First Citizens Bank is expanding in South Florida by buying a failed lender, in another deal brokered by federal banking regulators.
Raleigh-based First Citizens announced late Friday that it will buy Sun American Bank, a Boca Raton, Fla., lender with 12 branches. It's First Citizens' fourth deal during the past eight months orchestrated by the Federal Deposit Insurance Corp.
First Citizens is using its financial stability to expand during the economic downturn, especially in regions hit hard by rising unemployment and tumbling real-estate prices. The bank previously acquired banks in Los Angeles, the Puget Sound region of Washington state and southern California.
The Holding family that runs First Citizens is "doing a favor for taxpayers by taking over failed banks" so that the government doesn't have to shut them down, said Tony Plath, a banking professor at UNC-Charlotte.
"But there's no altruism here," he added. "They're making a lot of money on these deals. They'll keep doing these deals as long as the government keeps handing them attractive properties."
Any losses on $433 million of Sun American's assets will be shared by First Citizens and the FDIC, which reduces First Citizens' financial risk. The FDIC estimated that the deal will cost the federal deposit insurance fund $103.8 million.
The Sun American branches in Miami, Delray Beach and other Florida cities will reopen Monday under the First Citizens name. Sun American had assets of $535.7 million.
"South Florida is a great market for our company, especially with our focus on individuals, small to mid-sized businesses and the medical community," said First Citizens CEO Frank B. Holding Jr., in a prepared statement. "We look forward to a smooth transition."
There is some risk in cobbling together failed banks in new markets and combining the pieces under a new brand name, Plath said. "The Holdings are good at this," he added. "These are sweetheart deals for First Citizens shareholders."
On Friday, the FDIC also seized banks in Illinois and Maryland, boosting the total to 25 failed banks in the U.S. this year, after 140 failed in 2009. The agency typically seizes banks late on Fridays, so that officials can spend the weekend converting the branches with minimal disruption for customers.
The number of bank failures is expected to continue rising. The FDIC expects the cost of resolving failed banks to increase to about $100 billion over the next four years.
400 branches, 17 states
First Citizens has more than 400 branches in 17 states under the First Citizens and IronStone names. The company's net income in 2009 rose to $115.6 million, up from $91.1 million a year earlier.
As of Dec. 31, First Citizens had $18.5 billion in assets. The company's shares have more than doubled in the past year, and rose $4.81 to close at $185.40 Friday.
