By James Thorner, Times Staff Writer
Published Wednesday, June 4, 2008 10:03 PM
The housing downturn continues to crush Florida bankers: Overdue loans, mostly real estate related, have nearly quadrupled the past year in the Sunshine State.
If that were not enough, the state’s lenders have unusually low cash reserves to protect against mortgage defaults. And 41 percent of Florida-chartered banks were unprofitable the first three months of this year. That’s twice the number of banks that bled red ink last year.
These not-so-encouraging trends emerged from reports released the past week by the Federal Deposit Insurance Corp. Experts blame a chain reaction ignited by a two-year plunge in real estate values. It’s not just problem home mortgages, but also developers defaulting on loans used to buy land and finance condominium towers.
“We’re still on the downside of the curve. We’ve not reached a bottom,” Miami banking expert Ken Thomas said.
The FDIC reported that “past due and non-accrual loans” — loans people aren’t paying back on time — swelled 276 percent the past year in Florida. Bad loans rose from 0.7 percent of all loans in the first quarter of 2007 to 2.63 percent of all loans in the first quarter of 2008.
Though Florida’s percentage rise is among the worst, other states have more problem loans. Georgia and Nevada banks reported that more than 3 percent of loans are past due.
But the Florida report probably underestimates the extent of defaults. The state’s largest lenders — banks like Wachovia and Regions — report in the states in which they’re headquartered.
That means Wachovia’s bad Florida loans count against North Carolina, the state in which the bank is based. Same goes for Atlanta’s SunTrust.
“SunTrust has lots of problem loans in Florida but it shows up in the Georgia numbers,” Thomas said.
Federal regulators said they’re troubled by the depletion of cash reserves used to cover bad loans. Nationally, banks held about 89 cents in reserve for every $1 of bad loans.
Tampa Bay area banks reserves are closer to 60 cents on the dollar, the worst ratio in decades, Thomas said.
“This is a worrisome trend,” FDIC Chairwoman Sheila Bair said last week. “It’s the kind of thing that gives regulators heartburn.”
Some of the state’s hardest-hit banks have been in the Bradenton area.
Coast Bank went out of business last year, wiped out by problem loans made to customers of St. Petersburg builder Construction Compliance Inc.
The FDIC’s latest economic profile of Florida’s first quarter had its share of disturbing data. A sampling:
276% Increase in loans with past-due payments owed
47% Drop in single-family permits
34.6% Drop in multifamily building permits
62% Increase in nonbusiness bankruptcy filings year-to-year.