Financial Services - April 2008Data and Analysis
Sixth District banks generally reported lower earnings in the first quarter of 2008, mainly a consequence of the slowing housing market and higher loan loss provisions. Community banks in the region especially felt the impact of increasing past due loans and higher default rates. Many of these banks are concentrated in the real estate sector, and the lack of diversification makes them particularly vulnerable to the downturn in the housing market. At the same time, interest income and fee income have declined. In addition to increases in mortgage defaults, some banks reported increases in overdue construction and land development loans.
District banks generally imposed tighter lending requirements for consumer loans. Tightening was also noted in commercial real estate lending. Credit quality deteriorated further in most parts of the District.
Data from the Mortgage Bankers Association show that the percentage of seriously delinquent loans in the subprime mortgage segment increased significantly in all states during the fourth quarter of 2007 compared to the third quarter. As the fourth quarter map indicates, delinquency rates in this segment were greater than 10 percent in many parts of the country and more than 20 percent in Ohio and Michigan.
The percentage of seriously delinquent loans in the subprime mortgage segment was higher than 10 percent in all the District states during the fourth quarter of 2007: 11.9 percent (up from 9.9 percent in the third quarter) in Alabama; 17.5 percent (up from 12.2 percent) in Florida; 13.6 percent (up from 11.9 percent) in Georgia; 13.2 percent (up from 12.1 percent) in Louisiana; 16.4 percent (up from 13.8 percent) in Mississippi; and 12.2 percent (up from 9.9 percent) in Tennessee. The increase in Florida was the largest among District states—a 5 percentage point increase over the third quarter and a more than threefold increase from the fourth quarter of 2006, when the percentage was 5.2 percent.
Data from the Federal Deposit Insurance Corporation for banks headquartered in the Sixth District indicate that loans secured by real estate were relatively stable in the fourth quarter of 2007 compared to the fourth quarter of 2006, while credit card debt extended by District banks increased in the fourth quarter of 2007 compared to a year earlier.
Commercial and Industrial Lending
Data from the Federal Deposit Insurance Corporation for banks headquartered in the Sixth District indicate that commercial and industrial lending remained relatively flat in the fourth quarter of 2007 compared to a year earlier.