A plan to inject $50 million into U.S. Century Bank has been called off, leaving the undercapitalized Doral, Fla., bank in limbo.
A group of Miami investors called off the plan after the Dec. 31 closing deadline passed. The bank's board offered to extend the closing date by a month, but the investors balked and terminated the deal.
The cancellation was first reported Tuesday in the South Florida Business Journal, and was confirmed by a bank spokeswoman.
In May, a group of Miami investors led real estate developers James Tate and Sergio Rok, agreed to inject $50 million into U.S. Century and to fund the bank's exit from the Troubled Asset Relief Program. The bank agreed to sell $95 million in nonperforming loans to unrelated third parties.
The plan was later delayed to allow the bank's existing shareholders to participate in the recapitalization. But the arrangement failed to meet a number of closing conditions, including regulatory approval, securing agreements to sell the bad loans and the resolution of a class-action lawsuit brought by a group of minority shareholders.
The investors were also concerned that a number of more recent U.S. Century loans would have to be written down, which would require an infusion of more capital to restore the bank to well-capitalized status, Tuesday's Business Journal report said. Rather than extend the deadline, the investors opted to walk away.
In a letter to shareholders, U.S. Century's recently appointed chairman R. Alexander Acosta said he is "disappointed" in the termination but optimistic about the banks future.
"[D]uring the more than nine months since the beginning of negotiations with Tate/Rok, the board believes that the bank has made important progress in critical areas including asset quality, liquidity and core earnings profitability," Acosta said in the letter. "As a result, the bank has moved toward a position to again operate as a profitable and viable banking franchise and, hopefully, to obtain alternate sources of capital."
The cancelation marks the second deal that has fallen through for U.S. Century in the last year. It had planned to sell itself to C1 Bank in St. Petersburg, Fla., but that deal was cancelled in late December 2012 after there were difficulties negotiating U.S. Century's Tarp repayment.
The $938 million-asset U.S. Century is one of the nation's biggest undercapitalized banks, with Tier 1 capital of 5.1% and total risk-based capital of 7.28% as of Sept. 30, according to the Federal Deposit Insurance Corp. It lost $8.1 million in the first nine months of last year, according to regulatory filings.