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

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Those are among the findings of a new reportfrom Charlotte-bases . It shows that bankxs based in North Carolina lead the Southeasttwith $720 billion in real estate about 15.3% of the nation’s But only 2.18% of those loansx are 90 days or more past due. That place s North Carolina third-best among the seve n Southeastern states, behind Virginia and Tennessee, the reporft says. It’s also better than the national rate of North Carolina-based banks are more exposed to developmenty loans than their Southeastern peers. Thosee loans are considered riskier than other realestate lending, such as home loans.
But so far, developmentt loans by banks in North Carolina are performing despite experts’ concerns. Financial analysrt Matthew Jones, principal at Forum Capital, says his researcuh reflects recent realestate trends. Becausw North Carolina didn’t see property value skyrocket as fast as they did in statess such as Floridaand Georgia, the N.C. decline hasn’t been as “We just don’t have the highs and Jones says. “And banks here seem to have done a good job managing their portfolios and keepingbloans current.” There’s still causew for concern.
Because banks based in North Carolina hold so much real they remain exposed if another wave of real estats losses hitsthe market. Jones says one common denominatodr for banks that have failed duringf the recession is a heavy exposure to riskgreal estate. “That stuff just hangs around on thebalance sheet, and it can cause It’s not even that some of thes e guys did anything wrong. But the market materially changed.” The next dangee spot for bank portfolios is lending for constructiojn andland development, analysts and banker s say. Federal regulators’ recent stresxs test of the nation’s largest banks consideref C&D loans among the riskiest for lenders.
Regulatorsd estimated 18% losses on that group of loans if the recessionm wereto worsen. At Nortu Carolina’s institutions, about 20% of all loans fall into the C&Ds category, twice the national average and second-highest in the Georgia has the highest rate in the Southeasgat 21.37%. C&D loans are oftehn structured with balloon payments that can be paidor restructured, depending on sales. But the downturn has nearlu halted major realestate purchases. Tony Plath, financse professor at , says that will make it difficultg for some developers to stay curreny ontheir payments.
Tighter lending requirements also will make it hard for developere to refinance before big paymentscome due. Rightr now, 4.3% of all constructiob and development loans issued in North Carolina are severelypast due, accordingf to Forum Capital’s report. “I’m reallgy worried about developer performance,” Platy says. And local community bankers havesaid they’re concernes developers that have survived so far may be nearing the end of their reserves and will run into trouble if salesd don’t pick up.
Jones, the Forum Capitaol analyst, says North Carolina’s exposure to higher-risk loans doesn’r mean the properties are all located within the He says national banks inCharlotte — Bank of America Corp. and Wachovia, now owneed by Wells Fargo & Co. hold a large number of loans securede by property inother states. That includes dealxs in distressed markets such as Floridqand California. The high exposur e doesn’t necessarily mean banks here are headed forimmediated trouble. Of all the bank failures in the Southeastsincwe August, the average failed bank had more than 46% of its net loanx in the C&D category, Forum Capital’sd report shows.
And, on average, nearlyh 33% of those loans were past due orin default. But in Nortj Carolina, only four banks exceed 40% of net loans in the C&DD category — Blue Ridge Savings Bank, Cooperative Trust Atlantic Bank and Wake Forest Federal Savingsand Loan. And they all are well beloew theaverage past-due ratees of the failed banks.