Freedom Bank, which has struggled under problem loans linked to the real estate downturn and mortgage crisis, announced Tuesday it had entered into an agreement to raise additional capital to meet regulatory requirements.
Bank officials said Freedom Bank's board had signed an agreement with Richmond, Va.-based Community Bank Investors of America to purchase $5 million worth of the bank's stock, contingent on the institution raising an additional $15 million in capital from private investors.
The capital infusion is sorely needed by the bank, which was carrying $20 million in nonperforming loans on its books during the first quarter and had failed to maintain adequate capital as required by regulators.
"If we complete this transaction, we would not only be in excess of the minimum capital requirements, but we would also be amply capitalized to go forward and resume normal banking operations," said Freedom Bank President and Chief Executive Officer David Zuern.
CBIA is a private investment fund organized in 2006 that specializes in acquiring equity and debt interests in small market capitalization community banks, thrifts and savings banks, as well as their holding companies.
Tim Anonick, a general partner in CBIA, said the $1 per share price for Freedom Bank's stock was appealing.
"We think the problems have been identified and are pretty much behind them," Anonick said. "And with the recapitalization and the new management team, the bank will be very successful."
In arriving at the deal, CBIA took into account Freedom Bank's second-quarter financial figures, which should be filed with regulators by Friday, Anonick said.
As part of the deal, Anonick and Laurence Fentriss, another general partner in CBIA, will assume positions on Freedom Bank's board.
Anonick and Fentriss also serve as vice chairman and chairman, respectively, of Progress Bank of Florida in Tampa.
Progress changed its name in May from Bay Financial Savings Bank, in which CBIA purchased a 35 percent stake, Anonick said.
"I'll say the Bay transaction did not have the asset issues that this one (Freedom Bank) does, but we feel confident that the pricing is right in this transaction," Anonick said. "We're well aware of what the second quarter looks like."
Zuern said Freedom Bank was also resorting to cost-cutting measures like consolidating two banking locations in close proximity on Cortez Road and possibly raising prices on its armored truck services to offset rising costs.
Freedom Bank also is closing its Lakewood Ranch branch, which employs four, on Aug. 30, Zuern said.
Zuern said the bank is making progress in resolving problem loans through the acceptance of deeds in lieu of foreclosure and the active marketing of foreclosed properties. He declined to be more specific.
Kendrick Pierce & Co. of Tampa is serving as a placement agent for Freedom Bank stock.
Zuern said the CBIA agreement and stock offering were positive steps toward Freedom Bank's recovery.
"A lot of banks in the state and in the country, particularly community banks, are looking for capital and there aren't a lot of success stories there," Zuern said. "We're happy to be in this position."
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