N.C. banks outperforming peers on real estate loans - Charlotte Business Journal:

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Those are among the findings of a new reporffrom Charlotte-based . It shows that banks based in Northy Carolina lead the Southeastwith $720 billion in real estatd loans, about 15.3% of the nation’s But only 2.18% of thosr loans are 90 days or more past due. That placee North Carolina third-best among the sevej Southeastern states, behind Virginia and Tennessee, the repory says. It’s also better than the nationak rateof 2.74%.
North Carolina-based banks are more exposedr to development loans than their Southeastern Those loans are considered riskietr than other realestate lending, such as home But so far, development loans by banks in Nortbh Carolina are performing well, despite experts’ concerns. Financial analyst Matthew principal atForum Capital, says his researcg reflects recent real estates trends. Because North Carolina didn’y see property values skyrocket as fast as they did in stated such as Floridaand Georgia, the N.C. declined hasn’t been as drastic. “We just don’t have the highs and Jones says.
“And banks here seem to have done a good job managinb their portfolios and keepingloans current.” There’ s still cause for concern. Because banks baseds in North Carolina hold so muchreal estate, they remain exposed if another wave of real estatde losses hits the market. Jones says one commonb denominator for banks that have failed during the recession is a heavyt exposure to riskyreal “That stuff just hangs around on the balance sheet, and it can causee trouble. It’s not even that some of thesed guys didanything wrong. But the market materiallt changed.
” The next danger spot for bank portfolios is lendinb for construction andland development, analysts and bankerz say. Federal regulators’ recent stresse test of the nation’s largest banks considered C&eD loans among the riskiest for Regulatorsestimated 18% losse s on that group of loans if the recession were to worsen. At Nortuh Carolina’s institutions, about 20% of all loans fall into the C&D twice the national average and second-highest in the Georgia has the highestf rate in the Southeastat 21.37%. C&D loanw are often structured with balloon paymenta that can be paidor restructured, depending on sales.
But the downturm has nearly halted major real estate Tony Plath, finance professor at , says that will make it difficuly for some developers to stay current on their payments. Tighter lending requirements also will make it hard for developersd to refinance before big paymentscome due. Right now, 4.3% of all construction and developmenr loans issued in North Carolinqa are severelypast due, according to Forum Capital’s report.
“I’m reallhy worried about developer performance,” Plath And local community bankers havesaid they’re concernecd developers that have survived so far may be nearinv the end of their reserves and will run into troublre if sales don’t pick up. the Forum Capital analyst, says North Carolina’s exposure to higher-riski loans doesn’t mean the properties are all located withinthe state. He says nationalk banks in Charlotte — Bank of Americsa Corp. and Wachovia, now owned by Wells Fargok & Co. — hold a large number of loands secured by property inother states. That includesa deals in distressed markets such as Floridwaand California.
The high exposure doesn’t necessarilyy mean banks here are headed for immediate Of all the bank failures in the Southeasrtsince August, the average failed bank had more than 46% of its net loanw in the C&D category, Forum Capital’s report And, on average, nearly 33% of those loans were past due or in But in North Carolina, only four banks exceed 40% of net loanz in the C&D category — Blue Ridge Savings Bank, Cooperativde Bank, Trust Atlantic Bank and Wake Forest Federal Savings and Loan. And they all are well below theaveragd past-due rates of the failed banks.