California based lenders are facing a high volume of construction loan defaults. Lenders based in the sunshine state with significant levels of OREO ($1M or more) are showing an average construction loan default rate of nearly 15%. At the time this data was compiled these lenders were carrying about $740M in construction OREO while they had an aggregated balance of just under $4B in nonaccrual construction loans. Nonaccrual is a loan’s last stop on the property’s way to becoming bank owned or else being sold to a third party at foreclosure. Each loan type showed significantly higher levels of nonaccrual than REO at when this data was compiled.
One hundred and twenty three banks headquartered in California are showing just under $9.5B in distressed, defaulting, or otherwise challenged real estate loans. Residential loans showed the second largest volume of problem loans with about $2.65B in total problem loans. More troubling than the total volume of distress in this category is the fact that only about 10% is currently bank owned and therefore probably on the market. These figures could point to a 10-fold increase in bank owned properties coming to market.
Commercial real estate investors should expect to see 10-12X the volume of distressed opportunities over the coming months. With only $181M currently in REO portfolios California banks are likely to see more than $1.2B in trouble in the not too distant future.
Details for each of the lenders in the category are available in the full California Bank Owned Real Estate Report.
Florida Banks Distressed Real Estate: Construction & Residential Woes
Florida Banks Distressed Real Estate Balances
Florida based banks are showing mounting defaults in every loan type. The most recent FDIC data shows that Florida banks carrying more than $1M in OREO (bank owned real estate) have in total more than $8B in troubled real estate loans on their books.
Residential defaults lead the way with more than $3.5B in total problems. The most troubling part about this number is that 80% of this is 90 days late or else in nonaccrual meaning that the lender has lost hope the note will be repaid. This also means that the number of OREO properties currently on the market in Florida is the tip of the iceberg.
Construction loan defaults are also sky high totalling about $3.1B. The majority of this debt is also 90 days late or in nonaccrual which seems to confirm the broad speculation that lenders are not letting go of bad debt and failed real estate projects in hopes of sunnier days.
Florida banks with more than $1M in REO averaged construction loan default rates of 14.9% with many of them seeing problems with upwards of 30-50% of the construction loans they’ve made in recent years.
Complete details on each of the individual 137 banks with $1M or more in bank owned property are available here.