Home » MBJ FEATURE » Heritage Bank capital call nearly $6 million

Heritage Bank capital call nearly $6 million

Leaders not certain money can be raised

The FDIC has ordered Carthage-based Heritage Bank to raise nearly $6 million in capital by early September, and the institution’s leader is not asserting that the money can be raised.

Heritage has $238 million in assets and $225 in total liabilities, leaving only $13 million in equity, according to a recent earnings statement. Also, the bank has more than $10 million in non-accruing loans that have not been charged-off.

When asked directly if he thought the bank could meet the significant sum by deadline, bank president Charles Courtney did not assure the Mississippi Business Journal that the institution could come up with the funds: “I think all community banks are having trouble raising capital because they’re not public companies.”

However, Courtney said the bank was “working diligently to comply with all the requirements in the order,” and attributed the bank’s troubles to the economy.

 “We’re like about 800 banks around the county that are under some kind of regulatory order. Fifteen to 20 percent of banks in the country are under some kind of regulatory order due to the economy,” Courtney said.

Much of the language of the FDIC’s order to the Heritage was identical to that of a consent order sent to Peoples Bank of the South in Bude in Dec. 2009. The majority of the order addresses revisions to lending practices. 

A portion of the order concerning management detailed that Heritage must retain an outside consultant, who will write a management plan evaluating employees and designating who might need to be hired or reassigned to other duties.

The bank’s capital requirement may be met by sale of securities or cash contributions by bank directors and shareholders, among other methods, the FDIC states.

A  group of investors led by Jackson-area resident Dr. S.L. “Doc” Sethi took over Heritage in early 2007. Sethi told the Mississippi Business Journal at that time that he had a goal for Heritage to become a $1-billion financial institution in 10 years.

When asked if he thought the bank could raise the $6 million in capital, Sethi said, “I think so,” and referred the Mississippi Business Journal to Courtney.

Sethi, CEO and president of Jackie’s International, said he now owns approximately 38 percent of Heritage’s stock and has put $7 million in the bank. Jackie’s International comprises more than 70 hospitality industry businesses, such as Bumpers Drive-In, Western Sizzlin and Hampton Inn franchises. The company is also a partner in Pan Asia restaurant in Ridgeland.

In January, Heritage employee Kathryn Denson was barred from the banking industry by the FDIC because of “violations, unsafe or unsound banking practices” that the agency stated could make Heritage suffer financial loss or other damage. Denson waived her right to a hearing.

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