REO at Texas’ 587 banks rose by a little more than 6% this quarter.
Like other states construction REO makes up the majority of the bank owned real estate accounting for 49% of the total. First National Bank in Edinburg TX holds the number 1 spot. Forty percent of banks reported some construction OREO.
Commercial REO balances rose nearly 14.5% and comprise 30% of the whole. First National in Edinburg also owns the most commercial REO.
Residential REO balances rebounded by 13% after having shrunk by the same in the previous quarter. Beal Bank has the biggest residential REO balance sheet in Texas. Only 3% of banks reported any owned multifamily with Patriot Bank in Houston holding the top slot.
Commercial Foreclosures Set to Increase
After a brief reprieve last quarter, banks in Texas saw their early stage, 30-89 day late, commercial real estate defaults increase pointing to more trouble in the future. Non performing loans that were 30-89 days late or 90+ days late and still accruing, together, reached their highest level in more than a year increasing by almost 20%. Non accrual balances eased slightly. Overall late and non performing CRE loans grew modestly. Comerica Bank has the largest portfolio of non performing commercial real estate loans of all banks based in Texas.
Defaulted Construction Loans Drag On
Texas like just about every other state went heavy into construction loans which were the first of the asset types to see broad default. The good news (?) is that they’ve already booked in and now own a lot of the construction problems. Banks seem to be refusing to accept the value of their construction projects evidenced by the fact that it appears they own a lot and they aren’t selling any. No doubt this is due to the fact that they will take a bath on most of them. Better to leave it on your balance sheet and pray for a while I guess?
Residential Loans a Persistent Problem
While banks worked through some of their non accrual more homeowners fell behind on their loans for the first time than in each of the previous 2 quarters. Only 90 banks reported residential loans in the process of foreclosure but 292 banks reported late stage non performing residential loans (non accrual). It’s notable that Wells Fargo Bank in Houston owns a large portion of the residential loan portfolios owned by TX banks, however they actually saw fewer homeowners with 30-89 day late loans.