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Florida's Weak Banks Get Even Weaker

While loan quality has declined, especially over the past three quarters, Riverside's losses during the past 12 months have come mainly from write-downs on investment securities, beginning with preferred shares of Fannie Mae (FNM) and Freddie Mac (FRE), which were unexpectedly wiped out when the government-sponsored enterprises were place under conservatorship in September 2008.

Regulatory requirements to essentially write-down to zero certain securities downgraded below investment grade by the ratings agencies have also hurt the bank's risk-based capital calculations.

Executive Vice President Alan Polackwich told that Riverside "is actively seeking capital, and we have multiple parties that appear to be quite interested."

Florida Banks With Weakest Loan Quality

Since there were 42 Florida banks and thrifts with nonperforming assets comprising more than 10% of total assets as of June 30 (second only to Georgia, which had 45), we're limiting the list to the nine institutions with nonperforming assets above 15%:

Florida Banks and S&Ls with Nonperforming Assets Exceeding 15% (Millions of Dollars)
Source: Regulator filings via SNL Financial.

A total of 15 Florida institutions were included in the list of Undercapitalized Banks and Thrifts as of June 30.

Two of the Florida banks on the undercapitalized list included Florida Community Bank of Immokalee and Hillcrest Bank Florida of Naples. P/>

Free Financial Strength Ratings

Along with TARP, the temporary increase of the FDIC's basic limit on individual-deposit-insurance coverage to $250,000 from $100,000 has curtailed bank failures. This increase has been extended through 2013.

The FDIC's temporary waiver of all deposit insurance limits for business-transaction accounts (checking accounts) has also mitigated the risk of deposit flight. This waiver is set to expire on June 30, 2010, after which business-checking accounts will revert to the $100,000 limit.

This means it will be more important than ever for businesses and municipal entities such as school districts to carefully monitor the health of their banks. It's very easy to have more than $100,000 of somebody else's money flowing through a business account. Ratings issues independent and conservative financial-strength ratings on each of the nation's 8,500 banks and savings and loans. They are available at no charge on the Banks & Thrifts Screener.

The writer owns shares in Riverside Banking Co., the holding company for Riverside National Bank of Florida, a former employer.
Philip W. van Doorn joined Ratings., Inc., in February 2007. He is the senior analyst responsible for assigning financial strength ratings to banks and savings and loan institutions. He also comments on industry and regulatory trends. Mr. van Doorn has fifteen years experience, having served as a loan operations officer at Riverside National Bank in Fort Pierce, Florida, and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a Bachelor of Science in business administration from Long Island University.
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