CapitalSouth Bancorp in Birmingham, Ala., is considering putting itself up for sale after a plan to raise capital failed to pique investor interest.
The $694 million-asset company announced late Wednesday that it had hired Sterne, Agee & Leach Inc. to advise it on its options, "which would include a sale of assets or merger of the company."
In the same announcement the company said it could sell only 1.9 million shares, to directors and senior management, of the 7.5 million shares it offered its investors. It now intends to offer the remaining shares to the public at $2 each — or 166% above the shares' current trading price.
Like many banking companies in the Southeast, CapitalSouth has been battered by losses on real estate loans.
It lost a combined $21 million in the last two quarters and in October was slapped with an enforcement order from the Federal Reserve Board requiring it to strengthen its board, improve credit oversight, and hire an independent consultant to evaluate management.
Then on Nov. 24, the company announced that W. Flake Oakley would step down as president on Dec. 31 and resign from its board of directors. The company said in a Securities and Exchange Commission filing that the resignation "is not the result of any disagreement between the company and Mr. Oakley concerning Mr. Oakley personally or any matter relating to the company's operations, policies, or practices."
CapitalSouth officials did not return calls seeking comment.
It remains to be seen how much interest CapitalSouth, with 13 branches in Florida and Alabama, will attract from potential buyers.
Jeffrey Adams, the managing director in the Atlanta office of Carson Medlin Co., said the pool of buyers has dried up, especially in the Southeast.
"Banks that are would-be the buyers are dealing with their own problems," he said. "For them to go out and take on another bank's issues isn't something that a lot of banks have an appetite for."
And some banks that have the wherewithal for acquisitions, he said, "are sitting on the sidelines waiting to do failed-bank deals and get deposits, which is really what they want, at much lower prices."
CapitalSouth's real estate problems in the Florida market can be traced to its 2006 purchase of Monticello Bancshares Inc. in Jacksonville.
At Sept. 30, CapitalSouth reported, 6.5% of its assets, or $48 million, were nonperforming. The Federal Deposit Insurance Corp. showed its subsidiary bank's total risk-based capital ratio at the end of September as 9.45%, below the level need to be considered "well capitalized." Its Tier 1 capital was 8.18%.
CapitalSouth's share price barely budged on news that the company was considering a sale. The stock closed at 75 cents a share on Thursday, unchanged. The stock price is down more than 90% this year.