School of Business Commercial Real Estate Conference March 6, 2012 The End of Extend and Pretend A Look at the Recent CRE Loan Experience of Connecticut’s.

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Presentation transcript:

School of Business Commercial Real Estate Conference March 6, 2012 The End of Extend and Pretend A Look at the Recent CRE Loan Experience of Connecticut’s Community Banks Martin J. Geitz, President & CEO

Agenda Community Bank Profile Market Conditions Commercial Real Estate Loan Exposure Loan Quality Trends Conclusions

Profile of Connecticut’s Community Banks

Statistical Profile 46 community banks headquartered in Connecticut Often the largest bank in their home town Connecticut community bank deposit market share: approximately 22% 31 community banks’ data available for this analysis –Total Assets $23.0 billion –Total Loans $16.6 billion –Total Deposits $17.8 billion Community banks account for over 50% of small business loans in US

CRE Experience CRE loans are significant balance sheet concentrations for many banks Concentrations have declined slowly since 2009 peak Loan quality indicators are still elevated Expect continued impact of workouts: loan write-downs, foreclosures, distressed sales

CRE Market Trends

Commercial Real Estate U.S. Price Trends

U.S. Home Prices Trends

U.S. New Home Sales

U.S. Housing Starts

CT Housing Permits

Community Bank CRE Loan Concentrations

Total CRE Loans / Total Loans Data from FDIC UBPR Reports PercentagePercentage

Total CRE Loans / Total Loans Number of CT Community Banks in each tier Percentage of Total Loans Dec 2011 June 2011 Dec 2010 June 2010 Dec 2009 June 2009 Dec 2008 June 2008 Dec % % - 50% % - 40% % -30% % to 20% <10%

Total CRE Loans / Total Loans Median PercentagePercentage

Non-Owner Occupied CRE / Total Loans PercentagePercentage

Non-Owner Occupied CRE / Total Loans Median PercentagePercentage

Owner Occupied Non-farm Non-residential CRE Loans / Average Loans PercentagePercentage

Owner Occupied Non-farm Non-residential CRE Loans / Average Loans Median PercentagePercentage

Median Comparison PercentagePercentage

CRE Construction and Development Loans / Total Loans PercentagePercentage

CRE Construction and Development Loans / Total Loans Median PercentagePercentage

1 to 4 Family Construction Loans / Total Loans PercentagePercentage

1 to 4 Family Construction Loans / Total Loans Median PercentagePercentage

Total CRE Loans / Capital PercentagePercentage

Number of CT Community Banks in each tier Percentage of Total Loans Dec 2011 June 2011 Dec 2010 June 2010 Dec 2009 June 2009 Dec 2008 June 2008 Dec % % - 500% % - 400% % - 300% % - 200% <100%

Total CRE Loans / Capital Median PercentagePercentage

Non-Owner Occupied CRE Loans / Capital PercentagePercentage

Non-Owner Occupied CRE Loans / Capital Median PercentagePercentage

Community Bank CRE Loan Quality

Delinquency Trends Loan delinquencies typically forecast loan workouts and, ultimately, charge- offs Delinquencies plateauing for many CT community banks Delinquencies remain high for commercial real estate loans

All Loans 90+ Days Past Due PercentagePercentage

All Loans 90+ Days Past Due Median PercentagePercentage

1 to 4 Family Construction Loans 90+ Days Past Due PercentagePercentage

1 to 4 Family Construction Loans 90+ Days Past Due Median PercentagePercentage

Real Estate Loans 90+ Days Past Due PercentagePercentage

Real Estate Loans 90+ Days Past Due Median PercentagePercentage

Construction & Land Development Loans 90+ Days Past Due PercentagePercentage

Construction & Land Development Loans 90+ Days Past Due Median PercentagePercentage

Final Thoughts

FDIC Overall Loan Delinquency Trend

FDIC CRE Loan Delinquency Trend

Conclusions CT community bank CRE exposure has not declined significantly, though C&D loan exposure is down CRE delinquencies appear to be leveling off – but is it a trend? Weak economic growth offers little reason to expect quick improvement in community bank CRE loan conditions

Thanks School of Business Commercial Real Estate Conference November 1, 2011