ABA Banking Journal - December 2009 - (Page 16) COVER STORY (Continued from front cover) T hat banks’ commercial real estate lending sector is having a rough ride and is in for more is certain. There has already been an impact on many institutions’ earnings and capital, and there will be more pain before the real estate cycle begins to bring things back. All indications are that the problem will continue to hit regional and community banks hardest. The question is whether examiners and appraisers, toeing their professional standards religiously and conservatively in a period where all players face quick blame from Washington, are going to moderate their approach in accordance with new CRE workout guidance, or “stay the course.” In a series of extensive telephone interviews and face-to-face meetings with bankers, real estate experts, appraisers, and attorneys from around the country, as well as regulatory input, a picture is forming of a situation in flux. A generally positive regu- said Bair. “At the same time, examiners are instructed to take a balanced approach in assessing an institutions’ risk management practices for workouts. We feel that this guidance can help address the economic dislocations that are hurting both small business borrowers and their lenders.” (See “Guidance at a glance,” page 20, for the key points in the document.) A ranking FDIC official had given some tidbits about the new document in late October, during a session at ABA’s Annual Meeting in Chicago. More than 3,000 banks had exceeded either one or both of the threshold figures contained in the CRE lending guidelines issued a few years back, noted Steven Fritts, associate director in FDIC’s Division of Supervision and Consumer Protection. “Most of those 3,000 banks are working through this,” Fritts told assembled bankers. “They aren’t going to fail, and the great majority of them aren’t going to wind up on our problem list.” latory document may or may not be enough to quench the effects of gasoline being dribbled onto a smoldering fire by field examiners playing hardball. Picture of a roiling sector On Nov. 24, two days before Thanksgiving, FDIC announced quarterly industry earnings. In a press conference, Chairman Sheila Bair had been speaking of the industry’s high provisioning for loan losses, because of the growing levels of problem loans and chargeoffs. She spoke of the industry’s progress in charging off problem loans, and in building capital and reserves. Then she turned to something that had surprised many in the industry about three weeks earlier— the interagency “Policy Statement on Prudent Commercial Real Estate Loan Workouts.” “This policy statement encourages banks to continue making good loans to commercial real estate borrowers, many of which are small businesses, and to prudently work with borrowers who are having difficulties because of economic conditions,” By Steve Cocheo, executive editor 16 DECEMBER 2009/ABA BANKING JOURNAL But Fritts added that times like these revealed those who hadn’t underwritten CRE loans as well as others. “How they were underwritten shows up now,” said Fritts. “We saw this coming, and as regulators we probably didn’t do as good a job on this as we should have.” Skeptical reception…and why The Oct. 30 guidance—released in final form, as a policy statement, rather than as a rule that would have required notice and comment periods—was welcomed, but regarded with considerable skepticism by community bankers questioned. A senior regulatory analyst who read the document concluded that examiners retain considerable “wiggle room.” Some bankers are simply not ready