NEW YORK (
) -- According to data from the FDIC and from my analysis of the
Quarterly Banking Profile for the fourth quarter of 2012, I conclude that the "Great Credit Crunch" continues among community banks on Main Street, USA.
Among the 7,083 FDIC-insured financial institutions there are 1,113 publicly traded banks, most of which are categorized as community banks. Looking at FDIC data, I find that 73 of these banks are overexposed to construction and development loans (C&D), and 451 are overexposed to commercial real estate loans (CRE). In addition to these signs of continued stress, 47 have 100% of their CRE loan commitments fully funded among the 305 that have at least 80% fully funded.
Based upon this information, 460 bank stocks qualify to be on the ValuEngine List of Problem Banks.
Back on Dec. 11, 2012,
I profiled 24 community banks with overexposures to C&D and CRE loans as reported in the Q3 FDIC Quarterly Banking Profile. Today, I update these profiles based upon data in the Q4 FDIC Quarterly Banking Profile.
On Feb. 11,
I stated that only five of the community banks that I have been tracking beat their Q4 2012 EPS estimates. Nine missed. This was the first sign that stress among community banks continues.
The Feb. 11 post noted that three of the community banks had been downgraded to hold from buy, leaving us with eight buy rated stocks and 15 hold rated stocks.
Today's list of 24 community banks shows only four buy-rated community banks with five downgrades, one of which went to strong sell from buy.
Observations from the table above:
is the only bank among the 24 to reduce exposure to CRE loans to be below 300%.
Boston Private Financial Holdings
Western Alliance Bancorporation
were downgraded to hold from buy since Dec. 11, 2012 with STSA downgraded to strong sell from buy. There have been no upgrades among these community banks.
The biggest winner over the past twelve months is WAL with a gain of 66.7% and the biggest loser was STSA with a loss of 22.0%.
The twelve month trailing P/E ratios range between 13.1
United Community Banks
, among the 21 with ratios, so these community banks are not cheap.
The table shows key line items from the FDIC Quarterly Banking Profile comparing data from the end of 2007 versus Q4 2012.
Nonfarm / Nonresidential Real Estate Loans
: This category is a portion of what's known as commercial real estate loans (CRE). This category has not suffered the fate of other real estate loan categories with a rise of 10.8% since the end of 2007 to $1.073 trillion.
Construction & Development Loans
: C&D loans have been the Achilles Heel for community banks. These are loans to developers and home builders where a significant number of loans became noncurrent. While this asset class is down 67.6% since the end of 2007 it remains elevated at $203.9 billion.
Other Real Estate Owned (OREO)
: This asset class has been declining since peaking at $53.2 billion in the third quarter of 2010. This is still a source of stress in the banking system because at $38.5 billion is up 217.2% since the end of 2007.
: The peak in this bad loan category was $405.4 billion at the end of Q1 2010. While significantly lower today at $276.8 billion it's up $166.9 billion, or 151.8% higher since the end of 2007. This is another sign that the banking system continues to experience the affects of "The Great Credit Crunch."
The daily chart for the
America's Community Bankers Index
( ABAQ) (186.88), which represents 389 publicly-traded community banks, tested a multi-year high last Friday at 187.42. My monthly value level is 180.51 with a weekly risky level at 189.37. I show significant downside risk as my quarterly value level lags at 158.71.
Chart Courtesy of Thomson / Reuters
At the time of publication the author had no position in any of the stocks mentioned.
This article was written by an independent contributor, separate from TheStreet's regular news coverage.