Commercial real estate lending

Now that the Federal Reserve has raised short-term rates four times in the past 18 months, all eyes are on deposit costs as banks seek to keep pricing low and fatten margins. But that effort is complicated by the fact that banks must prepare for the unwinding of the Fed's balance sheet and consumers' rapid adoption of mobile deposits.

The FDIC is watching banks that use wholesale funds to support CRE lending. The warning comes as brokered deposit levels at community banks are at their highest level in nearly six years.

New data shows that large commercial banks are increasing their originations of single-family construction loans, but these loans still represent a small percentage of their total assets.

An aggressive band of community, regional and investment banks is stepping into the commercial real estate void left by more cautious lenders, saying there are still good CRE loans to be made or bought.

The trend of putting ever-smaller pieces of the same commercial mortgages into multiple securitizations requires investors to be extra careful, and will inevitably make workouts of bad loans more complicated.

Construction lending could make a comeback if bankers persuade Congress to reform capital and other complicated rules on so-called high volatility CRE loans. But will regulators go for it?

Loan demand disappointed as optimism for economic growth under President Trump gave way to uncertainty over the prospects for regulatory relief and tax reform. Credit quality held up, but the retail and health care sectors have become potential trouble spots. Here’s a recap drawn from banks’ quarterly earnings calls.

Executives at BB&T, KeyCorp and Citizens are milking commercial lending niches and balancing cost control with new investments while waiting for more rate hikes to fatten margins.