This time, Bank of Florida Corp. is trying to raise enough capital just to stay alive.

The $1.4 billion-asset Naples company's subsidiary banks — operating in three struggling markets in Florida — are "critically" and "significantly" undercapitalized by regulatory standards. They are under orders from regulators to reach well capitalized status, and they expect to receive prompt-corrective-action orders soon.

Bank of Florida has gone down this road before. It tried a $135 million offering in the fourth quarter but called it off, saying larger-than-expected industry losses in the third quarter had spooked investors.

But this time the company's strategy has changed, Michael L. McMullan, the company's president and chief executive officer, said in an interview Friday. Instead of raising enough capital for a worst-case scenario, Bank of Florida plans to raise just enough to be considered adequately capitalized and plans to grow after that through earnings. This offering also will be different because the company is seeking capital from its community, rather than from institutional investors.

"It would allow us to incrementally build our way to 'well capitalized,' " he said. The strategy lets the company "reach out to existing shareholders who expressed interest in the company and understand the value of the markets we are in. We approached this offering in a way we can target 'adequately capitalized' and work toward improving capital positions as markets improve and we see economic conditions improve."

Yet Bank of Florida's capital-raising ability is questionable, industry watchers said. Though investors have been receptive to bank companies with growth stories, those that need capital to survive have not had much luck.

"There are just too many problem banks chasing too few capital dollars," said Ken Thomas, an independent bank consultant and economist in Miami. "There is no public capital left — Tarp is gone. So it is just private capital. We have large pools of it looking at Florida, but they are waiting on the FDIC to move. Instead of vulture funds, they are vulture bank groups."

Gray Medlin, a managing director at Carson Medlin Co., agreed that competition for capital is fierce and that Bank of Florida faces substantial challenges to its capital-raising effort.

"I question [whether] there is any significant interest among investors in what I call filling holes, because you don't know how deep the hole is," he said. "If you were an investor, would you put money in to fill a hole if that might not even be the bottom of the hole?"

Bank of Florida is among a number of troubled banks trying to make headway in the capital markets. For example, the $1.2 billion-asset PAB Bankshares Inc. in Valdosta, Ga., last week announced its intent to raise $85 million to recapitalize its subsidiary bank, which was considered only adequately capitalized.

Meanwhile, Bank of Florida's problems have not leveled off in recent quarters. On Friday it announced that a revision of its fourth-quarter loss would triple the number, to $58.6 million.

The company's problems stem from a sharp decline in Florida real estate values. Roughly 97% of its $164 million in nonperforming loans at Dec. 31 were real-estate-related. The company lost $147.6 million in 2009. For the fourth quarter, its ratio of nonperforming loans rose to 13.56% of total loans, up 793 basis points from December 2008.

Medlin said he thinks investors would prefer to look at companies with stronger loan portfolios. "If you had the opportunity to invest in other deals where there is not such a high level of nonperforming assets and you don't have to fill a hole, you might pay more, but in the end you might pay less," he said. "It is just too much risk, throwing good money after bad."

Also Friday, the company announced it had recorded a $38.8 million valuation allowance on its deferred-tax assets. That caused the previously reported tax benefit of $12 million to become a $26.8 million expense — prompting the loss revision.

After the loss, the three-bank parent company reported a leverage ratio of 2.41%, a Tier 1 risk-based ratio of 2.94% and a total risk-based ratio of 5.33%. The company's tangible common equity ratio was 2.41%.

The $45 million public offering would be quite dilutive to shareholders, increasing the number of Bank of Florida's shares from 13 million to almost 100 million. The offering would be done in two stages, with 38.9 million shares offered to existing shareholders and another 44.6 million in a best-efforts offering.

Even if the offering — which has not been priced — succeeds, it would not bring the company's subsidiary banks to well capitalized status. To reach that status at its Dec. 31 asset size, Bank of Florida would need roughly $57 million for its total risk-based capital ratio to reach 10%. And to reach the 12% ratio by June 30, as required in a memorandum of understanding, the company would need $81 million in fresh capital, according to data from Carson Medlin.

In a prospectus filed with the Securities and Exchange Commission, the company said it expects to get a prompt-corrective-action order that would require higher ratios and that it does not expect to reach the ratios required by June 30. Yet with the $45 million capital-raising effort, it hopes to be adequately capitalized through 2010, it said.

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