CRE Concentration Ratio Calculator

The CRE concentration ratio is the dollar value of a bank's commercial real estate exposure divided by its capital base. Bank examiners use two of them: construction, land development, and other land (CLD) loans divided by Tier 1 capital plus the ACL, and total CRE loans (CLD plus multifamily and nonfarm nonresidential, excluding owner-occupied) divided by the same denominator. The supervisory criteria from the 2006 interagency guidance are 100 percent for the CLD ratio and 300 percent for the total CRE ratio, paired with 50 percent or more growth in the CRE portfolio over the prior 36 months.

Construction, land development, and other land loans; loans secured by multifamily residential property; and loans secured by nonfarm nonresidential property — excluding loans secured by owner-occupied nonfarm nonresidential properties. Owner-occupied is defined by source of repayment, not loan size: if the primary repayment source is the cash flow from operations of the owner or affiliate that occupies the property, the loan is owner-occupied and sits outside the 300 percent test.

No. The 2006 interagency guidance and every reaffirmation since are explicit that the thresholds are supervisory criteria for additional scrutiny, not regulatory limits or a safe harbor. A bank under the thresholds can still receive enhanced review if portfolio composition, underwriting trends, or market conditions warrant it. A bank above the thresholds with strong risk management, capital, and stress testing is not automatically cited.

Tier 1 capital plus the allowance for credit losses (ACL) attributed to loans and leases. The original 2006 guidance referenced 'total capital,' but effective March 31, 2020 the federal banking agencies aligned the denominator for credit-concentration measurement at Tier 1 plus ACL, reflecting the move to CECL and the desire for a more loss-absorbing capital base in the calculation.

The ratio is the entry point, not the conclusion. Examiners pair it with growth rate, sector mix, geographic mix, sponsor concentration, and the seven risk-management practices the 2006 guidance names — board oversight, portfolio management, MIS, market analysis, underwriting standards, stress testing, and credit risk review. A bank running at 350 percent with strong stress testing and a stable portfolio is treated differently from a bank at 220 percent that grew 60 percent in three years on speculative construction.

The levers are raising capital, slowing originations, selling participations, increasing the share of owner-occupied CRE (which sits outside the 300 percent test), or letting the portfolio run off. Most community banks use a combination — pricing discipline on new CLD originations, a participation pipeline for larger deals, and a board-approved sub-limit by property type. The 2015 interagency statement called out interest-only periods, longer amortization, and less restrictive covenants as the underwriting drift examiners watch for when concentration is high.

Criterion #2 in the 2006 guidance has two parts, not one. A bank meets it when total CRE is at or above 300 percent of Tier 1 plus ACL and the CRE portfolio has grown 50 percent or more over the prior 36 months. Banks that have run high concentrations for years without growth are weighted differently from banks that crossed the threshold recently on rapid origination.

No. This is a planning and policy-monitoring tool. Final classification of any loan as CRE, CLD, or owner-occupied for supervisory purposes follows Call Report Schedule RC-C instructions and examiner judgment. Use the ratio to track headroom against your board-approved policy and to flag when the portfolio is heading into territory the next exam will focus on.

Monthly at the minimum, quarterly with formal reporting to ALCO and the board, and on every new large CRE commitment before approval. The 2015 interagency statement made clear that growth velocity matters as much as the absolute number — a bank cannot wait for the call report to discover it has crossed a board-approved sub-limit.