Small Banks Face Hit from Commercial Loan Losses

New York, NY, Feb. 11, 2010--The Wall Street Journal is reporting that almost 3,000 small U.S. banks could be forced to dramatically curtail their lending because of losses on commercial real-estate loans.

The banks are being threatened by loans they made for shopping centers, offices, hotels and apartments, and they represent a major cog in the U.S. credit system, especially to entrepreneurs, the newspaper said.

Between 2010 and 2014, about $1.4 trillion in commercial real estate loans will reach the end of their terms and nearly half are “underwater,” meaning the borrower owes more than the property is worth.

The report by theCongressional Oversight Panel of the Troubled Asset Relief Program said that sand mid-sized banks may bear the brunt of coming losses on commercial real estate loans.