US regional banks struggle as commercial real estate market, especially offices, declines.

US smaller regional banks are facing growing challenges due to the declining commercial real estate (CRE) market, particularly office properties. According to Moody's, these banks increased loan modifications from 0.1% in the first half of 2024 to 0.32% in the first nine months of 2021, indicating rising distress. The situation is exacerbated by the upcoming maturity of about $500 billion in CRE mortgages, likely leading to more defaults and pressure on property values.