First East Side Savings Bank, Florida, Closed By Regulators

First Side Savings Bank, Tamarac, Florida, was closed today by the Office of the Comptroller of the Currency.  Earlier in the day, a second Florida bank, GulfSouth Private Bank, was closed by Florida banking officials.  Florida has now had a total of seven banking failures this year, representing 16% of total U.S. bank failures during 2012.

The FDIC, appointed as receiver, sold the failed bank to Stearns National Association, St. Cloud, Minnesota, which will assume all deposits of failed First Side Savings.

First East Side Savings Bank was a small bank with only one branch and $67 million in total assets but had a long history.  The Bank was established almost a century ago on January 1, 1920, surviving the Great Depression but ultimately failing due to the collapse of Florida real estate values and the resulting large increase in nonperforming loans.

The one branch of First East Side Savings will reopen on Saturday as a branch of Stearns Bank and depositors of the failed bank will automatically become depositors of Stearns, with uninterrupted FDIC deposit insurance coverage up to the applicable limits.  Today and over the weekend, depositors of First East Side can access their money through the use of checking accounts, ATMs and debit cards.

At June 30, 2012, First East Side Savings had total assets of $67.2 million and total deposits of $65.9 million.  Besides assuming all deposits, Stearns Bank also agreed to acquire all of the failed bank’s assets.

Including First East Side Savings, Stearns Bank has now acquired 9 failed banks since October 2008 along with a $730 failed loan portfolio from the FDIC.  Stearns Bank, founded in 1912, has over $1.4 billion in assets and a Tier One Leverage Capital ratio of 16%, making it one of the highest capitalized banks in the nation.

If every bank in the country had been run with the acumen of Stearns CEO, Norman Skalicky, there never would have been a banking crisis.  Mr. Skalicky noted in 2009 that “We have been preparing for opportunities, such as this, since late 2006. We began to curtail lending and increase our capital ratios and really focused on this beginning in August 2007. One of our main strategies during that time was to be prepared to capitalize on opportunities prior to the end of this banking cycle.”  The banking industry and especially the nation’s largest banks should take note of Mr. Skalicky’s views on properly assessing lending risks.

The Stearns Bank website provides further insights on why Stearns Bank has prospered while so many other many banks have become wards of the taxpayer or failed.

A common question asked by many outside the organization, “how does Stearns Bank perform so well year after year?” Many people wonder how Stearns Bank consistently remains a high performing banking company, especially when coupled with significant growth. This phenomenon is rare whereby many high performing banks achieve such success at the price of growth.

As in the case of most high performing companies, it is the people that achieve the results. But the environment of Stearns Bank mirrors the values and beliefs of the chief executive officer, Norman C. Skalicky. Under Norm’s leadership, the company has grown from a small rural bank to a very aggressive profit oriented commercial banking company utilizing a keen appreciation for risk and reward. It is Norm’s style that has developed through the entire organization, and it is his style that has become the culture of the company.

The cost to the FDIC Deposit Insurance Fund for the failure of First East Side Savings Bank is $9.1 million.  First East Side Savings was the 7th banking failure in Florida this year and the nation’s 45th banking failure of 2012.

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