Heritage Bank of North Florida, FL, Shuttered By Regulators

Heritage BankIn the second bank closing of the day, regulators shut down Heritage Bank of North Florida, Orange Park, FL.  The FDIC, appointed as receiver, sold the failed bank to FirstAtlantic Bank, Jacksonville, FL, which will assume all deposits of failed Heritage Bank.

Heritage Bank of North Florida was established in 1986 as Clay County Bank.  After several years of operations, the Bank expanded into the Ponte Vedra Beach area and changed its name to Heritage Bank of North Florida.  The Bank was initially formed by local investors with all shares of the Bank owned by the holding company Heritage Bancshares, Inc.  The locally owned Bank prided itself on serving the local community and received high customer service ratings.

Unfortunately, many of these satisfied customers defaulted on loans extended to them by Heritage Bank and the troubled asset ratio of the Bank reached alarming proportions of over 100% as far back as early 2009.  By mid 2010, the troubled asset ratio exceeded 200% and by December 31, 2012 had reached 441%.

In simple terms, a high troubled asset ratio means that loan customers are not paying their loans on time or have defaulted.  The FDIC and other banking regulators have shown remarkable patience with banks that have reached a point of insolvency from which recovery is virtually impossible.  Almost every bank with a troubled asset ratio in excess of 100% winds up in the arms of the FDIC as a failed bank, yet in this case, regulators allowed the Bank to continue to operate long after recovery seemed possible.

Both branches of Heritage Bank will reopen on Monday as branches of FirstAtlantic Bank and all depositors will continue to be covered by FDIC deposit insurance up to the applicable limits.  Over the weekend, depositors will have full access to their money through the use of checking accounts, ATMs and debit cards.

At December 31, 2012, Heritage Bank had total assets of $110.9 million and total deposits of $108.5 million.  FirstAtlantic Bank agreed to purchase all of the failed bank’s assets in addition to assuming all deposits.

FirstAtlantic Bank is a midsized bank with over $400 million in total assets, operating eight branches in the Jacksonville, St. Augustine, Orange Park and Ponte Vedra markets.

The cost to the FDIC Deposit Insurance Fund (DIF) for the failure of Heritage Bank of North Florida is $30.2 million.  The FDIC maintains that selling a bank to another institution, rather than closing down the bank completely, results in the least costly resolution of the failed bank.

Heritage Bank of North Florida becomes the seventh bank failure of the year and the first in Florida.  The last bank failure in Florida occurred on November 2, 2012.

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