RALEIGH, NC (November 7, 2017) — During a webinar last month, Sageworks, a financial information company that provides lending, credit risk and portfolio risk solutions, surveyed professionals from banks and credit unions asking whether commercial real estate (CRE) concentrations had been a topic of discussion in their most recent regulatory exam. The results show a vast majority of respondents were asked about CRE concentrations in some capacity during their last exam.
Sageworks conducted the poll during the October 17 webinar on CRE concentration risk management, which was co-hosted with CEIS Review, a financial consulting firm out of New York City.
According to more than a hundred poll responses from financial institution chief executive officers, chief lending officers, chief credit officers, vice presidents of lending and lenders, 47 percent reported ‘much discussion’ about CRE concentrations during their most recent regulatory exam. Another 41 percent said it was brought up, but they were not required to go into detail. Only 12 percent reported CRE concentrations did not come up during their exam.
“Banks that [had significant] CRE concentration during the last downturn, 20 percent of those banks failed… So that provides a little bit of historical context for why the regulators are voicing some concern at this point,” said Managing Director at financial consulting firm CEIS Review, Liz Williams.
During the webinar Williams went on to comment that, in her experience, even banks that don’t currently have significant CRE concentrations may want to prepare for increased regulatory scrutiny as they grow.
“Anecdotally from talking with our clients, we’ve seen a wide range. We’ve seen some banks that are not yet at the 300 percent threshold say that regulators have been all over this issue, and that’s mainly because of growth. So something to keep in mind too, if you’re not at the 300 percent level but you’re over that 50 percent growth target you might find yourself facing some scrutiny,” explained Williams.
During this webinar, Sageworks and CEIS Review discussed how to manage CRE concentration risk, including lessons learned from past cycles and current industry best practices. Sageworks covered topics including limit structures, underwriting/policy requirements, stress testing and board oversight.
The on-demand webinar is available for review here: CRE Concentration Risk Management. For more information on upcoming webinars, visit web.sageworks/com/bank-webinars/ or email research@sageworks.com.
Sageworks offers banks and credit unions lending, credit risk and portfolio risk software to efficiently grow and improve the borrower experience. By automating the life of the loan with Sageworks, bankers book commercial loans faster and reduce risk. Sageworks uniquely provides integrated solutions and industry expertise to more than 1,400 financial institutions that achieve an average 38% higher loan growth than peers. Visit www.sageworks.com to learn more.
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