A brief diversion from HW's usual coverage, but worth noting: Comptroller of the Currency John C. Dugan told a bank conference Thursday that the OCC is focusing increased attention on problems arising from high community bank concentrations in commercial real estate (CRE) at a time of significant housing market turmoil. "The combination of these conditions is putting considerable stress on one particular category of commercial real estate lending: residential construction and development -- and other categories of CRE loans will feel similar stress if general economic activity slows materially," Mr. Dugan said in a speech before a meeting of the Florida Bankers Association. A quick scan of recent coverage bears out Dugan's concern; HW has covered numerous banks that have recently reported earnings problems due to residential construction exposure (Webster Financial, for one; First Horizon, for another; Mercantile Bank, for yet another). IndyMac is rumored have dropped its construction lending division this week, as well. Friday morning, almost right on cue, Birmingham, Ala.-based CapitalSouth Bancorp. said it recorded a $2.1 million provision for loan losses for the fourth quarter, and extra $1.1 million over the provision charge recorded in Q3. The culprit? Residential construction, of course. NPAs jumped 115 percent in one quarter to $17.4 million, the bank said. The OCC noted that nonperforming C&D (construction & development) loans in community national banks amounted to 1.96 percent of the total at the end of the third quarter, double the rate of the year before. The fourth quarter, so far, clearly isn't looking much better.