Mode Eleven Bancorp has asked the United States Bankruptcy Court for the District of Wyoming to approve a private sale of substantially all its assets for $2 million, pivoting to a direct negotiation after two previously approved bidders failed to complete their transactions and with the company's subsidiary bank facing imminent receivership risk.
The debtor, which filed for Chapter 11 protection on June 9, 2025, is seeking to sell 100 percent of the capital stock of Summit National Bank, its primary asset, through a streamlined private sale rather than conducting a new auction process. The motion, filed January 5, 2026, comes after an extensive seven-month marketing effort that included a court-approved competitive bidding process and auction but ultimately produced no completed transaction.
Background on Auction Process
Mode Eleven Bancorp initially conducted a formal auction on July 28, 2025, that attracted three qualified bidders. The bankruptcy court approved the sale to a Successful Bidder on August 4, 2025, with a Backup Bidder designated as an alternative if the first transaction failed to close. The buyer submitted the third-highest bid at that auction. However, both the Successful Bidder and Backup Bidder subsequently informed the debtor they would be unable to complete their respective purchases, forcing the company to return to the market.
Sale Terms and Pricing
The proposed sale represents approximately 1.3 times the bank's tangible book value. For banks comparable in size to Summit National Bank with little to no profitability, the purchase price is typically no greater than 1.5 times tangible book value, and the average price is closer to 1.1 times tangible book value, according to declarations filed by the debtor's investment banker, Hovde Group, LLC.
The Share Purchase Agreement includes a $200,000 deposit to be held in escrow and applied toward the purchase price at closing. The buyer must obtain regulatory approval from the Office of the Comptroller of the Currency for the change-in-control transaction.
Receivership Risk and Preservation Efforts
The urgency underlying the sale motion stems from Summit National Bank's precarious regulatory position. The bank has been at risk of being placed into receivership by the Office of the Comptroller of the Currency since before the bankruptcy filing. The debtor has taken aggressive measures to maintain the bank's required capital ratios, including securing $500,000 in debtor-in-possession financing from the originally designated Successful Bidder to infuse sufficient capital into the bank.
The debtor's management has reduced risk-weighted assets by shrinking the bank's balance sheet through non-core deposit and natural loan runoff. The company has targeted operating expenses by reducing discretionary spending and negotiating with vendors to lower or restructure outstanding invoices. The chief executive officer reduced his salary to the federal minimum wage to preserve capital and demonstrate management's commitment to stabilizing the bank.
Marketing Process
The marketing process for the bank's sale began on May 20, 2025, when Mode Eleven Bancorp engaged Hovde as its investment banker. During the prepetition period, nine interested parties entered into non-disclosure agreements with the debtor, including two banks and a credit union. Following the bankruptcy filing, an additional 30 parties signed confidentiality agreements and were granted access to a virtual data room containing detailed financial information and due diligence materials.
The Court approved Bidding Procedures on July 11, 2025. Six potential purchasers submitted formal or informal indications of interest, and three parties submitted qualified bids by the bid deadline.
Post-Auction Marketing Efforts
When it became clear that neither the Successful Bidder nor Backup Bidder would close their transactions, Hovde contacted 12 additional potential purchasers in November 2025, approximately half of whom had participated in the earlier sale process. The contacted parties included state-chartered banks, credit unions, investor groups, individual investors, and non-depository financial companies. Four additional parties executed non-disclosure agreements during this renewed marketing phase.
Ultimately, only two parties submitted offers during the post-auction marketing process. While one investor group offered a somewhat higher purchase price, the debtor concluded after conducting reverse due diligence that this group would be unlikely to obtain the necessary regulatory approval from the Office of the Comptroller of the Currency to consummate the transaction. Another investor group submitted a letter of intent on November 26, 2025, but never provided an executed share purchase agreement.
Rationale for Private Sale
The buyer's offer is expressly conditioned on the transaction being consummated as a private sale. The debtor argues that a section 363(b) sale transaction does not require an auction procedure, and private sales are expressly contemplated by Federal Rule of Bankruptcy Procedure 6004(f)(1).
