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NUMBER OF BANKS ON FDIC WATCH LIST HIGHEST SINCE 1993
Jul. 20, 2011
American Society of Farm Managers and Rural Appraisers (ASFRMRA) reports:
With $295 billion in commercial mortgages maturing in 2011, losses on commercial real estate loans could trigger more bank failures, according to a July 6 MBA NewsLink report.
While 48 banks failed in the first quarter of 2011, the number of banks on the FDIC's list of problem institutions was 888, a slight increase over the 884 banks on the list during the fourth quarter of 2010. The FDIC's list now contains the highest number of problem institutions since 1993 when the number reached 928 during the savings and loan crisis, MBA NewsLink reported.
Combined, the 888 problem institutions held $397 billion in assets.
"A declining failure rate, despite growing list of 'problem banks,' may be due to a $1 billion negative balance in the FDIC Deposit Insurance Fund at the end of March," Delta Associate's CEO Gregory Leisch told MBA NewsLink. "With delinquency rates and mortgage maturities still rising, we expect the banking environment to remain challenging."
By sector, delinquencies on construction loans increased 30 basis points to 18.3 percent in the first quarter of 2011 compared to the previous quarter, while commercial mortgage delinquencies fell 10 basis points to 5.3 percent. Meanwhile, defaults on commercial mortgage loans fell by 10 basis points to 4.3 percent in the fourth quarter of 2010 compared to the third quarter, and multifamily defaults dropped 1 percentage point in the fourth quarter to 3.7 percent.
Leisch noted that bankrupt tenants, financially troubled owners, under-performance and other "significant obstacles" could increase the volume of distress in the short term. "The real test of the plateau of distress will be seen in the next 12 months with about $300 billion in loans coming due and delinquency rates possible edging up again," Leisch told MBA NewsLink.
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