Rising interest rates and the structural shift towards remote work are significantly impacting commercial real estate. While delinquencies, distress, and fire sales haven't been common to date, this may soon change. Banks play a crucial role in commercial real estate projects, and many loans made in better times are now maturing in challenging times. It's essential for CRE lenders to actively manage their portfolios to avoid falling behind.

Banking regulators have finally released the long-awaited final rule reforming Community Reinvestment Act (CRA) regulations—a regulation that often receives mixed sentiments from bankers. Fortunately (or unfortunately), regulatory changes typically unfold incrementally. The new rules, therefore, build upon existing ones rather than taking a wholly new direction.

Banks with between $80 billion and $120 billion in assets are in a tough spot, says Christopher McGratty of KBW. That’s because this group has the lowest structural returns among banks with at least $10 billion in assets, putting them in the position of needing to grow larger to help pay for coming regulations — or struggling for years... Of eight banks in that zone, Comerica, Zions and First Horizon might ultimately be acquired by more profitable competitors, McGratty said in a Nov. 19 research note.

Unrealized losses in HTM and AFS portfolios average 28-45% of Tier 1 Capital across all asset sizes. In the third and fourth quarters of 2023, securities portfolio restructuring is a strategy that appears to be gaining momentum. Mercer Capital reviewed regulatory, SEC, and various public filings for some of the banks that have announced such actions. The attached Mercer presentation overviews these findings.

The “Key Ten” offers actions to consider and key “big rock” regulations to watch...Expect 2024 to be a year of continued economic fluctuations, election-year uncertainties, and legal actions giving fuel to already elevated levels of regulatory intensity.

SoFi Technologies Inc., the fast growing one-stop shop for financial-services products, is exiting crypto even with token prices surging because of increased scrutiny of the sector by banking regulators.

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Although the FHFA’s review of the FHLB System has received relatively little press attention, the FHFA’s proposed reforms, if adopted, could significantly alter the structure and operation of the FHLB System, and potentially materially change the requirements of being a Federal Home Loan Bank (“FHLBank”) member. This Legal Update provides an overview of the Report and its legislative and regulatory recommendations.

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