Though we may not need to hear another boom-to-bust story, they're hard to avoid these days. So here's the latest on Brooksville's Cortez Community Bank.
No, it hasn't failed. It has $15 million coming from a Miami investor and, as a commercial bank, the Federal Deposit Insurance Corp. covers its customers. If you're one of them, in other words, don't panic.
Still, it doesn't take a Warren Buffett to see the bank has problems.
Of all the money Cortez has handed over to borrowers, at the end of 2009, 21 percent was tied up in loans more than 90 days past due, compared to the industry average of 3 percent, said Karen Dorway, president and director of research for the rating agency Bauer Financial.
The value of these bad loans was nearly 1 1/2 times as much as the bank's net worth. And, not surprisingly, Cortez lost $4.6 million last year.
All of this earned (if that's the right word) one star from Bauer in a rating system that runs from five stars to zero, meaning the company now considers Cortez "troubled.''
The FDIC would probably agree. In April, it issued a "cease and desist'' order to the bank — one of 16 in the state this year — which is bad, but maybe not quite as bad as it sounds.
It means the FDIC sent Cortez a long list of requirements, including that it write down or otherwise reduce the value of its bad loans. If it can't meet these demands, the agency can remove bank officers or, eventually, pull its insurance — at which point depositors probably should panic.
It's not going to happen, said Don Page, the bank's president and chief executive officer, who said Cortez is giving the FDIC everything it asked for.
And take a look at how things will change when the money from BCOM CCB Holdings of Miami arrives, hopefully in September. The bank's net worth will more than double. The ratio of bad debt to sound assets will drop drastically. It will have money to issue loans and start earning again.
"It will be nice to get back to being a banker,'' Page said.
Cortez's problems are probably not surprising, considering its original business strategy.
It was founded in 2003 by Brooksville's business elite, including lawyer Tom Hogan Jr. and semiretired developer Derrill McAteer. They wanted to write loans to wealthy home buyers in the elite subdivisions that were on their way to the area for the first time — Hernando Oaks, Southern Hills, the Cascades.
Developers of all three of these projects have been in bankruptcy court at one time or another. Homeowners needing loans turned out to be pretty scarce.
The home loans Cortez did issue were good ones, Page said. "We didn't do any of that silly stuff.''
So why is Cortez, which also has a Spring Hill branch, in such trouble while, say, Florida Traditions Bank of Dade City and Brannen Bank of Inverness have much higher Bauer ratings?
Not subprime mortgages, the usual culprit, but loans to developers.
The developers' assets looked sound enough that any bank would have backed them, Page said. But much of their holdings were in real estate that seemed sure to at least hold its value and that, of course, did not.
You know the story. Boom to bust.