CRE Caused Last Week’s Bank Failures, Analyst Says

Five of the six banks that regulators closed Friday failed primarily because of commercial real estate problems, according to Foresight Analytics, a division of Trepp LLC. The smallest bank to fail Friday – Cincinnati-based Bramble Savings Bank – was undone primarily by residential mortgages, with commercial real estate playing ‘a supporting role,’ the firm says.

Commercial real estate loans – mortgages and construction and land loans – constituted nearly 82% of the six banks' $152 million worth of nonperforming loans, according to data published in Trepp's Treppwire Report last week. Commercial mortgages were the largest source of the nonperforming loans, with a 44% share.

"We have seen a shift over the last several quarters, with commercial mortgages contributing a larger portion of the distress,’ says Matt Anderson, one of the group leaders of Foresight Analytics. ‘Construction loans are still the largest source of [commercial real estate] distress overall, but commercial mortgages have increased their share."

More than 65% of the nonperforming loans belonging to Winder, Ga.-based The Peoples Bank were commercial mortgages, according to the data from Trepp and Foresight Analytics. All six of the institutions had been on Foresight's bank failure watchlist for four or more quarters.

Foresight Analytics expects Georgia, which produced three of the six bank failures Friday, to lead the nation in bank failures for the rest of this year and into next year. Friday's closings brought the total number of bank failures in the U.S. to 123, and the total number in Georgia to 14.


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