There are currently 589 banks headquartered in Texas, the most of any state (which stands to reason). Like most parts of the country, banks in Texas went heavy into construction lending during the boom time. Today, construction REO makes up 47% of the bank-owned property on the state’s banks’ books. In fact, 225 banks are reporting, together, $821,718,000 in construction REO.
Two-hundred-and-seventy Texas banks, about 46% of them, are reporting commercial REO with a total dollar volume of $569MM. Commercial REO makes up 33% of the bank-owned real estate on their collective books.
Multifamily REO, which is very hot right now if the volume of emails I get is any indication, makes up just a sliver at 3.6% of the REO pie. A scant 29 (4.9%) banks have any multifamily REO to speak of.
One thing that’s interesting about the state of REO and NPLs in Texas is that far fewer banks are reporting construction loans in some stage of default but the total dollar volume of non-performing construction notes stands at $910MM, greater still than the REO.
It seems that banks have been focused on reducing their carrying balances with charge-offs (write downs), but, if the anecdotal evidence is true, many are still reluctant to sell at what many of us would consider market prices. The reality is that with lending as tight as it is, especially for construction, cash bids on speculative projects which have already failed would have to be low, lest ye follow in the steps of the prior owner.
The CRE problems facing banks in Texas are not as mature as the construction issues. Banks immediately pulled in the reigns on construction at the beginning of the downturn. They were much more reluctant to do so with commercial borrowers who seemed to have a chance. What that means for these banks today is that they have pending issues with non-performing commercial real estate loans to the tune of about $1.9B (vs their 1/2 billion in REO).
Banks in Texas, it would seem, have a way to go in fighting their way out of the woods.