Bailout beneficiary takes over Florida bank

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NEW YORK (CNNMoney.com) -- Fifth Third Bancorp, which is receiving $3.5 billion in bailout money, will acquire Florida's failed Freedom Bank.

The Bradenton, Fla., bank, which was shut down on Friday by state regulators, is the 17th bank failure this year. It had total assets of $287 million and deposits of $254 million, according to the Federal Deposit Insurance Corp.

In addition to taking over the deposits of the failed Freedom Bank, Fifth Third of Grand Rapids, Mich. will purchase $36 million of assets. The FDIC will retain the remaining assets - mainly loans - to dispose of later. The failed institution had $214 million in loans, as of June 30, according to a July letter to shareholders.

Fifth Third Bank this week said it has received $3.5 billion as part of the federal government's $700 billion plan to recapitalize the nation's financial system.

Fifth Third is the second bank in a week to announce an acquisition after receiving its share of the government bailout funds. On Friday, PNC said it would acquire struggling regional bank National City in a deal worth about $5.6 billion. PNC is receiving $7.7 billion from the government.

Banks have come under fire for signaling they would use the money for acquisitions, rather than to resume lending to businesses and consumers. The federal government is strongly encouraging institutions to jumpstart their lending to revive the weak economy.

In Friday's announcement, the FDIC said that that the cost to the Deposit Insurance Fund will be between $80 million and $104 million.

"Fifth Third's acquisition of all deposits was the least costly resolution" for the FDIC's insurance fund, the FDIC said in a statement.

The four branches of the failed Freedom Bank will open on Monday as branches of Fifth Third Bank. All customer accounts were automatically transferred to the new bank and their accounts will continue to be insured by the FDIC, according to the release.

No deposit customer at Freedom Bank will lose any of their deposit savings, according to Fifth Third.

Customers of the banks can still access their money by writing checks or using ATM or debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual, according to the FDIC's statement.

The transaction will give Fifth Third approximately $675 million in deposits in the Bradenton-Sarasota-Venice area, and raise its deposit market share in that market from 8th to 4th, according to recent FDIC data. Fifth Third already had 16 branches in the Bradenton-Sarasota market as part of its nearly 1,300 branches in 12 states.