On Friday, January 7, 2011,
First Commercial Bank of Florida Orlando, FL was closed by the Florida Office of Financial Regulation, and the Federal Deposit Insurance Corporation (FDIC) was named Receiver.
Safety Ranking
BankVega
safety score for First Commercial Bank of Florida was1 for the Sep 2010 Quarter. The average safety score for peer banks (similar mix of size, assets and deposits) in the country was 31.5. Thus, we had placed this bank in the riskiest bucket among all commercial banks in the country. Further, the safety indicator for First Commercial was consistently below its national peer average for the last few quarters and also decreasing. Hence it is no surprise that this bank has joined the ranks of failed banks for 2011 justifying our safety rankings.
Recovery Rate
Our estimates suggest that this bank will be able to recover about 87 % of its asset in post-failure auctions. Thus the bank is likely to maintain close to high value after its failure.
Key Performance Indicators
Historically the bank has always maintained less capital compared to its peer banks. However it was in a relatively healthy position during 2006 Q1 2007 Q4. This was because the bank consistently outperformed its peers in its earnings during that entire period. Our safety index has captured this trend. Since the bank had invested heavily into commercial real estate (67% of asset portfolio for 2010 Q3), earnings were hit drastically as loans started turning bad around 2008 Q1. This can be observed as we look at the trend in earnings for the bank.
Earnings index fell from 69 in 2007Q4 to 9 in 2008Q4. A comparison with average earnings index of similar banks in the country (63.6 for 2007Q4, 62.5 for 2008Q4) suggests how bad the decline in earnings was for First Commercial. Since the bank had always had low capital base, it could not use its capital to write off its losses under such grave circumstances making its position insecure. The management failed to diversify its loan portfolio and this trend continued with falling earnings and capital leading the bank towards eventual delinquency
Asset Quality: Quality of Banks assets was good earlier, however as loans turned bad around 2008, Asset Quality index went down.
Capital: As noted earlier, the bank has historically maintained a low capital base hence could not use it to write off its losses.
Earnings: As noted, earnings were very high initially and then plummeted as loans in its asset portfolio turned bad.
Liquidity: We can observe that the bank maintained reasonable liquidity throughout. In fact it improved its liquidity position towards in the last two years in order in an effort to remain safe and prevent itself form going under. However this was not an alternative to rapidly declining earnings and capital and it went bankrupt.
