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Robert Trigaux

Feds continue to cull weakest Florida banks



And then there was one less. The failure and immediate sale by regulators on Friday of Ocala National Bank, north of the Tampa Bay area, continued the thinning of the sick from the herd of banks in the state. Ocala National was closed by the Comptroller of the Currency, handed to the Federal Deposit Insurance Corp. (here are the FDIC details) which then sold Ocala National's deposit accounts to CenterState Bank of Florida in Winter Park. All four Ocala National Bank branches will open for business on Monday, Feb. 2, under the CenterState name. Cost to the FDIC: $99.6-million.

The Office of the Comptroller of the Currency, which oversees nationally chartered banks, issued its customary boilerplate explanation. It said it closed the bank after it "found assets and earnings dissipated due to unsafe and unsound practices."

The local newspaper, the Ocala Star Banner, reported on the bank's closing after tracking its slow demise. It's worth taking a closer look at Ocala National because there are other banks in Florida in similar precarious shape. And there were plenty of clues out there that Ocala National was probably doomed, especially in a nasty recession that's only getting worse for awhile.

In August of 2008, Ocala National said it would sell one of its branches to raise money in order to appease federal regulator concerns. But in November, bank president Rance Kay was quoted saying the branch sale is off:

"But we had an outside investor that put in, and will continue to put in, a substantial amount of capital. We have got more than enough capital to sustain us for a long time. I don't foresee us ever selling [the branch] but potentially expanding in the next several years."

Well, technically Kay was right. He never did sell that branch. Regulators took it from him when Ocala National failed and sold it for him.

Ocala National was one of 13 Florida-based banks with a "zero" star rating -- the worst possible on a zero to 5-star spectrum -- issued as of Sept. 30, 2008 by Bauer Financial, a Florida business that ranks the health of banks and credit unions. Here's an easy-to-use look at Florida banks based on that star system.

Some of the other 13 have already been "handled" by regulators to get them in the hands of stronger peer institutions. Just two weeks ago, the zero-star Bank of Bonifay, in the Florida Panhandle, for example, was sold to an Alabama insurance company that wanted to become a banks holding company (and thus gain potential access to federal TARP funds).

Here's another Florida zero-star tale. In November, the Hartford Financial Services Group purchased a Sanford-based thrift called Federal Trust Bank (a zero star). The move allowed Hartford to seek as much as $3.4 billion in Wall Street bailout money, once it became a thrift holding company.

Another Florida bank with a state charter, Freedom Bank in Bradenton, was shut down on Oct. 31 by Florida bank regulators. The FDIC sold the bank's remains to Fifth Third Bank.

Ocala National left a trail of trouble for those willing to look. On Valentine's Day of 2008, almost a year ago, Ocala National executives and directors agreed to a 29-page order from federal regulators. I'll boil  it down. The regulators told Ocala National to stop being a sloppy lender with weak underwriting standards, to set aside proper amounts of funds for bad loans, to raise capital to provide a bigger safety cushion and -- drum roll -- not to make a move without the okay of the feds. Typical of these consent orders during hard economic times, it proved to be too little, too late.

The bad news is we'll see some more of the weakest Florida banks seized by the feds or sold off to healthier institutions. The good news is, so far: Most of the banks in the worst shape are not headquartered in the immediate Tampa Bay metro area.

-- Robert Trigaux, Times Business Columnist

[Last modified: Tuesday, June 1, 2010 11:23am]


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