Naples bank receives $11 million present

— A Naples bank has a new lease on life.

The Royal Palm Bank of Florida has been infused with $11 million in capital by its owners.

Mercantile Bancorp Inc., the bank’s parent company in Quincy, Ill., announced the multimillion investment on Thursday as part of a multi-level recapitalization plan to reduce debt and strengthen itself. Neither bank has accepted any federal dollars set aside for troubled banks.

“That is money that came from our own organization. I think that’s important for people right now to know that we can stand on our own two feet. We are not asking for assistance,” said Greg Murphy, president and CEO of The Royal Palm Bank.

With the investment, the local bank now exceeds its regulatory mandates for capital. It fell below the required amounts a few months ago after it was forced to bolster its reserves for loan losses and make more write-offs on assets.

Royal Palm has been operating under a cease-and-desist enforcement action from its regulators since May because of its financial problems. The bank’s condition has only worsened as its operating capital continued to erode with its losses.

“This was a huge step for us to get this money,” Murphy said.

Through Sept. 30, the bank reported a net income loss of $39.3 million. A big part of that loss was writing off $26 million it was carrying on the books as goodwill for its sale to Mercantile Bancorp., a public company that trades on the New York Stock Exchange.

Royal Palm has been at risk of failing.

“Clearly a cease-and-desist is the last step,” Murphy said. “There is no other negative steps, other than the (Federal Deposit Insurance Corp.) coming in and putting you in a receivership.”

The bank hopes to turn itself around and become profitable again.

“We’re not that far from break even,” Murphy said.

He said the bank has been aggressive about writing off bad loans and it appears the worst is over. It doesn’t mean there won’t be more losses coming.

“That is why this capital is so important,” Murphy said.

Like other banks in Southwest Florida, Royal Palm was hit hard by its concentration of real estate loans, especially on the commercial side.

Mercantile is selling its two smallest banks in Illinois and exchanging another to raise the money needed to support Royal Palm and its other remaining banks.

The bank holding company expects to get at least $25.6 million for the sale of its two banks. The transactions are expected to close by March 2010, pending regulatory approval. In October, Mercantile Bancorp. filed an application to merge Royal Palm into Mercantile Bank, another one of its banks. But that action will be dropped now that the holding company has restructured its debt and has reached agreements to divest three other banks.

Selling Royal Palm wasn’t an option.

“Florida is a difficult environment. So there are not a lot of buyers out there for Florida banks,” said Ted Awerkamp, Mercantile Bancorp.’s president and CEO.

His company acquired Royal Palm in late 2006.

“We are confident in the management team and the market there and it’s just a matter of getting the cash infused to get prepared for the next chapter,” Awerkamp said.

“It’s time to move forward and get it healthy.”

He said how soon the bank can get turned around will depend on the local economy and how fast it recovers.

“Our attitude is that we are not going to let it fail,” Awerkamp said.

In Lee and Collier counties, five local banks have failed this year including Orion, which grew to become one of the largest privately held community banks in the nation.

It was seen as a better option to let Royal Palm keep its own identity and charter, rather than having it merge with another bank, Awerkamp said.

Murphy and his management team came to the bank in March 2008. He made the move after Community Bank of Naples, where he was CEO, was gobbled up by Royal Bank of Canada. He brought nine others with him.

Before Murphy joined Royal Palm, the bank made a lot of loans to real estate investors and speculators, many of which later went bad. Loans given out after he came to the bank are in much better shape, he said.

The bank’s lending focus has changed.

“We like to do business with people that are expanding their business or growing their business,” Murphy said. “We do their building and potential lines of credit and we want their operating accounts.”

Despite its problems, there hasn’t been a run on the bank’s deposits. The bank has worked hard to keep its customers informed about its financial situation and regulatory issues, Murphy said.

Royal Palm is now one of the most well capitalized community banks in Southwest Florida. It has money to lend, but it will stay away from riskier loans.

“This is a great place to work and live, and we’re confident Royal Palm Bank can play a meaningful role in the area’s recovery,” Murphy said.

The bank has branch offices in Fort Myers and Marco Island. Its main office is off Immokalee Road on Creekside Parkway.

Connect with Laura Layden at

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