Also This Week: FDIC-Assisted Buys Making Up for Continuing Asset Quality Deterioration at Centennial Bank
In the larger of the two, First Southern Bank in Boca Raton acquired substantially all of the assets and assumed all of the deposits, except brokered deposits, of First Commercial Bank of Florida from the Federal Deposit Insurance Corp. (FDIC).
The Florida Office of Financial Regulation closed First Commercial Bank of Florida and appointed the FDIC receiver. The Federal Reserve System had determined that First Commercial Bank of Florida was significantly undercapitalized and had given the bank 45 days from Oct. 25, to increase the bank's equity through the sale of shares or contributions or enter into and close a contract to be acquired by another bank.
First Commercial Bank of Florida had $598.5 million in total assets and $529.6 million in total deposits as of Sept. 30, 2010.
Its noncurrent loans and foreclosed assets made up almost 22% of its total assets. First Commercial distressed loan portfolio contained $56.3 million in commercial property loans in nonaccrual and another $12.4 million 30-90 days past due. Its foreclosed assets consisted mainly of residential and land development properties.
The FDIC and First Southern Bank entered into a loss-share transaction on $484.3 million of First Commercial Bank of Florida's assets. First Southern Bank will share in the losses on the asset pools covered under the loss-share agreement.
With this transaction, First Southern Bank now has a presence in seven counties in Florida's three most populous regions - South Florida, Northeast Florida and Central Florida - with 16 branches, including nine branches of the former First Commercial Bank of Florida. These nine locations include two in Orlando and one each in Winter Park, Winter Garden and Edgewood, all in Orange County; one each in Kissimmee and St. Cloud in Osceola County; one in Lake Mary in Seminole County; and one in West Volusia in Volusia County.
The FDIC estimates that the cost to its Deposit Insurance Fund (DIF) will be $78 million.
In the second failure, Enterprise Bank & Trust, a subsidiary of Enterprise Financial Services Corp. in St. Louis, MO, entered into a purchase and assumption agreement with the FDIC to assume all of the deposits and certain assets, including trust assets, of Legacy Bank in Scottsdale, AZ.
At Sept. 30, Legacy had two branches and reported assets of approximately $150.6 million, loans of approximately $109.7 million, other real estate owned of approximately $15.1 million and deposits of approximately $125.9 million.
Noncurrent loans plus foreclosed on assets made up 14.4% of those assets. Foreclosed assets consisted of $9.3 million of construction and land development projects and $5.2 million in nonfarm, nonresidential property. Its past due loans were all primarily residential development related.
As part of the transaction, Enterprise and the FDIC have entered into a loss sharing agreement whereby the FDIC will reimburse Enterprise for certain losses incurred on the assets acquired.
"This is our third FDIC transaction in Arizona, demonstrating our commitment to the Phoenix market and our enthusiasm for the growth potential it represents for Enterprise," said Peter Benoist, president and CEO of Enterprise Financial. "Our Arizona assets now approach $400 million, up from $30 million in just a year's time."
The FDIC estimates that the cost to its DIF will be $27.9 million.
FDIC-Assisted Buys Making Up for Continuing Asset Quality Deterioration at Centennial Bank
Home BancShares Inc., parent company of Centennial Bank in Conway, AR, has determined that it will be required to take a material charge for impairment to loans in Florida and Arkansas.
The company has reserved another $53 million for loan losses. Consequently, it has determined it will record a fourth quarter of 2010 provision for loan losses in the range of $60 million to $65 million.
Of the amount charged off for the impaired loans, approximately half is related to extensions of credit to several borrowers (whose financial condition has deteriorated) in Florida. The board's conclusion was based on the lack of significant economic recovery there and its unsuccessful efforts thus far to collect on the loans.
The other half relates to loans in the company's Arkansas market, primarily involving one borrowing relationship. After a review of the loans to this borrower, the board determined the terms and conditions of the loan documents are unlikely to be met due to a recent change in circumstances regarding the collectability of pledged collateral.
Home BancShares also recently became aware fraudulent rural improvement district bonds had been sold to various financial institutions in Arkansas. As a result of the apparent fraud the board of directors also authorized a $3.6 million charge to investment securities. In addition, fraudulent loans associated with the issuer of the bonds in the amount of $2.2 million were also included in the loan charge-offs noted above. Collection litigation has already been filed.
"While we are disappointed with the asset quality issues for the fourth quarter, we are pleased our company is continuing to pick up momentum in our base earnings," said Randy Sims, CEO of Home BancShares. "We are confident the FDIC-assisted acquisitions we have made during 2010 will continue to improve our base earnings in future years. We are proud of these acquisitions."
During December 2010, Home BancShares finished the initial evaluations and calculations for the Wakulla Bank and Gulf State Community Bank FDIC-assisted acquisitions completed on Oct. 1 and Nov. 19 respectively. These results indicate the Wakulla Bank transaction will result in the company reporting a pre-tax bargain purchase gain of $17 million. The Gulf State Community Bank transaction will result in it reporting a pre-tax bargain purchase gain of $8.1 million.
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Mark Heschmeyer
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