to believe that a policy statement will bring meaningful change in the field. “So the regulators are going to be kinder and gentler on CRE?” asked a North Carolina community banker rhetorically at a recent industry meeting. “Well, if you believe that, I have some land to sell you.” He was not alone in that view. What is it that has bred this level of cynicism? The matter goes deeper than just a mistrust of Washington agency statements. Subscribe at www.ababj.com http://www.ababj.com Table of Contents for the Digital Edition of ABA Banking Journal - December 2009 ABA Banking Journal - December 2009 Contents Editor's Column Briefing ABA Resources ABA Chairman's Position Community Banking Pass the Aspirin CRE Pain Fraud Looms Large on BSA Menu Tech Topics Compliance Clinic Mailbox The Economy ABA Banking Journal - December 2009 ABA Banking Journal - December 2009 - ABA Banking Journal - December 2009 (Page Cover1) ABA Banking Journal - December 2009 - ABA Banking Journal - December 2009 (Page Cover2) ABA Banking Journal - December 2009 - Contents (Page 1) ABA Banking Journal - December 2009 - Editor's Column (Page 2) ABA Banking Journal - December 2009 - Editor's Column (Page 3) ABA Banking Journal - December 2009 - Editor's Column (Page 4) ABA Banking Journal - December 2009 - Briefing (Page 5) ABA Banking Journal - December 2009 - Briefing (Page 6) ABA Banking Journal - December 2009 - Briefing (Page 7) ABA Banking Journal - December 2009 - Briefing (Page 8) ABA Banking Journal - December 2009 - ABA Resources (Page 9) ABA Banking Journal - December 2009 - ABA Chairman's Position (Page 10) ABA Banking Journal - December 2009 - ABA Chairman's Position (Page 11) ABA Banking Journal - December 2009 - Community Banking (Page 12) ABA Banking Journal - December 2009 - Community Banking (Page 13) ABA Banking Journal - December 2009 - Pass the Aspirin (Page 14) ABA Banking Journal - December 2009 - Pass the Aspirin (Page 15) ABA Banking Journal - December 2009 - CRE Pain (Page 16) ABA Banking Journal - December 2009 - CRE Pain (Page 17) ABA Banking Journal - December 2009 - CRE Pain (Page 18) ABA Banking Journal - December 2009 - CRE Pain (Page 19) ABA Banking Journal - December 2009 - CRE Pain (Page 20) ABA Banking Journal - December 2009 - CRE Pain (Page 21) ABA Banking Journal - December 2009 - Fraud Looms Large on BSA Menu (Page 22) ABA Banking Journal - December 2009 - Fraud Looms Large on BSA Menu (Page 23) ABA Banking Journal - December 2009 - Fraud Looms Large on BSA Menu (Page 24) ABA Banking Journal - December 2009 - Fraud Looms Large on BSA Menu (Page 25) ABA Banking Journal - December 2009 - Fraud Looms Large on BSA Menu (Page 26) ABA Banking Journal - December 2009 - Fraud Looms Large on BSA Menu (Page 27) ABA Banking Journal - December 2009 - Tech Topics (Page 28) ABA Banking Journal - December 2009 - Tech Topics (Page 29) ABA Banking Journal - December 2009 - Tech Topics (Page 30) ABA Banking Journal - December 2009 - Tech Topics (Page 31) ABA Banking Journal - December 2009 - Compliance Clinic (Page 32) ABA Banking Journal - December 2009 - Compliance Clinic (Page 33) ABA Banking Journal - December 2009 - Mailbox (Page 34) ABA Banking Journal - December 2009 - Mailbox (Page 35) ABA Banking Journal - December 2009 - The Economy (Page 36) ABA Banking Journal - December 2009 - The Economy (Page Cover3) ABA Banking Journal - December 2009 - The Economy (Page Cover4) http://www.nxtbook.com/nxtbooks/sb/ababj0513 http://www.nxtbook.com/nxtbooks/sb/ababj0413 http://www.nxtbook.com/nxtbooks/sb/ababj0313 http://www.nxtbook.com/nxtbooks/sb/ababj0213 http://www.nxtbook.com/nxtbooks/sb/ababj0113 