Regulators slapped U.S. Century with an enforcement action in June 2011, mandating it to boost capital, reduce its bad loans and return to profitability, among other requirements.
The enhanced regulatory scrutiny, itself, created additional expenses. In the bank's 2012 prospectus for its failed C1 deal. U.S. Century disclosed that in the previous year alone, "the costs to the bank resulting from the consent order and our heightened scrutiny have exceeded $3 million."
Depending on whom you ask, U.S. Century's woes were either the result of the unforeseen collapse of the housing market and the recession -- or the culmination of an over-emphasis on real estate lending and insider loans -- or some combination of both.
Pino's view is that the bank's problems mirrored that of the global economy. He said he has no regrets.
"Our business was to lend money, and we had guidelines and we exceeded the guidelines to be more conservative."
As of June 30, 2012, 88 percent of the bank's total loan portfolio were loans secured by Florida real estate. Of $713 million in commercial real estate loans, $173 million or 24 percent were nonperforming loans.
"In prior years, we focused on commercial real estate lending, which has resulted in a large concentration of commercial real estate loans," the C1 prospectus said. "Accordingly, we may have assumed greater lending risks than banks which have a lesser concentration of such loans and tend to make loans to larger companies or consumers."
For Thomas, the Miami banking consultant and economist, U.S. Century's decline reflects issues related to the economic, financial and housing crises.
"If that was the only bank that got in trouble I would say it was something that had to do with the bank and its management," he said. "But because there were so many problem banks, and so many banks that failed -- in 2010 [Florida] led the nation in bank failures -- it is clear that it was much more than just that bank."
Indeed, regulators never shut down U.S. Century, though they could have, Thomas points out.
"If it was as poorly run and as bad as all the critics say, the bank would have been taken over a long time ago," he said. "There were banks that were stronger financially than U.S. Century, yet they were taken over by the government, because they did not have the intrinsic value this franchise had -- two dozen branches, in good markets ... and a strong infrastructure that made [the bank] valuable."
But some shareholders take a different view. In recent months, shareholders have filed two lawsuits -- one a class action, and one a derivative action -- against current and former bank directors and officers, alleging mismanagement and malfeasance. The suits seek to recover losses that allegedly were incurred because of improper actions by the directors and officers.
The suits cite the bank's large volume of insider loans and other dealings, including that one third of the bank's 24 branches are leased from current or former directors.
Davila, who joined the bank in August of last year, said that U.S. Century has modified terms of its loans to past directors Pino and Barreto. Pino, for example, provided more collateral and agreed to a rate increase. Davila said that all loans to insiders are being paid on schedule.
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