NEW YORK ( TheStreet) -- The commercial real estate apocalypse that industry analysts feared would hit banks has not yet happened. But that does not mean the problems associated with the segment have gone away, according to analysts.

Credit quality has started to improve for the commercial real estate sector and with housing market showing signs of a double-dip, there are still more renters than buyers. That augurs well for vacancy rates and cashflows in the commercial real estate segment.

"Our feeling is that the heavy lifting of charging off the most severe commercial real estate loans is behind banks," said Peter Winter, analyst at BMO Capital Markets. "We still expect problems in commercial real estate but they won't be as severe because most of the problem commercial real estate loans now are income- producing, as opposed to construction and development loans that produced no cash flow."

Winter also said that the pickup in demand for distressed loans in the secondary market was a good sign for banks looking to offload their problem loans.

Matt Anderson, managing director at Trepp, a provider of commercial mortgage information and analytics also agrees that the problems aren't as severe as before because banks have shored up capital and shrunk their commercial real estate exposure.

But he says banks with a high concentration to commercial real estate are still at risk, especially if the economy slips into a double dip recession.

"A double dip would have a detrimental impact on the sense of recovery in the commercial real estate market.," he said. "Banks have been able to take charge offs on problem loans but have been able to replenish capital with earnings. But their ability to earn their way out might suffer in a double dip."

"Banks have been cutting down on provisioning," he added. "For the most part banks think they have provided for future losses. The economic outlook will have an impact there too. Banks might have to increase their provisions again which they are hoping they won't have to do."

The potential losses from commercial real estate are staggering. About $1.7 trillion worth of commercial mortgage debt is expected to mature between 2011 to 2015, of which more than half is expected to be underwater or close to underwater, according to Trepp. More than $250 billion of those mortgages are likely to be underwater by at least 20%.

While large banks have been successful in reducing their exposure, there are still several regional banks with a heavy concentration in the sector. And although banks have already taken significant losses from commercial real estate loan portfolios, not all of the losses have been recognized.

Banks have chosen to give borrowers more time to pay back their loans in the hope that things might improve and they will recover their loans. This way they avoid having to foreclose and sell property at fire-sale prices.

Critics, however, say it is just a case of "extend and pretend" practices - extending the maturity of a loan and pretending its underlying value has not declined.

Regions Financial ( RF) recently was in the spotlight on news that its board was investigating whether executives delayed disclosure of loans going sour during the financial crisis.

Another practice that has attracted scrutiny from the Federal Reserve involves one that breaks up a loan into performing and non-performing parts, which has the effect of understating nonperforming loans. If regulators force banks to recognize problem loans more quickly, that could pose another risk to banks, according to Anderson.

Here are five banks that have a high exposure to commercial real estate. The banks are ranked in the order of the proportion of nonperforming commercial real estate loans in relation to capital.

All data has been sourced from SNL Financial. Only banks with assets of more than $10 billion have been considered in TheStreet's screen.

5. New York Community Bancorp

Content on this page requires a newer version of Adobe Flash Player.

Get Adobe Flash player

Shares of New York Community Bancorp ( NYB) are down 20% year-to-date.

The bank is a big lender in the multi-family mortgages business in the New York region, with an emphasis on apartment buildings that feature below market rents. Multi-family loans totaled $16.9 billion as of the first quarter of 2011.

Total commercial real estate exposure stood at about $23 billion in the first quarter or 626% of capital (Tier1 Capital plus loan loss reserves), placing it among the banks with the biggest concentrations in commercial real estate, by that measure. Nonperforming CRE loans stood at 15.1% of total capital. About $388 million worth of multi-family loans were classified as non-accruals.

Peter Winter at BMO Capital says that despite its seemingly high level of nonperforming commercial mortgage assets, historically, New York Community Bank has had a very low charge off rate, partly because of its underwriting standards. "Their average loan-to-value is under 60% - that's a lot of equity. They lend based on cash flow and not market value of the property. Because of the equity in the building and because there is cash flow, the charge-offs are low," he said. "They also focus on the rent control market which is high in demand especially during such weak economic conditions when there is demand for cheaper rental apartments. The vacancy rates are low," he added.

The bank has tried to manage delinquent loans through concessions such as such as rate reductions, extension of maturity dates, and forbearance agreements. As of March 31, 2011, loans on which concessions were made with respect to rate reductions amounted to $258.8 million; loans on which maturities were extended amounted to $55.8 million; and loans in connection with which forbearance agreements were reached amounted to $56.7 million.

However, the lower spreads on the multi-family mortgages has been a point of concern for some analysts. "Although the very solid pipeline of multifamily even at tighter spreads could be cause for the market to get more excited over NYB, the final wrinkle to the NYB story over at least the near term is that refinance activity in the company's core multifamily book is very strong, " analysts at JPMorgan noted in a report in May. "As a result of strong refi activity, despite a very strong pipeline of business, management guided to expect mid-single-digit loan growth in 2011."

13 analysts rate the stock a buy, eight rank it a hold and only one has a sell rating on the stock.

4. First BanCorp

Content on this page requires a newer version of Adobe Flash Player.

Get Adobe Flash player

Shares of First BanCorp ( FBP) have plunged 45% year to date and 66% over a one-year period.

The holding company of FirstBank Puerto Rico had commercial real estate loans totaling $3.76 billion or 217% of its capital. Nonperforming CRE loans stood at $288.9 million or nearly 17% of its capital.

