Small Banks Failure Rate and CRE Loans

From the NY Times:

• About $870 billion, or roughly half of the industry’s $1.8 trillion of commercial real estate loans, now sit on the balance sheets of small and medium-size banks
• As a group, small banks have written off only a tiny percentage of the losses that analysts expect them to incur.
• Applying only the commercial real estate loss assumptions that federal regulators used during the stress tests for the big banks last spring, as many as 581 small banks were at risk of collapse by 2011. By contrast, commercial real estate losses put none of the nation’s 19 biggest banks, and only about 5 of the next 100 largest lenders, in jeopardy.
• Local and regional banks are exposed to about $870 billion in CRE loans. Not all of the loans will go bad, and the loss severity will be far less than 100%. So the losses may be in the $100 to $200 billion range; small compared to the residential mortgage losses, but still very significant.