---
title: "Commercial Real Estate Loans: definition, formula, and thresholds"
description: "Commercial real estate (CRE) loans are credit secured by income-producing or owner-occupied commercial property: office, retail, multifamily, industrial. They are the largest asset class at many community banks and the focus of intense supervisory attention since 2023."
canonical_url: https://www.bankregreports.com/glossary/cre-loans/
source: BankRegReports
category: "Asset Quality"
units: "$"
schedule: "Schedule RC-C"
---

# Commercial Real Estate Loans

> Commercial real estate (CRE) loans are credit secured by income-producing or owner-occupied commercial property: office, retail, multifamily, industrial. They are the largest asset class at many community banks and the focus of intense supervisory attention since 2023.

## Formula

```
CRE Loans = Loans secured by nonfarm nonresidential property, multifamily, and construction (Schedule RC-C)
```

Schedule RC-C breaks real estate lending into categories that aggregate to CRE. Supervisors track CRE both as a dollar total and as the CRE concentration ratio (CRE loans relative to capital) which flags banks that may warrant heightened risk management.

## Why it matters

CRE is where community-bank credit risk concentrates, and the post-pandemic stress in office and some retail property has made it the sector regulators watch most. A large CRE dollar book matters most when it is large relative to the bank's capital.

## How to read it

The dollar CRE figure is the input to the metric that really drives supervision, the CRE concentration ratio. Read the two together, and look at property-type mix: an office-heavy book carries different risk than one weighted to multifamily or owner-occupied space.

## Thresholds

| Range | Reading | What it means |
|---|---|---|
| Diversified, < 100% of capital | Strong | CRE well within supervisory concentration guidance. |
| Moderate | Adequate | CRE a normal share of a community-bank book. |
| Concentrated | Watch | Approaching the 300%-of-capital supervisory threshold. |
| Office-heavy / > 300% of capital | Concern | High concentration in a stressed property sector. |


## Worked example

A $2 billion community bank with $700 million of CRE loans and $200 million of capital has a 350% CRE-to-capital ratio, above the supervisory guidance level that prompts examiners to expect stronger concentration risk management, regardless of how the loans are currently performing.

## Questions

### What counts as a commercial real estate loan?

CRE includes loans secured by nonfarm nonresidential property, multifamily housing, and construction and land development. Owner-occupied commercial property is sometimes analyzed separately because it is repaid from business operations rather than property income.

### Why is CRE under so much scrutiny?

Post-pandemic remote work hit office property values, and CRE is highly concentrated at community banks. Supervisors use the CRE concentration ratio to identify banks whose CRE exposure is large relative to capital.

## Sources

- [FFIEC Call Report Schedule RC-C (Loans and Lease Financing Receivables)](https://www.ffiec.gov/sites/default/files/data/reporting-forms/FFIEC031_FFIEC041_202606_i.pdf) (PDF)

## Related metrics

- [Commercial Real Estate Concentration Ratio](https://www.bankregreports.com/glossary/cre-concentration/): The CRE Concentration Ratio measures supervisory commercial real estate loans (construction and land development + multifamily + non-owner-occupied CRE + loans to finance CRE not secured by real estate) as a percentage of Tier 1 capital plus the allowance for credit losses. The interagency guidance threshold of 300% is the most-watched CRE risk indicator in community banking.
- [Construction & Land Development Loans](https://www.bankregreports.com/glossary/construction-land-development-loans/): Construction and land development (C&D) loans finance the building and preparation of real estate before it generates income. They are the highest-risk slice of commercial real estate and carry their own supervisory concentration guidance.
- [Total Loans & Leases](https://www.bankregreports.com/glossary/total-loans/): Total loans and leases is the gross amount a bank has lent out (commercial, real estate, consumer, and agricultural credit) before subtracting the allowance for credit losses. It is usually a bank's largest asset and its primary earning engine.
- [Nonperforming Loans Ratio](https://www.bankregreports.com/glossary/npl-ratio/): A nonperforming loan (NPL) is a loan whose borrower has stopped paying as agreed: the bank has put it on nonaccrual because full collection is doubtful, or it is 90 or more days past due. The NPL ratio divides those loans by total loans. Regulators call them noncurrent loans.

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