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Report: Miami Bank Put On Watch List By Regulators

By
Real Estate Broker/Owner with Condo Vultures® LLC

A Miami-based bank with six locations and $613 million in assets is on the watch list of federal regulators due to the institution's deteriorating balance sheet, according to the Miami Herald.

Republic Federal Bank in Miami has been slapped with a formal reprimand by the Office of the Comptroller of the Currency. As part of the 24-page order, Republic Federal is to implement "a sweeping compliance program, covering much of the bank's programs and performance and demands the bank draw up a three-year strategic plan," according to the article.

Under the order, Republic Federal must also "design steps to improve earnings, better its loan-portfolio management, establish periodic reviews of loans of doubtful payment or other problems, establish reserves for loan losses and accurately recognize foreclosed assets, among other issues. The bank agreed to a new capital plan and to only pay dividends when it had complied," according to the article.

Republic Federal was created in 2007 as a result of the former Hemisphere National Bank in Miami purchasing local competitor Pinebank and adopting the current name.

Republic Federal has $438 million in deposits and employs 123 people at its six locations in Miami-Dade County, which includes the headquarters in the city of Doral, according to the Federal Deposit Insurance Corp., which insures deposits up to $100,000 per account.

Republic Federal reported a loss of $486,000 in the first quarter of 2008 ending March 31 compared to a profit of $467,000 a year earlier in March 2007, according to the FDIC.

The loss occurred as the bank's problem loans spiked. Noncurrent loans and leases jumped 312 percent to $30.5 million in March 2008 from $7.4 million in March 2007, The bank's ratio of noncurrent loans to overall loans jumped to 6.64 percent in March 2008 from 1.44 percent a year earlier in March 2007, according to the FDIC.

Financing related to construction and development or multifamily housing was the primary factor for the balance sheet problems.

Noncurrent construction and development loans surged to 35.5 percent in March 2008 compared to zero in 2007. Noncurrent multifamily real estate loans increased to 6.33 percent in March 2008 after reporting no problems a year earlier, according to the FDIC.

Investors are closely watching the banking industry in Florida given the state's rapidly deteriorating real estate market, which was a key lending focus for most institutions.

Deteriorating real estate markets on the West Coast of the United States has prompted federal regulators to seize three banks in the month of July, and seven institutions so far this year.

Earlier this week on July 28, a veteran investment banker disclosed that Florida-based Peninsula Bank, which has seven South Florida locations and assets of $606 million, is also being closely monitored by banking regulators, according to the Sarasota Herald-Tribune.

Peninsula Bank in Englewood, Fla., on the state's Gulf of Mexico coast is under regulatory scrutiny due to the instituion's noncurrent loans spiking 723 percent to $38.7 million on March 31, 2008 compared to $4.7 million in March 31, 2007. The bank's noncurrent loans to total loans jumped to 8.99 percent in March 31, 2008, compared to 1.05 percent in March 31, 2007, according to the FDIC.

Noncurrent construction and development loans were a major factor in the bank's rapidly deteriorating portfolio. Problem construction and development loans jumped from 1.19 percent on March 31, 2007, to 11.14 percent in March 31, 2008, according to the FDIC.

A Florida bank has not been seized since March 12, 2004, when regulators took over Guaranty National Bank of Tallahassee, which had assets of $74.1 million.

Out West, federal regulators shut down on July 25 two banks in three states with combined assets of $4.6 billion and 28 locations scattered around Arizona, California, and Nevada.

Regulators seized the First National Bank Holding Co. in Scottsdale, Ariz, the parent company of First Heritage Bank in Newport Beach, Calif., and the First National Bank of Nevada in Reno, Nev.The First National Bank of Arizona merged with the First National Bank of Nevada on June 30, only to be shutdown 25 days later.

The estimated cost of the failure of First National Bank of Nevada and First Heritage Bank is projected to be $862 million, according to the Federal Deposit Insurance Corp, which guarantees deposits up to $100,000 per account.

Earlier this month on July 11, federal regulators shut down IndyMac Bank, a $32 billion institution based in Pasadena, Calif. The estimate cost of that seizure is between $4 billion and $8 billion, according to the FDIC.

Before IndyMac, regulators seized Minnesota-based First Integrity Bank with $54.7 million in total assets and $50.3 million in total deposits on May 30; Arkansas-based ANB Financial with $2.1 billion in total assets and $1.8 billion in total deposits on May 9; Missouri-based Hume Bank with total assets of $18.7 million and total deposits of $13.6 million on March 7; and Missouri-based Douglas National Bank with $58.5 million in total assets and $53.8 million in total deposits on January 25, according to the FDIC.

Peter Zalewski is a principal with the consulting company Condo Vultures® LLC and a licensed real estate broker with Condo Vultures® Realty LLC. Peter can be reached at 305-865-5629 or by email at peter@condovultures.com. Be sure to check out Peter's blog at CondoDump.com. Don't forget to sign up for our weekly Market Intelligence Report. Looking for a property at a deep discount? You are encouraged to take a peek at the Vultures DatabaseTM .

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