Seacoast’s deepwater stock sale

June 23, 2009

Seacoast Banking Corp. of Florida is in a pickle.

The tiny bank with under $3 billion in assets is one of a handful of lenders that are so cash-strapped they’ve not only stopped paying dividends to shareholders, but to Treasury as well. The Wall Street Journal reported today that Seacost and two other small banks are no longer paying dividends on the preferred stock they gave to the federal government as part of Troubled Asset Relief Program capital infusion.

On May 19, the bank stopped paying dividends to all its various classes of shareholders.

But things are likely to only get worse for Seacoast shareholders, as the banks has now filed a prospectus to sell more shares to raise capital. In the June 22 offering statement, Seacost hasn’t yet said how many shares it intends to sell or at what price, but the obvious threat of future dilution to existing stockholders is real.

With shares of Seacoast trading around $2.33 a share–down from $25 a year ago–this offering will be a tough sell. 

But it’s the kind of thorny problem facing many of the nation’s struggling banks that don’t regularly make the headlines. And it’s one reason why the nation’s banking system is a long way from being fixed.

Unfortunately a lot of small banks are facing the same problem as Seacoast.

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