Horizon faces insolvency

Horizon Bancorporation Inc. is facing a difficult challenge, but bank president Charlie Conoley is confident that his company can keep regulators at bay.

The Bradenton-based bank is trying to raise capital to satisfy regulators and avoid what the firm refers to as “imminent insolvency” in its latest filing with the Securities and Exchange Commission.

The company is targeting between $10 million and $12.5 million in additional capital in the “next several weeks” and is employing three strategies to raise those funds:

• Equity issuance. The bank will sell preferred stock in a private placement offering. In its filing, the company stated that it had already received commitments for the purchase of $1.1 million in stock, as well as a “standby loan commitment” of another $1.1 million from a group of investors led by bank directors.

On Wednesday morning, Conoley told the Business Review that he had identified buyers for roughly 70% of the available shares.

Before any money changes hands, however, the bank must achieve its $10 million minimum sale target, and must also have its capitalization plan approved by regulators.

• Sale of main office. The bank is currently negotiating the sale of its main banking headquarters, and estimates that a potential deal could generate an additional $1.3 million in net profit.

Conoley argues that, in general, banks should prefer renting their properties to owning them, as the company could earn greater profits loaning those funds to customers rather than sinking them into real estate.

Conoley also says that he does have a potential buyer lined up, who would then lease the property back to the bank. That buyer has also committed to purchasing shares of Horizon stock.

• Sale of discounted assets. Horizon is working with Southport Asset Management LLC, a San Diego-based firm, to sell up to $10.25 million of its nonperforming assets at 68% of the assets' book value. Southport is also attempting to find buyers for $3 million worth of the stock being offered by the bank.

Despite the uncertainty, Conoley says he thinks Horizon will be able to do what it must to remain in business. “We're still able, on a day to day basis, to make money,” he explains. “We just need to get the capital in the bank.”

Horizon posted a net loss of $1.8 million for the recently ended quarter, after losing $7.4 million in the 2009 fiscal year. The bank was featured in the Business Review's latest special issue on Gulf Coast banking.