Black-Owned Florida Bank's Collapse Takes with It a Community's Dreams: Century National Vanishes into Barnett amid a Cloud of Bad Loans
ST. PETERSBURG, Fla. -- Almost all evidence of Century National Bank's eight-year existence was erased in a single night.
It began on Sept. 20, the day the Comptroller of the Currency declared the tiny, minority-owned bank in northwest Jacksonville insolvent. Within hours, the Federal Deposit Insurance Corp. had dispatched an army of federal agents to seize the $13.7 million-asset bank and then announced that it had sold the bank to the Barnett Bank of Jacksonville for $86,000.
By the next morning, Barnett banners hung over the Century National insignias. Inside the bank, regulators and Barnett and former Century officials scurried through desks and file cabinets, perusing ledgers and loan agreements, and sorting through mounds of paperwork that told the story of Century National's collapse.
With the flurry, Century National became a footnote in history. Gone was its independence. Gone, too, was the dream that a black-owned bank could prosper in this poverty-ridden area.
"The black community suffered a major defeat," says the Rev. Charles B. Dailey, a member of Century National's board of directors. "The most unfortunate thing is that we in the community are going to decide that we're not competent in areas of high finance. It's not true, but this is what many in the community are going to think." Problems from the Start
The notion that a black-owned bank could carve a niche in northwest Jacksonville was launched by the bank's founder, Wendell Holmes Jr., a funeral director. In 1972, Mr. Holmes formed an investment corporation to raise money to start a black bank to serve the black community. It was not an easy task.
It took four years for the bank to obtain the necessary capitalization. At one point, Mr. Holmes and some of the other investors sold stock door-to-door. Eventually, they raised the $845,000 they needed, and the bank was opened Nov. 13, 1976.
Almost from its inception, however, Century National had problems. It lost nearly $475,000 during its first two years. Then it hired a new president, W. Mitchell Hines, a man the directors felt sure would reverse the red ink. Mr. Hines did just that. From 1979 to 1981, the bank earned $633,000, prompting Mr. Holmes to tell shareholders in the 1981 annual report that the bank was "one of the most successful black-owned businesses in the state."
It was not. Lurking beneath the rosy figures on the balance sheet were loan problems so serious they would eventually kill the bank.
while no member of Century National's board of directors except Mr. Dailey will talk about the bank, it is clear that Century National employed loan criteria that could at best be described as risky and at worst, foolhardy.
"It's pretty clear that we got overextended on loans that could not be properly justified," Mr. Dailey says. "The lending policies were too lenient." Consent Decree in 1983
In 1982, the seriousness of the bank's problems came to the forefront when Century National lost $739,000. On Jan. 26, 1983, the Comptroller of the Currency entered a consent decree against the bank that called for Century National to formulate a written management plan; to raise its capital to at least 5.5% by the end of March 1983, 6.5% by the end of June, and 7.5% by the end of 1983; to adopt a program to improve collection methods on delinquent loans; and to adopt several other procedures for strengthening the bank.
In May 1983, Mr. Hines resigned under pressure and was later replaced by ronald Johnson. But the problems continued to mount. By the end of 1983, Century National was positioned much like a man slipping off a tightrope into a sea of piranhas.
For the year, the bank lost $440,00; its capitalization fell to 2.3% at year-end -- a violation of the consent decree. Shareholders equity stood at a horrendous minus $65,000. Bad loans totaling $508,000 were written off and another $699,000 in loans were placed on nonaccrual status. …