May 30 (Bloomberg) -- Fortress Investment Group LLC, Crestview Partners LP and Lightyear Capital LLC agreed to inject as much as $150 million each into First Southern Bancorp, part of the Boca Raton, Florida-based bank’s plan to increase assets.

The buyout firms, based in New York, will get non- controlling stakes in common stock and convertible preferred shares, First Southern said yesterday in a statement. The company’s First Southern Bank has about $400 million of assets, mostly commercial real estate loans, and five branches in Palm Beach and Broward counties, in southeast Florida.

Buyout firms are increasing investments in the banking industry as it recovers from more than $1.4 trillion in credit losses caused by the collapse of the housing market and global recession. Blackstone Group LP and Carlyle Group joined a group led by John Kanas, the former chief executive officer of North Fork Bancorp, to purchase the assets of Florida’s BankUnited Financial Corp. on May 21.

The Federal Deposit Insurance Corp., noting the interest of private-equity firms in buying banks, said last week that it would soon provide “policy guidance” for potential investors. The FDIC oversaw the sale of BankUnited after the Coral Gables, Florida-based bank collapsed, the biggest such failure in the U.S. this year. Regulators and government officials have expressed concerns over the consistency of rules surrounding private investment in banks.

“There is a need for private-equity investment in our banking system, but there must be clear rules for all of the regulators,” U.S. Senator Jack Reed, a Democrat from Rhode Island, said in a May 25 interview. “Private-equity firms are not transparent. There are potential conflicts with their other holdings, investors, management and sources of funding.”

New CEO

Buyout firms interested in banks should disclose their investors and their other holdings, Reed said.

R. Eugene Taylor, a former vice chairman of Bank of America Corp., is set to become chairman and chief executive officer of First Southern after the deal is completed, the bank said in the statement. Brian Sherr, a founding shareholder and current chairman, will become vice chairman, and Franklin Burnside, the former head of Citibank Private Bank in the United States, will remain president.

The bank, started in 1987, and the private-equity group plan to complete a definitive agreement within 60 days. The Financial Times reported this week that the three firms were considering investing as much as $800 million.

Fortress, a private-equity and hedge-fund company with $26.5 billion in assets, first sold shares to the public in February 2007. The stock has dropped 75 percent from the initial public offering price of $18.50 apiece.

Lightyear Chairman Donald Marron said in an interview May 12 that his firm was “looking at many opportunities right now” in the banking industry.

Keefe Bruyette & Woods Inc. is serving as financial adviser to the board of First Southern.

To contact the reporters on this story: Jason Kelly in New York at Jkelly14@bloomberg.net

Last Updated: May 30, 2009 11:26 EDT