Feds take over Peoples First Community Bank

PANAMA CITY — Federal regulators closed Peoples First Community Bank on Friday evening, ending 26 years of local ownership for what was the city’s largest locally chartered bank.

The Office of Thrift Supervision closed Peoples First and appointed the Federal Deposit Insurance Corp. (FDIC) as the receiver. Mississippi-based Hancock Bank won the FDIC bidding process for the bank, and Peoples First’s 29 locations throughout Florida are now Hancock Bank branches.

Peoples First was headquartered in Panama City and had branches in Destin, Niceville, Shalimar, Pace and Gulf Breeze.

The bank’s failure has no impact on most of Peoples’ customers’ finances. All interest-bearing accounts are insured by the FDIC up to $250,000, and non-interest-bearing accounts are entirely insured through June 30.

Peoples First was one of seven banks nationwide to close Friday. That brought the 2009 total to 140, the most since 1992.

FDIC employees streamed into the bank’s 23rd Street headquarters Friday afternoon, and the front doors were locked and guarded by two Florida Highway Patrol troopers at 5 p.m. Gordon S. Talbot, senior ombudsman specialist with the FDIC, stood outside to field media questions.

“We like the phrase ‘business as usual,’” Talbot said when asked how Peoples First customers should react to the news that they are now Hancock Bank customers.

Peoples First’s locations with Saturday hours were to open for business as Hancock branches today. The rest will join suit on Monday.

Peoples First spokesman Steve Bornhoft did not return several telephone calls Friday afternoon.

Hancock Bank issued a press release Friday evening.

“We are very pleased to welcome Peoples First customers and associates to the Hancock family,” Hancock President and Chief Executive Officer Carl J. Chaney said in the statement. “Peoples First depositors can rest assured their deposits remain safe, secure and accessible. The FDIC continues to insure their deposits to the fullest extent permitted, reinforced by the proactive risk management of one of the country’s strongest, safest financial institutions, Hancock Bank.”

Hancock Bank, based in Gulfport, Miss., operates more than 150 banking and financial services offices across Mississippi, Louisiana, Alabama and Florida, and has assets of about $6.8 billion. Bauer Financial, a Coral Gables-based bank-ratings agency, gave Hancock four out of five stars in its most recent ratings.

FDIC comes

For most of Friday, it looked like business as usual at Peoples First’s headquarters. But as 5 p.m. approached, FDIC employees trickled into the building and collected on the seventh floor in the bank’s executive offices. Most brought luggage with them as they prepared for a weekend of work leading the transition process.

“This is frantic, to get everything inventoried and turned over to the acquiring institution,” Talbot said.

Peoples First employees were told to stay late Friday so they could hear the news of the closure via a conference call, Talbot said. More than 100 FDIC employees are working Peoples First branches across the state this weekend on the transition process, Talbot said.

“We try to treat their employees well, because we ask them to give up their weekend and help us,” Talbot said.

Peoples First employees’ fates will be decided by Hancock Bank. There was no mention in Hancock’s press release of potential closures or layoffs.

Peoples First had about $1.8 billion in assets and $1.7 billion deposits as of Sept. 30, and the FDIC and Hancock Bank have entered into a loss-share transaction on about $1.4 billion of Peoples First’s assets, according to an FDIC press release. The FDIC estimates that brokering this acquisition will cost the Deposit Insurance Fund $556.7 million.

All local banks have struggled during the recession, but Peoples First is the largest, and the first to succumb to federal takeover. After healthy profits earlier this decade ($26.9 million in 2006 and $18.2 million in 2007), the bank dipped into the red last year, losing $22.5 million in 2008. Peoples First lost more than that in the third quarter of 2009 alone — $39 million — bringing its yearly losses to more than $135 million.

First hint

The first public hint of troubles for the bank came in November 2008, when Peoples First sent letters to several municipalities informing them the bank had to switch their accounts to non-interest bearing, because the state Department of Treasury raised Peoples First’s pledging requirement on public funds.

The OTS followed with a cease-and-desist order in February, mandating increased capital and different lending practices.

Peoples First’s capital levels plummeted this year, dropping below federal guidelines for well-capitalized banks this summer. The bank’s total risk-based capital ratio, the percentage of easy-to-access assets (such as cash) in relation to any assets that are assessed risk (such as loans), dropped below federal guidelines in the second quarter, and continued to drop this fall.

The FDIC considers a bank with a total risk-based capital ratio of 10 percent as “well-capitalized” and 8 percent as “adequately capitalized.” Regulators begin to monitor banks’ practices more closely when the ratio falls into single digits.

Peoples’ ratio, which was 11 percent in February, fell to 2.55 percent after the third quarter.

The large losses posted this year, bank officials said in a statement earlier this month, are because of money the OTS has required it to put into loan loss reserves to protect against future losses on bad loans.

Peoples actually posted an operating profit in the third quarter of $6.4 million, but that number was swallowed up by more than $48 million the bank had to take out of income to post against loan losses. Peoples has $221 million in non-performing loans, which are more than 90 days past due, with another $60 million in loans more than 30 days past due.

Peoples First opened in Panama City in August 1983 as Peoples First Financial Savings and Loan Association. Officials announced the name change to Peoples First Community Bank in December 1994, and the bank’s eight-story headquarters tower was built in 1999.