Bank owned construction projects continue to dominate the bank’s OREO balance sheets representing just over 45% of the total volume and being reported by 132 of 245 banks.

Commercial REO came in at 30% of the pie with 110 banks reporting some volume.

Fewer than a third of banks are reporting residential reo making up up 15.4% of the total.

Bank owned multifamily properties came in at just 8.3% with only 11% of banks having problems and farmland made up the remaining sliver.

The sum total of reported REO from California’s banks currently sits at $1.74B.

Fewer Commercial Properties Headed to Foreclosure

California banks saw a reduction in the total volume of early stage commercial real estate defaults (30-89 days late) of about 8.4% from the previous quarter which is just slightly better than the US average for Sep 2011. Later stage non performing commercial real estate loans (non accrual) fell by a similar amount.

Even as S&P is downgrading banks nationwide, banks are reporting improvements in CRE loans. It is interesting to note, however, that the commercial REO only represents about 13% of the total volume of distressed CRE assets currently reported.

This points to a LOT more bank owned commercial foreclosure inventory showing up on the market in the not-too distant future or else broader non performing loan sales. The assets have to go somewhere…

Construction Loans Still a Plague, But Less So…

Construction loans collapsed early in the cycle and if you’ve been trying to get one you know that banks aren’t giving them. Banks in California have been steadily reducing their construction loan exposure and consistently writing down losses but we’re not seeing much in the way of sales. Of course financing is the reason there aren’t substantial construction REO sales at this point, on both sides, meaning end product residential loans are difficult but construction loans are near impossible. Sort of self fulfilling isn’t it… Late and non performing construction loans and REO topped $2.4B for CA banks for Sep 2011.

Early Stage Residential Default Soars

Residential first position loans 30-89 days late, the first stage of default, jumped by 23.8% for CA banks. Residential REO bumped up slightly, and over all distressed residential loans and bank owned property rose about 4%.

Right now only 7% of the trouble has actually made it’s way to market as 0REO. Another way to say this is that there’s potential to see 14X the current volume of bank owned residential properties on the market with CA banks… Fifty banks reported $1.38B in residential loans in the process of foreclosure.

Multifamily Continues as a Bright Spot

Everywhere you look it seems multifamily (5+ residential units) is the big winner right now. California banks are seeing substantially reduced early stage defaults (30-89 day lates). Fewer than half as many banks reported 30-89 day late loans as they did non accrual (late stage non performing). Roughly 22% of the total volume of problems already found it’s way in as REO.

Next quarter we hope to start to take a look at where lending is increasing, or decreasing.

As we look across the stats for the US it seems pretty clear that we have a long, long way before we’re out of the woods and California’s banks are no exception. At the same time if you’re well positioned right now it’s these circumstances that produce serious wealth one or two decades from now.

When I got my start in this business, a little more than a decade ago (seems like yesterday), I remember working with investors who had bought during the ‘RTC‘ days, or I should say trying to work with them … They’d turn up their noses at a lot of the returns I’d show them and tell me about the old days… of course I was sure (until 2006) that they were reminiscent dreamers who were missing the boat, we’d never see RTC type discounts again… right?

This is significant for obvious reasons, not the least of which is that banks are going to be MUCH more motivated to sell REO and nonaccrual loans that are covered under loss sharing agreements.

New in BankProspector: See Which Banks are Holding What Assets Under Loss Sharing Agreements

Starting April 30th 2011 BankProspector will let you search and sort for banks with these agreements. The data is even better than that, you’ll be able to see exactly what’s covered under the agreement. I don’t know about you but I think this is pretty exciting stuff. The new report includes the following assets:

Loans Secured by Real Estate

1. 1-4 family residential construction loans
2. Other construction loans and all land development and other land loans
3. Secured by farmland
4. Revolving, open-end loans secured by 1-4 family residential properties and extended under lines of credit
5. Closed-end loans secured by 1-4 family residential properties secured by 1st liens
6. Closed-end loans secured by 1-4 family residential properties secured by junior liens
7. Secured by multifamily (5 or more) residential properties
8. Loans secured by owner-occupied nonfarm nonresidential properties
9. Loans secured by other nonfarm nonresidential properties
10. Commercial and industrial loans

Other loans

1. Credit cards
2. Automobile Loans
3. Other consumer loans
4. Lease financing receivables

We’ll probably start by showing just the real estate loans but I have had some call for consumer and C&I debt info so we’re looking into adding that as well.

