Commercial real estate exposure was the main source of problem loans for the eight banks that failed in July, according to new data released by Trepp LLC.
Trepp reports that commercial real estate exposure comprised $142.8 million (70.4%) of the total $202.8 million in nonperforming loans at the failed banks.
Construction and land loans accounted for $84.7 million (41.8%), while commercial mortgages made up $58.1 million (28.6%) of the nonperforming total. Residential mortgages were a secondary source of distress, with $38.9 million (19.2%) of the total nonperforming loans.
Commercial and industrial loans contributed $4.5 million (2.2%) of the nonperforming total. Other nonperforming loans, including unsecured consumer loans, totaled $16.6 million (8.2%).
All of July's failed banks had been on the Trepp Watchlist for a ‘considerable amount of time prior to failure, for a median of 14 quarters.’ Trepp adds that although this year's level of bank failures is lower than the levels of the past two years – 39 banks closed in the first seven months of 2012, down from 61 in the first seven months of 2011 and 108 in the same period in 2010 – there are still 190 banks at ‘high risk of failure.’