Sep. 6--PANAMA CITY, Fla. -- PANAMA CITY -- The economic downturn that preceded federal sanctions for Peoples First Community Bank earlier this year continues to affect the bank, which posted losses nearing $100 million through the first two quarters of 2009, according to Office of Thrift Supervision reports.

All area banks are struggling during the recession, but in Bay County only Peoples First and Coastal Community Bank have been issued cease and desist orders by their regulators. The OTS issued Peoples First a cease and desist order in February, mandating changed lending practices and increased capital levels. The bank's capital levels have continued to drop this year, though, causing the bank to miss a capital level goal set in the OTS order.

Bank officials declined to give an interview for this story, but did issue a statement in response to News Herald questions. They attributed Peoples First's struggles to the poor economy and said increases to loan loss reserves -- money set aside to guard against future losses on bad loans -- is causing the staggering income losses and depleted capital.

"We are doing all that we can to maintain the value and vitality of the Peoples First franchise. We believe in the futures of the communities we serve and of the great state of Florida. Together, we are facing difficult times and, together, we will overcome them," the statement said.

It is not clear what will happen if Peoples First's balance sheet does not improve, though a sale is a possibility.

"There's no formula," OTS spokesman William Ruberry said of the ramifications of continued failure to meet the requirements of the cease and desist order. "There are a lot of options that the agency would have. ... I can't predict what might happen in this case."

Cash challenges

After losing $22.6 million in 2008, according to the OTS reports, Peoples First lost $96.5 million in the first six months of 2009. The bank's total risk-based capital ratio, the percentage of easy-toaccess assets (such as cash) in relation to any assets that are assessed risk (such as loans), has dropped below federal guidelines.

The FDIC considers a bank with a total risk-based capital ratio of 10 percent as "well-capitalized" and 8 percent as "adequately capitalized." Regulators begin to monitor banks' practices more closely when the ratio falls into single digits.

The cease and desist order directed Peoples First to increase its ratio from 11 percent in February to 11.5 percent by June 30, and to 12 percent by the end of 2009.