U.S. Century has agreed to a deal with Miami investors that would clean up its loan portfolio and provide much-needed capital, while keeping the bank under local, independent management.
The Doral, Fla., bank said Tuesday that it has signed a letter of intent with a group of investors led by real estate developers James Tate of Tate Capital and Sergio Rok of Rok Enterprises, under which the group would invest $50 million in the bank and pay up to $90 million for its soured loans.
The $1 billion-asset bank had $98 million in nonaccrual loans as of Dec. 31, 2012, according to the Federal Deposit Insurance Corp. The bank lost more than $8 million through the first nine months of 2012 and lost more than $79 million in 2011.
Under the deal, the group of investors would gain control of U.S. Century's board, Tate said, but it intends to leave president and chief executive, Carlos Dávila, in place. The group has been impressed with the systems and controls that Davila has put in place, since becoming president in August, Tate said.
The group will also give existing shareholders the opportunity to re-invest in the bank, Tate said.
"There are two goals here. One is to recapitalize the bank and leave it with a clean book of loans so that it can again be profitable. And the other is to create a strong South Florida community bank under local management that mirrors the demographics of the market it serves," said Tate.
The group of investors also includes Miami real estate developer Jorge Perez, Tate said. The names of the other investors will be made public next week.
This proposed deal would mark the end of U.S. Century's efforts to raise capital or find a merger partner. C1 Bank agreed to buy U.S. Century in August, but the banks called the merger off late last year due to difficulties negotiating U.S Century's exit from the Troubled Asset Relief Program. The Treasury Department rejected C1's proposal to buy back the $50.2 million U.S. Century received through Tarp at a 90% discount. Tate said that he could not comment on the group's plans to repurchase the bank's Tarp shares.
Since the sale to C1 was called off, U.S Century has been unloading loans in an effort to raise capital. The bank sold $120 million worth of loans in the last quarter of 2012.
U.S Century expects to sign a formal agreement with Tate's and Rok's group in March, it said. The agreement also calls for the investment group to repay U.S. Century's Tarp funds, but that the amount they'll pay to do so "will be determined as the transaction progresses," Tate said.
The deal could close in the third quarter, pending shareholder and regulatory approval.
"After months of analyzing the best alternatives to raising capital for U.S. Century Bank, we firmly believe that this deal would have the best outcome for all our stakeholders: our employees, our stockholders and our community," said Dávila in the news release. "It allows us to continue to operate as an independent community bank and offer our customers the same level of superior customer service, while enabling us to reignite our loan programs and develop other areas of growth for the bank."
U.S Century faces lawsuits stemming from its losses following the financial crisis. Investors filed a class-action suit last month alleging that the bank's directors misused Tarp funds, according to the South Florida Business Journal. Tate says his group will try to meet with shareholders who have filed suits and express to them their desire to recapitalize the bank "but not throw good money after bad."
U.S. Century operates 24 branches in South Florida. The bank had Tier 1 capital of 4.60% and total risk-based capital of 7.32% as of Dec. 31, according to the FDIC.