Academic journal article ABA Banking Journal

C&I Asset Quality-A Few Cautionary Signals

Academic journal article ABA Banking Journal

C&I Asset Quality-A Few Cautionary Signals

Article excerpt

A midst all of the credit-related turmoil of the last few quarters, the commercial and industrial (C&I) lending segment has been largely untouched. Recent trends, however, suggest an uptick in problem loans in the segment with the first-quarter 2008 ratio of noncurrent C&I loans to total C&I loans increasing by 14 basis points at the national level as compared to the fourth-quarter of 2007. To get a sense for the geographic concentration of the problem loans, SNL took a look at state-level commercial bank data aggregated from the call reports. The table shows the states with the highest numbers.

New Hampshire stood out with a noncurrent ratio in the C&I segment of 5.12%, the state had previously run at around 1% to 1.5%, so the uptick was large indeed. Puerto Rico, while not technically a state, was near the top of the list with a ratio of 4.68%, up from the prior period, but largely in-line with prior behavior. Delaware and Minnesota also made the top of the list with increases in the 40 basis point range on a linked-quarter basis. The Southwest was represented with both Arizona and New Mexico showing up on the top-ten list.

The outlook for the C&I lending segment for the rest of the year is largely mixed following geographic lines. Look for noncurrent loans for the nation as a whole to creep upward. Regionally look for concentrations in areas that have experienced higher levels of losses in the 1-4 family loans segments as those woes spread into the general economy of the region. …

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