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Florida Banks Facing Tough Times - How Bad Will It Get?


This article from the Herald Tribune of Southwest Florida reviews the health of banks in the state. Florida has been hit especially hard by the real estate slump and the mortgage mess, and there are concerns that conditions will get worse as borrowers fall further behind on their loan payments and the housing slump spreads to other parts of the economy.

Some notable banking stats from the article:
40 percent of Florida's 314 banks and thrifts lost money in the first quarter of 2008, compared with just 18 percent one year earlier.

Florida's financial institutions earned just $30.6 million in the quarter, down sharply from $337 million last year.

And even the credit unions are having losses this year. Some of the major credit unions mentioned include GTE Federal and Suncoast Schools.

According to a bank analyst interviewed in the article:
The impact on banks will be to drive loan losses to levels only experienced in a depression. The annualized first-quarter 2008 domestic loss numbers are higher than in any year than 1934 already.

Out of the 8,494 banks in the nation, the article mentioned that several analysts expect we'll see around 200 failures nationwide this year. That would be high considering we've only had 4 so far this year. In May I reported on an article that quoted an estimate of 150 failures over the next 2 or 3 years. The highest number of bank failures since after the Great Depression was 534 in 1989.

Another analyst quoted in the article is more optimistic and believes banks are much better capitalized than in the past. He's expecting no more than 2 dozen failures. Also, federal regulators have reduced failures by helping to merge problem banks with healthy ones. The article mentioned one example of this with a Florida bank last year.

To help evaluate the health of the banks, you can use the services at Bankrate and BauerFinancial. One problem with these is that the ratings are based on data that can be several months old. I've recently been using Bauer since it has updated the ratings based on more recent data. Bauer is now reporting ratings based on data FDIC released in 3/31/08. Bankrate is still basing ratings on 12/31/07 data.

The safest strategy is to stay under the FDIC limits. Please refer to this previous post for some useful links. You can go over $100K and still be FDIC insured, but you have to be careful. Please see this post on ANB Financial closure and this post for more details of extending FDIC and NCUA coverage above $100K.

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Anonymous   |     |   Comment #1
Contrary to what is being reported by banks and media, I really don't think we have seen the worst yet.
marc   |     |   Comment #2
I would expect more CD deals from FL banks due to their dire straits, but haven't seen too many. Virtual Bank, once a top player, has not been up there for a while, which is too bad since they have a great website.
Anonymous   |     |   Comment #3
Interesting article, thank you. I was especially interested that they expect housing prices to fall til 09 or 10 and not pick up until 11. I guess I'll be staying here for a while.
Anonymous   |     |   Comment #4
Speaking of Virtual bank, I just got an email from them today that says they have raised their money market account rate. Unfortunately, I deleted it because it didn't seem that great...I think it was raised to 3.30% for balances over 100k.
John   |     |   Comment #5
Prior to retiring, my Dad was a high-level manager (like two notches down from being a presidential appointee) with the Office of the Comptroller of the Currency, the regulatory agency for national banks.

He actually transferred from New York to Texas in 1983 to work on cleaning up the S&L mess (also due to real estate). Since then, his biggest push was to get banks to strengthen their capital bases.

Here's to hoping that 25 years of regulatory pressure for increased capitalization pays off.