Imminent sale of longtime Richmond bank brings windfall to owners, but impact on jobs unknown
on October 3, 2014
Mechanics Bank of Richmond, locally owned for its entire 109-year history, is set to be sold to a private-equity firm out of Texas, the bank announced last week.
Ford Financial Fund, a $755 million private-equity firm owned by Texas billionaire Gerald J. Ford of Dallas (no relation to the former U.S president), put forward a tender offer to buy a majority interest in Mechanics bank for $265 million. The deal, which may take until early 2015 to be completed, is first part of a “roll-up” strategy, in which Ford is expected to buy up local and regional banks and sell them as a package for a profit.
“The Board strongly believes this transaction represents exceptional value for our shareholders and is in the best interest of our clients and employees,” Mechanics Bank CEO Christa Steele said in a press release announcing the deal. “Ford Financial is a highly successful bank investor with a proven 35-year track record of partnering with financial institutions to facilitate growth. We take great comfort in knowing that Ford Financial has an intimate understanding of the banking business, and is fully committed to upholding our longstanding culture of excellence.”
The announcement came as an unwelcome surprise to some local customers, who said they were considering moving their accounts.
Vernay Pilar Reber has had an account with Mechanics Bank for six years through her business, Sunnyside Organic Seedlings in Richmond.
“They’ve been such a big partner in my business that they asked me to do a commercial,” Reber said. But when she heard that the bank was being sold, she decided to move her account to a credit union, in part because credit unions can’t be sold.
“[The credit union] owns buildings in Richmond and employs people in Richmond,” Reber said. “And that’s where we’re going to move our money and account to.”
While the deal is clearly a huge windfall for Mechanics stakeholders, the bank has not said what the impact of the sale would be on local jobs.
Mechanics Bank was founded in 1905 as The Iverson Bank and Trust Company, next to a blacksmith shop on MacDonald Avenue and across from a small farm. In 1915 a group led by Edward M. Downer Sr. purchased a controlling interest in the bank, which has remained in the Downer family’s hands through four generations. E.M. “Eddie” Downer III, the patriarch’s grandson, stepped down at the end of 2013 as chairman emeritus of the bank’s board of directors. D.D. Felton, the great-granddaughter of Edward M. Downer Sr., serves as the bank’s chairman.
The sale of Mechanics, which will have to pass regulatory approval, is part of a continuing consolidation of consumer banking in the U.S. which has made sustainability increasingly difficult for regional banks, even one as successful as Mechanics.
Richmond Mayor Gayle McLaughlin said community banks “have an interest in helping elevate the economic needs of the surrounding community.”
“Mechanics Bank in Richmond has been a neighborhood community bank serving the financial needs of our local community for over a hundred years,” McLaughlin said. “It is sad that they are considering selling to a larger entity, as that will surely cause it to shed its independent character and mission in terms of helping our local community thrive and prosper.”
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