Bankers are trying to remain optimistic while addressing one of the industry's top concerns: commercial real estate loans.

Executives with regional lenders like Umpqua Holdings Corp., KeyCorp and Fifth Third Bancorp have said in recent weeks that their exposure to the troubled lending segment is manageable, even as industry watchers and investors fret that a drawn-out economic recovery will make it harder for businesses to service and retire their commercial mortgages.

Steve Rice, executive vice president of commercial banking with Umpqua, said in an interview that so far troubles in the Portland, Ore., company's $3.3 billion CRE book have been concentrated in Sacramento and Northern California. The stress in those areas is not "dramatic at this stage" and is not expected to "move north" into Umpqua's Oregon and Washington portfolios, Rice said.

Though demand for new CRE loans is low, this is actually a great time to make new loans thanks to the higher lending standards now in vogue, Rice said.

"Any deal you do today that is being underwritten to the new, tighter guidelines is a stronger asset than you were putting on the books two years ago," he said.

KeyCorp's chairman and chief executive, Henry Meyer 3rd, said during a banking conference in New York this month that the Cleveland company has made inroads managing its now $16.6 billion CRE portfolio in the last two years. It has shrunk its portfolio of loans to residential property builders by nearly 60% since early last year, to $1.5 billion, through asset sales and other means, he said.

Charles Hyle, KeyCorp's executive vice president and chief risk officer, said prospects have improved for its $2.7 billion retail properties book, as it appears that the holiday sales weren't as rough as last year's.

"A year ago, of course, the economy was falling through the floor and retail sales were horrible. And even though the early returns on Black Friday are a little inconclusive, they are certainly better and more stable than they were a year ago," Hyle said. "It's far from perfect, but there is certainly some general feel of improvement there that we'll get through the holiday season a little bit better."

Kevin T. Kabat, Fifth Third's chairman and CEO, said at the conference that the Cincinnati company had a good grip on its $10.5 billion in outstanding CRE loans.

That book represents 15% of assets and 20% of loans, which is "below median and averages of our peer group," Kabat said.

The company is also past the "highest loss periods of what" it will experience in its home building and non-owner-occupied CRE portfolio, having stopped extending those kinds of loans in early 2008, Kabat said.

"While we've experienced relatively high levels of losses on commercial real estate loans, we continue to believe the size and credit quality of the portfolio is manageable," he said.

Still, industry watchers are wary. "The banks have some issues, primarily with commercial real estate and loan reserves ahead of them," said William D. Rutherford, the president of Rutherford Investment Management in Portland.

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