Liquidity & Balance Sheet
Commercial Real Estate Concentration Ratio
Also known as CRE Conc.
The CRE Concentration Ratio measures commercial real estate loans (construction + non-owner-occupied CRE + multifamily) as a percentage of total risk-based capital. The interagency guidance threshold of 300% is the most-watched CRE risk indicator in community banking.
Formula
The 2006 interagency guidance defined CRE for concentration purposes as: construction, land, and land development loans; non-owner-occupied commercial real estate; and multifamily residential real estate. Owner-occupied CRE (where the borrower's business occupies the property) is generally excluded.
Why it matters
The 2006 interagency CRE guidance established threshold ratios that trigger heightened supervisory scrutiny: 100% of capital for construction loans alone, 300% of capital for total CRE, and CRE loan growth exceeding 50% in 36 months. Banks above these thresholds face risk-management expectations that include stress testing, market analysis, and policies. The metric was central to the 2008 banking crisis and the post-2022 office-CRE downturn.
How to interpret
Most US community banks report CRE concentration between 100% and 250% of capital. The 300% threshold is the supervisory line — above it, the bank should expect deeper exam attention to CRE risk management. Many CRE-specialty community banks operate between 400% and 600% with proper risk management.
Thresholds
| Range | Label | Interpretation |
|---|---|---|
| < 100% | Low | Below all interagency thresholds. |
| 100–300% | Moderate | Within typical community bank range. |
| 300–500% | Elevated | Above interagency threshold; supervisory attention. |
| > 500% | High | Substantial CRE concentration risk. |
Worked example
Frequently asked
Does owner-occupied CRE count toward the concentration?
No — under the interagency guidance, owner-occupied commercial real estate (where the loan is to the operating business that owns the property) is excluded. The concentration metric focuses on investor CRE and construction, which depend on property cash flows.
Why is 300% the supervisory threshold?
The 2006 guidance was based on FDIC research linking elevated bank failure rates to CRE concentrations above 300% combined with rapid loan growth. The threshold is not a hard limit — banks above it must demonstrate appropriate risk management — but it triggers deeper examination focus.
What's driving CRE concentration concerns in 2024-2026?
Office vacancy rates in major metros (San Francisco, Chicago, Houston) remain at multi-decade highs post-COVID, while office CRE loans extend an average 5-7 years and many are maturing into significantly higher rate environments. Banks with concentrated office CRE face refinancing-driven loss risk.
Sources
- FFIEC Call Report Schedule RC-C (Loans)
- FFIEC Call Report Schedule RC-R (Risk-Based Capital)
- 2006 Interagency Guidance on Concentrations in Commercial Real Estate Lending
See CRE Conc. across 4,394 US banks
BankRegReports ranks every FDIC-insured institution by CRE Conc., refreshed quarterly within 48 hours of FFIEC release.