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Florida's small banks face big deposit of trouble

By Robert Trigaux,
In print: Sunday, July 6, 2008

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ADVERTISEMENT Related Links Database: Your bank's health

Florida banks are starting to feel the nasty effects of the slumping economy. Some are getting hit hard — we'll name names later in this column. Others still operate above the quicksand swallowing banks burdened with too many bad loans.

Some local community banks like First National Bank of Pasco in Dade City, Liberty Bank in Clearwater and Valrico State Bank in south Hillsborough County still manage to get top marks in the latest ratings from Bauer Financial. Bauer ranks banks based on performance from five stars ("superior") to zero-star banks that probably can't survive long on their own.

To check a Florida bank, click on "Your bank's health" at our Web site: money.tampabay.com.

In September, there were no zero-star banks in Florida. At the end of March, there were eight. More are likely in the second quarter ended June 30, though those rankings are not yet out.

A Wall Street Journal headline on Wednesday said it well: "Small Banks' Reckoning Day is Coming." For some, it's here.

One small Minnesota bank, ironically called First Integrity Bank, made the classic no-no decision to start lending thousands of miles away — in and around Naples — after the CEO and his wife decided to buy the Olde Marco Island Inn.

"They were living in penthouses down in Florida on everybody else's money," investor Greg Thurman fumed in June to the Minneapolis Star Tribune.

First Integrity had been tagged a zero-star bank for a while. Regulators finally shut the bank down in May.

In another recent case, Naples-based First Florida Bank — a zero star with one of the highest percentages of nonperforming loans in the state — was merged into Synovus Bank of Tampa Bay in St. Petersburg. Both banks are owned by the Synovus banking company in Georgia. In April, Synovus called the merger a "combination of expertise and talent." The reality is the Naples bank was troubled and needed to be absorbed by its bigger brother in St. Petersburg. Now Synovus is expediting sales of its single-family construction loans in Naples and Atlanta to try to clean up its balance sheet faster than competing banks.

Other "zero-star" banks in the area include two in Bradenton: First Priority Bank and Freedom Bank (not affiliated with Freedom Bank of America of St. Petersburg). Both say they have been searching for investors to find new capital. As of early last week, there were no takers.

Other struggling banks include Ocala National Bank and Florida Community Banks in Immokalee.

The Federal Deposit Insurance Corp. keeps a nationwide list of "problem" banks. Through March, the FDIC added 14, bringing its count to 90 with total assets of $26.3-billion. Most have troubled loans in construction/development or commercial real estate.

Plenty of Florida banks in need of a cure have yet to take their medicine. Open wide.

Robert Trigaux can be reached at trigaux@sptimes.com.