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LIGHTNING EXCLUSIVE: The rise and fall of Mountain 1st Bank


'Where can I get terms like that?'

The bank suffered a net loss of $18.6 million in 2009 and $5.3 million in 2010. Under its new focus on straightening out the troubled loans, it was going in the right direction. Then, after an income tax expense related to a deferred asset, the bank lost $20.5 million in 2011. Although it again surged back the next year, making a net profit of $1.3 million, Mountain 1st was just too weak to stand on its own.
Writing to shareholders about the First Citizens merger, Mayer said the officers and directors knew Mountain 1st needed a cash rescue of about $50 million.
For three years bank officials talked with sources that might be willing to invest. In each case, though, "the possibilities fell victim to the Company's obligation to redeem the TARP preferred investment (which had grown to $19 million), the Bank's impaired regulatory capital levels, remaining asset quality issues, and the continuing weakness in our markets."
Now investors can only vote and wait.
Mountain 1st has scheduled a shareholder meeting on Dec. 10 to take up the merger.
Some shareholders may attend to object to the golden parachutes that would pay Mayer $331,959, chief administrative officer Peggy Denny $319,084 and Rees $1,285,714. Although the executive pay is one of two ballot questions shareholders may answer, their vote is advisory only. The payments are based on contracts that predate the proposed First Citizens merger.
Ciampi, a small investor, said he's bothered by the golden parachute and the director loans.
"Where can I get terms like that?" he said. "It's probably legal but they've just taken advantage of the whole thing. That's why the bank went down. They need to be held accountable for that. If I was on the board of directors — and I'm not in that league — I probably would have just said, 'Count me out. It might be legal but it doesn't pass the smell test.'"
Flynt, the banking professor, said the executive pay agreement is not unusual.
"A golden parachute is a very standard process," Professor Flynt said. "It's almost typical of any size bank at all that people are going to get some level of compensation for their years of service. It's simply a contract. Having said that, I can see that if the entire shareholder base is getting $2 million and three officers are getting more than a million, there's a sense of unfairness or jealousy there, and that's understandable."


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