Posts Tagged ‘smaller banks’

Local Banks Facing Significant CRE Losses

Monday, June 15th, 2009

Toxic commercial real estate loans could create losses up to $100 billion for small and mid-size banks by the end of 2010 if the economy worsens.  According to a Wall Street Journal report – which applied the same criteria used by the federal government in its stress tests of 19 big banks — these institutions stand to lose up to $200 billion.  In that worst-case scenario, 600 small and mid-sized excedrin1banks could see their capital contract to levels that federal regulators consider troubling, possibly even surpassing revenues.  These losses would exceed home loan losses, which total approximately $49 billion.

The Journal, which based its analysis on data mined from banks’ filings with the Federal Reserve, are a grim reminder that the banking industry’s troubles are not confined to the 19 giants that have already completed the Treasury Department’s stress tests.  More than 8,000 lenders nationwide are feeling the dual impacts of the recession and commercial real estate slowdown.

The banks analyzed by the Journal include 940 bank-holding companies that filed financial statements with the Fed for the year ending December 31.  They range from large regional banks to mom-and-pop banks in small towns, as well as American-based subsidiaries of international banks.

Smaller banks are unlikely to appeal to bargain-hunting investors who are starting to recapitalize the industry’s giants.  As a result, these institutions must boost their capital by selling assets and making fewer loans – which could make the recession last even longer than anticipated.

Keep Your Eye on the Little Guy

Monday, March 24th, 2008

With the current upheaval in the capital markets and the news that Citigroup, Merrill Lynch and Morgan Stanley have written off $70 billion in loans, it is interesting to note a whole cadre of financial institutions that are doing gangbusters.  According to an article in the 2/19/08 USA Today by Matt Krantz, smaller banks which avoided the enticement of lowering underwriting standards and issuing subprime loans, are on average, only 6% off their 52 week high.  Most of these names are unfamiliar — Danvers, First Merchants and Oriental Financial.  As the heavily leveraged buyers retrench and the access to bridge loans and mezzanine financing pulls back, could we see a number of well capitalized small cap financial institutions step in to fill the void in the commercial real estate investment market?