not to move forward with the Valley bank project and will be on the lookout for an opportunity for another bank sometime in the coming months,” Seminole Tribe spokesman Gary Bitner said.
Terms of the Valley Bank deal were confidential, but one line in the application shows what they were thinking.
“The creation of Seminole Bank will be transformational for the Seminole Tribe of Florida community as Seminole Bank will provide access to the full array of financial services available in the marketplace for each and every member of the Seminole Tribe,” the application said.
Banking attorney Lewis Cohen, a shareholder with GrayRobinson in Miami, said the Seminole Tribe could boost its profits by putting its casino proceeds in its bank and then use the cash liquidity to make loans, including to members of the tribe. The Seminole Tribe has nearly $2 billion in annual gaming revenues, according to state data, so that’s a considerable source of deposits. Most members of the tribe receive monthly dividends from its business profits.
A Seminole Tribe-owned bank could offer special products for Native Americans, such as the Department of Housing and Urban Development’s Section 184 Indian Home Loan Guarantee Program with favorable underwriting and down payments, Cohen said.
Bitner said gaining access to Section 184 lending is an important issue for the Seminole Tribe because most banks in Florida are hesitant to make loans on reservation land, which is held in a federal trust for the benefit of the tribe.
“They believe tribal members are underserved by banks, particularly in the more rural reservations like Brighton and Big Cypress where they have to drive for miles off reservation to get to a bank,” Bitner said.
The Seminole Tribe already undergoes anti-money laundering scrutiny from regulators for running casinos so they should be used to similar regulators for banks, Cohen said.
There are 19 Native American-owned banks in the United States but only one currently in the Southeast. The Seminole Tribe is a minority investor in Denver-based Native American Bank but it doesn’t have any branches here.
“I always wondered why the Seminole Tribe, with its strong cash flow and other business interests, has not pursued a bank here in South Florida,” Miami-based bank analyst Kenneth H. Thomas said.
The seven “undercapitalized” banks in Florida as of March 31 could present an opportunity for the Seminole Tribe to purchase a bank at a lower price, although it would also require cleaning up the operating problems that led them into trouble. The tribe could also target a smaller bank that’s healthy.
As for Valley Bank, the loss of this deal leaves the bank in desperate times with the FDIC on watch.
“This is not good news for Valley Bank or its sister bank in Moline, Ill. or its parent, since the Valley Bank here has been on the market for some time with no takers from existing banks, private equity banks, foreign banks, or even wealthy investors and non-banks,” Thomas said. “Meanwhile, now that the Seminole Tribe has made its banking intentions known, their leaders should expect a slew of calls from local community banks looking for investors, especially the more desperate ones that have significant capital issues.”