The Federal Deposit Insurance Corp. should have responded more aggressively to commercial real estate loan problems at a small Florida bank before its Aug. 1 failure, an oversight report says.

The report by the FDIC inspector general said the agency "conducted timely examinations" and off-site monitoring of the $241 million-asset First Priority Bank, then acted against the bank starting with the delay of branch approvals in 2006.

But the report, released Friday, also found that "supervisory actions" against the Bradenton bank "were not always timely and effective in addressing the bank's most significant problems."

The IG said a 2006 exam should have triggered "greater concern" from the regulator, since loan administration problems identified as early as 2004 had still not been corrected, the bank was in de novo status, its portfolio concentrated in commercial real estate and development loans was already deteriorating, and the risk profile was rising.

"Greater concern regarding FPB's loan documentation and administration deficiencies could have led to elevated supervisory attention and earlier supervisory action," the report said.

The report noted that the agency had taken steps to improve oversight of banks with high concentrations of commercial real estate loans.

In a Feb. 12 letter responding to the IG report, FDIC supervision director Sandra Thompson agreed with its findings. "We agree, in hindsight, with the OIG's assessment that credit administration deficiencies" at First Priority "identified by examiners should have warranted supervisory action at the 2006 examination."

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