The Florida housing downturn continues to squash bankers: Overdue loans, mostly Miami real estate related, have nearly quadrupled the past year in the Sunshine State.
Not only that, but the state's lenders have unusually low cash reserves to protect them against mortgage defaults. The first three months of this year, 41% of Florida-chartered banks were unprofitable, twice the number of banks that bled red ink last year.
The reports released over the last week by the Federal Deposit Insurance Corporation are responsible for these not-so-encouraging development statistics. A chain reaction provoked by a two-year plunge in real estate values is to blame experts say. It's not just problem home mortgages, but also developers defaulting on loans used to buy land and finance condo towers.
''We're still on the downside of the curve. We've not reached a bottom,'' an expert in Miami banking said.
The FDIC reported that defaulted loans swelled 276 % the past year in Florida. Bad loans rose from 0.7% of all loans in the first quarter of 2007 to 2.63% of all loans in the first quarter of 2008.
Other states have more problem loans even though Florida’s percentage rise is among the worst. Georgia and Nevada banks reported that more than 3% of loans are past due.
The extent of defaults was probably underestimated by the Florida report. Banks like Wachovia and Regions, the state states largest lenders, report in the states in which they're headquartered. That means Wachovia's bad Florida loans count against North Carolina, where the bank is based. Same goes for Atlanta's SunTrust whose statistics show up in the Georgia numbers.
Federal regulators said they're troubled by the depletion of cash reserves used to cover bad loans. Nationally, banks held 89 cents in reserve for every $1 of bad loans.
Contributed by MLR Realty
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