Friday, June 4, 2010

Non-Performing CRE Loans Behind Recent FDIC Closures

Non-Performing CRE Loans Behind Recent FDIC Closures The Federal Deposit Insurance Corp. , which shut down five banks on Friday, said that problems with commercial real estate loans were a significant contributing factor to the closures. The banks had assets totaling almost $2 billion and non-performing commercial real estate loans made up 80% of the non-performing loans at these banks, said Matt Anderson , an analyst at Foresight Analytics.

Breaking down the data, Foresight found that the non-performing loans were divided between construction and land loans and long-term commercial mortgages. Bank of Florida- Tampa , Bank of Florida - Southwest and Bank of Florida - Southeast were shut down while in Nevada, Sun West Bank was closed. Granite Community Bank in California was also closed.

Foresight, which analyzes bank portfolios and aims to predict closures and losses, believes that the next round of closures will be in the Pacific Northwest. "Most of the problems in [the Pacific Northwest] stem from a construction cycle that lagged behind the U.S. in the upswing and got hit hard by the economic downturn," Anderson said. Other areas of concern are Colorado, South Carolina and North Carolina. "If economic conditions don't improve there soon, we could see more failures in those states," he added.

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