By ALAN SAYRENEW ORLEANS (AP) ¿ Louisiana banks are being spared the problems bedeviling the country's largest institutions and, in many cases, are performing better than their peers in other states, the state's top banking regulator says. "The best word would be sound," Commissioner of Financial Institutions John Ducrest said in an interview. "Compared to some other parts of the country, our banks are in good shape." Only 6 percent of Louisiana banks posted an annual loss in 2008, compared to about 24 percent nationwide, Ducrest said. Ducrest would not say if he believed all of the state's 160 banks and thrifts would survive the current recession. But he said public fears are heightened unnecessarily by the high-profile cases of such banks as Citigroup and Bank of America and the collapse last year of Washington Mutual. "There's about 8,500 banks across the country," Ducrest said. "When you look at the FDIC problem bank list, they had 252 at the end of the year. The problem is the largest of the large banks are having significant problems and those banks are dominating the press."
Ducrest said that in 2008, banks in 37 of the 50 states, including Louisiana, experienced overall loan growth, despite the financial meltdown that froze credit late in the year. As part of the national banking bailout plan, healthy banks were eligible to receive federal money ¿ in exchange for preferred stock ¿ to stimulate loaning. However, Iberiabank Corp. is giving the money back, citing federal strings that include limits on executive bonuses, and MidSouth Bancorp Inc. and Whitney Holding Corp. have indicated they may act likewise. The Federal Deposit Insurance Corp. provides a quarterly number of problem banks ¿ defined as those with financial, operational, or managerial weaknesses that threaten their viability ¿ but does not identify those institutions to the public. No advance notice is given to the public when a bank is closed by regulators. According to the FDIC, 17 banks nationwide have failed and been closed so far this year. Regulators shut 25 banks in 2008. None has failed in Louisiana. Unlike states such as Florida and Nevada, Louisiana did not have the spiral in real estate prices that encouraged speculative lending that later backfired, Ducrest said. At the same time, the banks were less involved in exotic mortgages, such as subprime adjustable rate mortgages.
"Those were created to allow people to get into houses that they probably should not have gotten into," Ducrest said. During the fourth quarter of 2008, one of every 10 Louisiana homeowners had fallen at least 30 days behind in mortgage payments, with nearly one in three with subprime adjustable rates overdue, according to the Mortgage Bankers Association. Subprime home loans of all types in the state accounted for about 25 percent of those behind. Nationally, one of ever 12 homeowners had fallen at least one payment behind and 48 percent of those with subprime adjustable rate mortgages were either behind or in foreclosure, the MBA said. However, Louisiana banks have reported minimal exposure to the subprime market. Ducrest also said that many members of current senior bank management in Louisiana had lessons driven home as middle-level executives in the late 1980s and early 1990s as scores of banks and thrifts failed following the crash of oil prices that took out speculative real estate loans. "They saw what to do and what not to do," Ducrest said. After last year's Wall Street meltdown, Congress temporarily increased FDIC deposit insurance from $100,000 to $250,000 per depositor through 2009. At the same time, the FDIC provided unlimited coverage for non-interest bearing checking accounts, providing banks were willing to pay 10 cents annually for every $100 in the covered accounts.
According to the FDIC, 25 Louisiana banks ¿ almost all small institutions ¿ declined to participate in the checking insurance program. "Those banks probably had a lot of hands-on-touch with their large depositors," Ducrest said.