Stonebridge Financial Corp., a bank holding company located in West Chester, Pennsylvania, announced that it will sell its wholly owned subsidiary, Stonebridge Bank in order to significantly strengthen the bank's balance sheet and improve its financial position as a well-capitalized bank. The bank holding company has filed a voluntary petition in the United States Bankruptcy Court for the Eastern District of Pennsylvania and intends to sell the bank in a sale under section 363 of the Bankruptcy Code to the highest and best bidder. A group of members of the local business community have signed an asset purchase agreement and agreed to act as stalking horse bidders for the bank, in order to set a base level for all further offers.
"The sale of Stonebridge Bank through the 363 sale process will create a bank poised for growth," Daniel J. Machon, Jr., President and CEO of Stonebridge Financial Corp. and Stonebridge Bank, said in a statement. "Upon approval by the court and regulatory authorities, the bank will continue its mission to create a strong and secure community bank. We will continue to meet all federal and state regulatory requirements for capitalization."
The bankruptcy filing does not affect Stonebridge Bank, and only affects the holding company. The bank will not file bankruptcy, and Stonebridge Bank will continue to operate separately from the holding company and will conduct business as usual throughout the reorganization process. Deposits will continue to be insured to the fullest extent possible by the Federal Deposit Insurance Corporation (FDIC). There will be no impact on depositors, creditors or vendors of Stonebridge Bank.
The transaction is structured so that the investors would purchase the shares of the bank. This offer will be tested at an auction.
Chapter 11 filings have become a popular way for banks to recapitalize following the capital crisis in 2008.
Capitol Bancorp Ltd., which owned several banks, including: Bank of Las Vegas, Indiana Community Bank, Michigan Commerce Bank and Sunrise Bank of Albuquerque, recently used this strategy and consummated a sale of the banks to investor Wilbur Ross. First Mariner Bancorp, located in Baltimore, Maryland, recently sold its subsidiary 1st Mariner Bank to a group of investors through a bankruptcy 363 sale process. Also, Mercantile Bancorp Inc. was purchased recently by United Community Bancorp of Illinois through a Chapter 11 filing. Each of these bankruptcy transactions allowed the bank, which cannot file for bankruptcy, to significantly strengthen its balance sheet.