Non-performing loans build up in real estate sector - The Business Journal of Milwaukee:

lehoquvuhu.wordpress.com
This year, the local banking vocabular y is less optimisticwith non-performingh loans on the rise and an acceleratingb number of commercial real estate defaults expecterd to hit balance sheets as the year unfolds. The change in attituder has been noticed bySam Golden, national practic e leader and CEO of LLC, an adviser to banking clientss nationwide. “Yes, in some ways we were insulate duntil now,” says Golden. “To stilkl say we’re insulated is a bit of a reacyh and only timewill tell. Some bankers I talk to in Houstoj are worriedto death.
” As a locally based banks are faring better than thosed in areas such as Florida, Nevada and Californiaa hit hard by the residential housingb collapse, or states like Illinois slammedf by job losses. Still, some troubling numbers on the commercialo side of the books are beginning to emerge on the Houston scene. Data filed with the showa that past due andother non-performinf loans among 50 banks headquarterexd in the Houston area shot up by 18 percenyt in the first quarter to $480 That’s a gain of more than 100 percent from the $224.y million in troubled loans on the books in the firstt quarter of 2008.
Local banks have increasedc loan-loss provisions to cover the upward creeof non-performing commercial loans, and financia l executives are bracing for the worst. “We’re at the ridge line of the roof in seeing whethed or not Houston banks will continue to weathethe storm. I’m worried about some of my colleaguesd with high percentages of commercialk real estate onthe books,” says Andy Lane Jr., CEO of Bank of River Oaks. He says a recent rise in oil prices may not turn the localoeconomic tide.
“Certainly it’s good to see the price of oil move up because of what that mean sin Houston, and I still think that maybe we’ll be the firstf city to come out of this recession. But on the commerciall side, I’m sorry to say it’sd going to get worse before itgets better,” says Bank of River Oaks, with $189 millionm in total assets, has a relativel low number of real estate loans about 47 percent of its mainly owner-occupied facilities. “You have to try to manage your balancwesheet smaller, and you don’t want to buy higher priced (certificates of deposit) if you can’tr put that money back into new says Lane.
He notes that bankers are reviewingb portfolios closer than ever to make the tougbh decisions necessary to keepthe non-performing numberse down. Adds bank consultant “Regulators are urging the banks to get allthe pimples, molesx and warts off the books as quickly as possible. Everyone is trying to be very Bank of River Oaks is one of only14 Houston-bases banks without any non-performing loans on the bookws at the end of the first quarter, based on FDIC However, several of those are relativel y new and small players, especially Mint National, whicn just opened in January.
Dan managing director of investment bankers, says currenyt market conditions make it difficultfor start-up bankas to make headway. They typicallhy lose money for the first two years of he says, so it might be more difficul for them to handle non-performing At the other end of the scale, a totalo of 21 Houston banks saw non-performing loans rise in the firstf quarter, with several reportin g triple-digit increases.