Feds Scrutinize RE Lending
The higher-ups in the US federal bank system have sent another chilling notice to members, this time in the form of a FDIC letter. "An influential federal agency has raised a red flag over Washington banks for their heavy investment in commercial real estate, fearing that many of them risk a credit crunch if market conditions take a turn for the worse."
"The agency said it would 'typically' apply such additional reviews to banks that have a ratio of commercial real estate loans-to-Tier 1 Capital of 300 percent or higher. Here in Washington, fully two-thirds of the nearly 100 state banks have commercial real estate ratios of over 300 percent, according to FDIC data. Topping the list is Heritage Bank of Olympia with 832.6 percent, followed by Frontier Bank (697.5 percent), Golf Savings Bank (683.2 percent) and North County Bank of Arlington (680.7 percent)."
"'The median level of CRE loan exposure in banks in the San Francisco Region is roughly double that of banks in the rest of the country, with many banks actively involved in commercial real estate lending at levels far in excess of the region's median,' said the letter from Nancy Hall, for the FDIC."