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CRE exposures expand

SNL Report: As more banks exceed concentration guidance, regulators issue warning on CRE growth

SNL Financial is the premier provider of breaking news, financial data, and expert analysis on business sectors critical to the global economy. This article originally appeared on the subscriber side of SNL Financial's website. SNL Financial is the premier provider of breaking news, financial data, and expert analysis on business sectors critical to the global economy. This article originally appeared on the subscriber side of SNL Financial's website.

By Maria Tor and Venkatesh Iyer, SNL Financial staff writers

The number of banks concentrated in commercial real estate loans rose during the third quarter of 2015, an SNL analysis finds, as banking agencies warn that CRE underwriting standards at banks are easing.

The Fed, the FDIC, and the OCC issued a joint statement on Dec. 18 to remind financial institutions of existing regulatory guidance on "prudent risk management practices for commercial real estate … lending activity through economic cycles."

The statement encouraged banks to review the 2006 interagency guidance on CRE lending, which set thresholds for CRE loans as a percent of risk-based capital. Under the guidance, if banks' CRE loans crossed the thresholds, the banks would be considered concentrated in CRE and could be subject to further supervisory analysis.

The number of banks whose CRE loans were above the recommended thresholds rose to 474 at the end of the third quarter of 2015 from 448 at the end of the second quarter and 389 at the end of the third quarter of 2014, an SNL analysis of regulatory data finds.

http://www.bankingexchange.com/images/Dev_SNL/122815_NumberOfBanksExceeding.jpg

The number of banks concentrated in commercial real estate loans rose during the third quarter of 2015, an SNL analysis finds, as banking agencies warn that CRE underwriting standards at banks are easing.

The Fed, the FDIC, and the OCC issued a joint statement on Dec. 18 to remind financial institutions of existing regulatory guidance on "prudent risk management practices for commercial real estate … lending activity through economic cycles."

The statement encouraged banks to review the 2006 interagency guidance on CRE lending, which set thresholds for CRE loans as a percent of risk-based capital. Under the guidance, if banks' CRE loans crossed the thresholds, the banks would be considered concentrated in CRE and could be subject to further supervisory analysis.

The number of banks whose CRE loans were above the recommended thresholds rose to 474 at the end of the third quarter of 2015 from 448 at the end of the second quarter and 389 at the end of the third quarter of 2014, an SNL analysis of regulatory data finds.

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Old Bridge, N.J.-based Amboy Bank joined the list of companies that met both criteria at the end of the third quarter, despite having been issued a written agreement in 2009 to address its CRE concentration levels. At the end of the second quarter, it had only exceeded the C&D criteria, but in the third quarter, its total CRE loans moved up to exceed 300% of risk-based capital and its three-year CRE growth hit 59.5%. The growth was driven by multifamily, which has jumped by 86.10% since the third quarter of 2014. The bank is operating under a written agreement with the Fed, issued in 2009, which, among other things, requires the bank to identify, limit, and manage concentrations of credit "that are consistent with" the 2006 CRE guidance.

This article originally appeared on SNL Financial’s website under the title, "As more banks exceed concentration guidance, regulators issue warning on CRE growth"

Download PDF reprint of SNL article

Two Banking Exchange bloggers recently addressed CRE:

* Ed O'Leary's "Talking Credit": "Let's not do CRE trouble all over again"

Dan Rothstein's "Risk Adjusted": "Risk rating for CRE loans"

SNL Financial

SNL Financial, now part of S&P Global Market Intelligence, is the premier provider of breaking news, financial data, and expert analysis on business sectors critical to the global economy: Banking, Insurance, Financial Services, Real Estate, Energy, Media & Communications and Metals & Mining. SNL's business intelligence service provides investment professionals, from leading Wall Street institutions to top corporate management, with access to an in-depth electronic database, available online and updated 24/7. This article originally appeared on the subscriber side of SNL Financial's website in slightly different form and appears on www.bankingexchange.com as part of a cooperative venture. Each week a selected SNL article will be brought to our readers. Click here to learn more about SNL Financial and to obtain a free trial subscription. 

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