Another Week, Another 2 Florida Banks Fail

Florida bank failures continued to mount on Friday, August 20th when the FDIC announced the failures of the Independent National Bank in Ocala and the Community National Bank in Bartow. These two failures brought the total number of Florida chartered bank failures to 22 for 2010.

Independent Bank had total assets of $156.2 million, while Community National had $67.9 million.

The deepening real estate collapse in Florida guarantees that many more Florida chartered banks can be expected to fail in the near future.

Florida Commercial Banks Continue To Collapse

The depressed Florida economy claimed three more commercial banks in the past two weeks. On July 23, 2010 the Sterling Bank of Lantana was closed. Its latest published report showed total assets of $407.9 million.

On July 30, 2010 Coastal Community Bank in Panama City and Bayside Savings Bank in Port St. Joe were closed. The former had reported $372.9 million in total assets while the latter had $66.1 million.

The above three closures brought to 20 the number of Florida chartered commercial bank failures in 2010. Unfortunately, many more Florida bank failures can be expected in the immediate future as the economic woes of Florida continue.

Florida Bank Failures Continue To Mount

Commercial bank failures continue to mount in Florida as the economic outlook darkens. On July 16, 2010 the FDIC seized Miami-based Metro Bank of Dade County, with assets of $442.3 million; Turnberry Bank of Aventura, Fla., assets of $263.9 million; and Olde Cypress Community Bank of Clewiston, Fla., assets of $168.7 million.

These latest three failures brought the total number of Florida chartered bank failures to 17 for 2010. As forecast on this website, the number of bank failures in Florida now exceeds the 2009 total of 13.

Many more banks can be expected to fail in Florida in the immediate future as residential and commercial real estate problems worsen.

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.

Florida Real Estate Leads the Collapse

The Florida real estate market continues to plummet. In fact, the greater Miami area, which includes Fort Lauderdale and other cities as far north as West Palm Beach, has a deliquency rate of 28.8%. This rate measures the percentage of residential mortgages that are past due 90 days or worse. By comparison, the rest of Florida has a deliquency rate of 16%, while Las Vegas, Nev. has a 21.7% deliquency rate.

These measures of financial disaster were published by First American Corelogic a real estate information firm based in Santa Ana, CA.

The outlook for Florida residential real estate remains bleak for the foreseeable future. It is likely that numerous Florida banks will be closed because of their heavy concentration in real estate either directly and indirectly. The odds favor another leg down as potenital buyers return north and financing options diminish.

Outmigration Hits Florida's "Field of Dreams"

According to Census reports, net outmigration from Florida amounted to 10,000 people in 2008. This was in marked contrast to an average net inmigration of about 200,000 people per year from 2001 to 2006. Furthermore, it was the first outmigration recorded since 1946.

The Census Bureau reports also reveal that Florida experienced a larger decline in income than any other state in 2008 when its income dropped 3.9%.

Florida's "Field of Dreams" residential building mentality of "build it, they will come" has been destroyed. A turnaround in real estate prices looks unlikely given the lack of available financing, declining incomes, and outmigration.

Florida Real Estate Surplus Will Disappear First

The surplus of single family and multi-family homes is likely to disappear in Florida before the surpluses disappear in Arizona, Nevada, and California. The reasons for Florida’s surplus disappearing include weather and diplomacy.

Hurricanes are a fact of live in Florida and can be expected to destroy a number of residential dwellings during the next few years. Arizona, Nevada, and California cannot count on such forces of nature to alleviate their surpluses.

The real game changer in Florida, however, would be if the Obama Administration opened up trade with Cuba. If trade with Cuba became legal, there would be a huge influx of businesses and people into Florida especially in areas where the greatest residential surpluses exist.

Ending the Cuba embargo would also cause a surge in demand for office and warehouse space, which currently have high vacancy rates. Corporations wanting to do business in Cuba will beat a path to South Florida to be closer to the action and the ports of Canaveral, Palm Beach, Ft. Lauderdale, and Miami.