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Many More Community Banks Will Fail


Table of data provided by the FDIC The table above shows the thirteen largest banks by total assets that are overexposed to CRE loans according to data from the FDIC. These thirteen are not likely to fail, as many others on the ValuEngine Lists have significantly higher risk exposures.



ValuEngine has a Buy rating on East West Bancorp (EWBC), Signature Bank (SBNY), International Bancshares (IBOC) and Umpqua Holdings (UMPQ); IBOC is the only bank in the table that is overexposed the C&D loans, but its risk ratio is only 101.7% of risk-based capital.



Central Bancompany (CBCYB) is not covered by ValuEngine and the stock is extremely inactive in terms of trading volume.



All other banks in the above table have Hold ratings according to ValuEngine.



The only two banks in the above table with Pipeline risk above 80% are Synovus (SNV) and EWBC.



To measure the technical strength for community banks I track the weekly chart for the America's Community Bankers Index (ABAQ). This index is a composite of over 400 community banks with an aggregate $125 billion market cap.



The weekly chart for ABAQ is negative with declining momentum (12x3x3 weekly slow stochastic) reading and a weekly close below the five-week modified moving average at 158.98. ABAQ is still up 4.8% year to date, but its down 9.1% from its March 19th high at 170.54. My quarterly value level is 142.79 with my annual risky level at 166.87.




Chart Courtesy of Thomson / Reuters

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

At the time of publication, the author had no positions in any of the stocks mentioned.
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