Does anyone deal with People's Bank and, if so, did you hear the evening news concerning the "cease and desist" order? What' up with that? We love that bank and have had wonderful dealings with them for years.
Peoples First Community Bank sanctioned
Comments 4 | Recommend 1
Bank must get federal approval before giving land or construction loans
February 14, 2009 - 2:03 PM
Will Hobson
Florida Freedom Newspapers
Federal regulators issued a cease and desist order to Peoples First Community Bank on Friday, mandating increased earnings and changes to lending practices.
The cease and desist order is the result of a routine, 12-week examination of Peoples First that the Office of Thrift Supervision, or OTS, completed last summer. OTS is the federal regulatory entity for thrifts, or savings and loans.
For many customers of Peoples First, the order means little, bank officials said. All interest-bearing accounts are insured by the FDIC up to $250,000, and accounts without interest are entirely insured.
Peoples First has branches in Destin, Shalimar and Niceville - and others from Gulf Breeze to Jacksonville and south to Kissimmee.
For the bank, the order means it will not be able to extend loans for land or construction without OTS approval, but Peoples First still will lend for home mortgages and personal loans.
"We're stable; we're the same people who have been here for 25 years, and we're going to work through this," Raymond Powell, Peoples First president and CEO, said in an interview Friday.
Click here or the link at right to read related documents, including the cease and desist order.
Peoples First lost nearly $11 million in 2008, according to company financial reports, and had $167 million in nonaccrual loans, which are more than 90 days past due and are not collecting interest, representing 10.5 percent of all its loans. Nearly half of those bad loans were for land -- $72 million -- part of a common theme for struggling banks in the recession.
The OTS' findings of fact from its 2008 examination identified a number of problems at Peoples First, which it refers to as "the Association."
"The OTS finds that the Association has engaged in unsafe and unsound banking practices. ... The Association initiated and pursued an aggressive lending growth strategy resulting in excessive levels of land; nonresidential real estate; and acquisition, development and construction. ...
"The Association has failed to maintain an effective loan review system with appropriate policies, procedures, and controls. ...
"The Association's current capital levels are considered inadequate given the Association's risk profile. ..."
Powell blamed the bank's troubles on the crashing real-estate market. Peoples First did not engage in subprime lending, he noted.
A few years ago, if Peoples First foreclosed on a property, it could sell it and likely recoup its expenses. Plummeting real estate prices, however, have made it very difficult for the bank to break even on the sale of foreclosed property, according to Powell.
"This whole bit," Powell said, motioning to the stack of paperwork from the OTS in front of him, "is because of bad real estate. Prices are down. There's a glut ... ask any banker what's happening to real estate prices, they'll tell you they're just dropping through the floor."
The order also requires an increase in capital. Peoples First has a risk-based capital ratio of a little more than 11 percent, according to company financial reports, meaning that for every $100 of risk-based assets - loans and anything else that is assessed as having risk - the bank has $11 capital. The OTS order requires that ratio to reach 11.5 percent by June 30, and 12 percent by Dec. 31.
Peoples First has nearly $2 billion in assets, $1.5 billion of which is risk-based, so a 1-percent increase means it needs to raise about $15 million by the end of the year, Powell said.
The bank has several options. Its holding company, Peoples First Properties, could sell off real estate to inject cash into the bank, or it could transfer assets to the bank. Peoples First has laid off 23 Bay County employees, about 8 percent of its area work force, since March, and more layoffs and branch closures also could increase cash flow.
Powell said Friday he did not foresee branch closures in the immediate future.
Whatever Peoples First decides to do, it must, within 30 days, submit a written report to the OTS detailing how it will raise capital.
"The overwhelming majority of institutions that receive cease and desist orders get over their problems, get back onto their feet, and back to business usual," said William Ruberry, OTS spokesman. Ruberry said Peoples First is far from alone as a struggling bank.
"Our institutions traditionally focus on home mortgage lending, and the housing market has been the epicenter of this problem, so our institutions have been particularly hard-hit by this economic downturn," said Ruberry, who added the OTS has issued more enforcement actions as the recession has deepened.
The worst-case scenario would result in the bank's closure. Powell was not worried about that Friday, though.
"I don't think we're anywhere close to that. There's a lot of different paths we can go down before we get there," he said.
Banks do not always recover from enforcement actions. The OTS issued a cease and desist order to Suburban Federal Savings Bank in Crofton, Md., last March. The bank could not recover, though, and the OTS sent a directive on Jan. 21, ordering Suburban Federal to complete a sale or merger by Jan. 30. It could not find a buyer, and the OTS closed the bank.
Peoples First is one of the largest locally owned financial institutions in the region. Opened in Panama City in 1983 as Peoples First Financial Savings and Loan Association, it has 33 offices spread throughout the Panhandle and into Central Florida. Despite expanding its reach as far south as Orlando, Peoples First, which has existed under its current name since 1995, has maintained its headquarters in Panama City.
