Coming off its 13th consecutive quarterly loss and struggling to meet capital requirements set by regulators, Atlantic Coast Financial Corp. in Jacksonville, Fla., is considering selling itself to another bank.
The $792 million-asset company said in a news release Monday that "in light of current economic conditions, as well as recent operating results," it has hired the investment bank Stifel Nicolaus & Co. to help it explore its strategic options that could include "a potential business combination," and raising capital through a rights offering.
Atlantic Coast was hit hard by the real estate bust in the Southeast and has not turned a profit since the second quarter of 2008. Through the first nine months of 2011 it lost $6.3 million and at Sept. 30, 6.47% or its assets were not performing, up from 3.38% a year earlier.
The company raised roughly $17 million in capital earlier this year when it converted from a mutual holding company to a 100% stock-owned company, and has said that it planned to raise additional capital through a rights offering. Though it is considered to be well capitalized, Atlantic Coast is under orders from regulators to maintain a Tier 1 leverage ratio of 7%; at Sept 30, that ratio was 6.22%,
Because Atlantic Coast completed a stock offering this year, it needed special approval from the Federal Reserve to hire an investment bank. Banks and thrifts are typically barred from pursuing transactions that require stockholder approval within three years of a public offering.
Former Sovereign Bank Chairman and Chief Executive Jay S. Sidhu was chairman of Atlantic Coast for a brief period, but he stepped down shortly after the company completed its second-step conversion. Sidhu remains one of the company's largest shareholders.