Just when you thought it was safe to go back into the economic water, oil spill now tars banks
Wake up and good morning. Earlier this week we reported that 51 or nearly a fifth of the 280 banks based in Florida are "zero" rated -- meaning they are the lowest rated and weakest banks, vulnerable to failure. Now comes the next wave of bad news for Florida banking. The spreading gulf oil spill, already the bane of Panhandle and gulf coastal tourism and real estate, is also starting to hurt already struggling banks. (Photo: AP.)
This quote from Buzz Ritchie, president of Gulf Coast Community Bank in Pensacola, a bank with five branches and $266.4 million in assets, captures the threat of a banking double dip:
"We really believed we were coming out of it. ow we're afraid we're going back right where we were before, if not worse."
Ritchie's comments appear in today's Wall Street Journal story that says fear about the oil spill's impact is stalling gulf coast real-estate deals, causing owners of languishing hotels to worry that they will be unable to keep up with mortgage payments and giving local bankers nightmares about a new surge in loan defaults by businesses and consumers.
Research Foresight Analytics, the Journal says, reports U.S. banks have total exposure of $136.4 billion to commercial real-estate owners and developers in Alabama, Florida, Louisiana and Mississippi. Regions Financial Corp., based in Birmingham, Ala., has the biggest exposure to the four states along the Gulf of Mexico, totaling $12.4 billion. But others like SunTrust, Synovus, BB&T and Whitney Holding are also big lenders along the vulnerable gulf coast. And the big St. Joe Co., which has bet so big on real estate development along the Florida Panhandle's coast, is obviously worried (more on that here), along with its lenders. (Photo, right: Getty Images.)
Such troubling times prompted Florida banks to ask their federal regulators for help. In a June 15 letter from Florida Bankers Association CEO Alex Sanchez (photo, left) to Federal Reserve Board chairman Ben Bernanke, FDIC chairman Sheila Bair, Comptroller of the Currency John Dugan and acting director of the Office of Thrift Supervision John Bowman, Florida banks are asking for regulatory leeway to deal with overdue or troubled loans made worse by the spreading oil spill. Wrote FBA's Sanchez:
"The loss of jobs and business to our commercial customers will affect our industry when otherwise good customers stop paying their loans. A bank can only be as good as the community it serves. This oil will will decimate our communities, first in the Panhandle and then around the state as the oil spreads. Further more, no one knows how long this will last. Unlike a hurricane that blows ashore and moves on, allowing the rebuilding process to begin, oil could wash ashore and severely injure our tourist economy for an extended length of time."
Then Sanchez gets to the heart of the matter. "Unless our banks can work through this matter, we will have even more bank failures and even more loses (sic) to the FDIC fund."
We know the gulf oil spill is an astounding environmental disaster. We're still trying to gauge its economic devastation.
-- Robert Trigaux, Times Business Columnist