Florida Bank Shut As Regulators Continue Offensive

As Florida’s real estate market continues to plummet, banking regulators stayed on their offensive to clean up the industry by taking the extreme step of seizing a Florida-based institution.

First Priority Bank of Bradenton, a six branch institution with $261 million in assets located on the state’s west coast, was shutdown on the afternoon of Friday, Aug. 1, marking the first Florida institution to be closed by regulators in more than four years.

The last Florida bank to fail was Guaranty National Bank of Tallahassee with assets of $74.1 million on March 12, 2004.

First Priority Bank is the eighth bank to be closed in 2008, and the fourth since July 11. Local newspapers have identified two more Florida-based banks that have landed on regulatory watch lists.

Founded in December 2003 at the onset of the real estate bubble, First Priority Bank grew into an institution with 53 employees and with five locations in Bradenton, one in Sarasota, and one in Venice.

During the five year run, First Priority Bank reached $214 million in deposits and focused it lending strategy on commercial deals secured by Florida real estate, which is now freefalling in value.

As a result of the market downturn, First Priority’s noncurrent loans to loans spiked to 19.14 percent in March 2008 from 2.30 percent in March 2007. The bank’s real estate loans that were noncurrent jumped to 20.46 percent in March 2008 from 2.74 percent in March 2007, according to the Federal Deposit Insurance Corp.

The bank’s ratio of noncurrent construction and development loans skyrocketed to 24.89 percent in March 2008 from 2.15 percent in March 2007, according to the FDIC.

On the eve of the release of the First Priority’s second quarter results Florida Office of Financial Regulation seized the institution, and named the FDIC to be the receiver.

The FDIC in turn entered into an agreement to sell a large chunk of First Priority’s assets, liabilities, and all of Florida bank's branches to the Atlanta-based regional institution SunTrust Bank.

First Priority’s former branches are scheduled to open the morning of Monday, Aug. 4, as SunTrust Bank.

“Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship to retain their deposit insurance coverage,” according to an FDIC statement. “For the time being, however, customers of both banks should use their existing branches until SunTrust can fully integrate the deposit records of First Priority.”

According to the FDIC, First Priority had about $13 million in uninsured deposits held in about 840 accounts. The FDIC insures accounts up to $100,000.

To see a Florida bank fail shouldn't come as a shock to many. Investors have been closely watching the banking industry in Florida given the state’s rapidly deteriorating real estate market, which was a key lending focus for most institutions.

Deteriorating real estate markets on the West Coast of the United States has already prompted federal regulators to seize three banks in three state in the month of July.

Federal regulators shut down on July 25 two banks in three states with combined assets of $4.6 billion and 28 locations scattered around Arizona, California, and Nevada.

Regulators seized the First National Bank Holding Co. in Scottsdale, Ariz, the parent company of First Heritage Bank in Newport Beach, Calif., and the First National Bank of Nevada in Reno, Nev.

The First National Bank of Arizona merged with the First National Bank of Nevada on June 30, only to be shutdown 25 days later.The estimated cost of the failure of First National Bank of Nevada and First Heritage Bank is projected to be $862 million, according to the FDIC.

On July 11, federal regulators shut down IndyMac Bank, a $32 billion institution based in Pasadena, Calif. The estimate cost of that seizure is between $4 billion and $8 billion, according to the FDIC.

Before IndyMac, regulators seized Minnesota-based First Integrity Bank with $54.7 million in total assets and $50.3 million in total deposits on May 30; Arkansas-based ANB Financial with $2.1 billion in total assets and $1.8 billion in total deposits on May 9; Missouri-based Hume Bank with total assets of $18.7 million and total deposits of $13.6 million on March 7; and Missouri-based Douglas National Bank with $58.5 million in total assets and $53.8 million in total deposits on January 25, according to the FDIC.

Peter Zalewski is a principal with the consulting company Condo Vultures® LLC and a licensed real estate broker with Condo Vultures® Realty LLC. Peter can be reached at 305-865-5629 or by email at peter@condovultures.com. Be sure to check out Peter’s blog at CondoDump.com. Don't forget to sign up for our weekly Market Intelligence Report. Looking for a property at a deep discount? You are encouraged to take a peek at the Vultures Database™ .

Copyright © 2008, Condo Vultures® LLC