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Failure Unlikely For Local Banks
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Published: July 17, 2008
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TAMPA - Customers storming George Bailey's building and loan in the 1946 classic "It's a Wonderful Life" might seem more likely today, given the run on California-based IndyMac this week.
But, bank industry experts in Florida say most banking customers have little to worry about; they insist that the nation's banking industry overall is sound.
In Florida, nearly all banks and credit unions have seen what's called "nonperforming assets," largely delinquent loans and repossessed property, increase significantly in the past two years, according to data from banking analysts. Still, those nonperforming assets are low by historical standards, experts note, so there's no cause for widespread alarm.
BauerFinancial, a Coral Gables-based research firm that analyzes and rates banks, gives only two Bay-area institutions below-adequate marks for financial strength: Old Harbor Bank of Clearwater and Bay Gulf Credit Union of Tampa. That's out of 63 banks and credit unions with corporate headquarters in the area.
Lutz-based banking industry analyst Richard Bove, of investment banking firm Ladenburg Thalmann, said the vast majority of banks nationwide are in no danger of failing. Bove primarily focuses on large publicly traded banks.
"We're far away from the devastation of the late 1980s and early 1990s," Bove said, referring to that era's Savings and Loan crisis, during which hundreds of S&Ls went under, in part because of heavy exposure from real estate lending.
Banking has taken center stage recently with the failure of California-based IndyMac and worries about the future of mortgage giants Fannie Mae and Freddie Mac. Other banking giants aren't facing insolvency, but have posted big losses, such as Wachovia Bank, which lost $369 million in its most recent quarter, and Citibank, which lost $881 million.
Many banks operating in Florida also have posted losses recently, as increases in delinquent loans and repossessed properties hit the bottom line.
In general, banks aim to keep their nonperforming assets less than 2 percent of total assets, said Karen Dorway, president of BauerFinancial.
With foreclosures rising and real estate prices falling in the Tampa Bay area and statewide, the number of banks above that threshold has shot up. Of the 390 banks tracked by BauerFinancial that operate in Florida, 131 - or one-third - have nonperforming assets exceeding 2 percent.
Many of the hardest hit banks and credit unions are in Southwest Florida and Southeast Florida, which had some of the biggest spikes and sharpest declines in real estate.
Locally, Tampa's Bay Gulf Credit Union has taken hits because of problems in its auto and real estate loan portfolios. These problem loans caused the credit union to take a charge against earnings last year and the first part of this year, resulting in a loss of about $3.1 million last year and a loss of about $671,000 in the first quarter of 2008.
Despite the losses, Bay Gulf's chief executive officer, Bill DeMare, said the credit union is "well-capitalized," meaning it has enough money in reserve. "We feel pretty confident going forward," DeMare said.
Among locally based financial institutions, Bay Gulf and Old Harbor Bank of Clearwater each received two out of a possible five stars in BauerFinancial's rating system.
A rating of zero stars is the lowest level of financial strength, and five is the highest.
The ratings take into account the financial institutions' level of capital, profitability, nonperforming assets and other factors.
Old Harbor Bank's chief executive, William Short, could not be reached for comment Wednesday.
The remaining 61 banks and credit unions based in the Bay area, primarily small community banks, received scores of three stars, or adequate, to five, or superior. No local banks or credit unions received ratings of zero or one star.
"We're looking at an industry that's not as healthy as it was four or five years ago, but it's still in good shape," said Dorway, the BauerFinancial president.
Reporter Michael Sasso can be reached at (813) 259-7865 or msasso@tampatrib.com.
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