Red all around for Florida banks

The combined bottom line of commercial banks in Florida flipped into the loss column in the second quarter as banks here join national saving institutions in the red, according to Federal Deposit Insurance Corp. data released Tuesday.

Florida-based commercial banks lost $79 million in the second quarter after pulling in $75 million in the first quarter. About 48 percent of these banks were unprofitable, while just 17 percent saw earnings gains.

In the second quarter of 2007, these commercial banks combined for $200 million in profits. But, that was before the real estate meltdown and the collapse of many mortgages.

As of June 30, Florida-based commercial banks had $2.85 billion in non-current loans, which accounted for 3.34 percent of their total loans. This ratio is up from 2.44 percent in the first quarter and 0.96 percent in the year-ago quarter.

Industrywide, the non-current rate in the second quarter was 2.02 percent – the highest it’s been since 1993.

The non-current loans have risen faster than the reserves banks set up to account for their losses. The combined loan loss reserve of Florida’s commercial banks covered less than half of the non-current loans on June 30. A year ago, the reserve covered the entire amount of bad loans and then some.

The FDIC said the industrywide non-current coverage ratio fell to a 15-year low of 88.5 percent.

Florida commercial banks held $392 million in properties seized in foreclosure as of June 30, compared with $280 million in the first quarter and $77 million in the second quarter of 2007.

Showing 24,154 employees as of June 30, Florida-based commercial banks shed 1,184 workers over the past year, with 910 of them let go in the second quarter.

The results were just as bad at Florida-based savings institutions, which include Fort Lauderdale-based BankAtlantic and Coral Gables-based BankUnited.

According to the FDIC, Florida savings institutions lost $79 million in the second quarter, compared with a loss of $68 million in the first quarter.

About 54 percent of them were profitable and almost 9 percent increased their profits. That’s a nosedive from the $47 million in profits they made in the second quarter of 2007.

Florida’s savings institutions carried $1.74 billion in non-current loans as of June 30. That accounted for 4.25 percent of total loans, up from 3.12 percent in the first quarter and 1.4 percent in last year's second quarter.

The reserves for loan loss allowance for savings institutions covered just below one-third of their non-current loans.

While their loans soured, the savings institutions picked up more foreclosed properties. They held $258 million in real estate owned on June 30, up from $164 million in the first quarter and $53 million a year ago.

Statewide, these institutions cut 1,413 employees during the year to close the second quarter with 7,704 workers. They dismissed 526 in the second quarter.

While it’s clear there are major issues with some Florida banks, the FDIC doesn’t make public the identity of banks on its “problem list,” which numbered 117 in the second quarter, up from 90 in the first quarter.

“More banks will come on the list as credit problems worsen,” FDIC Chairman Sheila Bair said.

The FDIC also is feeling the pinch as it increases its loss reserves to cover bank failures. The fund’s ratio to insured deposits fell to 1.01 as of June 30 – putting it below the 1.15 percent federal requirement.

In early October, the FDIC will consider a plan to raise that ratio by adding capital to the fund, which would likely include an increase in premium rates for banks, Bair stated.

“We'll be proposing changes to the current assessment system that will shift a greater share of any assessment increase onto institutions that engage in high-risk behavior to encourage and reward safer behavior,” she said.