Banks after the housing bubble
As boom gives way to fizzle, more bad loans, lower profits and shrinking interest margins
You’re going to see mounting losses in the industry through the remaining six months of the year.
First the builders, developers, Realtors and investors lost their footing on the softening real estate market. Now it is the bankers who financed their activities who are tripping up.
All across the country, problem loans are on the rise, and bank profits are dropping. But nowhere are the problems as severe as in the nation’s hotbeds of real estate speculation — and Southwest Florida was definitely one of those.
As a group, the 20 community banks that operate from Palmetto to Punta Gorda recorded $91.5 million worth of loans that are 90 days past due as of March 31, data submitted to bank regulators shows. That is over 10 times the $8.3 million they had on their books during the same month a year ago.
At the same time, those banks saw their collective profits fall 35 percent. Just last week, First State Financial Corp., the parent of First State Bank in Sarasota, reported a drop of nearly 40 percent in second-quarter profits, blaming an “especially challenging” environment with the downturn in housing.
… “This is a watershed year,” said Steve Jonsson, chief executive of Bradenton-based Flagship National Bank. “The market is tight. Competition is tough and yields are low. You don’t want to make a mistake.”
The result is that banks in Southwest Florida and across the country are not going to grow as quickly as they have during the past 10 years.
Loan volume is slowing down across the board, especially in mortgages, which account for 54 percent of loans, said Richard Bove, Florida bank analyst with Punk Ziegel & Co.
“Overall, the outlook is not strong,” Bove said. “Banks may be losing business to the non-bank sector of the financial system, or their results may be reflecting the weaker activity in the economy. In either case, they need more loan growth to bolster earnings.”