For each of the loan categorie you’ll be able to see the loan totals in 30-89 day late, 90 day late, and nonaccrual status. Nice!

and REO including…

1. Construction land development and other development loans
2. Farmland
3. 1-4 Family Residential Properties
4. Multifamily (5 or more) residential properties
5. Commercial properties

And if you’re a geek like me you’ll also be interested to see the portion of the OREO covered by the loss sharing agreement. This is fairly big stuff if you know what you just read and it could potentially change who you’re approaching and how. I’m ready to hear a different opinion on that but I think I’m right.

Stay tuned for more updates on the way.

There is an increasing interest in non-performing loans among our members and prospective members and there is a developing pool of resources surfacing online to help guide investors through the process of how to buy non-performing loans, how to evaluate them, calculate returns etc. At distressedpro.com we’re actively talking with some of the best most credible sources for this information and we’re hopeful that in the not-too-distant future we’ll settle on a partner offering a real, credible, actionable plan or program.

Distressed multifamily totals at US banks generally improved in the final quarter of 2010. With late, non-accrual, and REO totals at (aggregated) their lowest level in more than a year. Some of this reduction could be attributed to effective disposition strategies, some of the assets disappeared with bank closures. Generally non-accrual balances improved significantly though there are still 1,060 banks reporting about $6.25 Billion in multifamily problems.

All told US banks reported $11.5B in multifamily late and non-performing loans and REO.

BankProspector gives members access to real time late or non-performing loan and REO data for more than 7,000 banks. Sign in for a free demo today.

The total volume of distressed multifamily assets at the nation’s banks dropped by $2.23 Billion. The biggest gains were made in the non-accrual column where US banks shed 32% of their troubles. REO and 90+Day Late Loan (and still accruing) totals were both reduced by over 10%.

Loans at the beginning of the default cycle (30-89 days late) increased by 6.2% but with 4.2% fewer institutions reporting the problem.

The coming quarters will tell whether or not this is the beginning of a significant turnaround in the multifamily space. Certainly if you’re watching multifamily CMBS delinquencies you’re aware that this quarter saw a record rate of 17.4%. These conflicting indicators could be the result of a couple of factors. One is, as was the case with commercial real estate report there were surely some multifamily assets that were removed from the reporting cycle after being assumed by the FDIC. We’ll aim to get a handle on just how much over the course of the upcoming quarter.

Something else to consider is the fact that the loan sizes in the CMBS market can be so large that a single delinquency (for example the $2.8B delinquency cited in the above referenced article) throws the curve.

The Multifamily REO Report for Q4 2010 is now available for download

The most significant improvement in conditions was a 29% decrease in owner occupied commercial real estate loans being reported as 90+ days late.

Numbers improved for 30-89 day late, 90+ day late and non accrual owner-occupied commercial property loans.

Non-owner occupied did not fair as well with a 10.7% increase in 90+ day late loans though 6% fewer institutions had said loans to report.

While overall ‘as reported’ distressed commercial real estate loans and REO improved this likely does not tell the whole distressed commercial property inventory story. From September 2010 to December 2010 the total number of banks tracked in BankProspector decreased by 1.3%, a reduction by 95 banks.

Thirty of these 95 banks are listed on the FDIC’s failed bank list presumably the other 65 merged or were acquired. In the case of the failed institutions most of the assets transfer to the acquiring institution with loss sharing according to the Assumption and Purchase Agreements, the FDIC however is still acquiring assets and these assets would obviously no longer be reported by any institution leaving a sort of ‘ghost’ inventory.

