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    Bank of Florida Corporation ($BOFL) Surges 40%

    Bank of Florida Corporation (NASDAQ: BOFL) surged more than 40% in today’s mid-day trading, climbing to $1.18 at last check. The Naples, Florida-based bank serves as a holding company for Bank of Florida-Southwest, Bank of Florida-Southeast and Bank of Florida-Tampa Bay.

    Earlier this week the Bank of Florida announced that it is offering 84.4 million of its shares for $0.85 each. The bank is looking to raise money after regulators had asked it to inject capital into its subsidiaries or face a sell off. The bank said on Monday that it was hoping to raise $71.8 million from the offering. According to the prospectus on the offering, each of the bank’s subsidiaries received a Supervisory Prompt Corrective Action Directive from the FDIC on March 18, 2010, due to BOF-Southwest’s “critically undercapitalized” status, BOF-Tampa Bay’s “significantly undercapitalized” status, and BOF-Southeast’s “undercapitalized” status. The Directive said that each of the banks must be “adequately capitalized” before April 17, 2010, and/or accept an offer to be acquired by a depositary institution holding company or combine with another insured depositary institution.

    Bank of Florida has been hit hard by the financial crisis. Prior to the crisis, the bank’s deposits and loans grew at compounded average annual growth rates of 33% and 38%, respectively. Like most regional banks, the crisis has taken its toll on Bank of Florida. Also, the fact that the bank caters to the Florida market, which was one of the worst hit markets when the housing bubble burst, has affected its business.

    FDIC’s directive places a lot of restrictions on the bank’s subsidiaries once they are “adequately capitalized.” These will remain in place until each of the banks maintains “adequately capitalized” status for four consecutive quarters. The bank’s latest offering should be sufficient to capitalize the three subsidiaries for now but does not assure if it will be sufficient for future regulatory needs. This places a lot of uncertainty on the bank’s operations and the stock.

    The bank’s stock today moved above its 50-moving average in trading. It has been volatile in the past year, as it has traded in the range of $0.50-$4.25. A lot depends on the success of the current offering and if it can be sufficient to capitalize for the given period by FDIC. Till that time, we expect the stock to continue its volatile trend.

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