In its motion, Mode Eleven Bancorp cites the case In re 160 Royal Palm, LLC as persuasive authority for approving a private sale after a previously approved auction process failed to produce a completed transaction. In that case, a Florida bankruptcy court approved a private sale of a hotel after litigation between the debtor and a potential buyer substantially delayed the sale process and created additional risk to the estate.
The debtor argues that conducting another auction at this stage would result in delay and additional administrative costs, with increasing risk that the bank will be placed in receivership. The debtor maintains that it is unlikely a renewed auction process would realize substantially more value given the previous thorough marketing of the assets both pre- and postpetition.
Legal Arguments
The debtor argues the sale satisfies the business judgment test applied by courts when reviewing section 363 sales. Courts typically consider whether: (1) a sound business reason exists for the sale; (2) there has been adequate and reasonable notice to interested parties; (3) the sale price is fair and reasonable; and (4) the proposed buyer is proceeding in good faith.
The debtor is requesting that the court find the buyer to be a good faith purchaser under Section 363(m) of the Bankruptcy Code, which would protect the purchaser from having the sale reversed on appeal. The motion argues that the sale is the result of arm's-length, good faith negotiation between the debtor, the buyer, and their advisors.
Mode Eleven Bancorp also seeks authorization to sell the assets free and clear of all liens, claims, and encumbrances under Section 363(f) of the Bankruptcy Code. The debtor represents that it is unaware of any liens on the assets other than the lien securing the debtor-in-possession financing, which will be repaid from sale proceeds according to the company's Subchapter V Plan of Liquidation. Any other liens or encumbrances would either be paid in full at closing or would attach to the sale proceeds with the same priority they held before the sale.
Timeline and Next Steps
The agreement was originally executed on December 12, 2025, then amended and restated on December 31, 2025, with a further amendment on January 5, 2026, extending various deadlines. Under the current timeline, the bankruptcy court must enter a sale order by February 4, 2026, with closing to occur by April 22, 2026. The parties have the option to extend the closing date to May 22, 2026, if regulatory approvals remain pending.
The motion requests that the court waive the 14-day stay typically imposed under Bankruptcy Rule 6004(h), allowing the sale order to become effective immediately upon entry.
Transition Services
The proposed sale includes a Transition Services Agreement under which Summit National Bank would provide certain services to Mode Eleven Bancorp after closing to facilitate the wind-down of the bankruptcy case and assist with bankruptcy administration and reporting requirements, at no cost to the parent company.
Community Impact
Summit National Bank serves small-town communities in the Mountain West region. The debtor states that maintaining the bank as a viable regional banking resource is an important consideration. Without a completed transaction, the bank faces the prospect of receivership, which the debtor argues would drastically harm the estate's value and eliminate a banking resource for the small communities the bank serves.
Case Information
Mode Eleven Bancorp's Chapter 11 case is proceeding as a small business reorganization under Subchapter V of the Bankruptcy Code. No official creditors' committee has been formed in the case, though a Subchapter V trustee has been appointed. The debtor continues to operate as a debtor-in-possession.
The debtor will provide notice of the motion to any entities known to have asserted any lien, claim, or encumbrance on the assets; all governmental taxing authorities; all parties that have filed requests for notice; all known creditors; the Office of the United States Trustee for the District of Wyoming; and the Subchapter V trustee.
The case is In re Mode Eleven Bancorp, Case No. 25-20240, in the United States Bankruptcy Court for the District of Wyoming. The debtor is represented by Covington & Burling LLP and local counsel Markus Williams Young & Hunsicker LLC.
This article was prepared using Stretto Conductor, our new AI-powered assistant that's here to help. Stretto Conductor was able to create this summary of a 123 page court filing in less than a minute. Always review the underlying docket filings for accurate information. The information and responses generated by Stretto Conductor may contain errors or inaccuracies and should not be relied upon as a substitute for professional or legal advice.