Sarasota-based Century Bank must sell or merge

gagostin@bradenton.comOctober 28, 2009 

SARASOTA — Regulators have ordered Sarasota-based Century Bank to look for a buyer.

The Office of Thrift Supervision is requiring the “significantly undercapitalized” bank to find a buyer or merger partner within 20 days to resolve its capital deficiency issues.

The bank’s troubled loans, however, could make it a difficult for a sale to prospective investors, putting the bank at risk of joining the growing list of bank failures this year.

Flagship National Bank of Bradenton was among seven community banks nationwide to close Friday, bringing the bank closure total nationwide to 106 for the year.

Century Bank’s non-performing assets are 21 percent of its total assets, and the bank lost $28.2 million in the second quarter.

“In the current environment, I don’t see how they could sell,” said Philip Van Doorn, senior banking analyst for TheStreet.com Rating. “Why would someone buy them when they have 21 percent in non-performing assets?”

Interested buyers may instead opt to let the bank fail first in order to get a better purchasing deal via a loss-share agreement through the Federal Deposit Insurance Corp., Van Doorn said.

Through a prompt corrective action directive issued Oct. 22, the Office of Thrift Supervision states that it wants Century Bank to recapitalize by merging with or being acquired by another financial institution or selling all of its assets and liabilities to another financial institution.

In addition, the OTS plans to market the institution to prospective investors and merger partners to see that it is sold.

“This is about as serious as it gets,” Van Doorn said of the enforcement order.

Century Bank has $846 million in assets and $833 million in liabilities through June 30, and $142 million in noncurrent loans and leases.

The bank is required to sell or merge within 20 days, and the institution must submit a binding merger or acquisition agreement to the OTS within 10 days.

“The order is very direct, and a regulatory order with a time span to take specific action with a 20-day time span is typically among the last actions a regulatory agency will take prior to taking decisive action,” said Frank Knautz, a local banking consultant.

John O’Neill, president of Century Bank, said he is optimistic Century Bank will find an investor. The bank is currently in contact with five institutions about a possible deal.

“We think we may have some resolution,” O’Neill said. “If there is a transition, it will be seamless to the customers. No one has ever lost their money in an FDIC-insured account. We have close to 100 percent of our customers who are all FDIC-insured right now.”

The corrective action order comes just two months after the OTS issued a cease and desist order to Century Bank, which received a zero-star rating by Bauer Financial for the second quarter.

In that order, the OTS said the bank pursued aggressive lending practices that resulted in excessive levels of home equity lines and high-risk loans.

Century Bank and its 11 branches in Manatee, Sarasota and Broward counties have since been prohibited from making loans for development, land, commercial and commercial real estate.

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