Bank Analysis School April 2025

Internal Use Only

Construction Loans have the Highest Historical Loss Rate

Average Net Loss as Percent of Loan Balances (2007-2022)

1.5%

1.36%

1.0%

0.68% 0.63%

0.5%

0.30% 0.28% 0.23%

0.13%

Construction Commercial

1-4 Family Non-Farm Non Res.

Multifamily Ag Production Farmland

19

Internal Use Only

Lending Concentrations can Increase Risk

Concentrations are not inherently bad but do add a dimension of risk which management should consider when formulating plans and policies. ” - FDIC Risk Management Manual

20

20