Only three banks failed in March 2011, which makes for the slowest monthly pace since December 2008. This was when three banks also failed, according to a Trepp report released today.

While the reasons for the bank failures were different, commercial real estate (CRE) loans were the biggest source of nonperforming loans.

Trepp noted that for the group of three failed banks in March, CRE loans comprised $44 million (or 55%) of the total $80 million in nonperforming loans. Commercial mortgages reached $27 million or 34% of the total, while construction and land loans made up $16 million (21%) of the total nonperforming pool.

The CMBS data firm also noted that the residential real estate loan category came in second, with $29 million in nonperforming loans, or 36% of the total nonperforming balance.

The remainder comprised the following: C&I loans ($3.3 million, 4% of the total) and consumer and other loans ($4.1million, 5% of the total).

According to Trepp, the three bank failures were in Illinois, Wisconsin and Oklahoma, which are all areas that have seen other bank failures in 2011. With 40 closures since the beginning of the current cycle in late 2007, Trepp said that Illinois was third among states with the highest counts of failed banks.

Meanwhile, yesterday Trepp reported that the CMBS delinquency rate worsened in March, although the market is starting to heal  The firm released its March 2011 U.S. CMBS Delinquency Report.

The U.S. CMBS delinquency rate increased again in March with the percentage of loans 30+ days delinquent, in foreclosure or REO rising three basis points to 9.42%, the highest in history for U.S. commercial real estate loans in CMBS. This month-over-month increase, however, is even less than February’s rise and is one of the smallest increases since the start of the credit crisis over two years ago. The value of delinquent loans is currently over $61.5 billion.

According to Trepp, the lodging and office sectors boosted the overall delinquency rate in March by increasing 136 and three basis points, respectively.

By contrast, the firm said that the multifamily sector improved by 40 basis points, yet stayed the worst performing property type, although the retail and industrial sectors also improved by nine and 19 basis points, respectively, Trepp reported. 

“For the second straight month, we've seen the delinquency rate increase in the low single digits. These are some of the best readings we've seen since the credit crisis began,” said Manus Clancy, Trepp managing director. “We believe that the overall delinquency rate will continue to rise over the next six months, but at a pace similar to what we've seen recently, not the 40 basis point jumps that we saw in 2009 and early 2010. You cannot discount entirely, however, the possibility that we see the rate decline slightly in one of these months.”


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