Don’t Bank On It: An Unusually Concentrated Loan Book

With this article, we continue our new series, “Don’t Bank On It,” which we intend to write for the foreseeable future.

Those of you who have been following our public banking articles know that we have been highlighting the major existential issues currently sitting on many bank balance sheets. In this series, we focus on the existential issues found on one specific bank’s balance sheet. We also challenge readers to figure out which bank we are covering in each article.

Our next highlighted bank is a publicly listed US regional bank with roughly $9B in assets and a concentrated New York operating footprint. The bank has one of the more unusual loan concentrations we have found among publicly traded US banks.

Extremely high exposure to healthcare and skilled nursing

At the end of 2Q26, approximately 87% of the bank’s loan portfolio consisted of CRE loans. More importantly, healthcare exposure is particularly high, as it has been growing aggressively over the past few quarters and now represents almost 46% of total loans. Almost all of the healthcare exposure is related to skilled nursing facilities.

The concentration looks even more extreme relative to capital. Total CRE exposure is roughly seven times CET1 capital, while the healthcare portfolio alone represents close to four times CET1. Skilled nursing exposure by itself is approximately 3.5 times CET1. Even fairly small losses across a book this concentrated could hit capital hard.

Healthcare credit is getting worse

This looks even worse given recent deterioration in the broader healthcare credit market. According to Fitch, healthcare providers had the highest number of unique defaults in its US private credit universe during the twelve months ending August 2026. The healthcare provider default rate increased to 9.9%, compared with 6.9% a year ago.

Fitch’s private credit universe is only one part of the broader shadow banking system and is not directly comparable with this bank’s skilled nursing CRE portfolio. Still, the deterioration is relevant. Nearly half of the bank’s loan portfolio is now concentrated in healthcare at a time when credit problems among healthcare borrowers more broadly appear to be increasing.

Asset quality issues are already visible

Annualized net charge-offs for the first six months of 2026 reached 1.35% of average loans, compared with only 0.06% for FY2025. Needless to say, this is quite a sharp increase, suggesting that the bank is already seeing signs of credit stress.

Another concerning issue is that some borrowers have already experienced payment problems after receiving loan modifications. Some of these credit problems may simply be getting pushed out rather than fixed.

Collateral values may be the key risk

Management points to relatively conservative loan-to-value ratios within the skilled nursing portfolio. But these are highly specialized properties, and apparently comfortable loan-to-value ratios can deteriorate quickly if the underlying property value falls. When skilled nursing exposure is approximately 3.5 times CET1 capital, the bank does not need anything close to a complete collapse in these property prices for losses to become significant.

Can you recognize this bank? If not, come to StockWaves at ElliottWaveTrader.net to identify it and view not only the fundamentals report but the Elliott Wave analysis to assist in making investing decisions.