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Central Arizona Bank, a unit of Capitol Bancorp, was set to be shut down with two sister banks last Friday, but a legal challenge bought it a few extra days.
May 15 -
A court deadline this week and the failure of two of Capitol's banks last week have added to the Lansing, Mich., company's increasingly tense bankruptcy.
May 13
Capitol Bancorp is down three banks in the past week, but it could have been four.
The Lansing, Mich., company said in a regulatory filing on Wednesday that regulators attempted to seize a fourth bank on Friday, but a temporary injunction from a state court stopped it.
The troubled Capitol did not name the bank that was spared, but said it has sufficient funds in escrow to support it and is awaiting approval from the Federal Deposit Insurance Corp. to inject the capital. Additionally, the $1.4 billion-asset company has agreed to sell the bank, and has a merger application awaiting regulatory review.
The company cautioned, however, that the bank could still fail.
"The likelihood of the bank avoiding future seizure by its state regulatory authority is not known at this time," Capitol said in the first-quarter filing with the Securities and Exchange Commission.
On Friday, state regulators seized the Pisgah Community Bank in Asheville, N.C., and Sunrise Bank in Valdosta, Ga. Central Arizona Bank in Phoenix was also slated to fail that day, but a legal challenge bought that bank a few extra days. Regulators prevailed, however, and the bank failed on Tuesday.
Collectively, the three failures are expected to cost the Deposit Insurance Fund roughly $35 million. Capitol warned that the FDIC could assess the losses to the seven remaining banks. That could have "material adverse effect" on the banks and the company's ability to complete its bankruptcy restructuring.
The company's bankruptcy plan includes a restructuring of all its debt and equity stakeholders into a 53% equity stake, with a new investor taking a 47% stake in exchange for $70 million to $115 million of new equity.
