Florida, Nevada Unscathed - So Far - By Bank Failures

Regulators have closed 34 banks in the United States in the last 13 months, yet somehow only five of the financial institutions to fail have been based in the devastated real estate markets of Florida and Nevada, according to a new report from Condo Vultures® LLC based on FDIC data.

Florida has had only three institutions fail - all outside of South Florida - while two Nevada banks were seized by regulators. For context, consider that Georgia, a state with a diversified economy and a somewhat steady housing market, has had six banks closed, which is twice as many as Florida and three times that of Nevada, according to the report.

Georgia's surprisingly high number of bank failures, in fact, ranks the state second in the nation behind only California, which has had eight institutions shuttered since January 2008, including three in 2009, according to the report.

"Many people are going to be surprised by the lack of bank failures in Florida and Nevada given the dramatic price drops that have occurred in both states' real estate markets," said Peter Zalewski, a principal with the Bal Harbour, Fla.-based consultancy Condo Vultures®. "One way to explain the low bank failure rate in Florida and Nevada is to assume that the local institutions in each market did a more competent job of lending and underwriting loans than did the out-of-town financiers who rushed to market.

"The other more likely explanation is that both states are primed for a rash of problems in the future."

Florida is home to 307 institutions insured by the FDIC, while Nevada has 41 banks with deposit insurance. California has 312 FDIC-insured banks, and Georgia 335 institutions. The FDIC insures deposits up to $250,000 per account at 8,310 institutions in the United States, Puerto Rico, Micronesia, Guam, American Samoa and the Virgin Islands.

In 2008, the FDIC shut 25 banks in 13 states at a projected loss to the government program of between $10.4 billion and $14.9 billion. In the first six weeks of 2009, the FDIC has already shut nine banks in seven states at a projected loss of at least $1.2 billion, according to the report.

The institutions that did fail in 2008 had combined assets of $374 billion and deposits of $234 billion. The 2009 failures have combined assets of $5.7 billion and deposits of $4.8 billion, according to the report.

Peter Zalewski is a principal with the consulting company Condo Vultures® LLC and a licensed real estate broker with Condo Vultures® Realty LLC. Peter can be reached at 305-865-5629 or by email at peter@condovultures.com. Be sure to check out Peter’s blog at CondoDump.com. Don't forget to sign up for our weekly Market Intelligence Report. Looking for a property at a deep discount? You are encouraged to take a peek at the Vultures Database™ .

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