C1 Bank called off its proposed purchase of U.S. Century Bank on Wednesday, 12 days before it was due to be completed, instead agreeing to buy certain assets and take over the lease of a Brickell Avenue branch in Miami.
C1 Chief Executive Trevor Burgess and U.S. Century Chairman Ramon Rasco each said the main reason for calling off the sale was that the banks could not meet certain pre-merger conditions, such as closing before the end of the year, as well as other contractual requirements.
“Any merger agreement has a number of conditions that need to be met,” Burgess said. “And there were certain conditions that were not able to be fulfilled by the end of the year.”
The sale of the Doral bank to C1 of St. Petersburg was still pending federal regulatory approval, as well as approval on the partial repayment of its TARP funds from the U.S. Treasury Department.
According to the proxy statement obtained by The Herald from a shareholder, other pre-conditions to closing included selling $15 million in U.S. Century’s classified assets (bad loans) and amending leases on each branch in which the lessor is a former or current director. Eight of the bank’s 24 branches are leased from current or former directors of the bank.
“We have terminated the proposed merger,” said Rasco, from his law office. “Instead we entered into a letter of intent with C1 in which we will sell certain assets to them, including certain classified assets.”
The bank is still working out the details of the asset sale, he said, but it will include at least $12 million of land the bank has taken back and loans. The result will be a gain to the bank, meaning U.S. Century will receive more than the book value of the assets.
U.S. Century will also assign the lease to its Brickell branch to C1 and will consolidate in its nearby downtown branch, which will save the bank expenses, he said.
Burgess said C1 will begin lending from temporary space in January, and will move into the Brickell branch during the second quarter.
“Were very focused on how we do the absolute best entry to Miami,” Burgess said. “I wish the U.S. Century deal could have happened, but we’re just as excited about what we are going to do now.”
Rasco said contracts are expected to be signed by the end of the year, and the asset sale will take place during the first quarter of 2013.
The deal to sell troubled U.S. Century to C1, reached at the end of August, would have given U.S. Century’s 441 shareholders just $2.5 million or 1.7 cents on the dollar for their $150.1 million investment.
It was also proposed to return only $6.27 million of $50.2 million in TARP funds to the federal government.
According to documents obtained by The Herald, the deal also included up to $400,000 to be paid by C1 to regulators should U.S. Century be fined over Bank Secrecy Act violations found in its recent regulatory examination.
The ill-fated sale was also caught up in a lawsuit brought by a group of shareholders last month against current and former directors and officers of the bank, which seeks to recover losses from the bank that allegedly were incurred because of improper actions by the bank’s directors and officers. That lawsuit, which cites the bank’s large volume of insider loans and other dealings, is ongoing.