US Century Bank: reward for failure ... by gimleteye

The absence of accountability for the worst financial crisis since the Great Depression is appalling. No investigations. No jail for the perpetrators. Even now, five years after the collapse of Lehman Brothers, top executives at the "too big to fail" banks are walking with hundreds of millions of dollars of compensation. At a more granular, local level, the same reward for failure is occurring at smaller banks. The preeminent example is Miami's US Century Bank.

It's been a year since ProPublica's piquant expose of U.S. Century Bank: the piggy bank used by political insiders to help spread suburban sprawl like a noxious weed into West and South Dade. The toxic story of US Century Bank is not just sprawl: a land use pattern that strips communities and civic life of vitality while remaining agnostic and pure as driven snow on a bank balance sheet.

According to US Attorney Alex Acosta, Miami is the "graduate school of fraud". The pedestrian forms of prosecutable fraud -- from Medicaire scammers, to mortgage fraudsters, to local Ponzi schemes -- would not be so prevalent if not for the tolerant atmosphere for legal forms of exploitation that pervade downtown Miami and the insular, parochial community of lawyers and bankers and lobbyists who control the political levers. These excesses rarely are discussed or brought up for scrutiny by the maintream media (Tom Wolfe missed this story), until something spectacular occurs. Something like the phenomenon of US Century Bank.



The founders and directors of US Century Bank in Miami-Dade are at the top of the political food chain. Their motives are unabashed: to make suburban sprawl a funnel for their private wealth, political campaign contributions, and a nightmare for taxpayers. (Use our search engine feature, "US Century Bank" for details how the directors are top land speculators outside the Miami Dade Urban Development Boundary.) Ramon Rasco -- a bank founder with Sergio Pino-- was a principal architect of the failed no-bid deal to convert the Homestead Air Force Base to a major commercial airport. In the aftermath of the 1992 Hurricane Andrew disaster, the subsequent financial fiasco involved a group of former directors of the Latin Builders Association lead by Rasco, revolving around a promise of $10 billion in economic opportunities, and thereafter consumed the county commission, untold millions of taxpayer dollars and the hijacking of county staff to serve the purpose of the HABDI investors. In 2000, as Rasco's HABDI deal was rejected by the US Department of Defense, Jeb! Bush appointed Rasco to the Eleventh Circuit Judicial Nominating Commission.

Miami Dade taxpayers never had a full accounting of the costs of diverting county personnel, staff and hard dollars to Rasco et al. The cost -- certainly in the tens of millions -- it needs to be added to the $50 million of federal TARP money that U.S. Century squandered and now will not have to repay, if current press reports are any indication. (Mayor Carlos Gimenez should disclose how much money, in total, was commandeered by the HABDI wrecking crew, including former mayor Alex Penelas. Penelas' anger at the Clinton administration and Vice President Gore for failing to deliver the air base to Miami Dade County, acting as a pass-through to the HABDI investors, accounts for his absence from Miami during the 2000 recount in Miami-Dade.)

9/11 and super low interest rates supported by then Fed Chair Alan Greenspan set the stage for a building boom around the nation, but especially in South Florida where the political machinery was primed. Sergio Pino, one of the most powerful lobbyists in the county at the time, was in the process of transforming a plumbing supply business -- organized to take advantage of sprawl's scalability-- into a major, privately owned homebuilder to replicate, perhaps, Lennar. In 2002, Pino and Rasco teamed up to form a bank to pump up a vertically organized enterprise to spread sprawl in the last remaining farmland in Miami-Dade County.

The bank they formed eventually turned into a massive insider enterprise, with more than a billion dollars in deposits and lax loan supervision that was outrageous by any standard. (Some of our commenters on earlier posts noted that if you were a county employee, there was a "special person" to handle your mortgage. We would love to learn more about this from our readers.) Bauer Financial, a respected banking analytical firm based in Coral Gables, rates US Century at "zero" today. EOM has reported on the miserable metrics of the bank, including massive insider lending.

Yet, at the brink of failure, U.S. Century was able to secure $50 million from taxpayers to stay open: the largest recipient of TARP funds in Florida. The FDIC should have shuttered U.S. Century Bank years ago. It is the largest undercapitalized bank in the nation and is struggling through an acquisition process by a little-known Brazilian investor group, called C1 Bank.

