|Regulators issue directive to St. George bank|
ST. GEORGE - Representatives from SunFirst Bank are working to attract additional investors after federal regulators ordered the St. George institution to either raise additional capital, accept an offer to sell the bank or form a partnership with another financial institution.
An order known as a "supervisory prompt corrective action directive," issued by the Federal Deposit Insurance Corporation on July 28 and made public Friday, describes SunFirst as "significantly undercapitalized" and directs the bank to take steps toward selling voting shares or obligations in an effort to raise capital or accept an offer to be acquired or combine with another bank.
"The bank's unacceptable capital restoration plan, deteriorating condition and management's inability to return the bank to a safe and sound condition require that prompt corrective action be taken immediately," the FDIC said in the directive.
Gerry Smith, an adviser to SunFirst's board of directors, said the bank experienced losses in recent years when the area's real estate market collapse resulted in a number of troubled loans.
SunFirst had $17,048,000 in total equity capital on June 30, representing a decline from the $23,645,000 in total equity capital recorded in June of 2010, according to the FDIC.
"They are facing the same troubles that all banks in the country are facing," said Tom Bay, supervisor of banks for the Utah Department of Financial Institutions. "The real estate downturn and the economic crisis have hurt the banking industry."
Bay said the FDIC directive was likely issued in an effort to "stem the further erosion of capital."
Smith said SunFirst is working to garner additional capital by attracting new investors. He declined to comment on the amount of new capital the bank hopes to acquire.
"The plan is over the next 60 to 90 days to have some firm capital commitments in place," he said, referring to plans to have the bank become adequately capitalized within that timeframe.
While the FDIC issued the corrective action directive on July 28 and ordered the bank to take action within 30 days, Smith said he expects SunFirst to have additional time to accomplish its goal.
"As long as you have a plan and you are in communication with the regulators, they will normally allow you more time to adhere to it," he said.
The FDIC first notified SunFirst of its undercapitalized status following an examination of the institution April 11, requiring the bank to submit an "acceptable capital restoration plan." SunFirst reportedly submitted a letter to the FDIC on July 6 describing the company's emergency business plan as a strategy to restore capital, but the plan was deemed unacceptable by federal regulators.
Bay said the FDIC insures most customer deposits at SunFirst up to $250,000. He said customers with concerns should call the bank directly or contact the FDIC.
Originally published August 30, 2011
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