Stock sale to help Cortez Community Bank falls through

BROOKSVILLE — The stock sale that would have given a South Florida holding company a majority ownership in the struggling Cortez Community Bank has fallen through, the bank's president said Friday.

BCOM CCB Holdings LLC — which has since changed its name to Trade Street Holdings, LLC — had agreed to invest about $15 million in Cortez.

As part of the agreement announced in February, Trade Street was to buy 8.1 million shares of common stock at $1.85 a share. Had the deal gone through, Trade Street would have owned at least 80 percent of Cortez's outstanding common shares, infusing much-needed capital into the homegrown bank.

But Trade Street backed out of the deal after it was unable to get approval by the Federal Reserve Board to become a bank holding company, said bank president Don Page.

Page said the reserve board wanted more information from Trade Street.

"I think they lost interest," Page said.

A representative from Trade Street reached Friday said she could not immediately comment and did not do so before deadline. Headquartered in Miami, BCOM Inc. was founded in 1980 as a real estate development firm. Later, the company formed BCOM Investment Advisers to manage pension assets.

"We are certainly disappointed that we were unable to consummate the transaction, which we believe would have benefitted our shareholders and the community," Thomas S. Hogan Jr., chairman of the Cortez board, said in a statement Friday.

Founded six years ago during Hernando's construction boom, Cortez Bank is suffering in large part because of commercial loans that soured in the economic downturn. The cash from the stock sale would have helped the bank deal with its troubled assets.

The bank's stock value climbed past $11 per share in early 2005. On the day the deal was announced in February, the stock opened at 35 cents per share.

On Thursday, the stock closed at 15 cents a share.

The bank is looking at another group of investors, Page said Friday. He declined to provide more details.

Asked if Cortez is at risk of being shut down by the Federal Deposit Insurance Corp., Page said the bank is still considered to be well-capitalized.

"We do have our problems, but we've taken some serious measures to get rid of toxic assets and if we can get the capital in, we'll be okay," he said.

Cortez has been under supervisory status with the FDIC since April, said Caroline Jervey, vice president of Bauer Financial Inc. of Coral Gables.

Bauer uses federal regulatory data to rate banks based on capital-to-risk ratio, profit/loss trend, delinquent loans and other factors. The ranking ranges from a high of five stars to a low of zero stars. The company's current ranking for Cortez is zero stars, defined as "troubled." That has dropped from two stars, or "problematic," since February.

Cortez reported $82 million in total assets and a net loss of $4.6 million in 2009 — $2.9 million of that in the fourth quarter. In the first half of this year, the bank lost $2.7 million, Jervey said.

Under the FDIC order, Cortez must work to write off delinquent loans, keep its leverage capital ratio above 8 percent and total capital-to-risk ratio above 12 percent, Jervey said. Those numbers were at 10.6 percent and 15.4 percent, respectively, as of June 30. Third quarter numbers were not available, Jervey said.

The bank's ratio of delinquent loans to assets is "astronomical" but has dropped since the first quarter, Jervey said.

"That's a good sign that maybe they've seen the bottom and they're going to be able to rein in some of these problems," Jervey said. "They are losing a lot of money, and if they continue to lose money then all bets are off."

At the end of calender year 2009, 21.2 percent of Cortez's total assets were nonperforming, such as past-due loans or foreclosed property. At the end of the first quarter of this year that figure had climbed to 24.1 percent, then dropped to 22.8 at the end of the second quarter.

At the end of last year, the bank had about $16.6 million worth of loans delinquent by 90 days or more and had repossessed real estate worth $1.3 million. The first number has not changed since then; the second has climbed to about $1.9 million, Jervey said.

Still, the bank was considered "well-capitalized" by federal regulators as of June 30. The highest of five categories, the rating means a bank's ratio of capital to risk is 10 percent or more.

As of Sept. 30, Cortez had about $77.5 million in total assets, $53.4 million in loans, and $7.1 million in stockholders' equity, according to Page.

Cortez has two branches, one in Brooksville and one in Spring Hill, and about 17 employees.

Tony Marrero can be reached at (352) 848-1431 or tmarrero@sptimes.com.

Stock sale to help Cortez Community Bank falls through 10/29/10 [Last modified: Friday, October 29, 2010 9:30pm]

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