Home  Business Sharp decline in Florida banks’ stocks
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Sharp decline in Florida banks’ stocks |
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Written by Dr. Garth A. Rose
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Thursday, 17 July 2008 |
With the recent failure of the Pasadena, California bank IndyMac Bancorp, there are jitters running through the banking industry. In Florida these jitters were not allayed with reports of the decline in the share value of some banks either headquartered or operating in South Florida. BankUnited Financial Corp, based in Coral Gables, and BankAtlantic Corp based in Fort Lauderdale reported decline in the value of their shares.
In the case of BankUnited its shares closed at 43 cents a share on Tuesday compared to a value of over $20 two years ago, while Bank Atlantic’s shares fell to just under a dollar from $14 two year ago.
A manager at a BankAtlantic Branch in For Lauderdale, who preferred to remain anonymous as he was not authorized to speak to the media on behalf of the institution, said that despite the falling shares there is no need for the bank’s customers to lose confidence. He said that the bank is solid and not threatened, especially as it does not have a large portfolio of defaulted mortgage loans. Bank United president, Ramiro A. Ortiz, was reported saying BankUnited customers have no need to panic, as the bank is well capitalized and doesn’t have sub-prime loans.
Another well known bank operating in Florida, Wachovia, one of the nation’s largest commercial banks, also received a negative report on Tuesday. It was reported that an Oppenheimer Co. analyst downgraded the bank and predicted that the outlook for the bank’s shareholders is bleak. Wachovia is one of those banks affected by bad mortgage loans. The National Weekly was unable to speak with any South Florida Wachovia managerial representatives.
The loss in the values of bank’s shares weakens their capital structure which is vital to them in weak economic situations. However, analysts indicate that most of the banks are well capitalized to protect against the type of loses which could cause failure. Moreover most bank customers with deposits of less than $100,000 – which represents the majority of bank customers - have their deposits protected by the Federal Deposit Insurance Corporation (FIDC), which all commercial banks are required to be a member of to insure their customers’ deposits. In the case of joint accounts each depositor is insured up to $100,000.
The fact that most deposits are backed by the FDIC is a balm to bank customers. National Weekly spoke to Jerry Rawling, a Margate resident as he exited a Bank Atlantic branch in Tamarac. Rawling said he is not worried by the threat of banks failing or even perturbed by the recent negative news relating to banks. “I bank with several banks and as long as they are insured by the FIDC, I regard my deposits as safe. No, I am mot worried.”
The loss of value in bank shares is largely the result of the continued strain placed on the banking industry because of losses incurred through of bad mortgage portfolios. This has eroded shareholder’s confidence, and the failures of large banks like Bears Stearns and IndyMac, and the problems recently related to the big mortgage guarantee banks – Fannie Mae and Freddie Mac – have not helped to restore confidence in the industry.
BankAtlantic is reported to have assets of $6 billion, while the assets of BankUnited, the largest banking institution based in the state, amounts to $14.3 billion. While the banks shrinking share values result in losses to shareholders and affects their shareholding capital, they do not actual affect the banks’ day-to-day banking operations. However, as the BankAtlantic manger said, “It still is not for our shareholders to be losing dividends, investors are losing confidence in the industry. It is now time for the entire banking industry, including the FDIC and the Fed Reserve to collaborate to restore confidence, and stave off the possibility of more bank failures. But, I am sure these problems shall past.”
References for this article were obtained from the Miami Herald, Wall Street Journal and The Associated Press.
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