First Federal enters local market

gagostin@bradenton.comOctober 27, 2009 

SARASOTA — Various notes filled a sheet of paper Keith Leibfried held onto Monday as he roamed about the newest branch of First Federal Bank of Florida.

The president of First Federal had a full itinerary to follow Monday as his Lake City-based institution began the process of taking over Flagship National Bank.

Flagship National, based in Bradenton, reopened its Bradenton branch and three Sarasota branches as First Federal on Monday after it was closed Friday by the Office of the Comptroller of the Currency due to poor lending practices. The purchase of Flagship, and assuming its $175 million in deposits, gives First Federal the opportunity to expand on its 11 branches and enter a new market, Leibfried said.

First Federal has $631 million in total assets, received a superior five-star rating by Bauer Financial, and an A rating in financial strength from Ratings. Previously, its branches were in northeast Florida.

“This is an opportunity that we were honored to be able to bid on and grateful to be the winning bidder,” Leibfried said. “We’ve always been interested in the Sarasota market, but it’s very difficult to come in and start a new institution like this.”

Philip Van Doorn, senior banking analyst for The, said snapping up failed banks is becoming the way for established financial institutions to expand these days.

That’s because loss-share transactions give banks such as First Federal some risk protection when they purchase a failed bank. In the loss-share transaction, the Federal Deposit Insurance Corp. agrees to absorb a portion of the loss on assets so that the bank can maximize its asset recoveries.

Flagship had $190 million in assets, and First Federal entered into a loss-share transaction on about $130 million of those assets with the FDIC.

“The loss sharing aggregates are so generous if you’re looking to get into banking or expand your bank in this market the best way to do it is buy a failed institution,” Van Doorn said. “I would expect this to continue.”

Certainly there have been plenty of failed institutions up for purchase this year. The number of bank closures nationwide reached 106 on Friday, the highest total since 1992 when 181 banks closed. Friday two other Florida banks closed, both in Naples.

Flagship National Bank was among seven community banks nationwide to close Friday. That daily total, which exceeded the three banks to close in all of 2007, prompted FDIC chairwoman Sheila Bair to address the state of the banking system on

“As the economy heals so will the banking system,” Bair said in a YouTube video. “Until the healing process is complete there will be more bank failures. However, the number of failures we are experiencing is significantly lower than those the FDIC has handled in past crises.”

Kevin Mukri, spokesman for the Office of the Comptroller of the Currency, said the regulatory agency usually knows months in advance when a bank is at risk for closure.

When a bank is deemed problematic by the OCC, Mukri said the agency usually issues a series of non-public actions to the bank to get them back into compliance.

Flagship’s failure ends more than a year of financial deterioration for the institution. The bank reported a $7.1 million loss at the end of 2008, and had lost $9.7 million during the first half of 2009, according to

In addition, Flagship has seen its noncurrent loans and leases increase to $25.4 million through June 2009, from $3.9 million in June 2008.

Bill Sedgeman, chairman of the board of directors for Community Bank of Manatee, said he was not pleased when learning of Flagship’s closure. “That news on Saturday morning ruined my weekend,” Sedgeman said. “I had many friends that were on that board and officers, and my heart goes out to them. It’s just sad when that kind of thing happens to a fellow banker in your community.”

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