C1 Bank appears to have been recently assembled from other bits and pieces of the housing market/ banking implosion in Florida. The Brazilian investors apparently want to keep some of the shareholders on board after the balance sheet is "cleaned up"; but cleaning up the balance sheet, according to South Florida Business Journal, might return some of the rotten assets on the bank balance sheet through foreclosure to the former directors of the bank who will be allowed to buy back those assets after foreclosure erases personal guarantees that were required by the original mortgages.

Armando J. Guerra, Agustin Herran, and Rodney Barreto; key board members during the rise of the bank and receipients of loans from U.S. Century, have resigned from the bank board. All were part of the insider dealing culture at the bank. (Jose Cancela remains on the board. Cancela, a former lobbyist, apparently relocated to Los Angeles to manage Telemundo properties there. Marco Rubio, whose home mortgage was with US Century Bank, gave his first interview as US Senator with Telemundo after a dispute with Univision that brought out facts related to drug charges within his extended family.) All the directors of US Century Bank have been partners in massive land speculation outside the Miami Dade urban development boundary: take a drive out by Krome and the UDB, the rag-tag disorganized, unlovely area is filled with ghost suburbs. For accuracy sake, it ought to be renamed, US Century Way. Meanwhile, according to the only news organization reporting on US Century -- the South Florida Business Journal -- the former directors all seem to be in various phases of foreclosures and work-outs.

http://www.bizjournals.com/southflorida/news/2012/10/19/two-former-us-century-bank-directors.html?page=all

According to the South Florida Business Journal, U.S. Century is trying to wangle yet another deal out of federal taxpayers: the sale agreement with C1 Bank stipulates the taxpayers would receive a penny on the dollar for its $50 million investment, while US Century shareholders would receive two cents on the dollar. My opinion: Ramon Rasco should be required to make all the US Century Bank shareholders and the US taxpayers whole. For that to happen, there would need to be some massive shareholder lawsuits.

The bottom line is that US Century Bank is one of the premier examples of "no accountability" for the perpetrators of the financial crisis. The executives of the Miami Herald, which has been the beneficiary of countless advertising dollars from interests related to U.S. Century, are complicit and quiet as a mouse. South Florida Business Journal dryly notes that no other bank reorganized while holding TARP funds was allowed to go down the drain with a 98 percent discount, as US Century Bank ready to do.

Apparently there is a December 31 deadline on the deal with C1 Bank. In a press statement, Ramon Rasco said, "We are excited to have the U.S. Century Bank team join C1 Bank. This transaction allows us to acquire the necessary capital to continue to operate and expand as a first class community-based bank." http://insiderealestate.heraldtribune.com/2012/08/31/c1-bank-to-purchase-u-s-century-bank/
Wow.

"First class" hardly describes the program of U.S. Century Bank and its directors. Calling the bank and its operators "notorious" hardly scratches the surface. The whole business should be allowed to fail on January 1st, 2013 and the FDIC should assign the bank's assets to bankers who have no ties whatsoever to the failed policies and practices of the directors, including the political insider dealing that was a hallmark of the Pino Century empire before it collapsed. The insiders should be banned from ever doing banking again or any business with the SEC. That's exactly what the US Department of Treasury and the FDIC should do.

When you write your complaint, please send a copy to your elected member of Congress and the US Senate:

Office of the Comptroller of the Currency
Customer Assistance Group
1301 McKinney Street
Suite 3450
Houston, TX 77010

FAX: 713-336-4301
TOLL-FREE PHONE: 1-800-613-6743 (available Monday – Friday, 7:00 a.m. to 7:00 p.m., Central Time)
EMAIL: Customer.Assistance@occ.treas.gov
WEBSITE: http://www.occ.treas.gov/customer.htm



U.S. Century Bank must sell problem assets before acquisition
South Florida Business Journal by Brian Bandell, Senior Reporter
Date: Thursday, October 4, 2012, 11:19am EDT
http://www.bizjournals.com/southflorida/blog/2012/10/us-century-bank-must-sell-problem.html?page=a


U.S. Century Bank must sell a certain amount of its non-performing assets before it is acquired by C1 Bank, a regulatory filing says.
Brian Bandell
Senior Reporter- South Florida Business Journal

