Still, Evercore ISI analyst John Pancari described the increase in soured real estate loans as a “notable jump.” Other problems might crop up, because nearly 40% of M&T’s $100 billion loan portfolio is in commercial real estate. That’s the highest for any regional bank in the Northeast, according to Evercore, and one of the most concentrated loan books for any midsize lender.
Buffalo-based M&T wrote a $230 million loan in 2018 for the TWA Hotel at Kennedy Airport and loaned $66 million in 2019 to the Financial District’s Hilton Garden Inn.
The bank said nonperforming loans rose in the fourth quarter to 1.92% of its portfolio, from 1.26% in late September.
As hotels, office buildings and storefronts remain dormant, real estate lenders everywhere are taking a hard look at their portfolios. So far banks have avoided taking losses on the loans thanks to the government’s economic rescue measures. But time is running short, at least for some borrowers.
Signature Bank, a major commercial real estate lender locally, said Thursday it thinks it has set aside enough in reserve to soak up loan losses.
“We believe we are adequately covered for what may come,” Chief Executive Joe DePaolo said, adding that deferrals fell to 2.7% of loans.
Others weren’t so confident.
One analyst questioned what was meant when Signature said 6.6% of loans have been “modified” for Covid-related reasons. Management explained those borrowers are paying only interest, not principal, for a period of six to 12 months.
“So essentially they are being deferred, right?” the analyst asked.
“We’re giving them a little relief,” DePaolo replied, adding he believes the loans will be repaid because the borrowers continue to pay operating costs, insurance and taxes.
King, the M&T finance chief, assured investors his bank’s problems are confined to a relatively small number of customers—albeit large ones.
“When we look at those credits, I don’t need to take off my shoes and socks to count them,” he said. “Which is a good thing.”