An ambitious merger of equals is underway in south central Wisconsin, bringing together two Madison-area organizations. SBCP Bancorp, Inc., the holding company for the $1.6 billion State Bank of Cross Plains, and Monona Bankshares, Inc., the holding company for $1.17 billion Monona Bank, closed on a merger agreement Oct. 3, the same day State Bank of Cross Plains President and CEO Jim Tubbs described the all-stock transaction to 150 bankers attending the Fall Seminar of the Bank Holding Company Association in Bloomington, Minn.
Merging the holding companies is the first step in the two-step process to create a single $2.8 billion holding company with 22 offices serving 17 communities with some 400 employees. The second step is expected mid-February 2023, when the banks merge according to a core conversion schedule. The deal was announced March 14.
The name of the post-merger bank is Lake Ridge Bank. The name pays respect to Monona Bank with the word “Lake” serving as a reference to Lake Monona in Madison. Cross Plains gets a nod from the word “ridge” as it reflects the bluffs in the area around Cross Plains.
Tubbs said he and Monona Bank president and CEO Paul Hoffmann share a friendship that goes back many years, involving periodic dinner dates with their wives and an annual exchange of Christmas cards. So there was nothing unusual about Hoffmann’s invitation to Tubbs to lunch on April 21, 2021.
“We sat down and the first thing he said was: ‘Ever think we could put our banks together?’ I’m thinking, ‘There is no way in hell. There’s too many hurdles.’ So we put that conversation aside,” Tubbs explained.
Thirty days later, Hoffmann called again, saying “I’ve been thinking.”
Tubbs replied, “Yes, we need to meet again.”
“The stumbling blocks on a deal like this are the social issues,” Tubbs explained. “Who’s going to be the CEO? Who’s going to be the board chair? What’s the name of the bank going to be? Where will the headquarters be? What will the culture be? I knew the culture well. I knew what kind of a person Paul Hoffmann was, and how he values his employees and customers. I feel like we have the exact same things at the State Bank of Cross Plains.”
Tubbs said they agreed on most of the social issues at that second meeting. They quickly decided on a CEO, a chair, a headquarters, and they agreed to come up with a new name.
Tubbs said they both required board members and other involved parties to sign non-disclosure agreements. Stressing the importance of confidentiality, Tubbs told his board members: “If you talk about this deal before we’re ready, this deal does not happen.” Rumors can be very destructive, he said, especially to employees who may act on them even before they have all the facts. But the NDAs seemed to have done the job. Even though the deal had been in the works for 11 months, Tubbs said, “No one saw it coming.”
A couple of keys to making the deal work: Tubbs said he and Hoffmann checked their egos at the door. “We never said, ‘You got the last one, I get this one.’ We just always did what was best,” Tubbs said.
John Reichert of the Reinhart Boerner Van Deuren law firm, which represented Monona Bankshares, Inc., told the BHCA audience that part of the reason the deal proceeded so smoothly was that the principals talked extensively and knew what they wanted. “They went a long way down the path of a deal before they brought the consultants in,” he said.
Each of the holding companies had about 700 shareholders, with no dominant shareholder group in either company. As the surviving legal entity, SBCP Bancorp needed to issue new shares to the Monona Bankshares shareholders. The move typically would require SEC registration, but the parties sidestepped that requirement through a fairness hearing, the first of its kind in Wisconsin, according to Tubbs. The holding company was renamed Lake Ridge Bancorp., Inc.
Tubbs said their dealings with the regulatory agencies went smoothly. He said they alerted the regulatory agencies prior to the public announcement of a definitive agreement. They filed regulatory applications the third week of May, about two months after the definitive agreement was announced. “By the end of June we had Fed approval; we got FDIC approval on July 7 and on July 14, it was approved by the Wisconsin Department of Financial Institutions,” Tubbs said.