First Guaranty Bank and Trust Co of Jacksonville, FL, Closed By Regulators

First Guaranty Bank and Trust Company of Jacksonville, Florida, the oldest bank in Jacksonville, was closed today by state regulators.  The FDIC, named as receiver, sold the failed bank to CenterState Bank of Florida, N.A.

First Guaranty Band and Trust was a family owned bank with a 62 year history.  Inexplicably, according to the Bank’s website “First Guaranty Bank’s 62-year history is built on time-tested, sound financial decisions.  We are highly capitalized, profitable, and FDIC insured”.  The latest reported numbers on First Guaranty show that the Bank had an astronomical troubled asset ratio of 522%.  Bank failure is almost a certainty once a bank’s troubled asset ratio exceeds 100%.

First Guaranty increased its lending rapidly during the real estate boom, growing its asset from $282 million in 2004 to $498 million in 2007.  First Guaranty signed a consent order with regulators in August 2010 for operating in an unsafe and unsound manner.

First Guaranty - courtesy

All deposits, excluding certain brokered deposits, were transferred to CenterState Bank.  All eight branches of failed First Guaranty will reopen as branches of CenterState Bank.  Customers of First Guaranty will continue to have full access to their money over the weekend through the use of checking accounts, ATM and debit cards.

At September 30, 2011 First Guaranty had total assets of $377.9 million and total deposits of $349.5 million.  In addition to assuming the deposits of First Guaranty, CenterState Bank also agreed to purchase all assets of the failed bank, subject to a loss-share transaction with the FDIC.  Under the terms of the loss-share agreement, the FDIC agrees to cover a substantial portion of losses on the assets purchased by the acquiring bank.

The loss-share transaction will cover $292.9 million (77.5%) of the failed bank’s asset pool purchased by CenterState Bank.  According to the FDIC, the use of loss-share transactions minimizes losses by keeping assets in the private sector and also minimizes disruptions to loan customers.

CenterState Bank has now acquired 6 failed banks in Florida, including Central Florida State Bank on January 20, 2012, which had $79 million in assets.  The four failed banks acquired by CenterState Bank prior to this year are Ocala National Bank, Olde Cypress Community Bank, Community National Bank at Bartow and Independent National Bank.

CenterState Bank is owned by publicly traded parent company CenterState Banks Inc. which is a regional multi bank holding company doing business through over 40 offices. For the year ending December 31, 2011, CenterState Banks Inc. lost $5.5 million but has a capitalization level of almost 11%, which is above average.

The loss to the FDIC Deposit Insurance Fund for the failure of First Guaranty is estimated at $82.0 million.  First Guaranty is the fourth banking failure of the year and the second in Florida.


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