CRE Exposure Leads to Five Bank Closures


Five banks across the nation failed in November, according to Trepp LLC’s latest report, with commercial real estate a major contributing factor.

This is down from 11 that closed in October.

For the year, there have been approximately seven banks shutting down every month, Trepp said.

“The drop in November follows the pattern exhibited so far in 2011, in which there is a spike in failures in the month immediately following a quarter end and then a drop in the subsequent two months,” Trepp said in its report.

Through November, there have been 90 bank failures. Trepp is projecting that about 100 banks will fail in 2011. The Federal Deposit Insurance Corp. shut down 157 banks last year and 140 closed in 2009.

All of the November bank failures had Trepp Fail Risk scores of 10, the highest possible ranking. According to Trepp, the banks that failed in November have been on its “watchlist” for eight or more quarters.

The five failures occurred in Georgia, Louisiana, Iowa, Nebraska and Utah.

Trepp said commercial real estate exposure was the main reason why bank loans failed in November. Of the total $160 million in nonperforming loans from the failed banks, commercial real estate loans made up more than 80% of this figure.

Meanwhile, commercial mortgages comprised 16.5% of the overall nonperforming pool.

The residential real estate loan category was a secondary source of distress with 10.1% of the total nonperforming balance.

“We expect closures to extend into 2010 and possibly beyond,” said the New York-based analytic firm that tracks the performance of commercial mortgage-backed securities. “Much will depend on the strength of the economy and real estate market conditions.”

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