Bank regulators change old habits

The FDIC might have to trade the F in its name from Federal to Frugal.

Indeed, the Federal Deposit Insurance Corp. is being lauded nationally by some in the banking industry for its newfound ability to play shrewd with banks that seek to acquire failed institutions.

It's a big change for the plodding government agency. And in at least one way, the slow transformation began with the agency's 2009 shutdown of two Gulf Coast banks: Naples-based Orion Bank and Sarasota-based Century Bank.

Lafayette, La.-based IberiaBank bought those two institutions from the FDIC after the agency shuttered the banks on Nov. 13. The FDIC gave IberiaBank a 1.26% discount on $2.5 billion in Orion and Century assets to facilitate the purchase.

Back then, more than a few local bankers grumbled to Coffee Talk that the FDIC was overly generous to IberiaBank. Others complained that by pairing banks like that, it eliminated other potential bidders that didn't have the financial wherewithal of IberiaBank, which had at least $7 billion in assets before getting into Florida.

In terms of pure competition among banks, those complaints could be legitimate. But according to a new study from SNL Financial, a Charlottesville, Va.-based research and analysis firm, the move saved the FDIC's deposit insurance fund — and likewise taxpayers — millions of dollars.

That's because the grouped sale of Century and Orion to IberiaBank, according to SNL, cost the FDIC the equivalent of 28% of the two institutions' assets. That is compared to an average cost of 41% for other FDIC-assisted deals in Florida through Nov. 13, SNL reported.

“We've argued in the past that marketing a group of failed banks as one entity will attract higher bids from potential acquirers,” SNL said in its report.

That trend continued April 16, when the FDIC shut down a trio of Florida banks in a busy day that saw eight other closures nationwide. The Florida banks — Fort Pierce-based Riverside National Bank of Florida, Palatka-based First Federal Bank of North Florida and Clermont-based AmericanFirst Bank — were sold to TD Bank, a unit of Toronto-based Dominion Bank.

The cost to the FDIC's deposit insurance fund in the TD Bank deal equaled 13% of the three failed institutions' aggregated assets, according to SNL. “The measure shows that the [three] failures were significantly cheaper than prior assisted deals in Florida,” SNL reported.

In fact, the SNL analysis found that the cost of the other 22 FDIC-assisted deals in Florida during the recession have averaged 33% of the failed institution's assets.