Tidelands Bancshares files for $35 million stock offering

Tidelands Bancshares Inc., based in Mount Pleasant, S.C., has filed plans with the Securities and Exchange Commission to raise $35 million through an offering of common stock.

 

The company, which operates Tidelands Bank, was the recipient of $14.4 million from the government's Troubled Asset Relief Program in December 2008.

 

Unlike most stock offerings from banks and holding companies still participating in TARP, Tidelands' prospectus makes no mention of using the proceeds to repay the federal aid.

 

Instead, Tidelands intends to improve its regulatory capital position, invest in the bank and "retain the remainder of any proceeds at Tidelands Bancshares for general corporate purposes."  

 

The company is seemingly a poor candidate to exit TARP in the near future, as it clearly needs to improve its capital position.  Tidelands had a difficult 2009, announcing a net loss of nearly $10.3 million for the year, more than double its 2008 deficit.

 

Much of the difference is traceable to the company's increasing loan loss provisions, which totaled $14.7 million last year and $4.7 million the previous year.

 

Tidewaters' troubled loan portfolio caught the attention of both the South Carolina banking department and the Federal Deposit Insurance Corp. According to the prospectus for the stock offering, Tidelands entered into an informal memorandum of understanding with both parties on November 16.

 

The company is required to submit a capital plan, reduce and improve adverse assets, decrease its concentration of commercial real estate loans, and develop plans and procedures to improve liquidity.  Tidelands must also provide quarterly status updates to both regulatory bodies.

 

Robert "Chip" Coffee, chief executive of Tidelands, characterized the particulars of the memorandum as "mild" and said that it would have no direct impact on the bank's customers or its daily operations. The prospectus, however, more pointedly notes that "failure to comply with the terms of the memorandum could result in significant enforcement actions against us of increasing severity, up to and including a regulatory takeover of our bank subsidiary."

 

On Monday, only three days after submitting the prospectus for the stock offering, Tidelands filed the definitive proxy statement for its April 12 shareholders' meeting. That documen makes no mention of the memorandum of understanding, although it does speak extensively about the company's need to raise its capital levels and address other shortcomings critiqued by regulators.

 

The proxy filing also proposes an amendment to the company's articles of incorpation, which must be approved by holders of two-thirds of the outstanding common shares.  That amendment would increase the number of authorized shares of the Company's common stock from 10 million to 75 million.

 

Although the filing mentions the need to raise capital as an important element of the increase in authorized shares, the company once again makes no direct mention of redeeming the preferred stock it issued the government in exchange for TARP aid.

 

Tidelands' stock closed Monday at $3.85 a share.