October 22, 2010 – Progress Bank of Florida, Tampa, Florida, was closed today by the Florida Office of Financial Regulation, which appointed the FDIC as receiver. The FDIC sold the failed two branch bank to Bay Cities Bank, Tampa, Florida, under a purchase and assumption agreement under which Bay Cities will assume all of the deposits and purchase essentially all of the assets of Progress Bank.
In May 2008, Progress Bank, formerly known as Bay Financial Savings, changed its charter from a savings bank to a state-chartered commercial bank. Progress Bank’s website contains an article by the Tampa Bay Business Journal explaining why Progress Bank decided to focus on commercial lending.
The Florida Office of Financial Regulation approved Bay Financial’s switch from a federal savings bank to a state-chartered commercial bank on April 15, along with a name change to Progress Bank. The change, effective May 1, allows the bank to expand commercial lending and divest some of its residential real estate portfolio, said Thomas Rummel Jr., president. The bank no longer is regulated by the federal Office of Thrift Supervision, which requires maintaining a significant portion of the assets in home loans.
“That was not the focus of the bank going forward. It’s commercial,” Rummel said. “We’re a commercial bank and we’re run by commercial bankers.”
The bank had $53.4 million in loans as of Dec. 31 with 60 percent of that, or $32.1 million, in residential real estate loans. It currently is looking to sell $7 million in residential loans, many of them loans that Bay Financial purchased from other institutions.
Since last year, the bank has added about $40 million in commercial loans, and it will build on those existing commercial relationships.
In hindsight, it probably wouldn’t have made much difference if Progress Bank had remained focused on residential lending or aggressively moved into commercial lending. Early Spring 2008 marked the beginning of the greatest collapse in residential and commercial real estate in Florida since the last depression.
Bay Cities Bank opened in November of 1999 as a community bank in Tampa, Florida. Bay Cities is an independently owned and operated community bank with over $500 million in assets according to information posted on Bay Cities website.
Bay Cities Bank is owned by parent company Florida Business BancGroup, Inc, which in April 2010, raised $21.2 million in capital from new and existing shareholders. The company currently has about 360 shareholders. Although Florida Business BancGroup received $9.5 million in TARP funds from the US Treasury in February 2009, the new money will not be used to payback the TARP money.
At the present time, Florida Business still owes the US Treasury $8.7 million. According to Greg Bryant, President and CEO of Bay Cities, repaying TARP is not the Bank’s first priority since TARP money is “cheap capital” and the new money can be better invested elsewhere by Bay Cities. According to Bryant, “We still see opportunities to expand our balance sheet and grow our [market] share.”
Depositors of Progress Bank will have access to their money over the weekend and will automatically become depositors of Bay Cities with uninterrupted FDIC insurance coverage.
Progress Bank had total assets of $110.7 million and total deposits of $101.3 million at June 30, 2010. Bay Cities did not pay a premium to the FDIC for the deposits of Progress Bank. Bay Cities and the FDIC entered into a loss-share transaction covering $82.6 million of Progress Bank’s assets to protect Bay Cities from losses on the asset pool acquired.
Progress Bank of Florida is the 134th banking failure this year and the 27th in Florida. The cost to the FDIC Deposit Insurance Fund (DIF) for the failure of Progress Bank is estimated at $25.0 million.
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