TIB Financial Corp. in Naples, Fla., has struck a deal that could bring as much as $350 million into the capital-strapped company.
The $1.7 billion-asset company announced late Tuesday that North American Financial Holdings Inc., led by former Bank of America Corp. executive Eugene Taylor, would invest $175 million in the company so that it can shore up its undercapitalized bank unit.
The deal calls for North American Financial, which is backed by Crestview Partners and other private equity firms, to buy 700 million shares of common stock at 15 cents per share, a 78% discount to the company's closing stock price Tuesday. It would buy an additional 70,000 shares of convertible preferred stock.
The investment would give North American Financial a 99% ownership stake in the company. Yet TIB's existing shareholders would be able to offset some of the dilution through a rights offering for up $22.4 million.
The deal also gives North American Financial 18 months to invest another $175 million in TIB.
The deal is conditioned on TIB reaching an agreement with the Treasury Department to repurchase the $37 million of preferred stock it issued as part of the Troubled Asset Relief Program, on terms acceptable to North American Financial.
If completed, the investment would dramatically alter TIB's financial situation, taking it from undercapitalized to abundantly so. "Our investment in TIB is expected to immediately reestablish it as a profitable bank, with a strong balance sheet and one of the strongest capital bases of any community bank in Florida," Christopher G. Marshall, chief financial officer of North American Financial, said in a press release Tuesday.
TIB ran into trouble as a result of construction and development loans. At the end of the first quarter, 5.5% of its assets were nonperforming and the bank had a total risk-based capital ratio of 8.1%. A July 2009 memorandum of understanding called for a ratio of 12%. Still, analysts have said TIB is a bank worth saving, given its attractive franchise on Florida's Gulf Coast.
That franchise appears, at least in part, to be the motivation for North American Financial's investment. "TIB has a very solid foundation in its current markets," Taylor said in the press release.
North American Financial's deal is independent of the other two recapitalization efforts TIB has announced. In April, it said private-equity firm Patriot Financial Partners had agreed to invest up to $25 million in the company, as long as TIB raised an additional $150 million. Earlier this month TIB announced that Marty Adams, former chief executive of Sky Financial Group, had agreed to help the company raise the capital it needed and then would take the helm.