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RETURN TO NEWS INDEX Strapped Florida Banks Ask For Help
By Dan Fitzpatrick
Wall Street Journal
Published: Jul 13, 2010
Florida banks -- already weakened by the real-estate bust and hit again by
customers suffering from the BP PLC oil spill -- are asking federal regulators
for a reprieve from government-ordered capital raising as they struggle to stay
alive.
In a Monday letter to Federal Deposit Insurance Corp. Chairman Sheila Bair
and Federal Reserve Chairman Ben Bernanke, Florida's top banking lobbyist
requested all local banks be granted a 12-month break from higher capital
requirements, loan appraisals and new regulatory sanctions.
"Unless we work together in giving our banks more time to work through this
oil crisis," more financial institutions will go under, wrote Florida Bankers
Association President Alex Sanchez. "A bank can only be as good as the
community it serves."
The FDIC and the Federal Reserve declined to comment. Regulators are working
on a joint policy statement that will address some of the questions posed by
the Florida bankers, according to people familiar with the matter.
Following Hurricane Katrina in 2005, regulators granted banks in Louisiana,
Alabama, Mississippi and Texas a three-year waiver from loan-appraisal
regulations but didn't offer a full exemption from capital requirements. "The
bank regulators have a long history of working with banks affected by natural
disasters," said Kevin Mukri, a spokesman for the Office of the Comptroller of
the Currency.
Thirty Florida banks already have failed since 2007, the third-highest total
among U.S. states, after Georgia and Illinois. The banks are suffering further
because the spill has caused construction delays and chased tourists from the
region, potentially leading to losses on real-estate loans the banks made on
hotels, strip malls and the like.
The spill "is going to be a source of additional stress in Florida for banks
that are already under significant duress," said University of Central Florida
economist Sean Snaith.
All told, the BP spill could sap as much as $10.5 billion in spending and as
many as 195,000 jobs from the state's economy, according to a recent study from
Mr. Snaith. That worst-case-scenario is based on a 50% drop in tourism spending
in the counties along the state's Gulf Coast. That region attracts $12.4
billion annually in tourism revenue, which helps employ 269,000 people.
One institution attributing its recent fund-raising problems to the spill is
Florida First City Banks Inc. The five-branch Fort Walton Beach-based lender is
operating under a regulatory order requiring it to put together a new capital
plan. But the bank suspended its efforts to raise at least $3 million after the
spill spooked potential investors, according to First City Chief Executive John
McGee.
Fund raising came to a "screeching halt," said Community Capital Advisors
Inc. President Shaun Dalton, hired to help First City find new capital.
Investors pulled about $500,000 in prior commitments, he added.
Potential funders said "they didn't know how the long oil spill would last or
when BP would plug the hole or what the long-term effect would be," Mr. McGee
added.
Despite the problems in Florida, regulators aren't likely to issue a "blanket
waiving" of new capital-raising requirements, according to banking consultant
Bert Ely. But "it's a tough judgment call," he said. "If there are banks really
crippled by this, it's a serious public-policy question as to whether they
should stay open."
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