The updated Commercial REO Report is now available for download. Look for the upcoming Non-Performing Loans Reports as well as the Multifamily REO Report due out shortly.

With some 94% of banks call reports for 12/31/2010 in the database we’re still not yet able to get a handle on what the final tally will be will be primarily due to the fact that some of those banks yet to file are the largest institutions with the biggest portfolios of non-performing loans and REO, namely JPMorgan Chase and Bank of America.

Look for updates to the Commercial REO Report and the Multifamily REO Report as early as tomorrow afternoon as well as some new reports including Non Performing Loan Reports and REO reports for the residential and construction assets later in the week.

To stay on top of these releases you can subscribe to the email newsletter or the FeedBurner feed if you’re a fan of RSS.

At the end of each quarter (12/31, 3/31, 6/30, 9/30) banks file their call reports. These reports are not due immediately, banks file them throughout the month and they have until January 30th. Between now and the end of the month all banks are required to submit their reports. If you log in today you’ll see that for the new period, Dec 2010, only 7 banks have reported.

When you search for banks with the text search you are accessing 2 quarters of information and you’ll notice that there are still some 7,000 plus banks in the database. When you visit an individual bank report you may see ‘Reporting Date: 20100930′ in the top right corner. This means that this bank has yet to file 20101231, the most current report. You will notice probably that your ‘saved searches’ are not producing much if any results today, this is true for all ‘Advanced Searches‘. That’s because the saved search results pull from the current reporting period. Rest assured that these will populate pretty quickly over the next couple of weeks.

Paid subscribers probably know that our system makes an hourly pull and checks for all bank reports and filings. What this will mean to you is that over the next month the data will change very rapidly. We find that the beginning of a reporting month can be somewhat slow but by the 10th we’re likely to see hundreds and occasionally thousands of banks filing new reports daily.

It will be very interesting to see where we end up in terms of year-end figures. As of today we can see in the back-end of the system that there are 7015 banks in the panel of reporters. Last quarter we had 7094 so that’s a loss of 79 institutions or about 1%. There are a number of whole bank acquisitions happening out there right now in addition to the closures. The banking landscape may look very different in another year’s time.

I was speaking recently with an analyst who consults with banks and provides financial modeling services for the industry. He says their firm is estimating that by the time we’re through this cycle we will have somewhere in the neighborhood of 5,000 banks left standing. The real question for you and me will be how much of that inventory liquidation can we be a part of.

Six hundred and sixty three (663) banks are reporting multifamily OREO balances for a total of $2.73B.

Non-performing multifamily loans meanwhile stand at about three times OREO balances or $8.26B spread over 1059 banks indicating more distressed sales in the pipeline.

The total amount of late, non-performing multifamily loans and multifamily OREO at the close of Q3 2010 comes to $13.77B.

The top chart shows clearly that there are a significant number of non-performing loans in the pipeline the full depreciation of which banks have yet to fully realize.

The four quarter trending chart shows that distressed multifamily loans and REO in the US are on the rise and may be for the foreseeable future.

The data presented represents whole loans balances reported by 98% of banks.

Top 25 Multifamily OREO Balances at U.S. Banks

Download the supplement to this report, a list of the US banks with the Top 25 Multifamily OREO balances (bank owned) and the totals for each.

This data is deemed accurate but not guaranteed and carries no warranty of any kind. All data sourced directly through the FFIEC’s CDR and compiled and analyzed by BankProspector. BankProspector is a hosted, online application designed to accelerate the process of prospecting banks directly for distressed real estate assets.

Commercial real estate problems at US banks soared by 10.6% in the first quarter of 2010 over Q4 2009.

Commercial real estate loans being reported as 30-89 days late increased 16.3% indicating that the trouble in the commercial real estate sector is increasing rather than abating. Reports for 90 Day Late Loans but still accruing increased by 8.5%. Non-accrual commercial real estate loans, a loans last stop on the way to foreclosure, increased 8.9% Commercial OREO balances, commercial real estate acquired by a bank through the foreclosure process increased 14.1%.

