• Sat. Dec 9th, 2023

Commercial Real Estate Loan Exposure A Concern With Collapse Of Two US Banks

ByMark Gilman

Mar 13, 2023
Commercial Real Estate Loan Exposure A Concern With Collapse Of Two US Banks

A second bank has folded, and the tension is increasing in the U.S. banking industry. 

It’s also stunned the commercial real estate (CRE) industry, not only with soon-to-be-vacant bank properties but because of the loans held by the defaulting banks.

First, California regulators closed Silicon Valley Bank (SVB), which subsequently was taken over by the Federal Deposit Insurance Corporation (FDIC) on Friday, putting billions of deposits in limbo. On Sunday, New York state regulators shut down Signature Bank, the third-largest failure in U.S. banking history. 

The closure of both banks could immediately impact the commercial real estate industry. While much of the attention regarding SVB’s closure has focused on tech companies and startups dependent on its loans, its 2022 financial report shows 15% of its loans were attached to residential mortgages and commercial real estate. Those loans will have to be taken over by someone else in the future. 

A total of $8.3 billion in personal home mortgages were logged by SVB at the end of 2022, with an additional $138 million used for home equity credit lines. On the CRE side, the bank held $2.6 billion in loans, with 35% associated with multifamily properties and 21% on office buildings. In its year-end report, SVB said it had increased its exposure to commercial real estate in 2021 by acquiring Boston Private for $900 million.

Signature, a commercial bank with client offices in New York, Connecticut, California, Nevada and North Carolina, focused on nine national business lines that included commercial real estate. According to the New York State Department of Financial Services, the FDIC has also taken control of Signature, which had $110.36 billion in assets and $88.59 billion in deposits at the end of 2022. 

Signature focused on commercial banking services, consisting of CRE lending, commercial and industrial lending and commercial deposit gathering.

President Joe Biden on Monday said the U.S. banking industry was safe and added that deposits will “be there when you need them.” He also said his administration is working to contain the damage from the collapse of SVB and its business customers.

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Image and article originally from www.benzinga.com. Read the original article here.