Just as equity had begun coming back into Florida banks, some investors have turned off the spigot because of the Gulf oil disaster.

Florida First City Banks Inc. said this week it had suspended an effort to raise up to $14 million after potential investors began backing away. Their reason: Worries about the potential consequences for banks as oil washes up on Panhandle beaches.

Although the Fort Walton Beach company, which shelved its capital plan until next month, was the first to disclose such a move, observers say the spill is having a chilling effect on investment in other Florida institutions.

"It casts a different element of uncertainty over the banking industry that was beginning to see some pricing stability," said John "Jack" P. Greeley, an attorney with Smith MacKinnon PA who is helping some Florida banks raise capital.

"Fear of the unknown" caused investors to pull out because of the spill, said John McGee, the chairman and chief executive of the $341 million-asset First City Bank of Florida, the bank unit of Florida First City.

The parent company started its $3 million to $14 million capital effort in April to comply with a regulatory order. McGee said it had raised $1.5 million in cash and commitments but after June 1 hit headwinds as news reports showed oil tarnishing the Panhandle's famed beaches.

"The spill has affected tourism [in the Panhandle] by 40% to 50%," McGee said. "When that happens, everybody here is concerned."

Other banks on Florida's Gulf Coast are starting to feel the effects of the spill, which until recently had appeared to be a threat mainly to the health of banks in Louisiana and Mississippi. Greeley said in the past month two Florida banks he was advising, which he would not identify, lost investors for offerings under discussion.

One was a private-equity deal and the other involved larger individual investors, he said. Both had a strong interest in investing in the banks prior to the spill.

For investors "it's not so much the investment as it is their own liquidity that they are worried about. They are concerned about what would happen to their own pocketbook," said Shaun Dalton, the president of Community Capital Advisors Inc. in Duluth, Ga., which is assisting Florida First City in its capital raising.

Meanwhile, an even greater concern is whether investors' fears will further delay the recovery of Florida's banks in terms of capital and pricing after the real estate market crash and financial crisis battered many banks in the state.

"It [the oil spill] makes offerings longer, it makes offerings harder to do and assuming the bank gets investor interest, it means further dilution to pricing," Greeley said.

Investors are hesitating because of uncertainty as to how much of an effect the spill could have on borrowers and their credit quality.

Dalton said that four years ago, a bank in Florida or Georgia could have raised $15 million to $20 million in capital in 60 days. Now, it takes four to six months to raise $5 million, and the oil spill is only prolonging that, he said.

As a result, Florida's banking community is now sounding alarm bells.

"The effects of the oil spill go far beyond the risk to our pristine beaches and wildlife. It affects the entire financial structure, from investors who are reluctant to invest in regional businesses to the citizens whose earnings are diminished," said Tom Cardwell the commissioner of the Florida Office of Financial Regulation, in an e-mailed response.

On Monday the Florida Bankers Association tried to get some relief for its members. Its president and CEO, Alex Sanchez, wrote to federal bank regulators requesting a 12-month suspension in the state of higher capital requirements and the use of appraisals for loans, among other things.

Sanchez acknowledged this is a tall order. "I know it's drastic but drastic times call for drastic measures and I just can't wait," he said Tuesday. "The red flags are coming up, the [tourism] season is a loss in the Panhandle but we've got to take action now."

Even if regulators were to honor the request — which seems unlikely — most investors and bankers said it would not automatically lead to a flood of capital into Florida banks.

Relaxing the capital requirements "keeps the banks viable long enough to go out and continue to raise capital," Dalton said.

On Wednesday, regulators issued a statement to all banks in the states affected by the oil spill, encouraging them to assist their creditworthy customers by waiving fees or expediting lending decisions.

But the regulators did not issue any formal relief regarding capital. Instead, the statement said only that examiners will consider whether a bank's board developed a "capital restoration plan that provides for capital augmentation in a timely manner."

That offered little encouragement to bankers like McGee, who figures he now must wait until at least August to restart his capital-raising initiative, even as his bank operates under a regulatory order.

For now, the only immediate relief from the oil spill for banks in Florida may be BP itself, with money the firm has set aside for the cleanup and to assist businesses affected by the spill. "We're exploring possibilities with BP through the BP trust fund," McGee said.

And in an unusual twist, one investor group is eyeing a Florida bank largely because of opportunities that could arise from distributions from BP's fund, said Paula Johannsen, managing director at Carson Medlin Co.'s Florida operations in Tampa. She would not identify the investors.

"All is not lost. There may be some recovery," she said. "We need the regulators to give us a little time. … We need that regardless of the oil spill."

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