Monday, March 12, 2012

More commercial loan collapse

We had an earlier piece about the banks pulling in the commercial loans of churches (Church foreclosure USA).  The following piece is well worth reading in its entirety.  As we can see, it is not just church loans that they have declined to extend.

David Ranii, News & Observer (Raleigh, NC), 11 November 2012

Bud Matthews has been battling for months to avoid foreclosure on his small company's offices in Chatham County, a scenario that he says would put him out of business. He faces this predicament even though he's been diligently making the monthly payments on his loan.

Matthews rails that his lender, SunTrust Banks, hasn't been willing to renew his five-year commercial real estate loan, which ran out in June. In the absence of a new loan, he owes SunTrust a balloon payment of more than $200,000 - money he doesn't have….

"If you think about what has historically been the prime collateral asset for a small business, it has been real estate," said Scott Daugherty, the state's small business commissioner.

The banking industry's pullback from the real estate market couldn't come at a worse time for small businesses, many of which were hurt big-time by the recession.

"It does an enormous amount of collateral damage," said Grant Yarber, former CEO of Raleigh-based Capital Bank. "It destroys jobs, and it puts small businesses out of business. A lot of banks don't really care about that."

...Tony Plath, a finance professor at UNC Charlotte:

"All the big banks have cut their exposure to commercial real estate," he said. "The little banks have done it too. But they have done it at the behest of the regulators."

Sun Trust is a large Atlanta based bank that pushed into the Raleigh-Durham-Chapel Hill (RDU) market at the peak of the last bubble.  They may have a little more exposure, and less roots in the area than some of the others.  But it is obvious that this is not just about Sun Trust.

It pays to look very closely at banking behavior.

It was not reported, but when the press was still all happy and cheerful with the economic prospects going forward (2006 -2007) a lot of the commercial banks in North Carolina (Bank of America, and BB&T at least) put some sort of hiring freeze on and began retrenching.  Commercial banks generally have better real time information on local business activity than any other group in the country.  It pays to keep an eye on what the smarter ones (which might not include Sun Trust) are doing.

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