Preferred Bank’s Post

$2.48 per diluted share 1.97% ROA 19.44 ROE 3.96% NIM 28.3% efficiency ratio It was a pretty good quarter.

Our commentary on 1Q24 bank earnings so far:

New in #RiskIntelligence: After adjusting bank CRE concentration ratios for banks’ unrecognized mark-to-market interest rate losses, data shows even modest CRE loan stress losses could test the solvency of hundreds of banks. https://bit.ly/3zjd3qw #financialrisk #realestate

Very interesting FRB-NY study finds banks are still extending and pretending when it comes to CRE. The weaker the bank, the worse the cover-up. In aggregate, banks have 27% of mark-to-market cap in CRE maturing in three years, 40% in loans maturing in five. The weaker the bank, the worse this exposure and the harder the maturity wall could hit if reserves, write-downs do not accelerate. https://lnkd.in/eMmDuXPZ

https://lnkd.in/eKbE9Dvq Hmmm. Concerning. Proceed with Caution. The results from the nation's second-largest lender offer the latest example of how even the biggest banks are increasingly challenged by high interest rates.

If you have a large MBL portfolio centered in #CRE and your external audit firm isn’t having any meaningful conversations with your about your reserves, they might be more interested retaining your business than having tough conversations. Random side note: I was in a CU Board meeting last year where a regional #CPA firm was arguing that #MBL loans should be risk rated based on their past due status and not the primary source of repayment. It was remarkably surreal moment. All I could think was “Who raised You?” If the majority of MBL audits are being conducted by #CUSOs (often the same group that performed the underwriting) and some CPA firms are treating MBL like consumer loans, I am very concerned about the unrecognized losses at some of our institutions. Pro tip: Print out this document https://lnkd.in/eyYgapi7 It’s the Policy statement on Prudent #CRE Workouts mentioned in the NCUA’s 2024 Supervisory Priorities. Read pages 31-33 and then skip down to the appendix and follow the fact patterns. Once done, you’ll have a better understanding of CRE risk management and classification. 🙏🏿 Have an amazing and blessed day. #MBLSuccess #LoanReview #CreditRisk #ERM

Interesting and timely analysis on bank exposure to CRE: https://lnkd.in/eKiEWRZH

Telis Demos, I am hearing a lot about big bank vs smaller bank CRE exposure. Big, bigger, biggest, balance sheet management is challenging with rates at a 23.4-year high. Thanks for breaking it down. Follow the link below to view the article. Big Banks Are Taking Hits From Commercial Real Estate

U.S. banks' net income surged to $71.5 billion in Q2 2024 despite challenges in office real estate and credit card portfolios, according to the latest FDIC report. Read more in my story about the FDIC's quarterly banking profile at the link below: https://lnkd.in/gvUh7URR

https://lnkd.in/gmHZR9ci The results from the nation's second-largest lender offer the latest example of how even the biggest banks are increasingly challenged by high interest rates.