The pace at which banks took back commercial real estate through foreclosure kept pace with the prior quarter with REO accounting for about 12.7% of the total pot in Q4 2009 and about 13.1% in the most recent report.

Overall (late, non performing loans, and REO) commercial real estate problems at US banks marched up 11% from $62.2B to $69.1B from Q4 2009 to Q1 2010.The pace of trouble was up with a total increase of 11.03% over the previous quarterly change which was 10.88% which was a slower pace than the 14.6% from the prior quarter.

The 50 Banks with the Top Commercial Real Estate REO Balances made up 40% of all commercial REO held at US banks while the top 50 banks with commercial non-accrual own 45% of those problems.

While the pace of problem loans and REO remains more or less the same the balances continue to grow. This growth in troubled balances shows a failure to act on the part of lenders struggling to workout their CRE loans and avoid write-downs.

With pressure continuing to build it seems highly likely that the commercial real estate market will have to see more distressed deals hitting the market.

Download a PDF copy of this report plus a bonus
Top 50 US Banks CRE REO Report
]]> http://www.distressedpro.com/blog/commercial-real-estate-problems-increase-at-us-banks/feed/ 0 http://www.distressedpro.com/blog/distressed-construction-loans-and-reo-report-q1-2010/ http://www.distressedpro.com/blog/distressed-construction-loans-and-reo-report-q1-2010/#comments Fri, 04 Jun 2010 16:34:27 +0000 Brecht Palombo http://www.distressedpro.com/?p=2211 Late and non-performing construction loans as well as construction REO jumped again. But before I get into that we have two announcements.

First, we are now reporting distressed construction loans and construction reo different than we have in any prior quarter. We’re doing this for two reasons. The first is that our goal is to bring you the most accurate bank data possible. We’re now separating 1-4 Family late and non-performing residential construction loans from all other construction related loans. We think that this is going to give a more accurate portrayal of what’s happening in both sectors.

The second reason is that BankProspector 2.0 will be reporting the distressed construction data in this same way and we though we’d start speaking the same language right off the bat. Which brings me to my second announcement.

We’re late. We’ve been working hard around the clock (literally) to get BankProspector 2.0 to launch but we’re no there yet. We’re behind schedule and we’re here to admit it. The challenge is that we’re working to bring you something that will really knock your socks off and the fact is that we’re playing with huge amounts of bank and other data. So a big thank you to existing members bearing with us and please rest assured that we’re going to make it up to you with bonuses and the like as soon as we release. We expect a BETA release, dare I say, very shortly. Now back to business.

Non-Performing Construction Loans and REO

Excluding residential, construction loan and REO trouble bumped up a little more than 6% in Q1 from Q4’09. With banks handling just over $74.1B in late loans and REO.

With distressed residential construction factored in, the total actually drops about .9% (a little less than $1MM) to $95.7B from $96.6B. The biggest difference coming in the non-accrual column which, it would seem, makes it safe to say that banks are pulling the trigger on lingering non-performing loans. Though, with all the bank closures forced by bad construction loans I wonder if some of this wasn’t just moved right off of the reporting table and into receivership. Surely some of this is due to write-downs and we’ll be able to quantify that in BankProspector 2.0. If someone can answer the question about receivership we’d love to hear from you in the comments.

Construction REO accounts for about 18% of the totals discussed above at $17.6B. What I’m hearing on the street and so are many of my colleagues is that a lot of lenders are trying to finish up their projects and pursue retail pricing. This is going to be a very hard road and likely fruitless for most of them. Of course every project and location is different but generally speaking there is an abundance of inventory and banks I’ve found don’t make great contractors.

As you can see in the chart at the top of this page the non-accrual construction (in red) continues to grow which means there’s still a lot more opportunity in the pipeline for investors and still a lot of pain ahead for lenders.

Learn More about how BankProspector 2.0 helps you find banks with with distressed assets, non-performing loans, and REO. Click Here.