Even Florida Keys Experiencing Bank Failures

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According to a new report from Bal Harbour Florida-based Condo Vultures, not even the paradise location of Key West is immune from the economic downturn triggered by the housing crash.

Regulators shuttered four banks on Friday, including the Key West Bank headquartered in the southernmost island of the Florida Keys.

Besides Key West Bank with $88 million in assets, regulators also seized two Georgia institutions - McIntosh Commercial Bank and Unity National Bank - and one institution in Arizona, Desert Hills Bank in Phoenix, according to the report produced using Federal Deposit Insurance Corp data.

The latest round of closings caused an estimated $320 million in losses, including $23.1 million for Key West Bank, for the FDIC's Deposit Insurance Fund, according to the report.

"If a place like Key West - where Jimmy Buffet's Margaretville was conceived - is experiencing financial failure, it is probably safe to assume no part of this country is immune from the housing crisis," said Peter Zalewski, a principal with Condo Vultures LLC. "Key West Bank with its focus on real estate lending is no different from the other 19 Florida banks to fail since the downturn began." 

Founded in 1999, Key West Bank lost $6.8 million in 2009 after losing $2.6 million in 2008. A year earlier in 2007, Key West Bank recorded a net operating income of $1.2 million.

The dramatic change in the financial stability of Key West Bank is rooted in the downturn in the housing market and the bank's dependency on financing residential real estate.

Mortgages on single-family houses, townhouses, and condominiums represented nearly $45 million of the bank's $66 million loan portfolio in 2009. In 2007 before the housing market crashed, residential lending represented $64 million out of Key West Bank's nearly $92 million portfolio.

In 2009, Key West Bank charged off $5.9 million which was preceded by a $2.9 million write down in 2008, according to the report.

Arkansas' Centennial Bank acquired the assets and deposits of Key West Bank. This is the second failed Florida bank acquired by Centennial Bank. Earlier this month, Centennial Bank purchased the $315.6 million in assets and $320 million in deposits of the former Old Southern Bank in Orlando, according to the FDIC.

The closing of Key West Bank increases the number of failures this year in Florida to six institutions with combined assets of $2.3 billion and deposits of $2.1 billion. The Florida bank failures generated more than $697 million in losses, according to the report.

Only Georgia, where seven banks have been shuttered, has more failures than Florida in 2010.

Rounding out the top five states for the most bank failures are Minnesota and Washington state tied for the third position with four closings each. Illinois and Utah are both tied for fifth with three failures each, according to the report.

With the six bank failures in the first quarter of 2010, Florida is on pace to easily surpass the 14 closings that occurred in 2009. Last year's bank failures in Florida generated nearly $7.2 billion in losses for the FDIC, which absorbed a $36.5 billion hit to its Deposit Insurance Fund.

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