The CRE concentration guidance, explained

What the guidance is

On December 12, 2006 the OCC, the Federal Reserve and the FDIC published joint guidance titled Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices (71 FR 74580). It is addressed to national banks and state-chartered banks. It tells a bank with a large or fast-growing commercial real estate book what risk management its examiners expect, and it tells the bank which numbers the examiners use to decide where to look first.

It is guidance. It is not a regulation, and it sets no ceiling. In the agencies’ words, the guidance “does not establish a limit on an institution’s CRE lending activity.”

The two screens

The “Supervisory Oversight” section says a bank that has grown its commercial real estate lending fast, has notable exposure to one kind of commercial real estate, or “is approaching or exceeds” either of two criteria may be identified for further supervisory analysis.

The two supervisory criteria in the 2006 guidance (71 FR 74580)

Three details in the text matter.

Total capital means total risk-based capital. A footnote defines “total capital” as total risk-based capital as reported in the call report’s regulatory capital schedule. That is a wider number than tier 1 capital. See total risk-based capital.

The second screen has two parts. A bank at 300 percent whose book did not grow by half in three years does not meet the second criterion as written. The agencies kept the growth test on purpose: banks that “have experienced recent, significant growth in CRE lending will receive closer supervisory review than those that have demonstrated a successful track record.”

Neither number is a safe harbor. The criteria “do not constitute limits on an institution’s lending activity,” and they do not “constitute a ‘safe harbor’ for institutions if other risk indicators are present.” A bank under both screens can still be asked about its book.

Which loans count

The guidance is about loans repaid from the real estate itself. It focuses on “those CRE loans for which the cash flow from the real estate is the primary source of repayment.” Under its definition, commercial real estate loans are:

• land development and construction loans, including 1-4 family residential construction and commercial construction, and other land loans;
• loans secured by multifamily property;
• loans secured by nonfarm nonresidential property where the primary source of repayment is rental income from the property, or the proceeds of its sale, refinancing or permanent financing.

For rental income, the text gives a test: loans “for which 50 percent or more of the source of repayment comes from third party, nonaffiliated, rental income.” Loans to real estate investment trusts and unsecured loans to developers also count if their performance is closely linked to commercial real estate markets.

Left out are loans on nonfarm nonresidential property where the primary source of repayment is the cash flow from the ongoing operations of the party, or an affiliate of the party, that owns the property. That is owner-occupied commercial real estate: the dentist’s building, the manufacturer’s plant. Also left out are loans where real estate is taken as a secondary source of repayment or “through an abundance of caution.”

In call report terms, the footnotes point the first screen at Schedule RC-C item 1.a (construction, land development and other land loans) and the second at items 1.a, 1.d (multifamily) and 1.e (nonfarm nonresidential), with the owner-occupied part taken out, plus a memorandum item for certain loans not secured by real estate. The call report guide shows where those lines sit.

What the guidance asks of a bank

Most of the document is about management, not numbers. A bank with a concentration is expected to have, in proportion to its size and the risk of its book:

• Board and management oversight. The board sets policy on the level and kind of commercial real estate the bank will hold, and reviews and approves exposure limits and sublimits.
• Portfolio management. The bank sorts the book into segments with common risk traits, such as property type, geographic market, tenant concentrations and loan structure.
• Management information systems. Reports that show the book by those segments.
• Market analysis. Regular review of the markets where the bank lends.
• Credit underwriting standards. Written standards, with exceptions tracked and reported.
• Portfolio stress testing and sensitivity analysis. The text says this “may be as simple as analyzing the potential effect of stressed loss rates on the CRE portfolio, capital, and earnings.”
• Credit risk review. A risk rating system suited to the loans the bank makes.

The guidance also notes that seasoned, well-margined multifamily loans “normally would require significantly less” stress testing than most acquisition, development and construction loans. The agencies treat the kinds of commercial real estate differently, and so do banks.

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The 2015 reminder

On December 18, 2015 the same three agencies issued a Statement on Prudent Risk Management for Commercial Real Estate Lending, sent by the Federal Reserve as SR 15-17. It did not change the screens. The agencies said they had “observed substantial growth in many CRE asset and lending markets, increased competitive pressures, and an easing of CRE underwriting standards,” and reminded banks of the existing guidance, the 2006 document included.

A worked example

Worked example (hypothetical). A bank reports total risk-based capital of $100,000,000. It holds $70,000,000 of construction and land loans, $120,000,000 of multifamily loans, $150,000,000 of loans on rented commercial buildings and $90,000,000 of loans on owner-occupied buildings.

First screen. $70,000,000 divided by $100,000,000 is 70 percent. That is under 100 percent.

Second screen. The owner-occupied $90,000,000 is left out. $70,000,000 plus $120,000,000 plus $150,000,000 is $340,000,000, or 340 percent of total capital. Three years ago the same book was $250,000,000. Growth is $90,000,000 divided by $250,000,000, which is 36 percent. That is under 50 percent, so the bank is above the 300 percent level and does not meet the second criterion as written.

Now say the bank adds a $25,000,000 construction loan and a $15,000,000 loan on a rented office building. Construction and land rises to $95,000,000, or 95 percent, which the guidance would call “approaching” the first screen. Total commercial real estate rises to $380,000,000 and growth to 52 percent ($130,000,000 divided by $250,000,000). Both parts of the second screen are now met. Nothing in the guidance stops the bank from making those loans. It does mean the bank’s examiners may look harder at how the book is managed, and the bank knows that before it decides.

The same bank could add a $40,000,000 loan to an owner-occupied manufacturer and neither screen would move.

What this means for a request

A bank near a screen may still lend, and may be choosier. A bank that is close to either level has reasons to pick which commercial real estate loans it adds. It may prefer owner-occupied loans, which sit outside the guidance, or shorter and smaller construction loans. That is a business choice by the bank. The public record cannot tell you what a bank has decided.

Owner-occupied is a different conversation. If the business that owns the building pays the loan from its own operations, say so in the first line of the request. A banker sorts the request by repayment source before anything else. See how bankers evaluate a deal.

Ask, do not guess. “Are you adding construction loans this year?” and “Do you have room for investor real estate of this size?” are fair questions. Bankers answer them every week.

Size is a separate ceiling. A bank’s capital also caps what it can lend to one borrower. That rule is in the legal lending limit guide.

What this site shows, and what it does not

A bank’s page here prints its commercial real estate books by kind, from the call report dated 2026-06-30, and prints those books against capital. Across banks, the commercial real estate book in the file is $3.03T FDIC call report, Jun 30, 2026.

Our percentage is not the regulators’ test, in two ways. We divide by tier 1 capital plus the allowance, because that is what the public file carries for every bank, and the guidance divides by total risk-based capital. And we do not test growth over 36 months. So a figure of 300 percent on a page here does not mean a bank meets the second screen.

Our calculation from public filings, as of the call report date. Not a rating, and not a statement about safety or deposits.

This site does not rank or list banks by concentration, and nothing here says a bank with a high or low figure is a better or poorer choice. Many banks operate above these levels with their examiners’ full knowledge. The figure is one fact about what a bank already holds.

Questions to put to the bank

• Is this request investor real estate or owner-occupied in your policy, and what share of rent from outside tenants moves it from one to the other?
• Are you adding loans of this kind and size this year?
• Do you have internal sublimits by property type, and is this property type open?
• If you like the credit and lack room, do you sell participations?

General information, not legal, tax or credit advice. A lender's own policy decides what it will do; ask it for the policy in writing.

Source and date appear beside each figure. Banks report balances, not loans made. Loans made come only from HMDA and SBA files. We do not audit filings and can make errors joining them. Report a problem