For Banks, More Trouble Just Around the Bend

Since bank call reports don't break down delinquent loans precisely enough to isolate commercial construction loans, we used reported numbers for nonfarm, non-residential real estate loans and "all other" construction loans, which exclude one- to four-family residential construction loans. Our figures for commercial real estate and construction delinquencies include some multifamily construction loans (which are usually for condominium projects) and large residential development loans.

For savings and loans, the data problem is even worse. The Thrift Financial Report lumps all delinquent construction loans together. Since this figure is dominated by one- to four-family residential loans, we have excluded the entire group from our data.

The table below ranks banks with over $10 billion in assets as of Sept. 30, by the ratio of domestic nonperforming nonfarm, non-residential real estate loans and "all other construction loans" (that is, those that aren't for one- to four-family residences) to total assets:

Banks with > $10 Billion in Assets Highest Asset Concentration in Nonperforming CRE & CCL

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All the banks on the list were considered well-capitalized per regulatory guidelines, with leverage ratios above 5% and risk-based capital ratios above 10%.

Westernbank Puerto Rico

Westernbank Puerto Rico, the main subsidiary of W Holding Company (WHI Quote), led the list with a ratio of nonperforming CRE and CCL to total assets of 5.07% as of Sept. 30. The institution's total nonperforming assets ratio was 9.44%.

Despite the high level of problem assets, Westernbank's year-to-date ratio of net charge-offs to average loans was just 0.77%. With loan loss reserves covering 3.33% of total loans, the bank would appear well-positioned to handle this level of charge-off activity going forward. However, Westernbank lost $12.1 million during the third quarter and with nonperforming assets doubling from last quarter, the bank appears to need additional capital in a hurry, despite the low rate of charge-offs so far.