Though its plan to get a capital infusion from Jay S. Sidhu fell through, Federal Trust Corp. has a new lifeline.

A group of investors in New York and Florida has signed a letter of intent to give the struggling Sanford, Fla., thrift $40 million to $55 million.

And a rush is on to complete the deal: The $637 million-asset Federal Trust has been ordered by its regulator to raise capital by Sept. 30 or find a buyer.

Dennis T. Ward, Federal Trust's chairman, president, and chief executive officer, said in an interview Tuesday that he is "optimistic" about beating the deadline. He said the investor group has until Friday to finish its due diligence. Then it would have to enter into a definitive agreement or lose exclusive negotiating rights.

Mr. Ward would not identify anyone in the group but said it includes investment firms and individuals.

Federal Trust has broken off talks with Mr. Sidhu, who has been looking to invest in the banking industry since being forced out as the chairman and chief executive officer of Sovereign Bancorp Inc. two years ago.

In early August, Mr. Sidhu, through an investment fund he controls, signed a letter of intent to invest $30 million in Federal Trust.

The investment fund, Sidhu Advisors FDT LLC, had exclusive negotiating rights with the thrift until Aug. 25, Mr. Ward said. But the two sides could not reach an agreement, he said, declining to be specific.

Mr. Sidhu echoed that in a brief e-mail. "We completed our due diligence and decided not to proceed in the structure proposed," he wrote. "We have no other comments."

The new group of investors signed its letter of intent Sept. 19; details such as the number of shares it would receive and at what price remain unsettled.

However, the group would acquire control of the thrift, Mr. Ward said.

Federal Trust's shares have lost 96% of their value during the past year, plunging to 25 cents.

Its capital ratios have also shrunk. At June 30 it had a total risk-based capital ratio of 8.24%, enough to qualify as adequately capitalized but below the 10% level required to be well capitalized.

Mr. Ward said he is unsure what might happen if this new deal collapses, given that Federal Trust is operating under a cease-and-desist order from the Office of Thrift Supervision. "That's a question I can't even begin to answer because it's not something I have control over," he said. "We'd have to see what the OTS has to say at that point. I think the OTS would make a decision based on what's in the best interests of the shareholders at that time."

In the past the OTS has given Federal Trust more time to raise capital. The initial order gave Federal Trust a July 15 deadline to raise $30 million to $35 million or sell itself. In July the OTS extended the deadline to Sept. 30.

Ken Thomas, a Miami consultant who operates the Web site, said that, though any new investor in Federal Trust would get a "steep discount," putting a value on the thrift would be difficult, especially with so much uncertainty about the government's loan bailout plan.

About 11% of Federal Trust's loans were noncurrent at June 30, one of the highest ratios in the country, he said, and it is "relatively underreserved" for these problems. The average ratio of reserves to noncurrent loans is 89% for banks nationwide and 42% for Florida banks, he said. Federal Trust had an 18% reserve ratio at June 30, according to Federal Deposit Insurance Corp. data.

Federal Trust's biggest advantage is simply being in a wealthy and growing state, Mr. Thomas said. "It's an attractive franchise in the sense that it's in Florida," he said. "If this same franchise was in Ohio, nobody would be interested."

Still, turning a profit on an investment in such a troubled thrift would be a challenge, he said. "They are clearly in for an uphill battle."

Michael Rose, an analyst at Raymond James & Associates, said that Florida banks like Federal Trust might benefit from the government bailout but that some are likely to fail regardless.

"There are still going to be bank failures, and this is obviously one that could be at risk of failing," he said.

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