Bair at CMSA: CRE Problems Go Beyond Small Community Banks

All banks and thrifts are having problems with commercial real estate loans, not just small community banks, according to FDIC chairman Sheila Bair. "Despite what you may be hearing, CRE credit problems are affecting big and small banks alike," the Federal Deposit Insurance Corp. chairman said in a prepared speech delivered at a Commercial Mortgage Securities Association conference in Washington, D.C. As of Sept. 30, FDIC-insured institutions held $1.3 trillion CRE and multifamily mortgages — nearly 18% of total loans. And $44.8 billion are classified as noncurrent (90-days or more past due or considered uncollectible). Banks and thrifts hold another $500 million in construction and development loans and 15% of these are noncurrent. "The annualized net charge-off rate of 6% on C&D loans in the third quarter significantly exceeds the highest rate of the last crisis, which was about 4%," Ms. Bair said. FDIC expects delinquencies and charge-offs will move higher in the coming quarters.