Capitol Bancorp Ltd. has outlined a strategy, including a shareholder rights offering and a potential reverse stock split, that it hopes will enhance its common equity and regulatory capital.
The company, which has dual headquarters in Lansing, Mich., and Phoenix and operates community banks in 14 states, has suffered massive loan losses and a dramatic rise in nonperforming assets.
Chairman and Chief Executive Joseph D. Reid said Thursday that Capitol is working to deleverage its consolidated balance sheet, reduce nonearning assets and strategically redeploy equity capital to other parts of its banking network. The current challenges remain "significant," he said, and the burden of high levels of nonperforming assets continues to consume capital.
Capitol will seek to increase its number of shares from 50 million to 1.5 billion, saying the higher share count would give it flexibility to pursue other possible capital initiatives.
It is also offering to exchange its outstanding trust-preferred securities for shares of common stock, with an aggregate liquidation value of $170.8 million. And it intends to consider a reverse stock split that could fall in a range of 1-for-5 to 1-for-75, in a bid to increase its stock's market value, making it "more attractive" to investors.