EY’s Landlord Didn’t Pay the Mortgage on the Downtown LA Office Building
Before we get into the situation, please note the issue discussed here is not EY’s fault. Rather, the office tower bearing the firm’s name at 725 South Figueroa Street in downtown Los Angeles has entered receivership after asset management company Brookfield stopped making payments on its debt in April. Commercial real estate firm Colliers has […]
Looks Like Deloitte Is Ditching Its Downtown Atlanta Office
Before anyone gets too excited, Deloitte isn’t going fully remote in Atlanta. Atlanta Business Chronicle reports Deloitte has not renewed its 260,000 square foot lease at 191 Peachtree according to loan documents reviewed by the Chronicle. It’s suspected that the firm is downsizing. Multiple sources with knowledge of the market say Deloitte is eyeing Midtown. […]
More Small Businesses Ditching Big Banks for Community Lenders
This story is republished from CFOZone, where you’ll find news, analysis and professional networking tools for finance executives.
Community banks are gaining ground in the banking sector, scooping up small business customers that are feeling underserved by bigger institutions.
The four largest US banks – Bank of America, Citibank, JP Morgan Chase and Wells Fargo/Wachovia – currently hold the greatest share of small-business customers, according to a report from Aite Group released Thursday. But community banks are growing their share at the fastest rate, often at the expense of large banks.
Roughly 35 percent of US small businesses consider a community bank to be their primary financial institution, up from 24 percent in 2006.
The report revealed that large banks are failing to connect with small businesses. One of the reasons is that they struggle to understand their needs.
“Large banks are missing the boat when it comes to effectively serving and cross-selling to small-business customers,” said Christine Barry, research director with Aite Group, in a press release. “This is evidenced by the declining satisfaction rates of their customers and their failure to meet cross-selling needs.”
Such a customer base is crucial, even for large banks, at a time when deposits are precious commodities.
Small banks have been able to make headway by purchasing failed community banks, as reported by The Big Money this week.
“As the continuing real-estate crisis pushes more tiny banks into failure, the most common saviors have been other small banks, community banks, small thrifts, and modestly sized lenders,” Heidi Moore wrote.
But small banks aren’t necessarily a safe haven from troubles ailing their bigger competitors.
Although banks with over $10 billion in assets hold over half of commercial banks’ total commercial real estate whole loans, smaller banks have an overall greater exposure to commercial real estate, according to a report from the Congressional Oversight Panel.
Sheila Bair, chairman of the Federal Deposit Insurance Corporation, recently voiced concerns about the risk that commercial real estate poses to community banks, noting that commercial real estate comprised more than 43 percent of the portfolios of community banks.
Those concerns are well founded, as commercial real estate has played an increasingly large role in bank failures. For the 205 banks that have failed since 2007, a third of their loan portfolio has been made up of commercial real estate loans, compared to an industry average of 26.9 percent, according to investment bank KBW. The seven banks seized by the Federal Deposit Insurance Corporation last Friday had an even higher concentration with almost 40 percent of their loans tied up in commercial real estate.
If write downs increase as expected, it could ultimately create capital problems for community banks, which could in turn curb lending to small businesses.
“The current distribution of commercial real estate loans may be particularly problematic for the small business community because smaller regional and community banks with substantial commercial real estate exposure account for almost half of small business loans,” the COP report published in February said. For example, smaller banks with the highest exposure to commercial real estate provide around 40 percent of all small business loans.