The pace of the construction implosion appears to be easing. Construction notes have been plagued by high rates of default and soaring REO balances since the economy has been in turmoil. This quarter, however, it appears that we may be “getting over the hump”.
Construction loans reported as 90+ days late but still accruing interest increased 27% this quarter from $7.2Billion to $9.1Billion. Construction loans reported as non-accrual were flat for the first time in many, many quarters. Bank owned construction projects (construction REO) increased by 10% to $14.85Billion. (construction is in red in the graphs below)
We’ve seen an increase in the number of lender’s selling construction notes but the data is simply anecdotal. As banks take on more water in the form of troubled commercial real estate assets its a safe bet that the more time consuming less secure assets like broken condo deals and busted subdivisions will get cleared out, there are only so many hours in a day and the assets that can command the best return of capital are likely to command the attention.
Local and regional lenders are taking the brunt of the construction loan problems. Many smaller banks went heavy into local development as it was one of the only areas they could compete with the big boys.
At present there are 1021 banks with 90 day late construction loans, 3,870 banks reporting non-performing construction loans and 3126 banks banks holding construction projects as REO.
Top 5 Construction Lenders by Distress Type
90 Day Late Loans
Wachovia Bank, National Association Charlotte NCMecklenburg National City Bank Cleveland OH- Wells Fargo Bank, National Association Sioux Falls SD
Minnehaha Branch Banking and Trust Company Winston Salem NC Forsyth- Compass Bank
Nonaccrual Loans
- Bank of America, National Association Charlotte
- Wells Fargo Bank, National Association Sioux Falls SD
- SunTrust Bank Atlanta GA
- Fifth Third Bank Cincinnati OH
- Regions Bank Birmingham AL
Construction OREO
- Branch Banking and Trust Company Winston Salem NC Forsyth
- AmTrust Bank Cleveland OH Cuyahoga
- U.S. Bank National Association Cincinnati OH Hamilton
- Bank of America, National Association Charlotte NC Mecklenburg
- M&I Marshall and Ilsley Bank Milwaukee WI Milwaukee
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