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Mergers, bank failures and a huge federal bailout have Florida financial institutions scrambling for ... a piece of the pie

Bill Klich had never seen anything like it in his 38-year banking career.

About $1.2-billion in deposits flooding from troubled Wachovia Corp. into regional rival BB&T. The bank's deposits in the Tampa Bay area swelled by $100-million in just a couple of days.

"It was a classic flight to safety," said Klich, head of BB&T's Tampa Bay operation and chairman-elect of the Florida Bankers Association.

That was just the first skirmish in a fierce battle over Florida's rich banking deposits. The stage is set for the most radical overhaul of the state's banking landscape in more than a decade, with an anticipated round of bank failures and acquisitions determining how the state's $400-billion in deposits gets carved up.

In one corner: Wells Fargo and JPMorgan Chase, emboldened by their takeovers of Wachovia and Washington Mutual, will join Bank of America as megabanks with a huge stake in Florida.

In another corner: super-regional banks like Regions Financial and SunTrust and strong community banks that could use some of the cash the federal government plans to inject into banks to buy up weaker competitors.

And in the middle:overleveraged regional and community banks that are fighting for survival.

"You are going to see the strong ones getting stronger and the weak ones getting weaker," said Ken Cherven, president of First Community Bank Corp. of America, a $475-million, 10-branch bank based in Pinellas Park.

Typically, 80 percent of the loans for any Florida bank are tied to real estate, which makes the state's banking industry more susceptible to a shakeout than most others. The percentage of past-due loans for Florida institutions jumped from 1 percent to more than 3 percent between June 2007 and June 2008.

Even banks that stayed away from risky subprime mortgages have beenaffected by the real estate bust the past three years. Now, more bankers in the region are citing a widening downturn in small-business accounts in general as the recession deepens.

What does that mean for consumers as they seek both a safe haven for their money and a banking relationship that will last?

Betting on winners and losers can be frustrating, but there are tools for gauging the general health of any bank. (See On the watch list at right.) Experts say the safest thing to do is to spread your risk.

Take solace that if your bank fails, the Federal Deposit Insurance Corp. is ready to help. Congress has temporarily increased FDIC deposit insurance from $100,000 to $250,000 per depositor at covered institutions through Dec. 31, 2009. And, as regulators are fond of pointing out, no depositor who has stayed under that limit has ever lost money at an FDIC-insured bank.

More good news for investors: As a recent spate of advertisements attests, banks have been offering great rates on certificates of deposits as they try to beef up deposits and reassure their customer base.

One such ad from SunTrust proclaims: "When you're ready to switch accounts, we're here to help."

Like BB&T and Bank of America, SunTrust picked up deposits during the recent drama over Wachovia's fate. Barry Koling, a spokesman for the Atlanta-based institution, added: "We have found historically that in a situation when other banks are in transition or distressed, we tend to be a beneficiary."

The last big bank transformation in Florida was largely a matter of the big fish swallowing small fish in the 1990s, willing to pay healthy premiums to grow. An influx of powerful out-of-state bankers gobbled up dozens of Florida banks, leaving the majority of the state's deposits in the hands of three institutions: Bank of America, Wachovia and SunTrust. Nationally, the number of banks fell from 10,000 to roughly 8,000.

This era is different. Some of the banks that will do just fine will be smaller, community banks; some of those gobbled up will be regionals or larger banks with too many loan defaults and not enough capital.

In just the last month, Florida has witnessed two of its top five banks change hands and is now heralding the entry of Wells Fargo and JPMorgan Chase as major consumer banks.

The wild card is what role the federal government will play in accelerating a shakeout and helping to pick winners and losers.

At least some of the money in the latest $250-billion bank rescue package will be steered to banks willing to buy underperforming rivals, according to regulators.

"We have to be very careful about not discouraging prudent acquisitions because that can actually help us get through these troubled times that we're in right now," Neel Kashkari, the Treasury official running the federal rescue program on an interim basis, testified Thursday at a Senate Banking Committee hearing in Washington.

Indeed, on Friday, Pennsylvania's biggest bank, PNC Financial Services, announced plans to buy troubled National City Corp. for about $5.2-billion in stock after receiving some $7.7-billion in Treasury funds.

After investing half of the $250-billion directly into the country's nine largest banks, Treasury Secretary Henry Paulson said the remaining funds would be enough to invest in every other qualified bank, with "qualified" being the operative word.

Florida bankers are keen to find out more. A sellout crowd of 240 came to the Kravis Center in West Palm Beach last week to hear a luncheon speech by FDIC director Tom Curry. One of the key topics during the Q&A: How can bankers get their hands on that federal money?

The money is intended to seed healthy banks, attendees heard from Curry. The process was spelled out: Banks have to fill out a standardized two-page form and submit it to their primary regulator by Nov. 14. The regulator will make a recommendation, then the Treasury Department will decide whether to inject capital. It won't reveal names of banks that withdraw applications or are turned down.

Under the plan, the government would receive preferred stock and warrants to purchase common stock in return for its investment in a bank.

Alabama-based Regions, Florida's fourth-largest bank, last week said it has gotten an informal nod from its regulators that it would qualify to receive $1.17-billion to $3.51-billion in capital. And it plans to apply.

"The higher level of capital will allow us to expand our customer base through organic growth or acquisitions," Regions chief financial officer Irene Esteves told analysts in an earnings conference call.

SunTrust also plans to apply. Others, like BB&T, were weighing their options last week.

Cherven, the Pinellas Park-based community banker, hasn't committed, but finds the offer attractive.

"It appears to be a very fairly priced, low-cost alternative for capital, and there are no other sources right now," he said. "If you're going out to raise stock, no one's buying bank stock right now."

Florida's biggest banks

These five control more than half the banking statewide and hold more than $200-billion in deposits.

Bank.......................Deposits.................Market share

Wachovia*...............$71.1-billion............18.70 percent

Bank of America.......$69.4-billion............18.25 percent

SunTrust..................$36.0-billion............9.46 percent

Regions....................$14.3-billion............3.76 percent

Washington Mutual**..$12.1-billion...........3.19 percent

* Acquired by Wells Fargo ** Acquired by JPMorgan Chase

Source: Federal Deposit Insurance Corp. market share report. Data as of June 30, 2008.

On the watch list

Some experts are predicting there may be more than 100 bank failures nationwide over the coming year. Others will be healthy enough to stay in business but weak enoughto be bought.

The FDIC has a watch list with 117 at-risk institutions. But it won't disclose names because that could spark a run on deposits - even though depositors at FDIC-insured institutions are covered for up to $250,000 under a recently expanded program.

By one measure of bank health, a ratio comparing a bank's troubled loans to its capital, such banks as Florida Community Bank of Immokallee and Ocean Bank in Miami have raised red flags.

Separately, Bauer Financial, a Florida firm that rates the health of banks on a five-star system, has given a "zero'' star signifying deep distress to seven banks in the greater Tampa Bay area. They include: Freedom Bank of Bradenton (not the one in St. Petersburg), Ocala National Bank, Riverside Bank of the Gulf Coast in Cape Coral and Community National Bank of Sarasota County in Venice.

To see how your bank rates, go to