According to the report:

Construction lending has seen the largest improvement as banks have worked through their legacy exposures, falling from a peak default rate of 16.8% to 1.6% in Q2.

Banks' nominal-dollar exposure to multifamily and commercial real estate set a new all-time high in Q2, reaching $1.49 trillion. That's about 14% higher than the previous cycle's peak.

The rate of growth in bank multifamily lending has been slowing. Year over year, bank multifamily lending was up 11.8% in the second quarter, compared to a peak growth rate of 15.9% in Q2 2014.

The growth in commercial -- that is, minus multifamily -- lending is overweighted to income-producing properties. The balance of commercial income-producing property loans increased 6% year over year. Lending on owner-occupied properties has made smaller gains, increasing by 2.1% over the same period.

Construction lending accelerated slightly in the second quarter, with net construction loans increasing for the ninth consecutive quarter. But the overall trend remains subdued as compared to previous cycles' construction lending recoveries.

And now for CEO Sam Chandan's concern. The report captures the continuing growth in lending. It would be good to remind people here that the improvement in the default metric reflects both the declining balance of non-performing loans as well as the growth in net new bank lending.

Instant Insights /

Bank CRE Default Rate Falls Below 1%

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