Examiners are taking a sharp look at national banks with high concentrations of construction and development loans in declining markets, according to the comptroller of the currency, who expects to see some bank failures this year. "There will be more criticized assets, increases to loan loss reserves; and more problem banks," Comptroller John Dugan told the Florida Bankers Association. "And yes, there will be an increase in bank failures." The comptroller noted that large and small homebuilders are under stress, and the percentage of nonperforming C&D loans 90 days or more past due in Florida is 3.34% -- up 70% from a year ago. "We see clear signs of credit quality declining," and bank management needs to make "realistic assessments" of their portfolio's current conditional and get new appraisals, Mr. Dugan said.

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