James Stevens, partner and co-leader of Troutman Pepper Locke’s Financial Services Industry Group, was quoted in a recent S&P Global Market Intelligence article by Claire Lawson, “Bank7 Eyes Expansion, Low-Cost Deposits in Unconventional Century Financial Play.” The article examines Bank7 Corp.’s unusual attempt to acquire a 71% ownership stake in Century Financial Services Corp. through a stalking horse bid in the U.S. District Court of Arizona. Industry observers have described this structure as highly uncommon in the bank M&A space.

The transaction, if successful, would give Bank7 access to Century Financial’s attractive, low-cost deposit base, with Century Financial’s cost of deposits at 1.01% compared to Bank7’s 2.18%, as well as expansion into the Santa Fe, New Mexico market. However, as James explained, acquiring less than 100% of a bank creates significant regulatory and operational complications. “If they can’t acquire 100% of the bank, it creates real problems for them on a going-forward basis,” James told Market Intelligence. Without full ownership, Bank7 would remain subject to the Change of Bank Control Act and the Bank Holding Company Act, including the source-of-strength obligation that requires holding companies with a majority share to support all subsidiary banks regardless of ownership percentage. James also noted that regulatory scrutiny of board, management, and business directional changes could prove challenging if existing management is not on board with the transaction, and that the situation is “pretty grey” from a regulatory perspective as to whether Century Financial will have any say in whether the sale proceeds.

Beyond the regulatory hurdles, James highlighted the practical realities of bank M&A more broadly: “Banking is very much a relationship and a people business. And if the people that are being acquired are not on board with the transaction, that may not be a great transaction for the buyer.” A bidding process is currently underway, with bids due August 31 and a sale hearing scheduled for September 9.

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