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Grand jury investigates Coastal Bank

The Bradenton lender faces more trouble, this time from federal officials.

By JAMES THORNER , Times Staff Writer
Published August 11, 2007

Legally embattled Coast Bank has one more thing to worry about: A federal grand jury is investigating whether the Bradenton lender broke the law in doing business with hundreds of customers of St. Petersburg builder Construction Compliance Inc.

Up to now Coast has faced civil lawsuits, including accusations of fraud from 129 borrowers on the CCI deals. But in its quarterly report released this week, the bank said it learned in May about an investigation by the United States Attorney's Office for the Middle District of Florida.

Coast's troubles began when CCI stopped construction on 482 homes last fall and left borrowers on the hook for about $70-million in construction loans to Coast. All but a few dozen of the borrowers have refused to pay back the bank.

Bank spokesman Tramm Hudson said it would be "reckless to assume Coast is the center of the investigation." He said the U.S. attorney didn't go beyond requesting written information from the bank.

"They have not deposed any directors, officers or employees of the bank," Hudson said.

The quarterly report described a bank in financial crisis. Bad loans have forced Coast to arrange an emergency $75-million line of credit from prospective merger partner First Banks Inc. of St. Louis. Hudson described the loan as a precaution in case depositors pull their money.

First Banks also agreed to supply another $1-million to finance Coast's operations in light of an $18.7-million loss in the quarter ending June 30.

First Banks announced last week a deal to buy Coast and its 20 branches for $22-million, or $3.40 per share. If more of the CCI loans go bad, First Banks reserves the right to lower its purchase price.

[Last modified August 10, 2007, 23:33:23]