Federal Trust Corp. in Sanford, Fla., must raise capital by July 15 or sell itself, according to a cease-and-desist order issued by the Office of Thrift Supervision.
The $673 million-asset company, which lost $2.2 million in the first quarter, was anticipating the order and had already announced plans to complete a rights offering of common stock by midyear.
The order, dated May 12, instructs Federal Trust to submit a written plan for improving and maintaining its capital strength within 30 days. The plan must include the amount it needs to raise, what method will be used, and an alternative strategy if the attempt to obtain more capital fails.
In filing its first-quarter results with the Securities and Exchange Commission, Federal Trust reported that its ratio of total capital to risk-weighted assets was 9.77% — enough to be considered adequately capitalized, but below the 10% required to be considered well capitalized.
Nonperforming assets jumped 23% from the fourth quarter, to $57.9 million, or 8.6% of total assets.
A separate cease-and-desist order criticized the company's Federal Trust Bank for unsafe and unsound banking practices and violating regulatory standards for real estate lending, loans to a single borrower, and asset classification. That order restricted the bank's growth, prohibited it from increasing its level of certain types of loans (including construction and acquisition and development), and required it to submit a three-year business plan for reducing expenses and improving operations, earnings, and profitability.
