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School of Business Commercial Real Estate Conference March 6, 2012. The End of Extend and Pretend A Look at the Recent CRE Loan Experience of Connecticut’s Community Banks. Martin J. Geitz, President & CEO. Agenda. Community Bank Profile Market Conditions

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school of business commercial real estate conference march 6 2012

School of BusinessCommercial Real Estate Conference March 6, 2012

The End of Extend and Pretend

A Look at the Recent CRE Loan Experience of Connecticut’s Community Banks

Martin J. Geitz, President & CEO

agenda
Agenda
  • Community Bank Profile
  • Market Conditions
  • Commercial Real Estate Loan Exposure
  • Loan Quality Trends
  • Conclusions
statistical profile
Statistical Profile
  • 46 community banks headquartered in Connecticut
  • Often the largest bank in their home town
  • Connecticut community bank deposit market share: approximately 22%
  • 31 community banks’ data available for this analysis
    • Total Assets $23.0 billion
    • Total Loans $16.6 billion
    • Total Deposits $17.8 billion
  • Community banks account for over 50% of small business loans in US
cre experience
CRE Experience
  • CRE loans are significant balance sheet concentrations for many banks
  • Concentrations have declined slowly since 2009 peak
  • Loan quality indicators are still elevated
  • Expect continued impact of workouts: loan write-downs, foreclosures, distressed sales
slide12

Community Bank

CRE Loan Concentrations

total cre loans total loans
Total CRE Loans / Total Loans

Percentage

Data from FDIC UBPR Reports

total cre loans total loans1
Total CRE Loans / Total Loans

Number of CT Community Banks in each tier

total cre loans capital1
Total CRE Loans / Capital

Number of CT Community Banks in each tier

slide30

Community Bank

CRE Loan Quality

delinquency trends
Delinquency Trends
  • Loan delinquencies typically forecast loan workouts and, ultimately, charge-offs
  • Delinquencies plateauing for many CT community banks
  • Delinquencies remain high for commercial real estate loans
conclusions
Conclusions
  • CT community bank CRE exposure has not declined significantly, though C&D loan exposure is down
  • CRE delinquencies appear to be leveling off – but is it a trend?
  • Weak economic growth offers little reason to expect quick improvement in community bank CRE loan conditions