Construction, land development and land loans are the biggest problem areas for the bank, hurt by its aggressive expansion into North Carolina's market in the boom years. Real estate construction loans accounted for 18% of the total loans in 2010, while commercial mortgages and other loans outside of residential real estate formed 29% of the total loan portfolio.

The bank said in the first quarter that it did not expect material improvement in nonperforming assets, nor deterioration, in the near future.

First BanCorp said in early June that private equity firm Thomas H. Lee had agreed to buy $180 million of its common stock, conditional upon it being able to raise another $320 million in common stock that will allow it to convert TARP preferred stock into common shares.

The additional capital is expected to cushion further losses.

Michael Diana, analyst at Cantor, reduced his estimates to reflect the expansion in the equity base, but viewed the deal as a positive for the stock, as it ensured First Bancorp's "survival as an individual entity."

The deal with Thomas Lee has triggered deal chatter. Cantor expects Doral ( DRL), its smaller rival, to renew takeover talks with First BanCorp. Other reports speculate that Bank of Nova Scotia ( BNS) might be interested in buying the bank.

According to Reuters, four analysts rate the stock a buy, while two rate it an outperform. There are no hold or sell ratings on the stock.

3. Synovus Financial

Content on this page requires a newer version of Adobe Flash Player.

Get Adobe Flash player

Shares of Georgia-based Synovus ( SNV) are down 20% year to date.

Synovus had a commercial real estate exposure of $11.5 billion as of the March 31, 2011, about 330% of its core capital. Non-performing CRE loans accounted for about 20% of its core capital.

Synovus is exposed to the SouthEast where real estate has taken the worst hit. Georgia and Florida, accounted for about approximately 53% and 13% of the total loan portfolio by geographic concentration.

JPMorgan analysts said in a note in May that Synovus is "likely to remain challenged on the growth front given a remixing of the loan portfolio away from C&D (construction and development) loans and more into C&I(commercial and industrial). In the first quarter, average loans declined at a 15% annualized pace. With the market seemingly very focused on top-line organic growth potential, we believe it's unlikely the market will take a more favorable view of SNV's growth prospects over the near term," the analysts wrote.

Wunderlich Securities recently downgraded the stock to a hold, citing capital constraints." We believe that Synovus' earnings power beyond this credit cycle will be greatly constrained by the potential need to raise significant amounts of common equity in order to exit the TARP program," the analyst wrote in a note.

Out of the 29 analysts covering the stock, four have a buy rating, 21 a hold rating and four have a sell call on the stock.

2. BancorpSouth

Content on this page requires a newer version of Adobe Flash Player.

Get Adobe Flash player

Shares of Bancorp South ( BXS) are down 24% year to date.

Shares of BancorpSouth ( BXS) are down 24% year-tp-date.

The bank, which like Synovus is also operates in the SouthEast, has faced deteriorating credit quality with total nonperforming loans increasing to 4.61% of net loans and leases in the first quarter from 2.43% in the year ago quarter.

BancorpSouth had commercial real estate loans worth $4.05 billion or 321% of its capital at the end of the first quarter. Nonperforming CRE (construction and commercial mortgages) loans at the end of the first quarter totaled accounted for 22% of capital.

"With 12% of total loans being C&D and 19% of these loans currently nonperforming, the bank currently has $886 million of performing C&D loans, very high, in our view, given only $921 million in TCE(Tangible common equity) at YE10," JPMorgan analysts said in a note last month.

"We also note that 74% of BXS's C&D loans are scheduled to mature in 2011, which we believe adds substantially to the bank's riskprofile. Although many banks are now in the process of restoring dividends, given the size of a stressed C&D portfolio at BXS relative to total capital and seeming near-term earnings power (which we peg in the range of $0.01 to $0.07 per share over the next several quarters), we believe this was the driver of the Board's recent decision to cut the dividend yet again."

On April 29, the company announced it would cut its quarterly dividend from 11 cents to a penny, which the management said was done to better preserve BancorpSouth's strong capital position.

There are no buy ratings on the stock. 13 analysts have a hold rating, while only one analyst has a sell call on the stock.


Content on this page requires a newer version of Adobe Flash Player.

Get Adobe Flash player

Shares of Banco Popular ( BPOP) are down 16% year-to-date.

A leading player in Puerto-Rico, Popular has been deeply affected by the real estate meltdown in that economy.

Total commercial real estate loans stood at $10.67 billion or 232% of its capital. Nonperforming commercial real estate loans made up 26% of its capital. The bank has a Tier 1 Common Equity ratio of 11.58%.

In May, the bank said it ended talks to sell a $500 million portfolio of troubled property loans, disappointing investors who were hoping that Popular would be able to offload non-performers. The bank has said it would seek new buyers.

Michael Diana at Cantor said he did not view the development as material. "Indeed, it appears, based on the language in the announcement, that Popular could have consummated this sale, were it willing/desperate enough to accept a low-ball offer. By refusing to do so, Popular seems to be demonstrating confidence in the Puerto Rico economy, that is, confidence that it will be able to work out these loans at a value no less than the level where they are marked."

Cantor has a hold rating on the stock.

Five analysts rate the stock a buy or outperform, while two have a hold rating on the stock.

--Written by Shanthi Bharatwaj in New York

>To contact the writer of this article, click here: Shanthi Bharatwaj.

>To follow the writer on Twitter, go to

>To submit a news tip, send an email to:
Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.