SEBRING — Highlands Independent Bank will be acquired by HCBF Holding Co., parent company of Harbor Community Bank.
HIB, the subsidiary of Highlands Independent Bancshares, currently has assets of about $250 million and five branches in Lake Placid, Sebring and Avon Park and a main office in Sebring.
Harbor was described in a news release as “one of Florida’s more highly capitalized banks.” The Fort Pierce bank has $655 million in assets and 18 branches, mostly on the Atlantic coast and Central Florida. Harbor also announced in April its intention to acquire nine branches of Popular Community Bank of Orlando.
Harbor is rated five stars by Bauer Financials; HIB was a four-star at the beginning of the recession, but slipped to one star in the past five years.
It’s not a done deal yet. The transaction is subject to shareholder and regulatory approval. HIB shareholders are expected to vote in July.
HIB was one of seven Florida banks that owed the U.S. Treasury and missed millions in divided and interest payments, according to the July 2013 update to Congress of the Special Inspector General to the Troubled Asset Relief Program.
As of March 31, 2014, HIB failed to meet 13 dividend and interest payments totaling $1.19 million of the original $6.7 million loan, borrowed March 6, 2009.
John Shoop, president of the Sebring bank, explained in a 2013 Highlands Today report that banks are prevented from paying their TARP payments if it would bring their capital below 8 percent.
As of mid-2013, 20 percent of the 707 U.S. banks that took TARP money had not repaid the interest; 25 banks failed; TARP’s investments in other banks were auctioned at a discount.
Shoop said the TARP loan was taken four years ago when HIB wanted to expand into other communities.
The federal government took preferred stock in HIB, and played no part in the merger, he said: “This was strictly a board decision.”
As HIB took the TARP money, it was continuing to expand from $101 million in assets in 2000, when Shoop became president. The bank focused on commercial lending, and assets grew to $321 million in 2009, when the bank earned $13.4 million in profits. In 2013, however, the bank lost $5 million.
Highlands Independent Bank opened its doors in November 1985. In 1996, a branch was opened in Avon Park.
After working for SunTrust in several cities, Shoop was transferred from Wisconsin to Florida in 1980, and came to Sebring in 1993. Highlands Independent Bank’s president was retiring and gave Shoop the opportunity to take over, which he did in 2000.
A south Sebring branch and the downtown Sebring office were opened in 2000, the Lake Placid branch in 2002, and a sixth location, Sun ‘N Lake, in 2006.
In 2008, however, the banking crisis hit, the stock market tanked, and the Great Recession began.
“A lot of people fell on bad times,” Shoop said. “There were a lot of people who couldn’t pay their bills.” Many also couldn’t repay their bank loans, and attorney costs climbed.
The federal government needed to restore confidence in banks. Instead of 5 percent reserves, the feds wanted 8 percent.
“The next year, 9 percent,” Shoop said.
The bank shrank its assets in the certificate of deposits market. HIB’s workforce was reduced from 96 in 2007 to 72 in 2012. Profits turned into losses. The way out became clear, Shoop said: seek outside capital, or find a partner.
“That’s how we ended up with Harbor,” said Shoop, who has been working on the merger for about nine months.
The deal is likely to close around Oct. 31, Shoop said.
“We will be Highlands Independent Bank until that date,” he said. Customers should continue to use their HIB checks and debit cards until they receive replacements from Harbor, which is likely to happen in February 2015.
Harbor is led by Chairman and CEO Michael J. Brown Sr. and President and COO J. Hal Roberts.
“Harbor is pleased with the opportunity to have John Shoop join us as the Highlands County market president (and) his team to expand the Harbor Community Bank footprint into this Central Florida market,” Brown said.
If the transaction is completed, Harbor Community Bank will have $1.1 billion in assets and banks in 11 Florida counties in Central Florida and Northeast Florida.
“I feel like this is a good fit,” Shoop said. “They’re not going to come in here and chop everybody. It’s pretty exciting, they’ll give us strength. They have a lot of capital. They are community bankers, and that’s something my board really focused on.”
In 2009, Highlands Independent Bank earned $13.4 million in profits. In 2013, the bank lost $5 million.