Jeff Ostrowski
Alexandra Clough
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Wonderful Life? Billionaire sees too many small banks
When I talked to Palm Beach billionaire Wilbur Ross last week about his deal to buy most of First Bank & Trust Co. of Indiantown, I neglected to ask his opinion of It’s a Wonderful Life.
The classic flick offers a romantic version of small banks as cornerstones of the American dream. Ross isn’t quite so dewy-eyed, though, about small institutions such as First Bank.
“There’s nothing wrong with them, it’s just that I don’t think they’re the wave of the future,” Ross said.
He noted that there are more than 8,000 FDIC-insured institutions in the U.S., which he called “a ridiculously large number.” Ross said he envisions using First Bank (assets: $85 million) as a platform to buy up other small banks.
Not surprisingly, small bankers don’t agree with Ross’ conclusions about the banking industry.
“There certainly is a reason why he would target small banks,” says Pat Cooper, president of First Bank of the Palm Beaches, which has assets of $74 million. “They’re profitable, and they’re in tune with their clients.”
Unlike big banks, small banks haven’t been hit especially hard by the financial meltdown, Cooper says. Indeed, he argues, the successors of Bailey Brothers Building & Loan are proving to be “good stewards of FDIC-insured money.”
Then there’s the matter of customer service.
“People like the personal touch,” Cooper says. “When you start buying them up and putting them all together and amassing them, what you end up with is a larger bank that loses that touch.”
If the FDIC approves the deal, Ross will pay a premium for First Bank and Trust Co. of Indiantown. The price of $7.3 million for 68 percent represents a premium, based on the bank’s equity capital of $7.8 million.
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By Get in the Game
January 20, 2009 10:17 PM | Link to this
FINALLY…
Welcome to the game, Jeff.
If 1,000 of those 8,000 banks fail - this only represents 12.5%.
So what?
This allows proper capitalized (seriously) banks to properly allocate resources in the banking industry.
Look around in the local communities.
How many various banks are there?
They are on every major intersection.
Why?
To take your hard earned money?
Do banks really create anything?
Do they produce anything?
All they do is take YOUR money and loan it to someone else while making interest along the way.
That is about it.
They do not make materials.
They do not till the land.
They are not innovative for future production (no I do not count securitization!).
So, yes there are WAAAAY to many banks in America.
Don’t believe me - go overseas to Asia or Europe and look around.
This is why the following banks are going to fail and/or be acquired (in no specific order):
Fifth Third (FITB) Bank United (BKUNA) Regions (RF) Colonial (CNB) Orion Bank of Florida (BOFL) Seacoast (SBCF)…
To name a few
Also:
Bank of America (BAC) Citigroup (C) State Street (STT)
These three shall be nationalized with our money - via the government - just like AIG, Fannie Mae, and Freddie Mac.
BTW: Seacoast accessed $50 M from the TARP (even though they are ‘well capitalized’).
Fifth Third accessed $3.5 B from the TARP - again they are ‘well capitalized’ as well.
So - enjoy the fireworks from the free money being dropped from the sky for these banks.
In the end - remember they do not produce much of anything - and the list above shall fail.
Just treading water in the meantime.
By dump the bums
February 21, 2009 7:21 AM | Link to this
I still fail to understand why we don’t let the “bad” banks fail and let investors like the one in this article buy up the pieces and rebuild good banks. I switched from private banking at a megabank to a small new private bank which is not burdoned with this mess.
By Richard Stabile Bergen County Real Estate
March 23, 2009 6:06 PM | Link to this
The fed money pouring into the market from every direction is turning things around. Any one who has the balance sheet and the capital to buy out these banks now will score big!
By Richard Stabile Bergen County Real Estate
March 23, 2009 6:06 PM | Link to this
The fed money pouring into the market from every direction is turning things around. Any one who has the balance sheet and the capital to buy out these banks now will score big!
By Shawna King
January 8, 2011 3:58 PM | Link to this
A billionaire would always keep all the things tied up as he would ensure the equity in the market. Small banks are really helpful as they save from the eyes of others.