History repeats itself…

February 8, 2007

key.jpegBack in the early 1990s, when I was a young reporter on Florida’s west coast, I covered a bank called Key Florida that talked a good game and dressed up its numbers real pretty, but was essentially a house of cards that eventually folded under the weight of too many questionable real estate loans during the last Florida real estate bubble. Key was the first time that I learned to really dig into a company’s financial statements and question exactly what those numbers were all about. When the CEO finally stepped down — for personal reasons, of course — the headline in the competing newspaper read “Negative Press Prompts Bank President to Resign” — a headline I clipped out and keep on my desk as a constant reminder — although a more accurate headline would have blamed the problems on bad business decisions or poor management.

I mention this because last night, an old friend sent me a link to this story in the paper I used to write for once upon a time. It seems as if the folks at Coast Federal (CFHI) failed to learn the lessons of Key Florida, even though the bank’s chairman — and here’s the interesting part — was an executive at the Bradenton Herald at the time I was writing all of those stories about Key. According to this story last weekend, Chairman Jim Toomey was rushed to the local hospital with chest pains and has taken a temporary leave from his responsibilities. I particularly liked the line in the article that mentioned how one of the bank’s board members “mouthed an expletive” to a reporter who called him about the bank. Talk about a walk down memory lane!

Up until Jan. 19, when Coast filed this 8-K, there was little indication that the bank’s finances were in such disarray. In the days following the filing, the stock dropped sharply and no doubt, lawsuits are in the works. Though the company did mention a potential downturn of the Tampa Bay real estate market in the K it filed last year, there doesn’t appear to be any mention of just how much of the bank’s business was tied to one customer — something that’s never a good thing. Indeed, footnote #12 in the company’s K has exactly two lines about the company’s credit risks, which isn’t exactly a lot of detail.

Will “negative press” be the reason for Coast’s downfall? This will be interesting to watch.

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