Peoples First Community Bank sanctioned
Comments 4 | Recommend 1
Bank must get federal approval before giving land or construction loans
February 14, 2009 - 2:03 PM
Will Hobson
Florida Freedom Newspapers
Federal regulators issued a cease and desist order to Peoples First Community Bank on Friday, mandating increased earnings and changes to lending practices.
The cease and desist order is the result of a routine, 12-week examination of Peoples First that the Office of Thrift Supervision, or OTS, completed last summer. OTS is the federal regulatory entity for thrifts, or savings and loans.
For many customers of Peoples First, the order means little, bank officials said. All interest-bearing accounts are insured by the FDIC up to $250,000, and accounts without interest are entirely insured.
Peoples First has branches in Destin, Shalimar and Niceville - and others from Gulf Breeze to Jacksonville and south to Kissimmee.
For the bank, the order means it will not be able to extend loans for land or construction without OTS approval, but Peoples First still will lend for home mortgages and personal loans.
"We're stable; we're the same people who have been here for 25 years, and we're going to work through this," Raymond Powell, Peoples First president and CEO, said in an interview Friday.
Click here or the link at right to read related documents, including the cease and desist order.
Peoples First lost nearly $11 million in 2008, according to company financial reports, and had $167 million in nonaccrual loans, which are more than 90 days past due and are not collecting interest, representing 10.5 percent of all its loans. Nearly half of those bad loans were for land -- $72 million -- part of a common theme for struggling banks in the recession.
The OTS' findings of fact from its 2008 examination identified a number of problems at Peoples First, which it refers to as "the Association."
"The OTS finds that the Association has engaged in unsafe and unsound banking practices. ... The Association initiated and pursued an aggressive lending growth strategy resulting in excessive levels of land; nonresidential real estate; and acquisition, development and construction. ...
"The Association has failed to maintain an effective loan review system with appropriate policies, procedures, and controls. ...
"The Association's current capital levels are considered inadequate given the Association's risk profile. ..."
Powell blamed the bank's troubles on the crashing real-estate market. Peoples First did not engage in subprime lending, he noted.
A few years ago, if Peoples First foreclosed on a property, it could sell it and likely recoup its expenses. Plummeting real estate prices, however, have made it very difficult for the bank to break even on the sale of foreclosed property, according to Powell.
"This whole bit," Powell said, motioning to the stack of paperwork from the OTS in front of him, "is because of bad real estate. Prices are down. There's a glut ... ask any banker what's happening to real estate prices, they'll tell you they're just dropping through the floor."
The order also requires an increase in capital. Peoples First has a risk-based capital ratio of a little more than 11 percent, according to company financial reports, meaning that for every $100 of risk-based assets - loans and anything else that is assessed as having risk - the bank has $11 capital. The OTS order requires that ratio to reach 11.5 percent by June 30, and 12 percent by Dec. 31.
Peoples First has nearly $2 billion in assets, $1.5 billion of which is risk-based, so a 1-percent increase means it needs to raise about $15 million by the end of the year, Powell said.
The bank has several options. Its holding company, Peoples First Properties, could sell off real estate to inject cash into the bank, or it could transfer assets to the bank. Peoples First has laid off 23 Bay County employees, about 8 percent of its area work force, since March, and more layoffs and branch closures also could increase cash flow.
Powell said Friday he did not foresee branch closures in the immediate future.
Whatever Peoples First decides to do, it must, within 30 days, submit a written report to the OTS detailing how it will raise capital.
"The overwhelming majority of institutions that receive cease and desist orders get over their problems, get back onto their feet, and back to business usual," said William Ruberry, OTS spokesman. Ruberry said Peoples First is far from alone as a struggling bank.
"Our institutions traditionally focus on home mortgage lending, and the housing market has been the epicenter of this problem, so our institutions have been particularly hard-hit by this economic downturn," said Ruberry, who added the OTS has issued more enforcement actions as the recession has deepened.
The worst-case scenario would result in the bank's closure. Powell was not worried about that Friday, though.
"I don't think we're anywhere close to that. There's a lot of different paths we can go down before we get there," he said.
Banks do not always recover from enforcement actions. The OTS issued a cease and desist order to Suburban Federal Savings Bank in Crofton, Md., last March. The bank could not recover, though, and the OTS sent a directive on Jan. 21, ordering Suburban Federal to complete a sale or merger by Jan. 30. It could not find a buyer, and the OTS closed the bank.
Peoples First is one of the largest locally owned financial institutions in the region. Opened in Panama City in 1983 as Peoples First Financial Savings and Loan Association, it has 33 offices spread throughout the Panhandle and into Central Florida. Despite expanding its reach as far south as Orlando, Peoples First, which has existed under its current name since 1995, has maintained its headquarters in Panama City.