U.S. Century Bank agreed to sell a certain amount of non-performing assets prior to its acquisition by C1 Bank, and it’s possible that some U.S. Century Bank shareholders could remain owners of the bank after the deal, regulatory documents requested by Business Journal show.
Doral-based U.S. Century Bank is the largest “undercapitalized” bank in the nation and the recipient of $50.2 million in taxpayer funds from the Troubled Asset Relief Program (TARP). The purchase by the smaller C1 Bank in St. Petersburg would prevent a potential failure of the bank, although it would likely result in major loss of TARP funds.
Yet, the path to executing this deal has several hoops to jump through.
The Business Journal obtained a partially redacted copy of the merger agreement from the Florida Office of Financial Regulation. Part of the agreement states that U.S. Century Bank will arrange for the sale of a certain amount of non-performing assets – the exact amount was redacted by OFR. This excludes loans and repossessed property held by current or former officers or directors of the bank. These assets can’t be sold to bank officers or directors either.
C1 Bank will have final say over each asset sale. However, the prices must be no less than the book value of these assets assigned by U.S. Century Bank on June 30.
U.S. Century Bank reported $220.5 million in noncurrent loans, $26.2 million in repossessed property and $20.8 million in loans past due by 30 to 89 days yet still considered current as of that date. It reported $46.5 million in insider loans. It also has additional loans made to bank directors that previously resigned, including Century Homes President Sergio Pino.
It is not clear from the bank’s financial reports whether any of its insider loans are non-performing.
U.S. Century Bank had $111.9 million in insider loans on June 30, 2009 – two months before it received TARP funds from the U.S. Treasury. By March 2010, its insider loans had grown to $140.1 million. They have steadily declined since then, although five director resignations occurred as well.
C1 Bank CEO Trevor Burgess and U.S. Century Bank officials declined comment.
One crucial issue for U.S. Century Bank is whether the non-performing loans it needs to sell be sold at their book value. Any shortfall could be taken out of the $60.1 million in reserve for future loan losses. The banks's $267.5 million in non-performing assets were previously reduced by $60.1 million to create the reserve.
U.S. Century charged off $86.1 million in bad loans over the past two-and-a-half years.
A considerable amount of its noncurrent loans are for land and development, a category where values have been hard hit.
Selling non-performing assets before the deal closes would reduce the risk to C1 Bank of taking losses from those assets later.
C1 Bank, which has $925.4 million in assets compared to $1.29 billion at U.S. Century Bank, plans to raise $100 million to handle the acquisition.
Those $267.5 million in non-performing assets at U.S. Century Bank, plus its current capital shortfall, means regulators must take a careful look at whether the $100 million in new capital is enough to cover the gap. If a good chunk of those non-performers are sold at book value, that would help put some of those concerns to rest.
The merger agreement revealed that some of that $100 million could come from current U.S. Century Bank shareholders. C1 Bank agreed to give them the right to purchase up to a certain number of new shares – the exact amount was redacted by OFR – within 30 days of the offering. Each U.S. Century Bank shareholder would get a private offering memorandum asking if they want to participate.
The document also disclosed that C1 Bank wants U.S. Century Bank to amend its lease for its headquarters, at 2301 N.W. 87th Ave., so it can terminate its lease within six months of the acquisition. Its landlord, Century Tower LLC, is managed by former U.S. Century Bank director Pino.
The merger agreement has a deadline of Dec. 31.
OFR declined to provide the Business Journal with the financial terms of the deal, including the terms on which U.S. Century Bank has proposed to exit TARP. The merger agreement requires the redemption of Treasury’s stake in the bank, but the proposed repayment to taxpayers was redacted. The bank has missed its TARP interest payments this year.
However, a source with knowledge of the sale agreement said that U.S. Century Bank shareholders would receive $3 million, essentially 2 cents on the dollar, while the U.S. Treasury would recover only $1 million to $2 million of the $50.2 million in taxpayer funds the bank received under TARP.
It’s not clear whether Treasury would accept such a large loss.
When Coral Gables-based Capital Bank Financial Corp. (NASDAQ: CBF) made a deal to acquire Southern Community Financial Corp., it initially mentioned a TARP discount in its public filings. But it ended up repaying the $42.8 million to Treasury, plus interest.
Other acquisitions of TARP banks did include repayment discounts, but none approaching 98 percent.