Florida banks skid to loss
The coronavirus pandemic took its toll on Florida’s banking sector in the first three months of 2020.
The state’s 102 banks and thrifts posted a combined loss of $281 million in the first quarter, the weakest performance since the Great Recession era, according to a report last week from the Federal Deposit Insurance Corp.
That red ink compares with profits of $560 million in fourth-quarter 2019 and $467 million one year earlier, FDIC records show.
Bank earnings nationwide plunged 70% during the January-March period, as the COVID-19 pandemic led to shutting down large parts of the U.S. and global economies.
Florida lenders set aside $1.3 billion in reserves to cover future losses from loans to customers, up sharply from just $162.3 million reserves a year ago.
The state banking industry had fully recovered from the Great Recession, with combined profits topping the $2 billion mark in both 2019 and 2018, FDIC data showed. But the economic damage from the coronavirus crisis will make that hard to repeat in 2020.
The FDIC called the big drop in bank earnings "a reflection of deteriorating economic activity, which propelled the increase in provision expenses and goodwill impairment charges."
"The FDIC was born out of a crisis, and we now find ourselves in the midst of another unprecedented period," FDIC Chair Jelena McWilliams said in a statement. "In spite of these anomalous shocks, the banking industry has proven to be a source of strength for the economy.
“Although bank earnings were negatively affected by increases in loan loss provisions, banks effectively supported individuals and businesses during this downturn through lending and other critical financial services,” she said.
The share of unprofitable banks based in Florida doubled over the year to 18. Nearly 40% of the state’s banks did report earnings gains from 2019.
But Southwest Florida’s four community banks all improved their financial performances to kick off 2020.
Sabal Palm Bank of Sarasota, Charlotte State Bank & Trust of Port Charlotte and Englewood Bank & Trust each posted higher over-the-year profits in the first quarter, FDIC reports showed.
That stood in stark contrast to some of the nation’s biggest banks, whose profits cratered as they set aside billions to cover expected losses from the economic shutdown over the coronavirus pandemic.
Sabal Palm reported the highest increase, surging 62% to a $556,000 profit during the January-March period.
As usual, Charlotte State was the region’s leading earner, with a profit of $2.3 million for the quarter. That was 15% ahead of last year.
Englewood, also owned by the Wauchula-based Crews Banking Corp., grew quarterly earnings 4.3% to $1.68 million.
Gulfside Bank in Sarasota trimmed its quarterly loss to $365,000 from last year’s $508,000. New banks like Gulfside, which opened in November 2018, typically aren’t profitable for a year or longer as they pay for start-up costs while building their loan business to generate revenue.
The nation’s 5,116 FDIC-insured institutions reported combined net income of $18.5 billion in the period, down by $42.2 billion over the year. The decline was broad based, with 60% of all lenders posting lower annual profits. The share of unprofitable institutions increased 7.3%.
The number of banks on the FDIC’s “problem list” rose from 51 to 54, the first quarterly increase since 2011. But the total of weak lenders remains near historic lows.