Peoples First facing merger, sale or takeover

PANAMA CITY — Peoples First Community Bank has been given less than a month to find a partner for merger or a buyer, or face takeover.

The Office of Thrift Supervision, the federal regulators for Peoples First, issued an enforcement action Nov. 27 giving the bank 25 days to do that, and 45 days to complete any sale or merger. The document, a “prompt corrective action,” identifies Peoples First as “significantly undercapitalized,” and the bank’s third-quarter filings tell the story.

A bank spokesman said a statement would be issued later today.

Peoples First, which has a branch on Emerald Coast Parkway in Destin, lost $39 million in the third quarter alone, bringing its 2009 losses to more than $135 million. Peoples’ capital levels have plummeted this year. 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 fell to 2.55 percent after the third quarter. That ratio was hovering around 11 percent in February, when the OTS first identified Peoples’ troubles with a cease and desist order that mandated increasing capital levels.

In a statement issued in September, Peoples management blamed the bank’s problems on the crash of the real estate market and the recession. The large losses posted this year, the statement said, are due to money the OTS has required it to put into loan loss reserves, to protect against future losses on bad loans.

The bank’s current challenges have no impact on most of its 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, 2010. Customers with more than $250,000 in an interest-bearing account could lose money in the event of a sale or takeover, though.