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State regulators closed Freedom Bank of Bradenton, Fla. on Halloween, in what was the 17th U.S. bank or thrift failure of 2008. It was also the second closing of a Bradenton-based bank in 2008, following the

Aug. 1 shuttering of First Priority Bank


The Federal Deposit Insurance Corporation (FDIC) was named receiver for Freedom Bank.

The good news for Freedom depositors was that Fifth Third Bank of Grand Rapids, Michigan (held by

Fifth Third Bancorp

(FITB) - Get Fifth Third Bancorp Report

) acquired all of the failed institution's deposits, including balances exceeding FDIC insurance limits. All four of Freedom's branches were scheduled to reopen as Fifth Third branches on Monday. Ratings back downgraded Freedom Bank to an an E- (Very Weak) financial strength rating in June. The previous rating was D- (Weak).

The institution was featured in the lists of

troubled Florida banks


poorly capitalized banks

published by

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in early August.

Like so many community banks in Florida and other states that were at the forefront of the housing boom, Freedom's problems sprang from loans to residential real estate developers, who stopped making payments shortly after a sharp drop in demand for housing. Nonperforming assets comprised 14% of the bank's total assets as of June 30.

The institution was considered significantly undercapitalized under regulatory guidelines, with a leverage ratio of 3.00% and a risk-based capital ratio of 4.97%, as of June 30. These ratios need to be at least 5% and 10%, respectively, for a bank to be considered well capitalized.

While Freedom announced an agreement with Community Bank Investors of America, LP, for $5 million in new capital back in July, this was contingent upon Freedom raising an additional $15 million from other investors. In light of the market meltdown in September and October, it's not surprising that the capital-raising efforts fell through.

The FDIC announced the loss to its deposit insurance fund from Freedom's closing would range between $80 million and $104 million, which follows a trend of very high losses from bank closings in relation to asset size.

Free Bank and Thrift Ratings

While depositors fared well in the closing of Freedom Bank, with Fifth Third acquiring even the uninsured balances, this was not the case last week when Alpha Bank & Trust was shut down. Alpha had $3.1 million in uninsured deposits in 59 accounts, and there was no word on whether those customers would receive any payments on those balances.

This underlines the importance of monitoring your bank or savings and loan's financial health. Ratings provides independent, objective and conservative financial strength ratings for all U.S. banks and thrifts. While depositors can take some comfort in the FDIC's temporary increase in deposit insurance limits, it is still a good idea to check out your institution's rating, and ask some questions if the rating is below a C- (Fair Financial Strength).

It is also important to consider that you or someone you know may be affiliated with a business or municipal depositor (such as a school district) that keeps large uninsured balances in a local institution.

Financial Strength Rat9ngs on each of the nation's 8,600 banks and savings and loans are available at no charge on the

Banks & Thrifts Screener

. In addition, the Financial Strength Ratings for 4,000 life, health, annuity, and property/casualty insurers are available on the

Insurers & HMOs Screener


Philip W. van Doorn joined Ratings., Inc., in February 2007. He is the senior analyst responsible for assigning financial strength ratings to banks and savings and loan institutions. He also comments on industry and regulatory trends. Mr. van Doorn has fifteen years experience, having served as a loan operations officer at Riverside National Bank in Fort Pierce, Florida, and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a Bachelor of Science in business administration from Long Island University.