The Zhitong Finance App learned that in January of this year, New York Community Bank (NYCB.US) announced that it had experienced serious losses due to commercial real estate loan losses, causing its stock price to plummet 70%. Shortly thereafter, financial analysts at Evercore ISI discovered that several regional banks had increased commercial loan exposure, which should be a source of concern for investors.

According to Evercore's research, if commercial real estate continues to be in trouble, four banks will be at risk: Cullen Buddhist Bank (CFR.US), American Commercial Bank (MTB.US), Sino's Financial (SNV.US), and Citizens Financial (CFG.US).

Evercore analyst John Pancari said that although loan defaults (or write-offs) have not reached the level during the financial crisis, continued losses in the commercial sector may force at-risk banks to increase their cash reserves. Having said that, Pancari doesn't see these banks at risk of going out of business in the face of increased commercial loan defaults.

“This is a profitability issue for banks, not a liquidity or capital issue,” Pancari said.

35% of Kulun Buddha Bank's loans relate to commercial real estate, and its loan reserve is 1.45%. One favorable factor is that Kurum Buddha Bank's average loan cash flow is 1.44 times debt expenses, which means that many of its loans are real estate to generate income and repay debts.

Synous Finance concentrates 32% of its loans on commercial real estate, with a reserve ratio of 1.09%. However, the CEO of Synous Finance said the bank had few problem loans and limited new commercial loans.

Citizens Financial's 19% loan exposure is commercial real estate, with a reserve ratio of 2.2%. Citizens Financial's situation is worrying, as office loans account for a large share of 19% of commercial real estate loan exposure. It also has a 10.2% reserve for office loans. This is important because the office market is probably the least popular sector in commercial real estate.

Commercial real estate loans from American Commercial Bank account for 24% of its total loans, and the reserve ratio is 1.9%. If CCB were to undergo a stress test, like the Federal Reserve's tests on large banks such as Wells Fargo after the 2008 financial crisis, these reserves would account for 22% of the losses of CCB.

According to the American Bank of Commerce, its outstanding commercial loan balance is the lowest in 15 years, with a loan to real estate value ratio of 56%. In a recent earnings conference call, Daryl Bible, CFO of American Commerce Bank, said: “We are very satisfied with the current state of reserves. I can't guarantee it won't go up. But we have made a very thorough assessment of high-risk credit types in the (commercial real estate) sector.”

Although Pancari believes that large-scale commercial real estate defaults are unlikely to hurt savers' interests, stock performance may be affected. History shows that as soon as a bank goes bankrupt due to non-performing loans, it will trigger a chain reaction and trigger a regional banking crisis.

Nearly $1 trillion in commercial loans will expire by 2024, and many developers will likely not be able to refinance at interest rates that keep the project profitable. This will inevitably lead to default and could put some regional banks at risk of bankruptcy.