Opinion ID: 2301005
Heading Depth: 2
Heading Rank: 5

Heading: Bancorp Tries To Sell Its Tampa Branches And Deposits.

Text: With its capital-raising strategy played out, Bancorp began selling assets. In 2010, BankAtlantic offered to sell its Tampa branches and approximately $350 million in deposits. Ten parties signed nondisclosure agreements, and four completed due diligence. Bancorp received two bids offering deposit premiums of 2% and 4%. Bancorp rejected the offers as inadequate. The concept of a deposit premium reflects the unique role that deposits play in a bank. Technically, deposits are liabilities, and customers can withdraw them at any time. Before the advent of federal deposit insurance, banks faced a real risk of a run like the one dramatized in Frank Capra's 1946 film, It's a Wonderful Life. But in a world with federal deposit insurance and where transferring an account to a new institution carries exit fees and forces the customer to re-establish a host of convenient features (such as direct deposit, automatic payments, and electronic bill-pay), deposits are sticky. As a practical matter, core deposits provide banks with stable, low-cost financing. As such, core deposits contribute significantly to bank profitability by lessening or eliminating the need for higher-cost financing and enabling banks to earn a wider spread when making longer-term, higher-interestrate investments, such as real estate loans. Banks also generate fee income from deposit accounts and can leverage their customer relationships to sell other products. Federal regulators view core deposits favorably and believe that generally, banks' increasing reliance on core deposits reduces the chance of failure and reduces the [Deposit Insurance Fund's] losses when banks do fail. Federal Deposit Insurance Corporation, Study on Core Deposits and Brokered Deposits 3 (July 8, 2011), available at http://www.fdic.gov/regulations/ reform/coredeposit-study.pdf (last visited February 27, 2012). For all of these reasons, banks willingly pay a premium for deposits, typically structured by having the acquiring institution assume a larger quantum of deposits than the assets transferred. As of December 31, 2010, BankAtlantic held approximately $2.8 billion in core deposits. Bancorp had invested significantly to build that deposit base. Levan testified BankAtlantic's deposit base is recognized not only in Florida but nationally as being one of the best deposit bases. Tr. 750.