BancTrust (BTFG) Hires Advisors to Explore Strategic Alternatives
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BancTrust Financial Group, Inc. (Nasdaq: BTFG) has ended its efforts to recapitalize the Company as an independent entity. Previously, the Company entered into an agreement with two private equity firms to serve as lead investors providing approximately 49% of the anticipated capital to be raised. In turn, the Company provided the investors an exclusivity commitment during the pendency of the additional capital raise. That exclusivity period has expired without a successful capital raise and without any obligation to pay a termination fee.
In connection with the capital raise due diligence process, BancTrust completed an in-depth review of asset quality, other real estate owned carrying values, and the adequacy of its allowance for credit losses. Earlier this month, management undertook a careful analysis as to whether, given the recently received information generated by this review, additional provisions and write-downs should be made in the fourth quarter of 2011. BancTrust, in consultation with its independent registered public accounting firm and with the concurrence of the Audit Committee of the Board of Directors, concluded that certain asset quality indicators and the expected liquidation horizon of nonperforming assets warrant an increase in its provision for loan losses and a decrease in the carrying value of certain other real estate owned, and that these matters should be included in the results of operations for the fourth quarter of 2011.
As a result, for the quarter and year ended December 31, 2011, the Company has decided to increase its provision for loan losses by $13.25 million and write down the net carrying value of other real estate owned by $27.00 million. The Company has also elected to expense $1.20 million of previously deferred costs associated with the capital raise during the 2011 fiscal year. The Company expects to recognize an additional $2.00 million of capital raise expenses in the first quarter of 2012. The 2011 adjustments require the Company to establish a valuation allowance for its net deferred tax asset resulting in an increased income tax expense of approximately $8.04 million for the quarter and year ended December 31, 2011. The combination of these 2011 adjustments is expected to result in a net loss to common shareholders for the fourth quarter of 2011 of approximately $50.48 million and for the fiscal year ended December 31, 2011, of approximately $50.94 million.
On January 31, 2012, BancTrust released preliminary unaudited financial results for the quarter and year ended December 31, 2011. The unaudited financial results reflected a loss to common shareholders for the fourth quarter of 2011 of $971,000, and for the fiscal year ended December 31, 2011, of $1.4 million. The additional adjustments outlined herein will be reflected in the financial information included in the Company’s Annual Report on Form 10-K.
Despite the increased net loss, both the Company and its subsidiary bank will remain “well capitalized” entities. With the 2011 adjustments, at December 31, 2011, the Company had Tier 1 leverage capital of 7.13%, Tier 1 capital to risk-weighted assets of 10.48%, and total capital to risk-weighted assets of 11.75%.
“By making these adjustments to its provision for loan losses and asset values, while still remaining well capitalized, we believe that BancTrust is now in a stronger position for the future and to engage in a strategic transaction to enhance shareholder value,” stated Mr. Lamar.
The Company is currently in discussions with the Federal Deposit Insurance Corporation (the “FDIC”) as receiver for Silverton Bank, N.A., to make certain modifications to its $20 million loan held by the FDIC and that is secured by all of the capital stock of the Company’s subsidiary bank, including removing any requirement that the Company must make any principal curtailment payments until the loan matures in April 2013.
In addition, BancTrust has determined that it is in the best interests of the Company and its shareholders to defer future interest payments on its two outstanding series of trust preferred securities. This deferral is permitted under the applicable indentures for both series of trust preferred securities for up to five years without penalty or default. BancTrust will also cease to declare and make future dividend payments on its Series A preferred stock, which is also a permitted deferral. These actions are intended to assist BancTrust in maintaining its well capitalized status while it explores strategic alternatives to recapitalize itself.
In connection with the capital raise due diligence process, BancTrust completed an in-depth review of asset quality, other real estate owned carrying values, and the adequacy of its allowance for credit losses. Earlier this month, management undertook a careful analysis as to whether, given the recently received information generated by this review, additional provisions and write-downs should be made in the fourth quarter of 2011. BancTrust, in consultation with its independent registered public accounting firm and with the concurrence of the Audit Committee of the Board of Directors, concluded that certain asset quality indicators and the expected liquidation horizon of nonperforming assets warrant an increase in its provision for loan losses and a decrease in the carrying value of certain other real estate owned, and that these matters should be included in the results of operations for the fourth quarter of 2011.
As a result, for the quarter and year ended December 31, 2011, the Company has decided to increase its provision for loan losses by $13.25 million and write down the net carrying value of other real estate owned by $27.00 million. The Company has also elected to expense $1.20 million of previously deferred costs associated with the capital raise during the 2011 fiscal year. The Company expects to recognize an additional $2.00 million of capital raise expenses in the first quarter of 2012. The 2011 adjustments require the Company to establish a valuation allowance for its net deferred tax asset resulting in an increased income tax expense of approximately $8.04 million for the quarter and year ended December 31, 2011. The combination of these 2011 adjustments is expected to result in a net loss to common shareholders for the fourth quarter of 2011 of approximately $50.48 million and for the fiscal year ended December 31, 2011, of approximately $50.94 million.
On January 31, 2012, BancTrust released preliminary unaudited financial results for the quarter and year ended December 31, 2011. The unaudited financial results reflected a loss to common shareholders for the fourth quarter of 2011 of $971,000, and for the fiscal year ended December 31, 2011, of $1.4 million. The additional adjustments outlined herein will be reflected in the financial information included in the Company’s Annual Report on Form 10-K.
Despite the increased net loss, both the Company and its subsidiary bank will remain “well capitalized” entities. With the 2011 adjustments, at December 31, 2011, the Company had Tier 1 leverage capital of 7.13%, Tier 1 capital to risk-weighted assets of 10.48%, and total capital to risk-weighted assets of 11.75%.
“By making these adjustments to its provision for loan losses and asset values, while still remaining well capitalized, we believe that BancTrust is now in a stronger position for the future and to engage in a strategic transaction to enhance shareholder value,” stated Mr. Lamar.
The Company is currently in discussions with the Federal Deposit Insurance Corporation (the “FDIC”) as receiver for Silverton Bank, N.A., to make certain modifications to its $20 million loan held by the FDIC and that is secured by all of the capital stock of the Company’s subsidiary bank, including removing any requirement that the Company must make any principal curtailment payments until the loan matures in April 2013.
In addition, BancTrust has determined that it is in the best interests of the Company and its shareholders to defer future interest payments on its two outstanding series of trust preferred securities. This deferral is permitted under the applicable indentures for both series of trust preferred securities for up to five years without penalty or default. BancTrust will also cease to declare and make future dividend payments on its Series A preferred stock, which is also a permitted deferral. These actions are intended to assist BancTrust in maintaining its well capitalized status while it explores strategic alternatives to recapitalize itself.
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