MD Holdings II | |||||||||||||||||||||||||||
LATTERNER, MICHAEL 13 S.W. 7TH STREET MIAMI FL 33130 US | |||||||||||||||||||||||||||
ROSEN, WAYNE 277 GALEON COURT CORAL GABLES FL 33143 US |
South Florida Business Journal by Brian Bandell, Senior Reporter
Date: Monday, November 12, 2012U.S. Century Bank’s merger agreement specifies two large land loans that could have a “material adverse effect” on the bank large enough to impact its pending acquisition by C1 Bank.
Avoiding severe losses on those loans in Homestead and rural St. Lucie County – two of the markets hardest hit by the real estate downturn – aren’t the only obstacles for U.S. Century Bank to completing this merger, but they illustrate the lending strategy that landed the bank in the “undercapitalized” condition it’s in today.
Both loans were already on the bank’s books in August 2009 when U.S. Department of the Treasury deemed the bank worthy of the largest Troubled Asset Relief Program (TARP) investment of any Florida bank.
U.S. Century Bank and St. Petersburg-based C1 Bank asked Treasury to give them a 90 percent discount to redeem the $50.2 million in TARP funds from taxpayers. Treasury rejected that offer and the banks countered by offering another $1.3 million to bring the TARP discount to 87 percent. It’s not clear whether Treasury will accept the new offer.
Yet, if U.S. Century Bank fails, taxpayer would see no return on their TARP investment. Loan charge offs, especially from volatile land loans, could hurt the bank’s prospects for surviving to close the deal and salvaging something for taxpayers and its shareholders.
The “material adverse event” section of U.S. Century Bank’s merger agreement and proxy statement, both obtained by the Business Journal from confidential sources describe how the bank could suffer a serious blow if it was required to take another $15 million in loan loss reserves. Only two borrowers are mentioned by name: Indian Sunburst Associates and MD Holdings II.
The larger loan is to MD Holdings II on 76.2 acres of farmland at 11760 S.W. 248th Street in Homestead.
The borrower, managed by Michael Latterner, obtained a $43.5 million mortgage from U.S. Century Bank in 2007, although the loan was modified at $25.6 million in January 2011. While there is no foreclosure action on file for that property, the housing market in Homestead has been slower to return than in urban parts of the county.
The site obtained approval in 2009 for 581 market-rate housing units and 83 workforce housing units.
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