Florida Closes First Priority Bank

First Priority Bank of Bradenton, Fla., was closed late Friday by the state Commissioner of Financial Regulation, after the bank announced earlier in the day that it was critically undercapitalized.

The Federal Deposit Insurance Corporation was named receiver, and arranged a purchase and assumption agreement with SunTrust ( STI). The failed institution's six branches will reopen Monday as branches of SunTrust Bank, which has assumed First Priority's $214 million in insured deposits.

First Priority had total assets of $259 million as of June 30. Uninsured deposits totaled approximately $13 million.

In most bank failures, depositors become creditors to the receivership for the amount any uninsured funds. These creditors then receive "dividends" when the FDIC disposes of the failed institution's assets. First Priority's uninsured depositors will receive payment early next week for 50% of their uninsured balances.

First Priority topped TheStreet.com's list of Florida's Most Troubled Banks and Thrifts, published in early May, since the institution had a very high level of problem loans and was considered undercapitalized per regulatory guidelines.

TheStreet.com Ratings downgraded the institution's financial strength rating to E- (Very Weak) on June 20, after downgrading to E from D- (Weak) in March.

The privately-held institution's second-quarter net loss of $9.4 million wiped out most of its remaining capital. As of June 30, First Priority's leverage ratio was 0.70% and its risk-based capital ratio was just 1.72%. These ratios need to be at least 5% and 10% for a bank or S&L to be considered well capitalized under regulatory guidelines.

FDIC spokesman David Barr confirmed that First Priority was on the agency's watch list of 90 troubled institutions.

Updates for institutions discussed in May

In our previous article on troubled Florida banks, we discussed two institutions that were below-well capitalized, in addition to First Priority.

Bank of Bonifay was considered undercapitalized per regulatory guidelines as of March 31, but there were some very positive developments during the second quarter. The bank brought in a new management team on June 17. Members of the new management team and the bank's board of directors invested additional capital, and the bank was well capitalized as of June 30, with leverage and risk-based capital ratios of 6.72% and 10.27%.

The institution's asset quality continued to deteriorate, as nonperforming assets, including loans past 90 days or more and repossessed real estate, comprised 8.44% of total assets as of June 30, up from 7.37% last quarter. Bank of Bonifay plans to continue raising capital, which will probably be needed, as loan loss reserves covered just 17.37% of nonperforming loans as of June 30.

The other institution we highlighted back in May was Federal Trust Bank of Sanford, held by Federal Trust Corp ( FDT) since it was not considered well capitalized per regulatory guidelines. According to the holding company's second quarter earnings release, Federal Trust Bank remained adequately capitalized as of Jun 30, with a risk-based capital ratio of 8.24%, down from a revised 8.96% last quarter.

In the earnings release, CEO Dennis Ward said the company's "plan to raise the additional capital within the Sept. 20, 2008, time frame we received from the Office of Thrift Supervision" is well under way.

A call to the company Friday afternoon seeking comment was not immediately returned.

At this time, preliminary June 30 financial information is available for just 207 out of over 300 Florida banks and savings and loan institutions. We will publish another watch list for Florida's banks and thrifts when a more complete set of June 30 data is available, probably next week.

TheStreet.com Ratings issues financial strength ratings on each of the nation's 8,600 banks and savings and loans which are available at no charge on the Banks & Thrifts Screener. In addition, the Financial Strength Ratings for 4,000 life, health, annuity, and property/casualty insurers are available on the Insurers & HMOs Screener.

Philip W. van Doorn joined TheStreet.com Ratings., Inc., in February 2007. He is the senior analyst responsible for assigning financial strength ratings to banks and savings and loan institutions. He also comments on industry and regulatory trends. Mr. van Doorn has fifteen years experience, having served as a loan operations officer at Riverside National Bank in Fort Pierce, Florida, and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a Bachelor of Science in business administration from Long Island University.

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