Florida Going Bust -- Half of Its Banks Are Unprofitable

NEW YORK ( TheStreet) -- Nearly a third of Florida's banks and thrifts have disappeared over the past four years and things aren't getting better: Almost half of the Sunshine State's financial institutions lost money during the fourth quarter.

As we discussed on our coverage of banks in Illinois and Georgia, even community banks that have managed to weather the real estate crisis are facing a seemingly endless regulatory assault on various revenue streams. With share prices for so many would-be acquirers recovering this year, it's only a matter of time before we see a wave of bank merger deals.

Community banks face a major threat to their "free checking" business model, with the latest regulatory pressure on profits coming from the Consumer Financial Protection Bureau, which last Wednesday announced that it had "launched an inquiry into checking account overdraft programs to determine how these practices are impacting consumers," with Director Richard Cordray saying that "overdraft practices have the capacity to inflict serious economic harm on the people who can least afford it."

Irrespective of pressure son fee revenue, and despite the disappearance of over 90 institutions over the past four years, there were still 24 undercapitalized Florida banks and thrifts as of Dec. 30, according to data provided by HighlineFI, not including Central Florida State Bank of Belleview and First Guaranty Bank and Trust Co. of Jacksonville, both of which failed in January and were sold by the Federal Deposit Insurance Corp. to CenterState Banks ( CSFL) of Davenport, Fla.

Please see TheStreet's Bank Watch List for a full listing of all the banks and thrifts across the country that were undercapitalized, per normal regulatory guidelines.

Since the Watch List is based solely on capital ratios, we take a different approach on our quarterly coverage of banks in key states, by looking at overall credit quality to identify troubled institutions.

Florida Banks with Weakest Asset Quality

The following list includes all banks in the state with nonperforming assets comprising more than 15% of total assets as of Dec 30:

Nonperforming assets (NPA) include nonaccrual loans, loans past due 90 days or more and repossessed assets. Government-guaranteed loan balances are excluded. The ratio of net charge-offs to average loans is annualized.

The total risk-based capital ratios needs to be at least 8% for most institutions to be considered adequately capitalized by regulators and 10% for most to be considered well-capitalized. Most of the undercapitalized banks on the above list are operating under regulatory orders to achieve and maintain total risk-based capital ratios higher than 10%.

The list also includes financial strength ratings provided by Weiss Ratings. Weiss Ratings uses a very conservative ratings model, placing the greatest weight on capital strength, credit quality and earnings stability to assign ratings ranging from A-plus (Excellent) to E-minus (Very Weak).

Vision Bank of Panama City had a 15.47% nonperforming assets ratio as of Dec. 30, and is held by Park National Corp. ( PRK)of Newark, Ohio. The holding company announced on Nov. 16 that it would sell "substantially all assets and liabilities" of Vision Bank of Home BancShares ( HOMB) of Conway, Ark., for $27.9 million. On Jan, 23, Park National said it expected the Vision Bank deal to be completed during the first quarter and also expected "to recognize a pre-tax gain of approximately $18 million on the closing date of the transaction."

Interested in more on Park National Corp.? See TheStreet Ratings' report card for this stock.

Largest Florida Banks

Florida remains a key market for major out-of-state banks despite the state's prolonged real estate depression, for the obvious reason that it remains a long-term growth story. The economic advantages -- including the lack of a state income tax, lower property taxes, and the huge savings for Southern Floridians who don't need to hear their homes in winter -- are sure restore Florida's status as a "destination state" as the economy slowly improves.

Bank of America, NA -- the main banking subsidiary of Bank of America ( BAC) -- has the lead deposit market share in Florida, with 19% of deposits in the state, as of June 30, 2011, according to the most recent FDIC data. The bank's market share grew from 18% a year earlier. Bank of America's dominating position in the state is a legacy of its acquisition of Barnett Bank in 1997 by NationsBank, before that company acquired Bank of America the following year, with the combined company taking the Bank of America name.

Wells Fargo Bank, NA -- held by Wells Fargo ( WFC) -- is in second place for Florida Deposits, with a 16% share as of June 30, 2011, declining slightly from a year earlier. Wells Fargo's extensive Florida operations were acquired when the company doubled in size through the purchase of the troubled Wachovia of Charlotte, North Carolina, when that company was pressured by regulators to sell amidst the worst of the credit crisis in 2008.

Since the Wachovia acquisition, Wells Fargo's deposit market share in Florida has fallen from Wachovia's #1 ranking in June of 2008, with a 19% share.

SunTrust Bank -- the main subsidiary of SunTrust Banks ( STI) -- ranks third in Florida, with a 10% market share as of June 30. Although it's headquartered in Atlanta, SunTrust has been a major presence in Florida for generations, and counts the state as "our largest banking state in terms of loans and deposits." As of Dec. 30, 20% of SunTrust's commercial loans were in Florida, while 27% of its residential real estate loans were secured by properties in the Sunshine State.

Here are the 10 largest banks headquartered in Florida along with key metrics as of Dec. 30:

The largest Florida bank is Everbank of Jacksonville, which had $13 billion in total assets as of Dec. 30, and operates mainly over the Internet. In October 2010, Everbank Financial Corp. -- Everbank's privately owned holding company -- announced that it would go public through an offering of common shares.

The public offering still hasn't taken place, however, in an updated public filing on Feb. 3, Everbank Financial Corp. said it would go ahead with a public offering "as soon as practicable," and listed Bank of America Merrill Lynch, Goldman Sachs, and Credit Suisse as joint book-running managers.

While Everbank's nonperforming assets ratio was a high 16.29% as of Dec. 30, the holding company said in the Feb. 3 public filing that it had achieved "positive earnings in every full year since 1995, consistently achieved double-digit returns on equity in every year since 2000."

The Everbank subsidiary earned $55.5 million during 2011.

The second largest Florida institution is BankUnited of Miami Lakes, which is held by BankUnited, Inc. ( BKU). The "new" BankUnited was formed was formed by an investor group led by John Kanas to acquire the old BankUnited FSB from the FDIC after the thrift failed in May 2009.

The investor group took the thrift public in January 2011. The holding company last Wednesday announced that its $71 million deal to acquire Herald National Bank ( HNB) of New York had been approved by the Federal Reserve Bank of Atlanta and the Office of the Comptroller of the Currency, and expected the acquisition to be completed on Feb. 29.

Interested in more on BankUnited? See TheStreet Ratings' report card for this stock.

Strongest Florida Banks and Thrifts

Based on fourth-quarter financial reports, only two Florida institutions were assigned "recommended" ratings of B-plus or above by Weiss Ratings:

Thorough Bank Failure Coverage

There have been only two bank failures in Florida this year, following 13 closures in 2011, 29 in 2010, and 14 in 2009.

Since the current wave of bank and thrift closures began in 2008, Florida has had 60 institutions shuttered by regulators, trailing only Georgia, which has seen 75 institutions fail, and leading Illinois, with 48 failures, and California, which has had 38 bank and thrift failures since the beginning of 2008.

There were two bank failures on Friday.

All 423 previous U.S. bank and thrift closures since the beginning of 2008 are detailed in TheStreet's interactive bank failure map:

The bank failure map is color-coded, with the states having the greatest number of failures highlighted in dark gray, and states with no failures in light green. By moving your mouse over a state you can see its combined 2008-2011 totals. Then click the state to open a detailed map pinpointing the locations and providing additional information for each bank failure.

-- Written by Philip van Doorn in Jupiter, Fla.

To contact the writer, click here: Philip van Doorn.

To follow the writer on Twitter, go to http://twitter.com/PhilipvanDoorn.
Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., 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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