Some yearend bank deals gave new meaning to the abbreviations M&A and CRE: More Anxiety about Crummy Real Estate loans.

The banks that agreed to buy Wilmington Trust Corp., Marshall & Ilsley Corp. and Whitney Holding Corp. took surprisingly big markdowns on their loans to homebuilders, apartment owners, office property developers and other commercial real estate borrowers.

Investors and analysts had been hoping these lenders and their competitors were getting a handle on problem loans to businesses by devaluing them and modifying terms. The markdowns suggest otherwise. They raise fears that banks are either downplaying the depth of their troubles in commercial real estate or being blindsided by rapidly increasing losses.

"It seems like there are further markdowns to be taken," said Tom Mitchell, an analyst with Miller Tabak & Co. "Every management team wants you to believe that they've taken a meat cleaver" to the value of their troubled loan portfolios.

Observers worry in particular about what the markdowns say about the health of other regional banks in the Midwest and Southeast with large portfolios of outstanding real estate-related business loans, like Huntington Bancshares of Columbus, Ohio and Regions Financial Corp. in Birmingham, Ala.

Prior to their deals, Wilmington Trust, M&I and Whitney had been making the case that they were containing their construction and commercial mortgage losses.

"Our credit quality trends continue to stabilize," Gregory Smith, M&I's chief financial officer, told investors in October, despite an uptick in problem credits that analysts saw as a setback to the Milwaukee company's two-year effort to stanch losses to homebuilders in Florida and Arizona.

Bank of Montreal's overall loan-loss projections of $4.7 billion ($800 million of that being construction and development loans) suggest that M&I is only halfway through its turnaround after having lost $4.8 billion in three years.

"Most people hoped that they were a little further along," said Scott Siefers, an analyst with Sandler O'Neill & Partners.

Since the summer, both Wilmington and Whitney had signaled a more aggressive approach to identifying and writing down problem loans after outside audits of their loan books.

But buyer M&T Bank Corp. estimated Wilmington will still lose another $534 million in construction loans after booking $216 million on bad loans to retirement home developers and other businesses since the beginning of 2008.

New Orleans-based Whitney, meanwhile, could lose $156 million, or 15%, of its construction book, according to the estimates of its buyer, Hancock Holding Co. of Gulfport, Miss. It lost $25 million on construction loans in the most recent quarter on stalled development projects in Texas and Louisiana. Hancock's estimate suggests more pain on the horizon, though Whitney had said most of its construction loans are less valuable than their collateral.

To be sure, nobody is panicking just yet about a pending meltdown in construction lending and mortgages. These loss projections are just that: projections. They haven't happened yet. Healthy banks have huge incentives to write down as many questionable loans as possible when buying troubled banks: They offer protection against an embarrassing post-merger surge in loan losses, and there is the prospect of earning that money back if the economy rebounds and borrowers have an easier time making payments. The three buyers — which analysts said have good risk management — may just be playing it safe.

The depth of their cuts is striking, though, experts said.

"Rationally and philosophically you would say: 'Yes. You should be as conservative as you can be when marking down acquired books,'" said Andrew Marquardt, an analyst with Evercore Partners. "But I think it's still pretty notable that Wilmington, M&I and Whitney all had pretty poor loss numbers. I think that makes you concerned about any institution that still has meaningful [commercial real estate] exposure that hasn't really addressed it."

Marquardt's team's bearish loss estimates on Wilmington and M&I are almost optimistic when compared with those of the companies buying them.

Evercore estimated that 25% of Wilmington's construction loans would go bad through the entire credit cycle; M&T's estimate is 40%. At M&I, Evercore called for total losses of 14.6% of its loans; Bank of Montreal's estimate is 21%.

"What does it mean?" Marquardt asked. "I think it may really just mean that the credit cycle is going to be longer and deeper than people really appreciated."

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