Richmond-based Community Bank Investors of America invested half of its $12.4 million to buy a 25 percent controlling stake in Progress Bank of Florida in Tampa. Now that bank is under an agreement with its regulators.
According to CBIA’s 2009 annual report, the fund originally spent $6.2 million for 345,795 shares, or about $18 per share, of Progress. As of Dec. 31, those shares were worth $1 each, representing a $5.8 million loss on CBIA’s initial investment in a little over two years.
The fund, whose mission is to invest in undervalued banks, was started by Larry Fentriss and Tim Anonick in 2007. It has since lost $8.3 million, almost three-fourths of its value.
“You don’t anticipate this,” said Fentriss of Progress Bank’s troubles. “It’s a rocky situation. The Florida real estate market has just been horrible.”
Fentriss is working to raise additional capital for Progress in order to meet regulators’ demands. Fentriss wouldn’t comment on the prompt corrective action order brought down by the Fed last week that demands Progress be sold or merged into another bank within 30 days. Fentriss, as chairman of the bank, is named as the person will work with regulators on the bank’s behalf
“I’m not going to comment on the agreement because it is what it is,” Fentriss said.
The order also prohibits the bank from accepting new deposits, making new loans, paying bonus or giving raises to executives. After burning through three CEOs, Anonick served as the bank’s head for about a month until a new leader was hired in July.
Fentriss said whatever money might be made from selling Progress would go to shareholders.
One of those shareholders is a local lawyer, Brian Farmer, who last month sued Progress Bank for fraud. Read more about that case in an RBS story here.
Including Progress, CBIA spent a total of $10.6 million to invest in four banks, including Norfolk-based Bank of the Commonwealth, Inland Community Bank in Los Angeles and Gateway Federal Savings Bank in the San Francisco area. The market value of that $10.6 million investment as of Dec. 31 was $2.2 million, according CBIA’s report.
Although the performance at the other banks has cost the fund about $2.4 million in losses, the biggest thorn in CBIA’s side by far is Progress Bank.
And for that reason, Fentriss, who is currently on the West Coast serving as interim CEO of Gateway FSB, said there is still a chance for position return on investment.
“The other investments we’ve made, I think, are doing quite well,” Fentriss said. “I think the returns will be significant and will more than make up for any losses we might experience on Progress.”
One local CBIA investor said he isn’t happy with what has happened to the fund’s value. But he doesn’t blame management.
“Am I worried about my investment? Yes,” said Scott Jordan, one of CBIA’s original investors who runs a local construction company. “Do I think things were done wrong or incorrectly? No.”
“Obviously it hasn’t been good timing,” Scott said. “They started the fund right before banks started going south.”
Fentriss said he understands why some investors might be worried about the value of the fund.
“I think we’re all worried,” Fentriss said.
Jordan said he knows some investments don’t pay off, but still hopes things could turn around for CBIA’s banks.
“We went in there with our heads up knowing the risk of any endeavor like that,” Jordan said. “I still have hope that part of the investment will pay off.”
Michael Schwartz is a BizSense reporter. Please send news tips to [email protected]