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While the roots of the financial crisis can be found in the nation's residential housing sector, it's now exposure to bad commercial real estate loans that's battering banks' balance sheets.
[IMAGE]The research and analytics firm ""Trepp LLC"":http://www.trepp.com released a new report Monday on recent U.S. bank failures and the drivers behind their demise.
In total, 11 banks failed during the month of October - up sharply from six in September and seven in August. The count through October is 85 failures year-to-date. Trepp says that puts the annualized pace at just over 100 for the full 2011 calendar year.
Two more institutions were shut down over the ""first weekend in November"":http://dsnews.comarticles/regulators-seize-lenders-in-nebraska-and-utah-2011-11-07, raising this year's failed-bank tally to 87.
Trepp's report looks at the October failures and the makeup of each bank's portfolio to ascertain nonperforming loan attribution. The company's analysts found that commercial real estate exposure was the main driver behind problem loans for the banks that went under in October.
[COLUMN_BREAK]Commercial real estate loans comprised $401 million (65.1 percent) of the total $617 million in nonperforming loans at the failed banks. Construction and land loans made up $254 million while commercial mortgages comprised $147 million of the total nonperforming pool.
According to Trepp's analysis, the residential real estate loan category was a secondary source of distress, with $136 million in nonperforming loans, or 22.0 percent of the total nonperforming balance.
The remainder was comprised of commercial and industrial (C&I) loans made to businesses and corporations, which comprised $69 million (11.2 percent) of the non-performers, and consumer and other loans, which tallied $11 million (1.7 percent).
The majority of October's bank failures occurred in the Southeast and Midwest. However, the largest closing of the month was in the West - Community Banks of Colorado, which accounted for nearly 40 percent of total failed bank assets last month.
Trepp says its forecasting solution indicates that there are still about 250 U.S. banks with an ""extremely high risk of failure.""
With commercial real estate loan portfolios having such a large impact on bank solvency, Trepp also offered up an analysis of the sector's performance.
In prior quarters, the company says the U.S. banking system had seen delinquency rates drop sharply and the volume of troubled commercial real estate loans fall.
Early data from the third quarter indicates that those delinquency rate improvements have improved somewhat, Trepp says. At the same time, however, the company notes that the pace at which banks are resolving troubled real estate loans has slowed considerably.
