Commercial real estate lending up in Midwest, loan quality sound

The state profiles made available online March 19 by the Federal Deposit Insurance Corporation show concentrations of commercial real estate loans growing at banks across the Upper Midwest. The reports show loan concentrations as the median percent of qualifying total capital. In Iowa, for example, the 2017 year-end figure was 84.06 percent, up from 80.93 percent a year earlier. In Minnesota, the figure was up to 160.91 percent from 145.70 percent, and in Wisconsin it was 222.20 percent compared to 217.25 percent.

Although regulators are increasingly saying they are watching rising levels of commercial real estate lending, asset quality across the board in Iowa, Minnesota and Wisconsin is improving. Past-due and nonaccrual loans as a percentage of total loans was lower at year-end 2017 than it was at year-end 2016 in all three states. Other measures of asset quality, such as noncurrent loans to total loans, also showed improvement during the 12 months of 2017.

North Dakota and Illinois also saw increasing concentrations in commercial real estate loans. In North Dakota the loan concentration in commercial real estate grew to 74.16 percent at year-end 2017 (median percent of qualifying total capital) from 68.52 percent a year earlier. In Illinois, the figure grew to 130.74 percent from 125.86.

Across the country, business lending was up at community banks, the FDIC reported. Most of the growth was in nonfarm nonresidential loans and commercial/industrial loans.

Also of note across the country, noncurrent loan rates declined 6 basis points during the fourth quarter to 0.85 percent, following a quarterly 4.4. percent decline in noncurrent loan balances. Nearly two out of three community banks reported lower or unchanged noncurrent rates from a year ago. Since fourth quarter 2016, the noncurrent rate decline 16 basis points to 7.1 percent.