RMA/AFS Risk Analysis Service Confirms Rising Delinquency and Non-accrual Levels
The Risk Management Association (RMA), in alliance with Automated
Financial Systems, Inc. (AFS), this week released its commercial
benchmarking data updated through first quarter 2007. Results show
risk ratings in the broader middle market remaining relatively
unchanged, with signs of credit weakness continuing in the
construction sector and emerging in other sectors.
Non-accruals in the middle market have increased more than 17% in
the period spanning the last quarter of 2006 and the first quarter of
2007. Non-accrual levels in the construction industry have increased
more than 100% over the same six-month period. Also within the
construction industry, loans past due 30 to 89 days have increased
5.8% from third-quarter levels.
"Given that growth in construction lending has comprised a
substantial share of total loan growth at many organizations for the
past several years, these trends continue to warrant close attention,"
said Maurice H. Hartigan II, President and CEO, The Risk Management
Association.
In addition, the real estate and rental & leasing sector shows
emerging credit quality deterioration. Non-accruals have risen more
than 38% over the six-month period, with loans past due 30 to 89 days
rising nearly 22%.
The first quarter updates to the Risk Analysis Service reflect
data for middle market loans totaling approximately $600 billion in
commitments and $321 billion in outstandings provided by 16 top tier
banks. The database is estimated to include nearly half of all middle
market commercial loans in the U.S.
These findings came from the RMA/AFS Risk Analysis Service, which
enables participating financial institutions to benchmark the risk
profiles of their middle market portfolios relative to those of their
peers and the industry. The service also allows participants to gain
real-time insights into changing credit quality and portfolio
concentrations.
Recent enhancements to the Risk Analysis Service announced by RMA
and AFS include 1) an expanded risk rating scale capturing both
probability of default and loss given default metrics, 2) expanding
the depth and granularity of geographic coverage to allow state-level
reporting 3) a dedicated reporting module focused exclusively on
commercial real estate loans, and 4) rolling out the Service in
Europe.
For additional information on the Risk Analysis Service, please
contact Suzanne Wharton at RMA at +1 (215) 446-4089 or Doug Skinner at
AFS at +1 (484) 875-1562.
About RMA
Founded in 1914, The Risk Management Association is a
not-for-profit, member-driven professional association whose sole
purpose is to advance the use of sound risk principles in the
financial services industry. RMA promotes an enterprise-wide approach
to risk management that focuses on credit risk, market risk, and
operational risk. Headquartered in Philadelphia, PA, RMA has 3,000
institutional members that include banks of all sizes as well as
nonbank financial institutions. They are represented in the
Association by 18,000 risk management professionals who are chapter
members in financial centers throughout North America, Europe, and
Asia/Pacific. Visit RMA on the Web at www.rmahq.org.
About AFS
Automated Financial Systems, Inc. (AFS) is an information
technology and software development company providing products and
professional services exclusively to the financial services industry.
Its mission is to work with forward-looking financial institutions to
build the industry-leading global franchise for lending processes
based on a straight-through processing model and on-demand technology
and services. AFS assists clients by combining the lending
applications, execution expertise, and management information to
mitigate risk, reduce costs, and increase revenue. The firm is
headquartered in Exton, PA; its European subsidiary, Automated
Financial Systems GmbH, is located in Vienna, Austria. For further
information, visit the AFS Web site at www.afsvision.com.