Non-performing loans build up in real estate sector - Minneapolis / St. Paul Business Journal:

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This year, the local banking vocabulary is less optimisticwith non-performingh loans on the rise and an acceleratinbg number of commercial real estate defaultds expected to hit balance sheets as the year unfolds. The changw in attitude has been noticed by Sam national practice leader and CEOof LLC, an advisetr to banking clients nationwide. in some ways we were insulatedduntil now,” says Golden. “To still say we’re insulated is a bit of a reach and only timewill tell. Some bankers I talk to in Houstoj are worriedto death.
” As a locally based banks are faringb better than those in areas such as Nevada and California hit hard by the residential housing or states like Illinois slammed by job Still, some troubling numberx on the commercial side of the bookx are beginning to emerge on the Houston Data filed with the shows that past due and othed non-performing loans among 50 bankz headquartered in the Houston area shot up by 18 perceny in the first quarter to $480 That’s a gain of more than 100 percent from the $224.6 million in troubled loans on the books in the firstr quarter of 2008.
Local banks have increasecd loan-loss provisions to cover the upward creeoof non-performing commercial loans, and financial executives are braciny for the worst. “We’re at the ridg line of the roof in seeing whethee or not Houston banks will continuse to weatherthe storm. I’m worried about some of my colleagues with high percentagesz of commercial real estate on the says AndyLane Jr., CEO of Bank of River Oaks. He says a recent rise in oil prices may not turn the localpeconomic tide.
“Certainly it’s good to see the price of oil move up becausew of what that means in and I still think thatmaybwe we’ll be the first city to come out of this But on the commercial side, I’mk sorry to say it’s going to get worse beforew it gets better,” says Lane. Bank of Riveer Oaks, with $189 million in total assets, has a relatively low number of real estateloansa — about 47 percent of its mainly owner-occupied facilities.
“You have to try to manager your balance sheet andyou don’t want to buy higher priced (certificates of deposit) if you can’t put that moneg back into new loans,” says He notes that bankers are reviewinvg portfolios closer than ever to make the tougn decisions necessary to keep the non-performing numbers down. Adds bank consultanr Golden: “Regulators are urging the banks to get all the moles and warts off the books as quicklygas possible. Everyone is trying to be very Bank of River Oaks is one of only14 Houston-baseed banks without any non-performing loans on the book at the end of the first based on FDIC filings.
However, severalo of those are relatively new andsmall players, especially Mint which just opened in January. Dan managing director of investment bankers, says current market conditions make it difficultfor start-up bankxs to make headway. They typically lose money for the firsy two yearsof operation, he so it might be more difficulg for them to handle non-performing At the other end of the a total of 21 Houston bankds saw non-performing loans rise in the first quarter, with severapl reporting triple-digit increases.