More Bank Failures May Be on Florida’s Horizon

Bank examiners are keeping a close eye on Florida banks this week, as the number of institutions seen as being dangerously close to insolvency grows.  Florida has always been a large real estate market, and this has presented a problem for many banks whose loans defaulted during the recent economic slump.  Thus far, Florida has had 6 bank failures in 2009, fourth in the U.S. after Georgia, Illinois and California.

Home Foreclosures in Florida

In 2007, Florida has the highest number of loans in the U.S., second only to California.  However, the number of loans that were past due was higher than in California, at 6.47%, as opposed to 4.42% past due loans in California.  Of those loans that were subprime Adjustable Rate Mortgage (ARM) loans, 11.54% were in foreclosure. (USA Today)

By 2009, these numbers had jumped drastically, reaching almost 60% of loans that were past due, according to a report by the Mortgage Bankers Association this year.  Now more and more banks are being placed on the “watch” list, and Floridians are getting worried that their bank might be next.  On the Bauer Financial website, only 92 of the 301 Florida banks rated were given above a 3 star rating, meaning that 69% of banks in Florida were considered only adequate, problematic, or troubled. (Bauer Financial)

Floridians Beware

So far, there is no certain way to tell if your bank is going to fail; and as long as it is FDIC insured, your deposits will be safe no matter what happens.  However, having your bank fail can certainly be a hassle, and so it is important to be prepared.  If you see your bank on a list of banks to watch, it might not be a bad idea to keep a close eye on your banks news and press releases, just so that you aren’t caught off guard if something does change.  In order to be considered “well-capitalized,” banks are required by regulators to keep risk-based capital ratios above at least 10%; if your bank falls below that, it might be time to start considering a different institution.