Florida Bank Shuttered By Regulators

A Tampa area bank has been seized by regulators, marking the 17th U.S. institution to fail this year and the second in the state of Florida since August.

Freedom Bank, a Brandenton, Fla.-based institution with four branches and assets of $284 million, was seized by Florida regulators on the afternoon of Oct. 31. The Federal Deposit Insurance Corp., which insures deposits up to $250,000 per account, has been named receiver.

“The FDIC estimates that the cost to the Deposit Insurance Fund will be between $80 million and $104 million,” according to an FDIC statement.

The failure of Freedom Bank pushes the overall bank failure losses to the FDIC for the year to between $6.2 billion and $10.5 billion. Florida’s portion of the losses represent between $152 million to $176 million, according to the FDIC.

In preparation for the latest seizure, Fifth Third Bank, a Michigan-based institution with an existing Florida presence, entered into a “purchase and assumption agreement” to assume all of Freedom Bank’s deposits, $36 million of assets, and the former Florida bank’s branch locations. The FDIC plans to dispose of the remaining assets in the future.

Fifth Third Bank is a Grand Rapids, Mich.-based institution created in 1853 that has assets of $54.2 billion, loans of $40.8 billion, and deposits of $37.4 billion. Fifth Third has 847 locations nationwide, including 165 in Florida. Before the real estate market turned in 2005, FifthThird Bank had been on in a Florida expansion mode primarily through acquiring existing institutions.

Founded in 2005, Freedom Bank was a state-chartered institution on Florida’ Gulf Coast with three branches in Bradenton and a fourth location in the affluent area of Sarasota. Freedom Bank had deposits of $265 million and loans of $214 million in the first half of 2008 ending June 30, according to the most recent FDIC data.

Freedom Bank lost $14.8 million in the first half of 2008 through June 30 as the institution’s noncurrent-loans-to-loans ratio jumped from 1.66 percent in 2007 to 15.49 percent in 2008.

The bulk of Freedom Bank's noncurrent loans are concentrated in construction and development, representing 31.72 percent; commercial real estate, representing 8.13 percent; and commercial and industrial loans, representing 8.91 percent, according to the FDIC.

Freedom Bank’s failure marks the fourth institution to be shut in the fourth quarter, and the second Florida institution to fail since Brandenton-based First Priority Bank, which was closed on August 1, 2008. Prior to 2008, the last time a Florida bank was closed was 2004.

In the fourth quarter which began Oct. 1, four banks have failed costing the FDIC between $284 million to $316 million. Nine institutions were shuttered in the third quarter at an estimated cost of between $5.7 billion and $10 billion, according to the FDIC.

Regulators shut two institutions in the second quarter at an estimated cost of $216 million and two more institutions in the first quarter at an expense of nearly $6 million, according to the FDIC.

The bank failures have been scattered throughout the United States. California, Nevada, Georgia, Missouri, and Florida lead the nation in failed institutions with two banks each. Arkansas, Minnesota, Kansas, West Virginia, Washington state, Michigan, and Illinois each have had one institution shuttered this year.

Peter Zalewski is a principal with the consulting company Condo Vultures® LLC and a licensed real estate broker with Condo Vultures® Realty LLC. Peter can be reached at 305-865-5629 or by email at peter@condovultures.com. Be sure to check out Peter’s blog at CondoDump.com. Don't forget to sign up for our weekly Market Intelligence Report. Looking for a property at a deep discount? You are encouraged to take a peek at the Vultures Database™ .

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