BRADENTON - Plagued by problem loans and facing myriad lawsuits from angry investors and borrowers, Bradenton-based Coast Bank of Florida has been placed on the auction block.
Coast Bank officials announced Friday a proposed sale of the 20-branch bank to St. Louis, Mo.-based First Banks Inc.
The deal, worth just over $22.1 million, would pay shareholders of Coast Financial Holdings Inc., Coast Bank's holding company, $3.40 a share in cash.
Sale of the bank would first have to be approved by shareholders and regulators.
Under the terms of the sale, the purchase price can be adjusted if there are deficiencies in Coast Bank's reserves to cover projected loan and lease losses.
"I think the board and the bank have been very focused on trying to address the issues here to maximize shareholder value and to make sure that our employees and customers are well taken care of," said Tramm Hudson, a Coast Bank spokesman. "They've worked very hard to bring this to a successful resolution."
Coast Bank is still reeling from $110 million in loans it made to 482 borrowers whose homes were being built by St. Petersburg-based Construction Compliance Inc.
CCI's owner, Jesse B. Battle III, announced in January he was unable to complete the homes and he has since claimed bankruptcy.
Both the bank and its holding company face numerous lawsuits from borrowers and shareholders.
The loan fallout sent shares of Coast Financial Holdings tumbling from an August 2006 high of $17.06 a share to a low of $2.22 per share on May 30.
Shares of Coast Financial (NASDAQ: CFHI) closed down 4 cents to $2.28 on Friday.
Terrance M. McCarthy, president and chief executive officer of First Banks, which has $10.5 billion in assets and operates 197 offices throughout Missouri, Illinois, Texas and California, said Coast Bank was a desirable acquisition despite the legal and financial woes it currently faces.
"We're acquiring the whole company. That would include the assets and liabilities of the company," McCarthy said. "I think we clearly understood the challenges that Coast had and we factored that into our decision to proceed and the price that we put forth. A 20-branch, key platform in Florida was certainly of interest to us in Coast Bank."
First Banks' board Chairman James Dierberg purchased 633,800 shares of Coast Financial Holdings stock in February through a Nevada-based investment firm and there were rumors he might be planning a takeover.
McCarthy said Dierberg's stock acquisition and First Banks' interest in buying Coast Bank were not necessarily related.
James Schutz, an analyst following Coast Bank for Birmingham, Ala.-based Sterne, Agee & Leach Inc., was not surprised by news of the proposed sale, particularly since the bank had been attempting to raise additional capital under order from the FDIC.
"I know their first priority was to sell the firm," Schutz said. "They probably did the math and figured out that raising the capital would have massively diluted shareholders."
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