Rising mortgage stress was evident at the close of 2025, with nonperforming single-family home loans increasing to 2.02%.
The Dallas region shows the highest risk, but Bauer has identified 52 banks nationwide with elevated residential real estate exposure.
While most banks remain stable, growing early-stage delinquencies and uncertain interest rate expectations signal potential worsening credit conditions.
Growing Stress in Single-Family Mortgage Portfolios
We expect to have new star-ratings (based on March 31, 2026 financial data) available for you in next week’s issue. Before then, there is one thing we want to examine more thoroughly with the year-end data, so we have more to compare when the FDIC releases its first quarter Quarterly Banking Profile (QBP) on May 27th. That thing is single family residential real estate.
Aside from credit cards and other loans to individuals, single family residential real estate loans and home equity loans (HELOCs) are showing the most strain. (HELOCs represent a very small portion of mortgage loans and are included with 1-4 family residential loan numbers.) Nonperformers of home loans jumped 81 basis points (BPs) over the year, ending 2025 at 2.02%.
That’s the nationwide average but all regions were up year-over- year. Kansas City was the only region to lower its nonperforming single family real estate percentage during the fourth quarter. According to Realtor.com (5/21/2026), the Kansas City metro region also has the largest year-over-year increase in new listings and contract signings.
In another report, the National Association of Realtors (NAR) and Realtor.com jointly reported that, due to a “mismatch” in the housing market, households earning roughly $75,000 per year currently have access only to homes priced under $261,000. (That’s about 23% of listings, nationwide.) In a balanced market, the report goes on to say, this income group should be able to afford 44% of homes. That leaves buyers sitting it out or, worse yet, stretching themselves too thin.
Stretching to attain a home loan that should not be approved has gotten this country into trouble more than once. That’s why keeping an eye on nonperforming home loans is so important. It is also important to note that, new Fed Chairman notwithstanding, rate cuts that were expected in the near future, are no longer supported.
While most banks are handling their mortgage loans very well, rate expectations can have unsettling consequences when not delivered. On page 5 you will find 52 banks that Bauer is watching closely for residential real estate cracks. Each bank listed has:
- A Bauer Star-Rating <= 3½-Stars;
- Assets consisting of at least 30% loans;
- A loan portfolio with at least 25% residential real estate loans; and
- 1.5% (or more) of the residential real estate loans are nonperforming.
Ten of these banks were also listed last week when we were looking at total loan delinquencies. Focusing specifically on residential real estate, we’ve had some interesting finds.
For example, 4-Star Grant County Bank, Ulysses, KS (10918) which was on this list last August (JRN 42:39) with June 30, 2025 financial data, hails from the Kansas City region. After reporting stronger loan quality and earning another half a star from Bauer, it has been removed from this list.
The following banks all come from the Dallas region, which, at 4.33% has the highest home loan delinquency rates in the nation. (The next highest is Chicago at 1.99%.) 3½-Star Priority Bank, Fayetteville, AR (33818). Priority Bank was on this list last August with 64% of its loans in residential real estate and 3.54% of them 90 days or more delinquent. It remains listed today, as residential real estate loan volume was up 12% and delinquent residential real estate went up to 4.23%.
A sneak peek at Priority Bank’s first quarter 2026 call report shows that, as was the case last year, home loans 90-days (or more) delinquent and still accruing are non-existent. However, short term past dues (30-89 days in arrears) and nonaccruals are both growing. (As shown in chart below.)
| Priority Bank | 30-89 Days | 90 Days & Accruing | Nonaccrual |
| 2’Q 2025 | $1.394 mil | 0 | $2.399 mil |
| 4’Q 2025 | $1.461 mil | 0 | $2.918 mil |
| 1’Q 2026 | $1.605 mil | 0 | $3.030 mil |
Other Dallas region banks joining the list this time around include:
1) 3½-Star Apex Bank, Camden, TN (9176), with close to $1.4 billion in total assets and 22 branch offices. Apex Bank’s residential real estate loans grew 4.6% during 2025. That’s a slower rate than the overall 8.9% loan growth, indicating Apex Bank may be tightening its lending standards.
With over 80% of its loans invested in single family homes, that is a very wise decision. What Apex Bank has in its favor are very high capital ratios; much higher than its peer group. Unfortunately, its nonperforming loans are much-much higher than its peers. And,
2) 3½-Star Chickasaw Community Bank, Oklahoma City, OK (11521), which is decreasing its residential real estate loans. In fact, it’s decreasing its entire loan portfolio. Single family home loans account for about 51% of its entire loan portfolio. While the delinquency rate on these home loans is high (3.06%), many carry government guarantees.
That makes a huge difference. Total nonperforming loans represent 2.38% of Chickasaw’s tangible assets. When we remove the government guaranteed portions from the equation, that ratio goes to 1.67%.
