Northwest lender exposure to construction loans?
Does anyone have any idea what kind of exposure northwest banks (and other lenders) have to construction loans? Would it be correct to assume that banks in our region have far fewer loans tied to construction (commercial or residential) since we didn't have the same massive building boom as elsewhere in the nation? Sure, plenty of regional banks are hurting in Florida and California, but both of those states saw massive building booms in recent years.
The articles (about local banks) Tim cited in his blog post don't seem to give any details on what the construction loan portfolios look like at individual banks, and just seems to imply that their stocks are down because of a general malaise across the country.
If northwest banks really don't have the same degree of exposure to construction as their peers across the nation, maybe they are far less vulnerable to a downturn.
The articles (about local banks) Tim cited in his blog post don't seem to give any details on what the construction loan portfolios look like at individual banks, and just seems to imply that their stocks are down because of a general malaise across the country.
If northwest banks really don't have the same degree of exposure to construction as their peers across the nation, maybe they are far less vulnerable to a downturn.
Comments
- Westsound Bank of Bremerton
- Sterling Savings Bank of Spokane
Just which projects were these banks lending money to? Considering how our region hasn't really experienced much of a downturn yet, these lenders must have really picked lemons to back. Or maybe they were somehow pouring money into hot markets like Florida or Arizona. I've heard of mid-Western lenders who fell into that trap.
http://online.wsj.com/public/resources/documents/info-Loan080701-sort.html
Yes, there are "custom" homes dotted around Bellevue, but nothing on the scale of the large development projects that took place in California, Florida, Arizona, or Nevada. It's hard to imagine that all these individual projects could equal the loan exposure that the regional banks in bubbly areas bulked up on.
1.5 million loan x 100 = 150 million exposure. The lenders I knew, easily underwritten more than 150 million dollar worth of construction loan per month locally.
BECU and probably most other credit unions do not use FDIC. I believe their deposit insurance is NCUA. When I looked into the limits, they were quite comparable to FDIC limits.
Maybe the best move is to spread your money across several good banks. I hear, that even with deposit insurance, it can take a long time to get your money back. If you diversify across 2-5 banks, and one of them goes down, you've still got a significant portion of your cash on hand in case you need it before you get reimbursed.
I heard somewhere that it is ten years. But I heard that about twelve years ago so don't quote me...
I am moving to Homestreet Bank very soon.
Oops, I was too vague before. What I meant was FDIC only guarantees you'll be paid back, not when. Of course people whose money is in the first failing banks will be reimbursed relatively quickly. I would expect nothing less.
It's the case where enough banks fail that the FDIC gets swamped that I'm talking about. My understanding (I wasn't there) is that during the S&L crash, it took years before some parties were reimbursed fully.
Surprisingly, the one not named would have been the one I'd pick to go under first: City Bank in Lynnwood who held a high market share of builder and developer loans. I have heard that their stock price is very low right now.
There was also a nice article in Ethix magazine about Homestreet Bank and how they chose to stick with offering FHA loans and avoided originating all subprime. However, they also have a good reputation as being a new construction friendly bank.
I don't actually know, but my gut feeling is you should just be happy you're getting the capital back.
Jill, Frontiers exposure to Barclays North as of May was $300,000 TOTAL.
Barclays exposure is of course sterling, north sound, and a few banks which will not be named as of yet.
Barclays went under last week BTW.
Yes and that's because Frontier was first in line many months ago to make Barclays pay up. Frontier still has exposure to other residential and commercial developers.
Barclays actually went under on June 19th. I blogged about it here:
http://www.raincityguide.com/2008/06/19 ... cash-flow/
Well, well. Look who's in the news tonight. Columbia Bank:
http://www.bizjournals.com/seattle/stor ... ily21.html
Its a shame to see Barclays go though because Pat is really a hard working guy who came from the roots up and built a very diverse company, with hard working people behind it. Riding on that edge and optimism arrogance crept up.