The number of failing Florida banks has fallen dramatically in the past two years, but Sunshine State customers still have reason to be wary.
Florida leads the nation in both the number and percentage of banks and thrifts operating under severe enforcement actions, according to an analysis by SNL Financial released Friday.
Nationally, one in eight banks and thrifts are under severe enforcement action; in Florida it's more than one in three.
In fact, nearly 36 percent of Florida's financial institutions are under severe regulatory actions, with Hawaii coming in second (33 percent), followed by Nevada (32 percent) and Georgia (32 percent). Based on sheer number of troubled institutions, Florida is tops with 77 banks and thrifts affected, followed by Illinois (75), Georgia (73), and California (51).
All told, 14 states and Puerto Rico have more than 20 percent of their institutions under enforcement actions.
The heightened regulatory scrutiny is hardly limited to community banks still recovering from the real estate bust and credit crunch. All four of the country's largest banks — JPMorgan Chase, Bank of America, Citibank and Wells Fargo — are operating under three separate severe actions. All four of the megabanks are active in Florida.
The numbers are even more alarming given how much Florida deposits are dominated by those out-of-state banks. Nearly 63 percent of Florida's deposits are held at banks or thrifts under a severe enforcement action issued since 2007.
Alex Sanchez, president and CEO of the Florida Bankers Association, said the higher level of regulatory involvement is nothing to fear, especially since FDIC insurance protects customers from deposit losses if the worst did happen. "Not one red cent has been lost in the 77 years since the FDIC has been created," he said. "People can sleep very calmly and safely at night."
Moreover, Sanchez said, banks overall are much healthier than a couple of years ago.
"We've had 70 bank failures in Florida, but they've dramatically declined in the past year," he said. "The banks remaining are much stronger, much more well-capitalized. Enforcement actions are on the decline."
Heading into December, eight Florida banks have failed so far this year, most recently Heritage Bank of Lutz, which was closed by regulators Nov. 2 and its deposits assumed by Arkansas-based Centennial Bank.
By comparison, 13 Florida banks were shut down in 2011 and 29 in 2010.
Banks can fall under federal oversight for a variety of reasons, from being undercapitalized to having too many problem loans. Some of the megabanks' problems involved mortgage lending and foreclosures.
About 12.6 percent of the banking industry nationwide is still operating under some type of severe action, such as a cease and desist order, formal agreement, consent order or other government directive, according to SNL. That's down from 13.9 percent a year earlier.
"However, this decline is somewhat tempered by the fact that 56 of the 1,042 banks and thrifts in last year's analysis have since failed and mergers, internal reorganizations and other actions precluded another 61 banks and thrifts from being considered," the report said.
Only Alaska and Vermont can brag that they have zero banks and thrifts under severe enforcement action.