The danger looming over commercial real estate is as apparent as an empty Circuit City. While banks brace for CRE storms, new stress testing software can soften the blow, or at least provide a more detailed diagnosis.
To prepare for regulatory exams, Pacific Commerce Bank is deploying stress testing software from Banker's Toolbox to locate weaknesses in its CRE portfolio. Cliff Nielsen, vp and CTO of Pacific Commerce Bank, says the $180 million asset bank's CRE portfolio has not been earmarked as having a high concentration of CRE loans, a distinction usually reserved for banks with outstanding CRE loan value of more than 300 percent of Tier 1 capital. But the institution is concerned about how economic weakness will impact the retail sector, and how that impact will be felt downstream in the bank's CRE portfolio. "It's always in our best interest to be doing [stress testing] to make sure we're in good working order and not in a problematic situation," says Nielsen, noting that the bank's CRE footprint is mostly in California and Arizona.