Real Estate Loans Dominate Florida Banking

Thanks to strong loan growth, the profitability of community banks around Florida is soaring. Based on data from the Federal Deposit Insurance Corp., these institutions have been enjoying an especially high concentration of real estate-related loans when compared to recent years.

More than half (56 percent) of community banks in Florida had an exposure of construction and development loans that were 100 percent or more of capital, according the Florida banking profile released by the FDIC today. In contrast, just 22 percent of banks had such exposure during 1987, the last boom period.

Construction and development loans grew 66 percent during 2005, a record increase and the 10th consecutive year of double-digit growth. As you can tell, Florida home loans are not the only popular type available from banks in the state.

The FDIC defines community banks as those with assets of $1 billion or less.

”The majority of C&D lending is for residential housing (i.e. Florida home loans), and continued strong absorption of new housing units will be a crucial factor,” the FDIC said.

In January, the Federal Reserve and other banking regulatory agencies, including the FDIC, proposed supervisory guidance regarding concentrations of commercial real estate lending. At the time, the Federal Reserve said these loan portfolios might expose banks to unanticipated earnings or capital volatility due to shifts in the real estate market.