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Private Equity Group Buys 3 Failed Banks
July 19, 2010, 6:26 am
North American Financial Holdings, run by the former chief of Bank of America’s investment banking unit, bought three failed U.S. lenders, as the number of banks taken over by the Federal Deposit Insurance Corp. this year hit 96, Bloomberg News reported.

North American has taken over two banks in Florida and one in South Carolina, the F.D.I.C. said Friday. The private firm acquired First National Bank of the South, based in Spartanburg, S.C., with $682 million in assets; Miami-based Metro Bank of Dade County, with assets of $442.3 million; and Turnberry Bank of Aventura, Fla., with assets of $263.9 million.

North American, headed by Gene Taylor and backed by other longtime Bank of America executives, has raised $900 million from investors to buy banking assets.

Bloomberg noted that the North American is only the second privately-backed firm this year to be granted permission by the F.D.I.C. to purchase failed banks. Through June, the F.D.I.C. had awarded only three of 86 failed banks to private investors, with all three taken over by privately-backed Premier American Bank.

Under F.D.I.C. rules, a bank acquired by private investors has to keep an extra cushion of capital to protect against losses in the first three years of ownership. This has deterred many private equity shops from buying more distressed lenders.

Along with the three banks purchased by North American, the F.D.I.C. also announced that it has seized three other lenders: Woodlands Bank, based in Bluffton, S.C., with $376.2 million in assets; Mainstreet Savings Bank of Hastings, Mich., with $97.4 million in assets; and Olde Cypress Community Bank of Clewiston, Fla., with assets of $168.7 million.

Bank of the Ozarks, based in Little Rock, Ark., agreed to assume the assets and deposits of Woodlands Bank, while CenterState Bank of Florida is assuming the assets and deposits of Olde Cypress Community Bank; and Commercial Bank, based in Alma, Mich., is acquiring the assets and deposits of Mainstreet Savings Bank, The Associated Press reported.

The failure of Woodlands Bank is estimated to cost the deposit insurance fund $115 million. Estimated costs for the others are: First National Bank of the South, $74.9 million; Mainstreet Savings Bank, $11.4 million; Metro Bank of Dade County, $67.6 million; Turnberry Bank, $34.4 million; and Olde Cypress Community Bank, $31.5 million.

With 96 closures nationwide so far this year, the pace of bank failures far outstrips that of 2009, which had been a brisk year for shutdowns. By this time last year, regulators had closed 57 banks. The rate has accelerated as banks’ losses mounted on loans made for commercial property and development.

The number of bank failures is expected to peak this year and be slightly higher than the 140 that failed in 2009.

http://dealbook.blogs.nytimes.com/2010/07/19/private-equity-group-buys-3-failed-banks/