This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

10 Strong Commercial Real Estate Lenders

NEW YORK ( TheStreet) -- Commercial real estate credit quality continued to decline during the third quarter, but there are signs that losses in the asset class are starting to abate.

Defaults on commercial properties, which includes mortgages at least 90-days delinquent and those loans in non-accrual status, continued their ascent to 4.36% vs. 4.27% in the second quarter and 3.41% a year ago, according to the most recent report by Real Capital Analytics.

The rise was one of the smallest sequential increases since the market downturn began. However, multifamily default rates, which dropped "sharply" in the prior quarter, jumped back to a new high for the three months ending in September, according to Real Capital.

"As property prices and rent measures stabilize in many markets, the increase in strain on bank health related to commercial real estate is also becoming more measured," Real Capital Analytics' global chief economist Sam Chandan writes in the November 30 report.

Defaulted commercial real estate mortgages and multifamily loans on banks' balance sheet totaled $57 billion at September 30, according to Real Capital. Banks have only worked through "a subset of these loans," and so the potential for losses is still high, the report says.

Real Capital also points out that default rates at banks with between $100 million and $1 billion in assets is 3.29% -- 107 basis points below the national average -- despite the fact that these institutions typically hold high concentrations of commercial real estate, multifamily lending and construction lending.

Still challenges remain.

Banks' Commercial Real Estate Collapse Has Yet to Hit

"We're certainly not at the end of the credit cycle with CRE, but I would say at the same time a lot of the heavy lifting has been done," says Peter Winter, an analyst at BMO Capital Markets, a unit of Bank of Montreal (BMO). "Banks haven't really made a loan in over two years in that area. They've aggressively written down the loans in that area."

Winters adds that with the economy starting to stabilize, commercial real estate prices are also stabilizing.

"The secondary market has been more active for loan sales and that's helping the banking industry," he says. "As banks have written down the loans and pricing has stabilized, the valuation gap (between buyers and sellers) has narrowed, which is leading to more sales activity."

TheStreet decided to take a look at banks with the best positioned loan portfolios given their high CRE concentrations.

We looked at the top 50 largest holding companies, with at least 25% of their loan portfolios comprised of commercial real estate loans, construction loans and multifamily loans. We then narrowed that list down to top 10 banks based on their nonperforming assets vs. total assets. Regulatory data was provided by SNL Financial.

The major difference between banks that had better resiliency in their CRE portfolios is likely a combination of factors. First, banks like M&T Bank Corp. (MTB - Get Report), New York Community Bancorp (NYB) and Valley National (VLY - Get Report), which all the made TheStreet's Top 10 List, are located in the Northeast, an area where real estate prices in general held up better than the rest of the country.

However, as Winter points out, banks like M&T and New York Community (the only two on the list which he covers) are "relationship-oriented banks," meaning neither bank went out of their natural footprint to make loans.

"That's where a lot of banks got into trouble," Winter says.

Additionally, both banks have good track records for underwriting and never really strayed from that throughout the heavy lending years earlier in the decade.

Winters noted that it didn't surprise him that M&T and New York Community made the list."In fact it would surprise me if they didn't make the list," he says.

Here are the ten with the strongest loan quality among those loan types.
1 of 11

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
CATY $34.47 -0.09%
FULT $14.47 -0.14%
FMER $20.34 -0.10%
MTB $124.94 0.28%
VLY $11.11 -0.18%


Chart of I:DJI
DOW 17,813.39 +1.20 0.01%
S&P 500 2,088.87 -0.27 -0.01%
NASDAQ 5,116.1430 +13.3350 0.26%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs