This past weekend, the FDIC closed yet another bank, Freedom Bank of Bradenton, Florida. The bank had total assets of $287 million and total deposits of $254 million. Super regional Fifth Third, based in Cincinnati, Ohio will take over the insured deposits of the institution and all Freedom branches have opened today as Fifth Third branches.
What is most significant about this announcement has nothing to do with Freedom and everything to do with Fifth Third. In the aftermath of the U.S. treasury’s TARP bank re-capitalizations, we should see this announcement as an endorsement of the beleaguered super regional.
Freedom Bank, Bradenton, Florida, was closed today by the Commissioner of the Florida Office of Financial Regulation, and the Federal Deposit Insurance Corporation (FDIC) was named receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Fifth Third Bank, Grand Rapids, Michigan, to assume all of the deposits of Freedom Bank.
The four branches of Freedom Bank will reopen on Monday as branches of Fifth Third Bank. Depositors of the failed bank will automatically become depositors of Fifth Third. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship to retain their deposit insurance coverage. Customers of both banks should continue to use their existing branches until Fifth Third can fully integrate the deposit records of Freedom Bank.
Over the weekend, depositors of Freedom Bank can access their money by writing checks or using ATM or debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual.
As of October 17, 2008, Freedom Bank had total assets of $287 million and total deposits of $254 million. Fifth Third agreed to assume all the deposits for a premium of 1.16 percent. In addition to assuming the failed bank’s deposits, Fifth Third will purchase approximately $36 million of assets. The FDIC will retain the remaining assets for later disposition.-FDIC
If you recall, Fifth Third has been one of the regional banks under greatest scrutiny and selling pressure along with NCC, Zions, Wachovia, Regions Financial and KeyCorp. Recently, the bank had expanded well beyond its core regional base into Florida and has seen a significant increase in non-performing assets.
Yet, it is now deemed safe enough to take on the assets of failing institutions in Florida. To my mind, that is a green light for Fifth Third investors. It says that regulators see the bank as more of the solution than the problem. Granted the FDIC has focused only on smaller institutions given its limited capital to back failing institutions. But, ultimately regulators had the opportunity to use a number of banks to take on these assets, but it chose Fifth Third.
That must be seen as very good news to any Fifth Third depositor or shareholder.
Fifth Third Bank Acquires All the Deposits of Freedom Bank, Bradenton, Florida – Press Release, FDIC