Florida Bank Failures Weigh On Real Estate
Commercial banks in Florida are failing at a record pace thanks to the moribund residential and commercial real estate markets. The closing of three additional banks by the FDIC on May 28, 2010 brought the total number of Florida chartered bank failures in 2010 to 13. By comparison only 3 Florida banks were closed during the first five months of 2009.
Without doubt the number of Florida bank failures in 2010 will far surpass the 14 failures in all of 2009. Since the introduction of FDIC insurance in 1934, a total of 135 Florida chartered banks have failed and 27 of those were in the past 17 months.
Continuing failures promise to further depress an already dismal real estate market as gun-shy bankers restrict lending activities. This reluctance to lend is understandable when it is noted that Florida banks had net loan charge-offs of $2.154 billion in 2009 versus $1.176 billion in 2008. In 2007 net charge-offs amounted to $338 million and during the halcyon year 2006 they only amounted to $57.1 million.
Amazingly, more than 10% of all Florida banks have failed during the past 17 months. Those banks held about 25% of the total assets of the Florida banking industry. Unfortunately, many more Florida chartered banks can be expected to fail going forward, because Florida bank loan portfolios are heavily concentrated directly or indirectly in commercial and residential real estate.
A truer picture of the decimated loan market emerges when the failure of Washington Mutual and the forced merger of Wachovia are considered. While not officially Florida chartered banks, these two institutions were major lenders on Florida real estate and their new owners are not nearly as anxious to lend.
The relative lack of available financing for Florida real estate is likely to persist for the foreseeable future. The outlook for any bounce in real estate prices is bleak.
Without doubt the number of Florida bank failures in 2010 will far surpass the 14 failures in all of 2009. Since the introduction of FDIC insurance in 1934, a total of 135 Florida chartered banks have failed and 27 of those were in the past 17 months.
Continuing failures promise to further depress an already dismal real estate market as gun-shy bankers restrict lending activities. This reluctance to lend is understandable when it is noted that Florida banks had net loan charge-offs of $2.154 billion in 2009 versus $1.176 billion in 2008. In 2007 net charge-offs amounted to $338 million and during the halcyon year 2006 they only amounted to $57.1 million.
Amazingly, more than 10% of all Florida banks have failed during the past 17 months. Those banks held about 25% of the total assets of the Florida banking industry. Unfortunately, many more Florida chartered banks can be expected to fail going forward, because Florida bank loan portfolios are heavily concentrated directly or indirectly in commercial and residential real estate.
A truer picture of the decimated loan market emerges when the failure of Washington Mutual and the forced merger of Wachovia are considered. While not officially Florida chartered banks, these two institutions were major lenders on Florida real estate and their new owners are not nearly as anxious to lend.
The relative lack of available financing for Florida real estate is likely to persist for the foreseeable future. The outlook for any bounce in real estate prices is bleak.
posted by Tarot Cardreader at 8:41 AM
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