Florida Banking Market Goes from Soft to Softer
Davis, Paul, American Banker
Last year banking companies were still paying top dollar to acquire a toehold in Florida, traditionally one of the fastest-growing states.
Now those banks and their Florida-based competitors face spiking credit costs as lower demand from speculative buyers collides with rapidly falling land valuations, grinding the Florida housing market to a halt.
The result, according to many who follow the state, is an economy in danger of slipping into a recession even if the nation as a whole manages to dodge one.
Gregory Miller, the chief economist at SunTrust Banks Inc., said Florida has "recession-like conditions." He estimated that economic growth there slowed to 2.5% in the second half of 2007 - "anemic" by Florida standards - and said it would not have grown that much if not for continued - though slower - population growth and foreign investment propped up by the weakened dollar. He predicts that it could fall further this year.
Jacqueline Reeves, the managing director at Bell Rock Capital LLC, said in an interview Monday that "the investment community is questioning the competence of credit and the capital structure" of many banks based in the state. "The residential real estate market in the state is still quite soft," she said.
Florida's November sales of single-family homes fell 12% from October and 30% from a year earlier, according to the most recent data from the Florida Association of Realtors. The median sale price fell 3% from a month earlier and 10% from a year earlier, to $215,800.The only states with worse depreciation are California and Michigan, and the nation as a whole averaged appreciation of 1.8%, according to the Office of Federal Housing Enterprise Oversight. Home prices in Florida were appreciating at a 25% annual pace as recently as early 2006, according to OFHEO.
December data has yet to be released, but during the fourth quarter bank executives repeatedly warned that residential developers and home builders in Florida were under intense pressure as the year drew to a close, prompting several to boost loan-loss provisions significantly.
In October, BankAtlantic Bancorp Inc. of Fort Lauderdale reported a $29.6 million third-quarter loss and said nonperforming assets rose 659% from the end of the second quarter. Lloyd DeVaux, the $6.5 billion-asset company's chief operating officer, said at a conference in November that the state's operating environment was "the worst downturn that we've seen in 16 years" and that no bottom was in sight.
Florida's slumping housing market has also stung a number of out-of-state banks.
Regions Financial Corp. of Birmingham, Ala., said last week that problems in Florida, particularly Miami, contributed to his company's decision to set aside $360 million for problematic loans, or four times what it provided for in the third quarter. …