 |
 |
 |
 |
 |
 |
 
 |
|
|
 In case you missed it, last Thursday (Jan. 31) the Comptroller of the Currency John C. Dugan told the Florida Bankers Association the OCC is focusing increased attention on problems arising from high community bank concentrations in commercial real estate (CRE). "The combination of (current conditions in the real estate and mortgage markets) is putting considerable stress on one particular category of commercial real estate lending: residential construction and development – and other categories of CRE loans will feel similar stress if general economic activity slows materially," Dugan said. "While overall commercial real estate performance has been sound, weaknesses have plainly begun to emerge ... As of Sept. 30, (non-performing construction and development [C&D]) loans amounted to 1.96 percent of total C&D loans, a rate that's more than twice that of a year earlier ..." Dugan's concern: the ratio of commercial real estate loans to capital has nearly doubled in the past six years, and the increase is up more than 100 percent from 9/30/2006. "[It's] clearly a trend that we need to monitor closely," he told the Florida bankers. So what does any of that mean? Hard to tell for certain in Oklahoma because our state's economy bears little or no resemblance to the one in Florida. But it may pose problems for community banks everywhere, if we're reading Mr. Dugan's words properly and in context, and it may reflect the views of other Washington-based banking regulators. "There will be more frequent interaction between supervisors and banks with concentrations in CRE loans that are declining in quality," he said. "There will be more criticized assets; increases to loan loss reserves; and more problem banks." (emphasis added) In stressed markets (but probably not so much in Oklahoma yet) Dugan said "it will almost certainly require (banks) to downgrade more of (of their) assets, increase loan loss provisions, and reassess the adequacy of bank capital," (emphasis added) Taken together, these comments are not a reason to panic or throw stones at anyone. They simply suggest "tougher" examinations on safety and soundness issues, certainly in Florida, are likely to be ahead for bankers across the country. We'd guess this would be especially true if there's any hint of a commercial real estate lending concentration in the bank. According to their news release, the OCC "expects banks with CRE concentrations to make realistic assessments of their portfolio based on current market conditions, and to make necessary adjustments as market conditions change." We don't think this is really "news" for Oklahoma bankers, since most of them do this as a matter of course. But we wanted you to be aware of Mr. Dugan's speech and his statement that CRE (and probably other safety and soundness issues) will be high on examiner radar screens going forward.  Back to top |
|
||||||||||||||||||||||||||||||||||||||||
| © 2008 Oklahoma Bankers Association | |
 PRIVACY & SECURITY CAREERS |