Horizon told to raise funds or merge

BRADENTON — Horizon Bank of Bradenton has been ordered by the Federal Reserve to either raise funds or merge with another bank within 45 days.

The directive for prompt corrective action was issued March 4 by the Board of Governors of the Federal Reserve in Washington and reported Tuesday. It states that the undercapitalized bank has not filed a capital restoration plan that meets federal requirements and therefore must take immediate action to improve its financial position.

Some of those actions could include increasing the bank’s equity through the sale of shares, or contributions to surplus in an amount sufficient to make the bank adequately capitalized, or by combining with another insured depository institution. Under such a directive, one of the toughest issued by the Fed, the bank must submit an acceptable plan and timetable to the Fed within 30 days, detailing its plan of action.

Charles Conoley, president of Horizon Bank, said the bank has been working with the Fed and is on target to raise $3.5 million to improve its financial position. Once a plan is approved, he said, money would be raised within two to four weeks.

“The capital plan is still being negotiated with the Fed. I’ve been told it had to issue the order because of statute and timing. We expected to get our (plan) approval before now,” Conoley said.

The bank has been working on a private stock offering to raise the funds and submitted an updated version of the capital plan to the Fed as required by Jan. 8, Conoley said.

“It’s frustrating because it’s taking longer than it should have,” he said. “Our stock plan says the Fed has to accept the capital plan before the release of escrow funds.”

Horizon received zero stars in the just-released Bauer Financial quarterly report on bank health, the lowest ranking possible. The bank has $8 million in capital, $200 million in total assets and a risk-based capital ratio of 6.38 percent.

“It ain’t good news,” Florida banking consultant Mike Woody said about the Fed action. Today’s banking climate and federal intervention, he noted, has made raising capital very hard for community banks.

“Why would people invest as long as there are loss-sharing agreements with the FDIC?” Woody said. “The government has poisoned the market.”

Under the enforcement action, the bank also cannot accept or solicit new deposit accounts or renew any time deposit bearing an interest rate that exceeds the prevailing rates on insured deposits.

Conoley, however, believes Horizon is making progress in pulling itself out of its financial woes and is not considering a sale or merger.

“Then we get press that looks bad. I don’t want to get the public panicked, not after all the hard work we’ve done in the past eight months,” he said.