http://www.nxtbook.com/nxtbooks/sb/ababj1212 http://www.nxtbook.com/nxtbooks/sb/ababj1112 http://www.nxtbook.com/nxtbooks/sb/ababj1012 http://www.nxtbook.com/nxtbooks/sb/ababj0912 http://www.nxtbook.com/nxtbooks/sb/ababj0812 http://www.nxtbook.com/nxtbooks/sb/ababj0712 http://www.nxtbook.com/nxtbooks/sb/ababj0612 http://www.nxtbook.com/nxtbooks/sb/ababj0512 http://www.nxtbook.com/nxtbooks/sb/ababj0412 http://www.nxtbook.com/nxtbooks/sb/ababj0312 http://www.nxtbook.com/nxtbooks/sb/ababj0212 http://www.nxtbook.com/nxtbooks/sb/ababj0112 http://www.nxtbook.com/nxtbooks/sb/ababj1211 http://www.nxtbook.com/nxtbooks/sb/ababj1111 http://www.nxtbook.com/nxtbooks/sb/ababj1011 http://www.nxtbook.com/nxtbooks/sb/ababj0911 http://www.nxtbook.com/nxtbooks/sb/ababj0811 http://www.nxtbook.com/nxtbooks/sb/ababj0711 http://www.nxtbook.com/nxtbooks/sb/ababj0611 http://www.nxtbook.com/nxtbooks/sb/ababj0511 http://www.nxtbook.com/nxtbooks/sb/ababj0411 http://www.nxtbook.com/nxtbooks/sb/ababj0311 http://www.nxtbook.com/nxtbooks/sb/ababj0211 http://www.nxtbook.com/nxtbooks/sb/ababj0111 http://www.nxtbook.com/nxtbooks/sb/ababj1210 http://www.nxtbook.com/nxtbooks/sb/ababj1110 http://www.nxtbook.com/nxtbooks/sb/ababj1010 http://www.nxtbook.com/nxtbooks/sb/ababj0910 http://www.nxtbook.com/nxtbooks/sb/ababj0810 http://www.nxtbook.com/nxtbooks/sb/ababj0710 http://www.nxtbook.com/nxtbooks/sb/ababj0610 http://www.nxtbook.com/nxtbooks/sb/ababj0510 http://www.nxtbook.com/nxtbooks/sb/ababj0410 http://www.nxtbook.com/nxtbooks/sb/ababj0310 http://www.nxtbook.com/nxtbooks/sb/ababj0210 http://www.nxtbook.com/nxtbooks/sb/ababj0110 http://www.nxtbook.com/nxtbooks/sb/ababj1209 http://www.nxtbook.com/nxtbooks/sb/ababj1109 http://www.nxtbook.com/nxtbooks/sb/ababj1009 http://www.nxtbook.com/nxtbooks/sb/ababj0909 http://www.nxtbook.com/nxtbooks/sb/ababj0809 http://www.nxtbook.com/nxtbooks/sb/ababj0709 http://www.nxtbook.com/nxtbooks/sb/ababj0609 http://www.nxtbook.com/nxtbooks/sb/ababj0509 http://www.nxtbook.com/nxtbooks/sb/ababj0409 http://www.nxtbook.com/nxtbooks/sb/ababj0309 http://www.nxtbook.com/nxtbooks/sb/ababj0209 http://www.nxtbook.com/nxtbooks/sb/ababj0109 http://www.nxtbook.com/nxtbooks/sb/ababj1208 http://www.nxtbook.com/nxtbooks/sb/ababj1108 http://www.nxtbook.com/nxtbooks/sb/ababj1008 http://www.nxtbook.com/nxtbooks/sb/ababj0908 http://www.nxtbook.com/nxtbooks/sb/ababj0808 http://www.nxtbook.com/nxtbooks/sb/ababj0708 http://www.nxtbook.com/nxtbooks/sb/ababj0608 http://www.nxtbook.com/nxtbooks/sb/ababj0508 http://www.nxtbook.com/nxtbooks/sb/ababj0408 http://www.nxtbook.com/nxtbooks/sb/ababj0308 http://www.nxtbook.com/nxtbooks/sb/ababj0208 http://www.nxtbook.com/nxtbooks/sb/ababj-compsurv08 http://www.nxtbook.com/nxtbooks/sb/ababj0108 http://www.nxtbook.com/nxtbooks/sb/ababj1207 http://www.nxtbook.com/nxtbooks/sb/ababj1107 http://www.nxtbook.com/nxtbooks/sb/ababj1007 http://www.nxtbook.com/nxtbooks/sb/ababj0907 http://www.nxtbook.com/nxtbooks/sb/ababj0807 http://www.nxtbook.com/nxtbooks/sb/ababj0707 http://www.nxtbook.com/nxtbooks/sb/ababj0607 http://www.nxtbook.com/nxtbooks/sb/ababj-jackhenry http://www.nxtbook.com/nxtbooks/sb/ababj0507 http://www.nxtbook.com/nxtbooks/sb/ababj0407 http://www.nxtbook.com/nxtbooks/sb/ababj0307 http://www.nxtbook.com/nxtbooks/sb/ababj-compsurv07 http://www.nxtbook.com/nxtbooks/sb/ababj0207 http://www.nxtbook.com/nxtbooks/sb/ababj0107 http://www.nxtbook.com/nxtbooks/sb/ababj1206 http://www.nxtbook.com/nxtbooks/sb/ababj06corebanking http://www.nxtbook.com/nxtbooks/sb/ababjcompsurv2006 http://www.nxtbookMEDIA.com
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